Qantas Equity $1.9B Raising and Announcements June 2020

[Pushka]

Just heard an announcement on the Radio re Qantas and financial announcement to be made today. Didn't sound great.

 

[moa999]

Raising $1.9bn in equity.
6000 job losses, 15000 remain stood down.
A380s written down ($1.25-1.4bn hit)
320neos and 789s deferred
747s retired early
Joyce to remain till Jun-23

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[Kendall Roy]

Sad news, but not unexpected.

 

[levelnine]

747s to be retired immediately. Sad we'll never see them flying again.

Devastating news for so many staff as no one else in the industry will be hiring anytime soon.

 

[teammongo]

Breaking news
Qantas enters trading halt

 

[mviy]

Not that surprising.

QF had hoped international flights would be going back to some kind of new normal before Christmas, but now it looks like international flights may not resume for several months after that.

I wouldn’t be surprised if they did another capital raise in 12-18 months.

 

[tgh]

Raising $1.9bn in equity

not from me….

 

[flyingfan]

600 jobs lost would be a bad day. 6,000 is cataclysmic. Wonder what AJ sees the international and domestic network and frequency to look like after these jobs are gone.

From a customer perspective this can't mean an improvement in service levels but if the alternative is the very survival of QF, then so be it. At least IMHO the A380s are being kept on from what I see.

EDIT: Not the cheeriest way to mark my 1,000th post...

 

[Hvr]

Wonder what AJ sees the international and domestic network and frequency to look like after these jobs are gone.

I doubt there will be a very busy domestic network until at least next year.

As for international well, 2022 might eventuate. COVID-19 infections are still increasing at a rapid rate and it appears several countries are in denial about its severity.

Once the infectious phase is over then the economic recovery needs to occur before leisure travel will recommence. Many people will never recover the financial ability to get enough discretionary income to have an overseas trip.

Others will decide they need to have a larger financial buffer before spending large amounts on leisure travel.

Basically, IMHO, AJ has made a pragmatic and realistic business decision to ensure the financial survival of QF. This is his responsibility as CEO.

 

[jakeseven7]

Completely expected but does not make it any easier for the people directly affected, my heart goes out to them.

They needed to make quick sharp decisions to give the business the best chance possible to survive.

Let us all hope for a fast as possible rebound in travel to get these people back in the air again.

Hopefully everyone pulls through.

VA2 will be next once PE gets ahold of them (although they have already fired lots of people pre-corona)

 

[QF WP]

Wow, big news. Interesting to see how the market digests it. Not the first and won't be the last capital raising from an airline.

Agree with the plans to send some planes to the boneyard. If they come back into service, a full maintenance review and they can be the scheduled LAX/DFW/JFK to Australia flights. Cheaper to fly them over and parking costs, versus maintaining them here.

Glad I have no international plans until 2022, so can save up. However, can't wait for the domestic sectors to hopefully open up in July.

 

[jakeseven7]

Raising $1.9bn in equity

not from me….

Lucky this thread isn't about you then, perhaps spare a thought for the people impacted instead.

 

[SeatBackForward]

Leftfield thought - are the travel industry, including airline etc, that are so badly affected by Coronavirus doing anything to support the development of a vaccine? $1.9bn could go a long way towards such research and would probably provide better returns than just lifting up one operator for a short term period. Not suggesting it should be only QF that does this but putting the values into perspective.

 

[Melburnian1]

To access the lengthy announcement, see it on the ASX website, or type in 'QAN ASX quote' to your browser and choose the ASX site.

It isn't just that 6,000 staff will be redundant, but 15,000 more (the QFi staff) will continue to be stood down.

$1.36 billion is by a placement to presumably institutional shareholders.

Up to $500 million is by way of a share purchase plan to retail investors.

All shares are likely to be issued at A$3.65, a discount to yesterday's market price.

QAN (QF) has also revoked what had been its dividend. Previously it had deferred payment until September 2020. This sort of reneging may not go down at all well, given that it made the previous announcement (the deferral) on 19 March 2020 when some of the effects of COVID-19 were known.

Maybe the financial commentators think differently, but this sort of raising tends to dilute the small retail 'mums and dads' shareholders and has attracted criticism when other companies have done this. A minority of companies have been fairer, giving retail holders the opportunity of a non-renounceable entitlement issue.

QF says it will record a breakeven to small profit before tax in 2019-20 but international travel will still only be at 50 per cent in 2021-22, by which time domestic travel will have also got back to where it was. The latter seems an optimistic assertion although the travails of VA (which I reckon will liquidate) may see the QF forecast become reality, at least when comparing QFd passenger numbers prior to COVID-19.

In 2019-20 (the financial year about to end), QF expects an impairment charge of $2.8 billion. I am not an accountant but this may be one of those 'non cash' items.

As noted above, QF confirms that the 12 A388s won't be used 'for the foreseeable future. I read this as 'never again.'

 

[Melburnian1]

Leftfield thought - are the travel industry, including airline etc, that are so badly affected by Coronavirus doing anything to support the development of a vaccine? $1.9bn could go a long way towards such research and would probably provide better returns than just lifting up one operator for a short term period. Not suggesting it should be only QF that does this but putting the values into perspective.

The costs of developing vaccines are huge. There is no certainty we will have one from what I read. Not an airline's role.

 

[eastwest101]

Very sad day for the industry, and will probably be repeated worldwide, I don't think the industry has seen such large capacity destruction since post September 2001 but its a sign of an industry resetting its size and costs and Covid-19 will obviously put a lot of aircraft and human resources related to operating aircraft as excess capacity. It will be interesting to see how Covid-19 develops and how the airline industry will bounce back in the future, I still think there will be opportunities out there in the future although they aren't really obvious at the moment...

When any industry shrinks into survival mode it actually sets the clock ticking for the next boom/expansion, as excess supply is destroyed or parked then when demand returns the early movers and people who have invented a way to do it better often flourish.

I assume the bulk of the job cuts are QFi division, head office and not so much QFd and Jetstar? I haven't seen any hard numbers of which divisions will be wearing the pain of job losses yet.

 

[jase05]

Anyone else hear AJ say no International flights until July 2021?

 

[moa999]

but this sort of raising tends to dilute the small retail 'mums and dads' shareholders and has attracted criticism when other companies have done this. A minority of companies have been fairer, giving retail holders the opportunity of a non-renounceable entitlement issue.

All depends on what the scale back is under the SPP, and what your shareholding is.
Eg. If you had a $1000 shareholding you could get up to $30000 under SPP .
To some extent retail shareholders get a better deal as they get a free option for a short period

 

[Melburnian1]

Interestingly, the QF Frequent Flyer program is expected to be the biggest contributor to profit (or break even) in 2019-20, declining only five to 10 per cent.

All those "enhancements" have paid off.

Media suggests that the bulk of the 6000 redundancies will be from 'ground and cabin crews, and the Sydney head office.'

By the looks of it the A388 flight crews will continue to be stood down, not retrenched. Perhaps one reason is that if they're needed, there would be a huge cost to 'upskill' those from B789s, so it's cheaper to keep the existing staff trained through simulators?

Post automatically merged: Jun 25, 2020

All depends on what the scale back is under the SPP, and what your shareholding is.
Eg. If you had a $1000 shareholding you could get up to $30000 under SPP .
To some extent retail shareholders get a better deal as they get a free option for a short period

Unlikely, because it's capped at $500 million, and it's not as if Qantas has only 10000 shareholders. Many of similar equity raisings recently have had substantial scalebacks applied by the Board.

 

[levelnine]

Anyone else hear AJ say no International flights until July 2021?

Incorrect. Executive Traveller has an accurate summary of what he said:

"We'll be parking the A380s for at least three years," Qantas Group CEO Alan Joyce confirmed to media during a press teleconference following the announcement of a sweeping three-year 'post-Covid recovery plan'.

With Qantas forecasting its international network to reach only 50% of its pre-pandemic capacity in the 2021-2022 financial year, Joyce said the A380s "don’t have any use during this period of time."

Joyce said he doesn't expect the Qantas' international network to restart "in any real size from July next year", with those flights led by the smaller Boeing 787 and Airbus A330 jets "to establish the network as fast as possible."

Qantas to mothball all Airbus A380s until at least 2023

Alan Joyce says the mighty superjumbo is likely to stay grounded "for at least three years."

www.executivetraveller.com