Qantas shares soar in surprise takeover as demand returns

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A ground worker walking near a Qantas aircraft is seen from the international terminal at Sydney Airport in Sydney, Australia, November 29, 2021. REUTERS/Loren Elliott/

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  • Underlying annual loss widens, but outlook improves
  • The airline will buy back 400 million Australian dollars of shares
  • Cancels planned interior capacity increases

SYDNEY, Aug 25 (Reuters) – Qantas Airways Ltd (QAN.AX) said on Thursday it would buy back up to 400 million Australian dollars ($276 million) of shares after the lifting of COVID restrictions spurred a strong rebound in travel demand, surprising the market and sending its shares up 6%.

The rush to travel once borders opened boosted its performance in the second half and helped reduce debt levels, although it also led to a host of operational issues that contributed to the airline’s cancellation. planned increases in domestic capacity.

“We always knew travel demand would recover strongly, but the speed and scale of this recovery has been exceptional,” Qantas chief executive Alan Joyce told reporters.

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The airline recorded an annual pre-tax underlying loss of A$1.86 billion in the 12 months to June 30, higher than the A$1.77 billion restated figure for the previous year and slightly higher than analysts’ forecasts.

The bulk of the losses were reported in the first half when domestic and international borders were closed under strict measures to contain the COVID-19 pandemic.

Jefferies analyst Anthony Moulder said in a note that Qantas appeared well positioned to return to profitable growth this financial year despite rising oil prices.

Qantas chief financial officer Vanessa Hudson said a metric combining ticket prices and percentage of occupied seats would need to rise 10% domestically and 20% internationally this year to recoup the cost more fuel high.

Joyce told analysts those targets were met at this point, adding that was part of the reason the airline had cut its domestic capacity forecast for 2022/23 to 101% of pre-COVID levels from around 110% previously.

The airline reduced debt levels below its target range, enabling it to repay shareholders who had provided A$1.4 billion in equity to help it weather the pandemic.

It also plans to hold a competition among aircraft manufacturers to replace its aging fleet of 28 Airbus SE (AIR.PA) A330 planes within the next 12 to 18 months, Hudson said. Read more

REPUTATION BLOW

As demand has improved, Qantas has in recent months reduced domestic capacity compared to previous forecasts due to widespread staff shortages at airports, high rates of crew sickness in winter and high fuel prices. fuel.

On Sunday, Qantas announced it would offer AU$50 flight vouchers, loyalty status extensions and frequent flyer passes, a move to apologize for increased delays, cancellations, lost luggage and staffing issues since travel demand rebounded. Read more

“Our brand has taken a hit,” Joyce said Thursday. “You would expect that given the performances we’ve had.”

However, he noted that the airline’s reputation had rebounded fairly quickly from earlier lows, such as in 2011, when management temporarily grounded the carrier amid an industrial relations dispute.

The airline is now facing industrial action from engineers, starting with one-minute work stoppages, as they push back on its standard offer to unions of a two-year wage freeze followed by annual increases of 2% in a context of galloping inflation.

Qantas said it planned to spend A$50 million on pay rises for employees covered by union agreements this financial year and to improve staff travel benefits. It had already earmarked A$200 million for a recovery bonus of A$5,000 and 1,000 share rights for more than 17,000 employees.

($1 = 1.4476 Australian dollars)

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Reporting by Jamie Freed; Editing by David Gregorio, Lincoln Feast and Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

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