Melburnian1
Veteran Member
- Joined
- Jun 7, 2013
- Posts
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I'd never heard of 'investment bank Jeffries' but this is a brief cut and paste from some 'The Australian' article that appeared an hour ago (Tuesday 9 June 2020):
'...Qantas is expected to emerge from the COVID-19 crisis a much leaner operation with about half of its current workforce and a greatly reduced cost base in response to much weaker demand.
Detailed equity research by investment bank Jefferies forecast staff costs for the Qantas Group to shrink to just over $2bn in the 2021 financial year, from $4.2bn in 2019.
Expenditure on fuel, aircraft and marketing were also tipped to be slashed in a move that could see Qantas return to profit in 2021 after a net loss of around $200m in 2020...'
Then later the article says, quoting a better known investment bank:
'...Another report by Merrill Lynch research analysts Meredith Baxter and Kevin Wu, looked at the extent to which Qantas could discount airfares to stimulate demand without incurring further losses.
“Given fuel and staff cost saving, we expect ticket prices can be cut by up to 30 to 35 per cent in the first half of the 2021 financial year and still be cash flow neutral,” said the analysts.
“These discounts can be larger in the first quarter of the 2021 financial year, up to 40 per cent, given staff costs will in part be offset by Jobkeeper payments.
The Merrill Lynch report estimated the total cash burn by Qantas since the COVID-19 crisis forced aircraft to be grounded and workers to be stood down, was in the vicinity of $1.5bn...'
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If first prediction is anything near reality (by no means certain), that'd mean 15000 staff receiving redundancy. A large number, although QF is a far smaller employer than companies like Woolworths and Coles. From memory Woolworths had about 180000 staff prior to COVID-19, although not all would be full time. I don't know what the FTE headcounts would be but the grocery retailers would still be hugely ahead of Qantas under that metric.
The claimed 'cash burn' of $1.5 billion to date is more than what another analyst (I forget from where) said. His claim of two or three weeks ago was that the weekly cash burn by the QF Group was $90m (with the much publicised aim of Alan Joyce, CEO to bring that down to $40m per week by the close of June 2020).
23 March was probably when any cash burn intensified. If one assumes that it's all occurred in the c.11 weeks since then, that comes to about $140 million a week, an enormous amount. Perhaps there was some cash bleeding prior to 23 March given that the Federal Government shut off flights from mainland China at the start of February 2020.
One thing's for sure: all these airlines would have some 'costs' that travellers like me would be unaware of. Perhaps not surprising QF has tried to defer payment of some bills, and has done the same with its shareholder dividend, deferred until September 2020.
In the 'Will QF enter administration?' thread, AFFer RAM said:
"I'm not so sure it is actually in such a good way. More than 60% of their fleet is grounded by number, and by value its >80%. Q has massive staff entitlements to pay out when it starts laying staff off - by law it has to offer redundancies (2 weeks pay per year of service) plus accrued leave & other entitlements such as long service..." and went on to make many other assertions.
We'll have to wait and see whether RAM is proven correct.
'...Qantas is expected to emerge from the COVID-19 crisis a much leaner operation with about half of its current workforce and a greatly reduced cost base in response to much weaker demand.
Detailed equity research by investment bank Jefferies forecast staff costs for the Qantas Group to shrink to just over $2bn in the 2021 financial year, from $4.2bn in 2019.
Expenditure on fuel, aircraft and marketing were also tipped to be slashed in a move that could see Qantas return to profit in 2021 after a net loss of around $200m in 2020...'
Then later the article says, quoting a better known investment bank:
'...Another report by Merrill Lynch research analysts Meredith Baxter and Kevin Wu, looked at the extent to which Qantas could discount airfares to stimulate demand without incurring further losses.
“Given fuel and staff cost saving, we expect ticket prices can be cut by up to 30 to 35 per cent in the first half of the 2021 financial year and still be cash flow neutral,” said the analysts.
“These discounts can be larger in the first quarter of the 2021 financial year, up to 40 per cent, given staff costs will in part be offset by Jobkeeper payments.
The Merrill Lynch report estimated the total cash burn by Qantas since the COVID-19 crisis forced aircraft to be grounded and workers to be stood down, was in the vicinity of $1.5bn...'
------------
If first prediction is anything near reality (by no means certain), that'd mean 15000 staff receiving redundancy. A large number, although QF is a far smaller employer than companies like Woolworths and Coles. From memory Woolworths had about 180000 staff prior to COVID-19, although not all would be full time. I don't know what the FTE headcounts would be but the grocery retailers would still be hugely ahead of Qantas under that metric.
The claimed 'cash burn' of $1.5 billion to date is more than what another analyst (I forget from where) said. His claim of two or three weeks ago was that the weekly cash burn by the QF Group was $90m (with the much publicised aim of Alan Joyce, CEO to bring that down to $40m per week by the close of June 2020).
23 March was probably when any cash burn intensified. If one assumes that it's all occurred in the c.11 weeks since then, that comes to about $140 million a week, an enormous amount. Perhaps there was some cash bleeding prior to 23 March given that the Federal Government shut off flights from mainland China at the start of February 2020.
One thing's for sure: all these airlines would have some 'costs' that travellers like me would be unaware of. Perhaps not surprising QF has tried to defer payment of some bills, and has done the same with its shareholder dividend, deferred until September 2020.
In the 'Will QF enter administration?' thread, AFFer RAM said:
"I'm not so sure it is actually in such a good way. More than 60% of their fleet is grounded by number, and by value its >80%. Q has massive staff entitlements to pay out when it starts laying staff off - by law it has to offer redundancies (2 weeks pay per year of service) plus accrued leave & other entitlements such as long service..." and went on to make many other assertions.
We'll have to wait and see whether RAM is proven correct.
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