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Qantas to Slash Jobs with the Completion of Institutional Placement

News collaboration with Michael Kodari, Kodari Securities, KOSEC:

Australia’s biggest airline ‘Qantas’ to cut jobs

Over the past week, significant developments involving Qantas Group (ASX: QAN) have been underway. In preparation of an equity raising announced on June 26, with an AUD1,360 million fully subsidized institutional placement, and an AUD500 million non-subsidized share purchase plan, QAN announced a trading halt the day prior. One of the objectives of this plan being to be able to recover the company if macroeconomic conditions were to arise, and the other one to simultaneously cut back on operation costs.

QAN revealed the successful completion of the placement on June 26, worth AUD1,360 million ratified for 372.7 million additional shares, whilst being available for institutional investors at AUD3.65 per share. Institutional shareholders that were using medium-sized investment brokers were given priority on a pro-rata basis, and smaller institutions were able to gain allocations based on having a much higher likelihood to support QAN indelibly.

Aims Behind The Equity

The reason behind this equity was for the sake of a speedy recovery and reinforcing balance sheets, with the move representing a 25% boost in total shares on issue. Nevertheless, with QAN having reclaimed approximately a third of their shares in recent years, this move is not drastic as it appears to be. Current shareholders gained 94% of share allocation.

COVID-19- Centric Plans

Strategies for a stable recovery after the worldwide COVID-19 pandemic are believed to continue over three years with plans of utilizing AUD15 billion to result in benefiting the business. Out of this amount, AUD2.4 billion will be accounted for via restructuring benefits, with AUD2.6 saved as a result of the decreased workforce, AUD4 billion saved in a reduction of activity, and AUD6 billion in fuel savings. Part of this plan is to rest around 100 aircraft – which can be brought back into service until normalcy returns and international flights are allowed again – for a period of 12 months or even longer, among which six Boeing-747s will be discharged immediately, which is ahead of schedule by six months.

Staff Being Adversely Impacted

Much to the dismay of everyone involved, this plan will, unfortunately, result in 6000 roles being curtailed across all parts of the business. 15,000 employees responsible for international operations will be put at a disadvantage, being affected at the hands of prolonged stand-downs until things go back to normal. A minimum of 1,450 non-operational corporate roles and 1,500 jobs will be lost across airports other than that, jobs involving a fleet presentation, baggage handlings, ramp operations, and cabin crew seeking will see 1050 job losses as a result of the Boeing-747 retirements. Some contractors and IT staff will also have to be laid off.

Engineering sections will also suffer around 630 jobs lost as a result of the Boeing-747 being retired, with 2900 pilots currently on stand-by and 220 pilots losing their jobs. It is to be added, however, that, of the company’s 29,000 staff, around 8000 will be expected to return by the end of July, and this number will gradually increase to 15,000 by the end of 2020 and further still as international travel is allowed again. Qantas is hoping to reach 21,000 active employees by June 2022.

Alan, having made this decision, considers an environment where revenue will be decreased, and early adaptation will result in a more improved and competitive airline in the long run. However, Alan will remain and follow his duties of being CEO at least until the end of FY23 to allow the company to maintain stability as this challenging period is navigated and hopefully overcome. In spite of all of these changes, Alan said the company is hopeful about what is to come, saying that despite the hard choices being made, they are fundamentally optimistic about the future.

Interim Dividend Canceled

Having taken this new direction means the next dividend distribution will be canceled. On March 19, Qantas had announced that it would have to suspend its $201 million dividend payments until September. But that decision was also updated on June 25, with the company announcing the cancellation of all it all together and will use the funds in an attempt to maintain financial resources. Further decisions regarding future dividends will be made according to QAN’s finances.

Australian Industry News Analysis in collaboration with https://www.kosec.com.au/

Michael Kodari from KOSEC / Kodari Securities is an influential figure in Australian Finance and a reliable contributor to accurate financial news.

 

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