Why the Qantas (ASX:QAN) share price is under scrutiny

The Qantas Airways Limited (ASX: QAN) share price is under the spotlight today after deciding to stand down thousands of employees.

Qantas share price falls after standing down thousands of crew

Around 2,500 frontline Qantas and Jetstar employees will be stood down for an estimated two months because of the ongoing COVID-19 outbreaks.

The airline has decided to take this difficult decision because of a significant drop in flying caused by COVID-19 restrictions in Greater Sydney, as well as knock-on border closures in all other states and territories. Qantas emphasised that no job losses are expected. But we’ll have to see what actually happens.

Impacts for the employees

The employees being impacted by this include domestic pilots, cabin crew and airport works, mostly in NSW, but also in other states due to the nature of airline networks.

Employees will be given two weeks’ notice before the stand down takes effect, with pay continuing until mid-August.

Qantas said that income support from government disaster payments will be key to helping eligible employees get through this challenging period.

Management comments

Qantas CEO Alan Joyce said: “This is clearly the last thing we want to do, but we’re now faced with an extended period of reduced flying and that means no work for a number of our people. 

We’ve absorbed a significant amount of cost since these recent lockdowns started and continued paying our people their full rosters despite thousands of cancelled flights.

Qantas and Jetstar have gone from operating almost 100% of their usual domestic flying in May to less than 40% in July because of lockdowns in three states. 

Hopefully, once other states open back up to South Australia and Victoria in the next week or so, and the current outbreak in Brisbane is brought under control, our domestic flying will come back to around 50% to 60% of normal levels.”

When will things get better?

Qantas is expecting Sydney’s borders to be closed for at least two months. Qantas said once the borders do reopen, travel is expected to be at the top of people’s list and flying tends to come back quickly, so it can get employees back to work.

The airline said that the vaccine rollout means the end is in sight and “the concept of lockdowns will be a thing of the past.”

A few thoughts on the Qantas share price

It’s hard to get excited about Qantas shares at the moment. Travel continues to be disrupted and it could be a long time before things get to a ‘new normal’. There are other ASX growth shares that I’d rather look at.

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

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