Qantas FY20 Financial Results

 

Qantas’ 2020 Yearly Report is in and the results were ugly with Qantas reporting a very skinny $124 million (Underlying) profit down 91% from last year. When you factor in their aircraft write-downs and redundancy costs Qantas actually made a statutory loss of $2.7 billion. Qantas ratios in particular profitability and gearing have been smashed as seen in Fig A below.

The airline was on track for a profit of more than 1 billion when the Covid-19 crisis struck. Qantas was hit with a $4 billion decrease in revenue in the second half of the financial year as the airline was virtually grounded due to the Covid-19 crisis and associated border restrictions.

Qantas’ results were significantly better than what might have been given their circumstances. Fast action to radically cut costs and place much of Qantas into hibernation helped minimise the financial impacts. These aggressive measures included retiring and grounding aircraft, standing down staff, making staff redundant, cutting executive salaries and deferring orders of new planes.
Around 20000 employees remained stood down and Qantas expects to have finalised 4000 of the 6000 planned redundancies by the end of September. Qantas had expected to be back to about 45% of pre-COVID domestic capacity by now but instead it is currently operating at 20% due to the domestic border closures.

Qantas’ liquidity was boosted by cutting capital expenditure, deferring its dividend payment, and sourcing additional funding through $1.75 billion in new debt finance (secured loan against wholly owned aircraft). Qantas balance sheet was also strengthened because it raised a further $1.9 billion through the sale of shares (equity finance).

Qantas collected $267 million in payments through the Job Keeper scheme with the majority going to stood down workers and the rest used to subsidise the wages of staff continuing to work. The Government also refunded and waived a range of Government charges like fuel excise as well as underwriting the cost of Qantas operating a minimum domestic network servicing the most crucial metropolitan and regional routes to maintain connectivity.

Qantas’ recovery plan is targeting a massive $15 billion in cost cutting over the next 3 years however Alan Joyce expects recovery to take some time. The recently resigned CEO anticipates Qantas will post a significant loss in 2021 with Covid-19 continuing to have a huge impact. Alan Joyce said the pandemic presented the toughest set of conditions for Qantas in 100 years and that it unlikely that Qantas will resume international flying before June 2021.

Fig A Qantas Financial Ratios

2020 2019
Net Profit Ratio  .09% 7.2%
Rate of Return on Owners Equity 8% 37%
Liquidity Ratio .60:1 .49:1
Gearing Ratio 469% 134%
Total Expense Ratio 117% 92%
Revenue Seat Factor 82% 84%

Source: Qantas dives to $2.7b statutory full year net loss, underlying profit down 91% by Robyn Ironside The Australian Aug 20th, Qantas boss Alan Joyce says some border closures make no medical sense by Patrick Hatch SMH Aug 20th.

David Broadbridge

David Broadbridge holds a Bachelor of Commerce at the UNSW and a Dip Ed at UNE. He is the former Head Business Studies teacher at Pymble Ladies College. Follow David on Twitter or read his Qantas News Blog.