Tourism Stocks Banking on Wanderlust Redux – ShareCafe


Qantas says it lost $1.9 billion last financial year, as COVID losses and fuel costs rose but promised shareholders a reward of a $400 million buyback and also reassured its customers that its aggravating operational problems should end next month.

The carrier recorded a statutory loss after-tax of $860 million, a nearly 50% improvement on 2021’ loss of $1.7 billion.

Underlying earnings before interest, tax, depreciation and amortisation was $281 million, 31% lower than 2021.

Qantas will also revealed invest more than $400 million in customer loyalty offerings including new lounges and new routes such as Auckland to New York.

Qantas CEO Alan Joyce said the airline said losses related to the pandemic now add up to nearly $7 billion over the last three years.

However, Joyce said the latest result shows that the company is showing signs of a rapid recovering from the effects of COVID-19 lockdowns.

“The numbers we’re reporting today put the full impact of the Delta and Omicron lockdowns on the Group in stark financial terms.

“But they also show how quickly – and how strongly – the recovery is now happening.”

The airline’s aggressive cost-cutting program- which axed about 9,400 jobs and saved the company about $650 million in 2021 – has been blamed for terrible operational performance and the attendant bad publicity that’s caused thousands of delayed and cancelled flights in recent months, including long queues, unanswered phone calls, website problems and a surge in lost baggage reports and claims.

Compounding the problem has been the number of staff falling ill due to COVID-19 and the flu. Sick leave is estimated around 50% higher than normal as a result.

Qantas formally apologised for its chaotic recent performance on Sunday and extended an olive branch to its frequent flyers, offering them $50 flight discounts, additional lounge invitation and improved reward seat availability.

To address the staff shortage, the airline introduced temporary domestic capacity reductions (taking planes out of service) of more than 10% to boost the number of available staff for the smaller fleet of aircraft.

Qantas says it has also hired about 1,500 people, with 80% employed in operational roles such as cabin crew.

The Board said the on-market buyback of up to $400 million is being undertaken “as the benefits of the recovery materialise. This is the first return to shareholders since 2019 and follows $1.4 billion of equity raised at the start of the pandemic” in 2020.

The equity issue was made at $3.65 a share, Qantas shares traded around $4.86 yesterday (up more than 7%), meaning a very juicy profit of $1.21 a share if that’s the buyback price when it starts (or more than 30%) over three years.

Qantas said it has entered 2022-23 “with its balance sheet repair process effectively complete, strong levels of travel demand and a clear path to improving its COVID-related operational challenges.”

The airline says its current forecasts see its recovery plan to be completed in this financial year, delivering $1 billion in annual cost reduction. “Parallel focus on offsetting CPI from FY19 to FY23 through additional cost and revenue initiatives “(more, unspecified cost cuts).

Fuel costs for 2023 are forecast to be $A5.0 billion, “driven by a ~60 per cent increase in fuel prices compared to FY19.”

Revenues are expected to fully recover increased fuel prices across the Group as well as temporary unit cost increase associated with addressing operational challenges – so no deep discounts or bargains. That means seat prices will be at maximum for the coming year.

To help, Qantas is cutting its group domestic capacity by a further 10 percentage points in response to higher fuel costs and operational challenges. “Some capacity may be restored once operational resilience improves.” That will apply to Qantas domestic, Jetstar and QantasLink.

But Qantas said group international capacity will “increase as more A380s and 787-900s enter service and overseas borders continue to reopen.”

Strong yields in Qantas Freight expected to moderate but remain above pre–COVID levels.

Qantas also said its debt had been cut to below optimal levels by June 30.

“Strong revenue intakes, plus the sale of surplus land, helped the Group to lower its net debt to $3.94 billion, taking it below the optimal target range of $4.2–$5.2 billion. Total liquidity at 30 June 2022 was $4.6 billion including $3.3 billion cash,” the airline said on Thursday.


Meanwhile, Flight Centre narrowed its full-year loss to $287 million and says it is confident underlying earnings are rebounding from the pandemic’s losses

It posted a statutory pre-tax loss of $377.8 million for the 202-22 financial year, a significant improvement on the $601.7 million loss it incurred the previous year.

Its statutory after-tax net loss for the 12 months to June 30 came in at $287.2 million.

Underlying earnings also narrowed sharply to a loss of $183.1 million, within the company’s guidance range for a loss between $180 million and $190 million but adrift from many analyst estimates.

But for all those signs of an improvement, the shares slid 4.5% to $16.55 as there was a feeling the figures in the report didn’t quite live up to the hype in recent updates.

Like Qantas, Flight Centre, fourth quarter saw a big improvement as borders re-opened, Covid restrictions were eased and people regained their confidence and started travelling again – firstly domestically and in the 4th quarter, internationally.

Flight Centre said its fourth quarter total transaction value (the amount spent through its channels) exceeded the TTV for all of 2021 and its global corporate and leisure businesses, other than Asia and ‘other’ segments, reported a positive underlying EBITDA.

Total revenue for the company topped $1 billion and the company said there was still considerable pent-up demand for travel that has yet to be met.

Australian outbound travel is improving but is only 35% of pre-Covid levels and in bound holidaymakers were only starting to return to travel.

A full market recovery was not expected until 2023 but the strong momentum of the 2022 fourth quarter was providing momentum in the new year.

Provisional Australian Bureau of Statistics data for July showed passenger numbers are improving. There were 1.083 million arrivals and 973,000 departures. Both were the highest since the pandemic began, reaching 54% and 55% of July 2019 levels.

That was after the weak 2021-22 year data showed (because of the limited international travel during the financial year), the number of short-term visitor arrivals increased nearly eightfold, to 1.192 million, with seven times as many short-term resident returns, up to 1.591million.

While increasing, these financial year totals are still less than 15% of those for 2018-19, the ABS said.

Flight Centre says the recovery in travel and tourism is being hampered by a slower return of airline capacity. The absence of Chinese carriers and a reduced presence from Virgin Australia were among key issues.

“(The) added complexity, cancellations and delays, challenges in securing seats again reinforces travel’s resilience and are helping fuel a renaissance if the expert travel advisor across both leisure and corporate,” the company said in Thursday’s release.

“While supply constraints and macro-economic changes are being monitored they are not currently, noticeably impacting demand.”

The company backed away from providing specific guidance for 2023 because the rebound in travel was “still in its infancy”, while China remains closed to travel and airline was capacity was yet to stabilize.

“Profit and TTV recovery are unlikely to be linear and again expected to be heavily second-half weighted,” Flight Centre said.

But CEO Graham Turner was his usual upbeat self in Thursday’s outlook, saying there was a much brighter outlook.

“Travel demand has recovered rapidly since most governments globally removed or relaxed border restrictions and we have started the new fiscal year with strong momentum,” Turner said.

“In the leisure sector we are generally gaining market share in our core markets, increasing productivity and capturing more sales and securing a strong pipeline of account wins to drive future growth.”


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