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What’s going on with Qantas (ASX:QAN) shares?

Qantas Airways Limited (ASX: QAN) shares have had a very volatile year in 2020.

Qantas’ tough year

COVID-19 has had a really tough impact on Qantas. There are almost no international flights and very few domestic flights.

FY20 saw a big drop in revenue in the final quarter of the year. Its revenue dropped by 20.6% to $14.26 billion over the course of the whole year.

The airline reported 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. 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.

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. 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.

Even so, Qantas announced a statutory loss after tax of $2 billion in FY20.

Qantas is expecting a significant underlying loss in FY21, though it is well capitalised to get through this difficult period after a capital raising.

What else can it do?

On the revenue side of things, Qantas is limited by passenger demand as well as the state and national border restrictions.

However, on the cost side of things, Qantas is looking to see what else it can do according to the AFR.

Qantas is thinking about moving its HQ to another state with the new Western Sydney Airport a potential location. It’s going to review all of its rented space, particularly its corporate offices. An office in Mascot, Sydney and Jetstar’s leased head office in Collingwood, Melbourne will be looked at.

The AFR said Qantas indicated “some aviation facilities, such as flight simulator centres currently in Sydney and Melbourne as well as Qantas’ heavy maintenance facilities in Brisbane, would also be considered for relocation, particularly if there was an opportunity to bring some or all of those facilities together somewhere within Australia”.

Qantas Chief Financial Officer Vanessa Hudson said: “Like most airlines, the ongoing impact of COVID means we’ll be a much smaller company for a while. We’re looking right across the organisation for efficiencies, including our $40 million annual spend on leased office space.

Most of our activities and facilities are anchored to the airports we fly to, but anything that can reasonably move without impacting our operations or customers is on the table as part of this review. We’ll also be making the new Western Sydney Airport part of our thinking, given the opportunity this greenfield project represents.”

Summary

This seems like it could be a good move to consider other options for its operations, particularly if it saves millions of dollars a year. For Qantas, it really depends on what happens with the COVID-19 vaccine and when Australia’s state borders open up. If state borders open up then domestic travel could materially come back.

However, I wouldn’t expect decent profit until FY22 at the earliest. I think there are better ASX growth shares out there to consider such as Pushpay Holdings Ltd (ASX: PPH).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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