![Marriott Bonvoy Status Match [2020]](https://www.australianfrequentflyer.com.au/app/uploads/2020/08/marriott-bonvoy-phone-150x150.jpg)
Qantas has secured an additional $550 million in debt funding, giving the airline sufficient liquidity to survive until at least December 2021, CEO Alan Joyce revealed in a market update this week. But this is not without trade-offs, with Project Sunrise now delayed indefinitely and Qantas’ A380 refurbishment program suspended. We may never see an Airbus A350-1000 in Qantas colours (pictured above) after all!
The additional funding is secured against three of Qantas’ wholly-owned Boeing 787-9 aircraft. Qantas already took out a loan in late March that was secured against a further seven wholly-owned Dreamliners.
This week, Qantas also announced it is extending its domestic and trans-Tasman cancellations until the end of June. All other international flights will be cancelled until the end of July.
Qantas is currently running a limited domestic network which is subsidised by the federal government, but until now had not made changes to its schedules beyond the end of May. Qantas says that it will consider reinstating some domestic and trans-Tasman services if demand picks up before the end of June, but this will depend on government restrictions.
Qantas is now operating around 5% of its usual domestic passenger capacity and 1% of international services. As a result, most Qantas staff are currently stood down with some receiving JobKeeper payments. The stand down has now been extended until at least the end of June. In the meantime, some Qantas staff have been given temporary jobs at Woolworths.
If current market conditions are sustained, Qantas expects to be losing around $40 million per week by the end of June 2020. That’s around $4,000 per minute.
“Our cash balance shows that we’re in a very strong position, which under the circumstances we absolutely have to be. We don’t know how long domestic and international travel restrictions will last or what demand will look like as they’re gradually lifted,” Qantas CEO Alan Joyce said.
“We’re expecting demand recovery to be gradual and it will be some time before total demand reaches pre-crisis levels. That means we need to think about what the Qantas Group should look like on the other side of this crisis in order to succeed. Fleet, network and capital expenditure will all have to be reviewed but our commitment to serve communities across Australia will not change.”
Although Qantas is losing money at the moment, its Loyalty and Freight businesses continue to perform well. Qantas Frequent Flyer continues to earn revenue by selling points to third-party program partners such as Woolworths, BP and the major banks. The strategy of encouraging Qantas Frequent Flyer members to continue to earn points on the ground underpins the new Qantas Frequent Dreamer campaign.
You can join the discussion about the Qantas market update on the Australian Frequent Flyer forum: Qantas dips into balance sheet
Project Sunrise called off (for now)
After milking last year’s Project Sunrise marketing research flights for maximum publicity, a public flight with the pilot’s union, and finally deciding on the Airbus A350-1000, Qantas has now delayed a Project Sunrise aircraft order indefinitely.
Although the business case for Project Sunrise stacked up, Qantas is not in the right financial position to order new aircraft right now.
Qantas also plans to review its existing international fleet in light of expected weak demand for the foreseeable future. The airline’s remaining Boeing 747s will likely be the first to go, although Qantas does currently have a Boeing 747 flight scheduled from Melbourne to Tokyo in October 2020.
There is some discussion about Project Sunrise here: Project Sunrise: A350 or 777X?
Airbus A380 refurbishments paused
In light of current market conditions, Qantas has also suspended its Airbus A380 cabin refurbishment program after upgrading just half of the airline’s fleet of twelve A380s. The program may be resumed in the future, but it will depend on whether demand picks up enough to justify bringing all twelve Airbus A380s back in the air. It is possible that Qantas will retire the unrefurbished A380s instead.
Qantas has been progressively upgrading its Airbus A380 cabins with new Business and Premium Economy seats, and refreshed First and Economy cabins, since last year. The work has been carried out in Dresden, Germany.
Join the discussion on the Australian Frequent Flyer forum: Qantas A380 refurbishment news and updates.
