Aviation

Qantas secures $550m debt funding as it extends current employee stand-down

Christian Fleetwood

Qantas has secured a further $550 million in funding against three of its wholly owned Boeing 787-9 aircraft.

The Qantas Group stands in better stead than most to weather the impacts of the COVID-19 pandemic, but has revealed that the stand-down of more than 25,000 employees would extend until at least the end of June.

The airline expects to reach a net cash burn rate of $40 million per week by the end of June 2020, based on current conditions where domestic and international borders remain closed.

However, the group remains optimistic that it can respond to a range of recovery scenarios, including one where the current trading conditions persist until at least December 2021.

According to Qantas, it currently has $2.7 billion in unencumbered aircraft assets and can raise funds against these if required. The funding announcement likewise follows $1.05 billion raised in March against seven of the group’s 787-9s.

“Our cash balance shows that we’re in a very strong position, which under the circumstances we absolutely have to be,” Qantas Group CEO Alan Joyce said.

“We don’t know how long domestic and international travel restrictions will last or what demand will look like as they’re gradually lifted.

“Our ability to withstand this crisis and its aftermath is only possible because we’re tapping into a balance sheet that has taken years to build.”

Qantas said its net debt is now within the middle of its target range, at $5.8 billion, and that it has no financial covenants on any existing or new debt facilities, and no significant debt maturities until June 2021.

See more: Government announces $715m relief package for airlines

As at close of business 4 May 2020, total short-term liquidity stands at $3.5 billion, including a $1 billion undrawn facility, according to the group.

Qantas is currently operating around five per cent of its pre-crisis domestic passenger network and around one per cent of its international network on an available seat kilometre basis.

On a flying hours basis, which includes charters for the resources sector at 75 per cent of pre-COVID-19 levels and passenger aircraft flying as freighters, the group is operating 13 per cent of its domestic network and six per cent of international.

Under these circumstances, Qantas and Jetstar are extending existing domestic and trans-Tasman flight cancellations beyond the end of May through to the end of June 2020. International flight cancellations will be extended through to end-July 2020.

A Qantas 787-9 lands at Perth Airport (iStock.com/Kristian1108)

However, despite the impacts to flying, Qantas revealed its loyalty program continues to perform well, with external billings flowing from Frequent Flyer partners, including financial services and retailers such as Woolworths.

A partnership with fuel company BP has also created a new opportunity for members to earn points through another consumer staple, along with the ability to gain points through exercise using the Qantas Wellbeing app.

According to Qantas, two-thirds of all Qantas Points were earned on the ground pre-coronavirus crisis, meaning that the opportunity to engage with its 13 million members remains high.

See more: Governments must get behind efforts to restore confidence in aviation: IATA

The news comes amid the continuation of Qantas and Perth Airport’s legal stoush, with The Australian reporting the gateway has been accused of withholding as much as $200 million in payments for a terminal handed back by the airline to the airport.

Qantas’ accusation was reportedly made after Perth Airport revealed it was owed $20 million by Qantas in unpaid rent and passenger fees for the months of February and March.


Featured image: iStock/mixmotive)

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