The Qantas Group has posted its third consecutive Statutory Loss Before Tax of more than A$1 billion, reflecting the Delta and Omicron impacts as well as upfront costs from restarting the airline as lockdowns finally ended. For the full 2022 financial year, the Group experienced an Underlying Loss Before Tax of $1.86 billion and a Statutory Loss Before Tax of $1.19 billion. The difference between these two measures largely reflects the $686 million net gain on sale of surplus land, which helped reduce COVID-related debt.
While the first three quarters of the year were defined by border closures and waves of uncertainty caused by COVID variants, the fourth quarter saw the highest sustained levels of travel demand since the start of the pandemic. Overall, the Group’s flying levels for the year averaged at 33 percent of pre-pandemic levels but finished at 68 percent.
Group Domestic operations were profitable at the Underlying EBIT level in 4Q22, while Qantas Freight posted another record annual performance and Qantas Loyalty accelerated its earnings growth to double digits in the second half.
The reopening of borders saw a huge increase in forward travel demand, which when combined with the Group’s recovery plan, has resulted in a significant improvement to the balance sheet. Net debt has fallen from a high of more than $6.4 billion to $3.9 billion at the end of FY22, putting it below the optimal target range of $4.2 billion to $5.2 billion.
With the existential crisis posed by the pandemic now over, the Group is focused on responding to current operational challenges. Key customer measures for Qantas including contact centre wait times, cancellation rates and mishandled bag rates are trending back towards pre-COVID standards during August 2022.
There has been a significant improvement in on-time performance, which lifted from 52 percent in July to 66 percent for August (to date). This is expected to reach 75 percent in September and around 80 percent in October 2022, pending external factors such as extreme weather.
Qantas Group CEO Alan Joyce said: “This result takes the Statutory Loss Before Tax impact of COVID on the Qantas Group to nearly $7 billion and our total revenue losses to $25 billion. These figures are staggering and getting through to the other side has obviously been tough. The past year has been challenging for everyone. We had to ramp down almost all flying once Delta hit and stay that way for several months before ramping back up through multiple Omicron waves as we all learned to live with COVID in the community.
“We always knew travel demand would recover strongly but the speed and scale of that recovery has been exceptional. Our teams have done an amazing job through the restart and our customers have been extremely patient as the whole industry has dealt with sick leave and labour shortages in the past few months,” Joyce said.
“Safety remains number one, but our service isn’t at the level expected of the national carrier. There is a lot of work happening to bring us back to our best, including hiring more people, rolling out new technology and reducing domestic flying so we have more sick leave cover. We saw a big improvement in baggage handling and cancellations in August, which we expect will return to pre-COVID standards next month. On time performance also improved significantly and should be close to our usual high standard in September. We’re even more confident in the future than we were six months ago, so today we’re announcing more investment in our people and our customers, including a major boost to staff travel benefits, new routes and new lounges. We’re also announcing the first capital return for shareholders since they provided us $1.4 billion at the start of the pandemic to support our Recovery Plan.”
GROUP DOMESTIC
After several stop/start rebounds across FY22, domestic travel demand made a sustained recovery in the fourth quarter. Total domestic flying averaged 63 percent of pre-COVID levels for the year and reached 103 per cent by 30 June. This drove Group Domestic to positive Underlying EBIT for the fourth quarter, but long periods of low activity combined with restart costs resulted in a full year Underlying EBIT loss of $1.1 billion.
Across Qantas and Jetstar, revenue intakes from leisure bookings in the fourth quarter were approximately 125 percent of pre-COVID levels, with the Group’s dual brand strategy putting it in a unique position to meet demand from both the budget and premium parts of the market. The rebound in leisure saw the Group add more than 20 new domestic routes during the year. Revenue intakes from business purpose travel in the fourth quarter were around 90 percent of pre-COVID levels. With a cost base significantly below its competitors, Jetstar’s commitment to low fares saw 47 percent of its customers pay less than $100 for their domestic flight and 87 percent paid less than $200 – a larger proportion than before the pandemic.
GROUP INTERNATIONAL AND FREIGHT
Heavy losses by the Group’s international passenger business were again significantly offset by a record performance of Qantas Freight, which benefited from high yields due to a continued shortage of cargo space globally but also from the ongoing shift to e-commerce domestically. Overall, the Qantas International and Freight division recorded an Underlying EBIT loss of $238 million and Underlying EBITDA profit of $448 million.
While the reopening of Australia’s border in November 2021 finally saw international passenger travel return, the rebound was initially slowed by the Omicron variant and the delayed opening of key markets such as New Zealand and Indonesia. The Group’s international capacity averaged just 17 percent of pre-COVID levels for the year but rose to 49 percent by 30 June. The Group has now resumed flying to 19 ports and announced eight new destinations, including Rome, Seoul and Delhi.
Jetstar suffered significant financial losses in New Zealand, Singapore and Japan due to continued border restrictions plus restart costs as flying gradually returned. Globally, airlines are constrained by aircraft and labour availability in returning to pre-COVID capacity levels despite high levels of demand. While this situation is temporary it is driving strong yields across the Group’s international flying, which are offsetting the significant rise in the cost of jet fuel.
QANTAS LOYALTY
Loyalty achieved a significant increase in revenue, up 36 percent to $1.33 billion. Underlying EBIT rose by 7 percent across the year and increased by double digits in the second half as consumer patterns changed out of lockdowns. The division has performed strongly throughout the pandemic by focusing on its value to members and, by extension, its program partners. A decision to lower the number of points required for hotel and holiday redemptions in February 2022 helped drive a 40 percent increase in bookings in 4Q22. During the year, agreements were renewed with all five major financial services partners as well as Woolworths. New partnerships were launched with Accor, Optus and Zip. Qantas Business Money was launched and will expand further in FY23. Frequent Flyer members grew to 14.1 million during FY22, reflecting a total increase of around 1 million since the start of the pandemic.
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