Qantas FY22 Financial Results

Qantas FY22 Financial Results

Qantas’ 2022 Yearly Report is in, and the results were again very ugly. Qantas reported a (Underlying) loss of $1.9 billion due to border restrictions and lockdowns from both the Delta and Omicron variants of COVID-19. The results were according to Alan Joyce staggering but not surprising. Qantas has lost $25bn in revenue over the Covid period.

The grim financial year result brings Qantas’ total loss from the pandemic to $7bn. Once the airline’s star performers, Qantas Domestic and Jetstar slid further into the red. Qantas International also finished the year in the negative, leaving Qantas Loyalty the only profitable segment of the group.

Qantas ratios in particular profitability and gearing were smashed again as air travel was decimated. This can be clearly seen in Fig A below where the 2022 ratios are compared to 2021 and 2019 (the most recent complete period not affected by the pandemic).

There is no doubt the wheels for Qantas really did fall off when borders reopened. Record levels of sick leave from COVID-19, difficulties in recruitment due to tight labour markets and a surge in demand severely impacted Qantas’s operational performance. Poor weather also played a role, with runway capacity limitations at key Australian airports. After taking a reputational beating in recent months Qantas is narrowing in on aircraft cancellation rates, call centre experiences, on-time performance, and lost bags. These crucial operational markers are starting to trend back towards levels seen before Covid-19 hit. The upcoming September school holidays will be a good litmus test for Qantas.

Qantas is now positioned for a vastly better 2023. Its cost cutting program is ahead of schedule and the airline predicts it will be back in the black next year. There is very strong demand for travel with forward revenue looking particularly healthy. Net debt has slid from a pandemic high of $6.4bn to $3.9bn, below the optimal target range. Qantas also announced a capital return for shareholders, in the form of a $400m share buyback.

Joyce has flagged higher airfares to account for a fuel bill that was $1bn above that in 2019. Since April, Qantas has hired more than 1500 staff and will add more in the next few months. Domestic flying capacity has been reduced so Qantas has more sick leave cover to cover for COVID-related stresses. Following on from a $50 travel credit for every Qantas frequent flyer Qantas will bring in new routes and lounges in a massive $400m splash to woo back customers.

Fig A Qantas Financial Ratios 2019, 2021 and 2022

Source: Qantas flags 20% hike in international airfares on back of bumper fuel bill by Robyn Ironside The Australian Aug 25th, Qantas numbers a tribute to Alan Joyce by Terry McCrann The Australian Aug 25th, Holiday test looming for Alan Joyce after Qantas turbulence by Eric Johnson The Australian Aug 25th, Jetstar records biggest loss of the group, Alan Joyce promises to improve service levels by Robyn Ironside The Australian Aug 25th, Qantas survived the pandemic despite $7b hit. Now it sees clear skies ahead by Stephen Bartholomeusz SMH Aug 25th.