Qantas seeks $15bn savings in dramatic post-Covid recovery plan

The three-year 'rightsize, restructure and recapitalise' plan will see most of Qantas' international fleet grounded to mid-2021.

By David Flynn, June 25 2020
Qantas seeks $15bn savings in dramatic post-Covid recovery plan

Qantas will ground the bulk of its international fleet until the middle of 2021, seek to raise $1.9 billion in equity and reduce costs by $15 billion under a three year 'post-Covid recovery plan' announced this morning by Qantas Group CEO Alan Joyce.

The 'rightsize, restructure and recapitalise' plan will also continue the stand-down of 15,000 employees – around half of the airline's total workforce – with a further 6,000 jobs to be lost "across all parts of the business."

Immediate fleet impacts will see the early retirement of all remaining Boeing 747s and, as previously reported, pushing back the delivery of new Boeing 787-9 jets for Qantas and Airbus A321neo aircraft for Jetstar.

All Airbus A380s will be grounded “for at least three years”, Joyce revealed, with most international flights not expected to restart until mid-2021 and the Boeing 787 becoming the workhorse of that fleet.

Qantas has also flagged a "domestic fleet optimisation", the specific shape of which has yet to be detailed.

Three-year, three-pronged plan

Joyce, whose tenure as CEO will be extended through to at least the middle of 2023 to implement the recovery plan, outlines the three-pronged plan as being to "to rightsize our workforce, fleet and capital spending for a world that has less flying for an extended period; restructuring to deliver ongoing savings across the Group’s operations in a changed market; and recapitalising through an equity raise that will strengthen our balance sheet and accelerate our recovery."

Joyce said that despite the airline entering the pandemic in a strong financial position, "this crisis has still hit us very hard."

"We’ve never experienced anything like this before. No one has. Right now, all airlines are in the middle of the biggest crisis our industry has ever faced. Airline revenues have collapsed. Entire fleets are grounded. And the world’s biggest carriers are taking extreme actions just to survive."

"What makes this even harder is that right before this crisis hit, we were actively recruiting. We were gearing up for Project Sunrise. We were getting ready to buy planes. Now, we’re facing a sudden reversal of fortune that is no one’s fault – but is very hard to accept. Across the world, airlines are shrinking by up to 50 per cent."

Slow path to recovery

The airline says it expects domestic demand to fully recover in the 2021-2022 financial year, but international recovery is "anticipated to be slower with only ~50% of capacity expected in the same period."

The expected opening of a trans-Tasman bubble to New Zealand later this year, with the prospects of a 'green lane' to Singapore to follow, will still leave Qantas without its flagship routes to the USA, London and other parts of Asia.

As a result, while the majority of the international fleet is "expected to ultimately go back in to service", Qantas admits that "some leased aircraft may be returned as they fall due."

Joyce said he doesn't expect the Qantas' international network to restart "in any real size from July next year", with those flights led by the smaller Boeing 787 and Airbus A330 jets "to establish the network as fast as possible."

Over the next few years, the Boeing 787-9 will become Qantas' international workhorse "to Los Angeles, New York, Chicago, London and Asia," he said.

The job losses flowing on from this will include at least 220 pilots, "mostly due to early retirement of the 747s", and at least 1,050 cabin crew "due to early retirement of the 747s and less flying activity."

A further 2,900 pilots and 6,900 cabin crew will be stood down from July 2020 onwards, the airline says, while some 3,000 jobs will be cut from 'non-operational' corporate areas and ground operations "due to less flying activity."

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

Qantas - Qantas Frequent Flyer

15 Jan 2013

Total posts 37

Seems to be one of the more sensible and transparent plans amongst the airlines so far. Staff losses are never good news and this will be the toughest part of the plan. Thoughts are with those people today.

QF

11 Jul 2014

Total posts 454

They say Trucks carry the country, but the important of Australian airline are more important and need protection

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 152

Protection by whom?

Qantas - Qantas Frequent Flyer

06 Jul 2018

Total posts 2

What did Joyce actually say around the July date?

A lot of outlets are reporting no international travel until July 2021 but it seems he meant the "majority" of international flights won't resume until July 2021

24 Oct 2010

Total posts 2389

Alan definitely meant most international flights, not all - in the presser he clearly called out NZ "and other nations opening up with bubbles" as exceptions: see https://www.executivetraveller.com/news/qantas-to-suspend-all-overseas-flights-bar-nz-until-middle-of-2021

01 Apr 2014

Total posts 90

So no more First Class for the next 3 years on QF, or maybe forever. Will be interesting to see if there are any changes to points redemption availbility (or points cost) on partner airlines; and whether QF might offer further status extensions etc. Unfortunate for the affected QF staff, but as unpalatable as that might be, it was probably the fiscally responsible decision in the long term.

Qantas - Qantas Frequent Flyer

11 Nov 2015

Total posts 41

I was intrigued by the AJ comment on Asia. I see a hint of QF hunting there, outside of the ACCC.


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