Qantas (ASX:QAN)  “in a survival mode”, States Chairman At the Virtual AGM

Summary

  • Qantas Airways Limited (ASX:QAN) conducts 2020 virtual AGM with the Chairman Richard Goyder and CEO Alan Joyce taking the stage to highlight business challenges and potential solutions.
  • The Company is “in a survival mode” - Richard Goyder.

Qantas Airways Limited (ASX:QAN) conducted the annual general meeting and highlighted the business challenges and opportunities.

Chairman – Richard Goyder

The Chairman – Richard Goyder addressed the shareholders through a virtual meet in Perth.

By referring to the virtual format of the AGM as a symptom of the travel restrictions and border closures, Mr Goyder suggested those same restrictions continue to considerably impact the Group.

The Chairman further acknowledged the impact of the COVID-19 outbreak on profitability during the first half of the year, which coupled with domestic and international border closures during March 2020, led to a $4 billion decline in the revenue for Q4FY2020.

Mr Goyder referred the current stance of the Company as “in a survival mode”, and to improve the liquidity position the company has taken steps to preserve cash.

Locking-in Cash

 Qantas had put many operations into hibernation to avoid burning the cash and since March 2020 the company has raised over $2 billion in cash through secured and unsecured debt.

  • Furthermore, the Group raised additional funds of $1.4 billion through an equity raising, marking the first such event in a decade.

Acknowledging the Impact and Hard Decisions Taken

 While cash preservation and generation has been among one of the top priorities for the Company, meeting them called for some harsh decisions.

  • The Company had to lay-off 6,000 people and is considering an additional 2,000+ in ground handling underway. As of now, the total lay-off has climbed to 18,000.

Structural Change Post COVID-19 Impact

CEO, Alan Joyce suggested that there would be some structural changes as compared to the pre-COVID outbreak period.

Further pointing towards the ground reality, Mr Joyce cited that revenue will be significantly lower for some time, especially with the continued grounding of most international operations.

  • Additionally, Mr Joyce mentioned that the only way, for now, is to bring the running cost of the Group down, and the Company has identified $15 billion in cost savings over the next three years, primarily through less flying.
  • QAN is targeting $1 billion in ongoing cost improvements from FY2023.

QAN suggested that at present, $1 billion in savings is front-end loaded, out of which, $600 million would be unlocked in the current financial year with FY2021 program expected to be 90 per cent complete by the end of December 2020.

Also, QAN is currently reviewing the ground handling operations with an aim to save $100 million per year.

The Present Scenario

At present, the delay in cross broader operations has resulted in a loss of $100 million in earnings for Q1FY2021 with further impact expected in Q2FY2021.

However, while an impact on revenue is expected, Mr Joyce mentioned that the current cash flow from continuing operations, which is positive, could keep the Company buoyant for some time.

The market seems to be going by the numbers with the stock of the Company correcting from a recent high of $4.64 (intraday high on 5 November 2020) to the present low of $4.49 (06 November 2020, AEDT 12:07 PM).


 


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