Qantas Airways Limited (ASX: QAN) has announced its FY20 result which saw a net loss of $2 billion.
FY20 report
Qantas announced that its revenue dropped by 20.6% to $14.26 billion.
The airline said there was a $4 billion drop in revenue in the second half with a near total collapse of travel demand due to the COVID-19 crisis and associated border restrictions.
Qantas said that fast action to radically cut costs and place much of the flying business in a form of ‘hibernation’ helped minimise the financial impact. From April to the end of June, revenue fell 82% while cash costs were reduced by 75% helping limit the drop in underlying profit during the second half to a decline of $1.2 billion.
Overall, Qantas generated $124 million of underlying profit before tax in FY20, which was down 91%. It made $771 million of underlying profit before tax in the first half of FY20.
Government support played its part to support the business. Qantas has collected $267 million in jobkeeper payments, the majority of which was paid directly to employees on stand down and the rest was used to subside wages of those still working.
Qantas and Jetstar are operating a serious of domestic, regional and international flights on behalf of the federal government, as well as some freight services, to maintain critical links that had been made commercially unviable by travel restrictions. These flights were operated on a fee-for-service basis, with fare revenue offsetting the cost to the taxpayer.
To 30 June 2020, the total gross benefit of government support was $515 million, with the net benefit (after costs for flights operated) of $15 million.
Qantas announced a statutory loss after tax of $2 billion, with a statutory loss before tax of $2.7 billion – the majority of which related to reducing the value of its aircraft and assets of $1.4 billion and $642 million in redundancy and other costs relating to restructuring for the recovery.
Outlook
The airline said that despite significant uncertainty across most markets, the company is well positioned to take advantage of the eventual return of domestic and, ultimately, international travel demand. Meanwhile, Qantas Freight and Qantas Loyalty continue to generate significant cashflow and charter operations for the resources sector are performing strongly.
Qantas is expecting a significant underlying loss in FY21, though it is well capitalised to get through this difficult period after a capital raising.
Are Qantas shares worth buying? It depends how long it takes for travel to return to normal and what volume there will be. I don’t like to make that type of bet on shares, I prefer businesses with clearer growth plans like Bubs Australia Ltd (ASX: BUB) and Pushpay Holdings Ltd (ASX: PPH).
