The Qantas Airways Limited (ASX: QAN) share price rose by almost 3% today as investors learned of potential more job cuts at the airline.
What happened today?
According to reporting by the Australian Financial Review, Andrew David, who is the leader of both Qantas International and Qantas Domestic, admitted to a senate inquiry that there could be more job cuts because of the continuing difficulties that the airline sector was facing.
Qantas has been supported by large levels of government support over the last year with the closure of international borders, and sometimes state borders too. Jobkeeper is coming to an end and COVID-19 vaccinations are now being distributed in the country and across the world.
However, the international border still remains closed, and Aussies aren’t allowed to go on holiday overseas either. The international border closure has been extended for another three months
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Getting back to those Qantas job cuts, the AFR reported that Mr David said: “There may be more [redundancies]. This is about when we get ourselves through the pandemic and the impact on this business that we can stand on our own two feet. We’ve got to make sure that when we come through this we are fighting fit because we’ll be carrying a lot more debt that needs to be paid down, have issued more shares, and we’ve also got leaner competition.”
Qantas is apparently hoping that the government support will continue until international borders reopen because Qantas is expecting conditions to be difficult until that happens.
It seems that an industry-specific jobkeeper for airlines isn’t going to happen, though there could be some sort of further support.
Qantas has said that its domestic business is making positive underlying cashflow and it made positive EBITDA (EBITDA explained) of $71 million in the first half of FY21. The airline is expecting an even stronger domestic performance over the coming months if state borders stay open and more people get comfortable with flying again within Australia.
Summary thoughts
There are still many thousands of international Qantas workers that are stood down but being supported by jobkeeper. I hope the airline can save many of those jobs. It’s a difficult situation for Qantas because it doesn’t have any control of the borders, but it still has to pay for the costs of the planes and so on. However, when it emerges from COVID-19, it should be in a stronger position than it was been over the last 12 months.
I’m not sure if it’s a buy or not, it depends how strongly travel recovers over the next 15 to 18 months, and whether COVID-19 is no longer a global issue, particularly those stronger variants. Airlines have typically not proven to be great investments over the long term.
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