Qantas has just revealed a post-coronavirus recovery plan, which will see the airline grounding 100 planes for around 12 months (and in some cases even longer), and laying off around 6,000 employees.
In this post:
Qantas’ future fleet plans
With Australia expected to remain closed to visitors from most countries throughout 2020 and beyond, Qantas has a bleak outlook on a recovery for travel demand. As a result, Qantas will significantly adjust its fleet. What should we expect?
- Qantas will ground up to 100 aircraft for up to 12 months (some for longer), including most of the international fleet; the majority of planes are expected to ultimately go back into service, but some leased aircraft may be returned as they fall due
- Qantas will retire all six Boeing 747s immediately, six months ahead of schedule
- Airbus A321neo and Boeing 787-9 deliveries will be deferred
Even most Qantas 787s will be grounded for quite a while
And then there’s the A380…
Could Qantas’ A380s never fly again?
Qantas notes that while most long haul aircraft are expected to steadily return to service over time, there is significant uncertainty as to when flying levels will support the fleet of 12 Airbus A380s.
These planes will be idle for the foreseeable future, “which represents a significant percentage of their remaining useful life.”
The carrying value of the A380 fleet, spare engines, and spare parts, will be written down to their fair value, resulting in an estimated non-cash impairment charge in FY2020. This represents the majority of the asset impairment charge of 1.25-1.4 billion AUD.
With Qantas having no plans to bring the A380 back into service in the next few years, one has to wonder if the A380 will ever make a return at the airline. This is also the only plane in Qantas’ fleet to feature first class, so the end of the A380 would also spell the end of Qantas first class.
And to think, Qantas just spent tens of millions of dollars reconfiguring A380s with new cabins.
Qantas has just outfitted some A380s with new cabins
Qantas isn’t alone in reconsidering the A380 as a result of the current pandemic. Air France retired its entire A380 fleet as a result of the current pandemic, and Lufthansa doesn’t plan on flying its A380 fleet in the next couple of years either.
Qantas will lay off 6,000 staff
Qantas currently employs around 29,000 people. Of those:
- 8,000 are expected to return to work by the end of July 2020
- 15,000 are expected to return to work by the end of December 2020
- 21,000 are expected to return to work by June 2022
Therefore the company is proposing redundancies for around 6,000 roles, while 15,000 employees will temporarily be managed through a mix of stand down, annual leave, and leave without pay.
Qantas will start consulting with unions, but the plan is for redundancies to impact the following areas of Qantas and Jetstar:
- Non-operational – at least 1,450 job losses, mainly in corporate roles, due to less flying activity
- Ground operations – at least 1,500 job losses across airports, baggage handling, fleet presentation and ramp operations due to less flying activity
- Cabin crew – at least 1,050 job losses due to early retirement of the 747s and less flying activity; further 6,900 cabin crew will be on stand down from July 2020 onwards
- Engineering – at least 630 job losses due to 747 retirement, less flying activity (particularly of the wide body fleet) and redistribution of work from Jetstar’s Newcastle base to make better use of existing maintenance capacity in Melbourne
- Pilots – at least 220 job losses mostly due to early retirement of the 747s; a further 2,900 pilots will be on stand down from July 2020 onward
6,000 Qantas employees will be made redundant
Bottom line
Australia more or less has coronavirus under control, and that’s also largely thanks to shutting off from the outside world. While it’s nice that life in Australia can mostly return to normal, closed borders aren’t ideal for Qantas.
It’s not surprising to see Qantas take such drastic action, given that it’s unlikely most international travel will be allowed anytime soon.
Unfortunately Qantas will be laying off about 6,000 employees, and also plans to keep 100 planes grounded for around a year. Not only that, but there are no plans to bring the A380s back into service in the next few years, which sure makes you wonder if they’ll ever fly again.
What do you make of this development from Qantas?
Qantas has just refurbished their A380s a few months ago. If Qantas doesn't return the Airbus A380s to service in few years, it will be a waste of money. Some of their aircraft are only 9 years old and is unnecessary to retire them.
@Tony
Oh god Hell NO I hate the 777 with a passion! Especially the 10 abreast in economy. Glad Qantas never ordered them.
Qantas made a mistake buying the A380 over the 777 in the first place, as admitted by their management. Guess that decision 20 years ago is still biting them today.
New Zealand and, to a certain extent, Australia, are banking on vaccine development. If none is forthcoming in the next 12-24 months, then what? Continued total isolation from the much of the world? Many countries appear to have made the decision to just live with Covid-19 using social distancing, masks, etc. No one really knows for sure what the "best" decision is -- time will tell, as this is an evolving situation. For example, CDC...
New Zealand and, to a certain extent, Australia, are banking on vaccine development. If none is forthcoming in the next 12-24 months, then what? Continued total isolation from the much of the world? Many countries appear to have made the decision to just live with Covid-19 using social distancing, masks, etc. No one really knows for sure what the "best" decision is -- time will tell, as this is an evolving situation. For example, CDC has just removed age as a risk factor, a major about face.
@ bruh, Qantas was very choosy with the routes it operated the 380 on, and it was mainly from SYD/MEL-LAX and SYD/MEL-SIN-LHR, where they could dispatch with the F and J cabins as full as possible every day. The vast majority of the wealth in Australia is concentrated in Sydney and Melbourne (despite some notable exceptions in Perth). And as anyone who's ever looked for award/upgrade seats to F and J on those routes, particularly...
@ bruh, Qantas was very choosy with the routes it operated the 380 on, and it was mainly from SYD/MEL-LAX and SYD/MEL-SIN-LHR, where they could dispatch with the F and J cabins as full as possible every day. The vast majority of the wealth in Australia is concentrated in Sydney and Melbourne (despite some notable exceptions in Perth). And as anyone who's ever looked for award/upgrade seats to F and J on those routes, particularly LAX, can tell you, they sold most of the seats, every day.
Qantas has had no choice to but to make these decisions. Virgin on the other hand went into liquidation so their international flights are unlikely ever to come back. I'm not sure if everyone realises but Australia by government decree has had all its international borders closed since mid March apart from repatriation flights. Qantas has been grounded internationally now for a considerable period of time and only essential (almost none) domestically. Whilst the Australian...
Qantas has had no choice to but to make these decisions. Virgin on the other hand went into liquidation so their international flights are unlikely ever to come back. I'm not sure if everyone realises but Australia by government decree has had all its international borders closed since mid March apart from repatriation flights. Qantas has been grounded internationally now for a considerable period of time and only essential (almost none) domestically. Whilst the Australian govt has officially only said borders are closed till mid September the 'talk' is that it will be until mid 2021 at the earliest. So, while people around the world are playing tennis, going to nightclubs or complaining about having to wear a mask, Australians literally are prohibited from leaving the country.
Of course these unforeseen circumstances also give QF the opportunity to realign their business under the guise of CV19 but at the same time, there is financial govt support here for individuals as well as business so making those decisions now whilst simultaneously Capital raising (for securitisation purposes) is clever on their part.
Australians are renowned travellers so many will happily board a plane again and as approximately 50% of the population is only 1st generation, the links to family abroad are enormous. Having said that, whilst Aussies would be happy to board planes, until the US, UK and Europe start to reverse their trends of the virus I don't imagine anyone would want to take their chances in any of those places.
@Bruh, I heard Joyce say this morning that it is possible the 380 will come back but it sounds like he is focussing more on the 787 which I know he loves but I hate but as he rightly says, it is smaller, greater range and more flexibility. He also said they were burning $40million per week vs AA - $880 & BA - $300 - and while its a lot, felt that the prospect of Australia's domestic borders opening soon will help put them into a good place going forward but even that is a way away!!
@PTO
Love your sense of humour. Refreshing, mate! Everybody takes this blog too seriously some times.
I must admit the translation almost was more understandable. ;-)
@Jason - depends, what authoritarian country are you self deporting to?
I read today Qantas does not expect Australia will open borders before July 2021 - in the best case scenario..
If Australia has the virus under control someone needs to let the Premier of the state of Victoria know that.
@Anup. 787-9s. Pretty much their only option.
What aircraft do you think they'll use on the A380 routes starting next year?
Even more regrettable now that my A380 went mechanical last December with me booked in First Class... I ended up on their 787 instead so I could take my trip at all...
Hoping they do return to the sky at some point; while it will take adequate treatment/vaccination to restart Int'l travel in full, I don't think that will take the years that some groups are thinking
If Joe Biden gets elected on November 4th does the Corona virus magically disappear on November 5th?
Or do we have to wait until inauguration day?
To be honest, this will also be the end of the road for Qantas A380 :( C'mon, let's be practical here. Airlines failed to make money with the A380 even in the good days. And given that the whale will be grounded for years will just increase costs for Qantas (maintenance costs, grounding costs, airport charges etc.) And when these planes get back to skies, it wouldn't be able to compensate for all the money...
To be honest, this will also be the end of the road for Qantas A380 :( C'mon, let's be practical here. Airlines failed to make money with the A380 even in the good days. And given that the whale will be grounded for years will just increase costs for Qantas (maintenance costs, grounding costs, airport charges etc.) And when these planes get back to skies, it wouldn't be able to compensate for all the money Qantas burnt on grounding them and by then, we could even see even more fuel-efficient airplanes and it would get to a point where the A380s are gas-guzzlers. I hate to say it, but Goodbye Qantas A380!
@Susan International to International transit where immigration is not required is allowed in Australia. However, do note NZ have their own border controls so you need to check that. The best case (as always) is check with your airline and the Australian border force website
@Katie, in layman's terms, it means that Qantas has reduced the value of the assets that make up the A380 fleet (airframes, engines and spare parts) to reflect their current market value (which has been lowered because they are no longer as useful to Qantas as they were before COVID-19). That reduction in value will need to be reflected on the company's financial statements and it will show as a charge against their earnings, which...
@Katie, in layman's terms, it means that Qantas has reduced the value of the assets that make up the A380 fleet (airframes, engines and spare parts) to reflect their current market value (which has been lowered because they are no longer as useful to Qantas as they were before COVID-19). That reduction in value will need to be reflected on the company's financial statements and it will show as a charge against their earnings, which means the difference in value between what the A380 assets were worth before COVID and what they are worth now, will be subtracted from the company's profit. Realistically, this year, it means they will add this negative value to their losses.
So, if Qantas made a profit of $100 in 2020 from their operation (i.e. flying people and cargo, selling miles, etc.), but reduced the value of the A380 assets by $50, then Qantas' profit would be reported as $50. If Qantas reports a loss of $100 in 2020 from their operation and reduces the value of the A380 assets by $50, they would report a loss of $150.
@Katie The on paper value of the A380 fleet, spare engines, and spare parts, will be lowered to represent the price at which they can most likely be sold at, resulting in accounting (or on paper but no cash effect) value loss in FY 2020. This makes up the majority of the loss in asset value of 1.25-1.4 bilion AUD.
Hope that helps:)
@PTO you know what she meant... She would like an explanation in layman's terms. Not all of us who read OMAAT are in the business/finance world. In the amount of time it took you to copy that into google translate, you could have helped her understand but instead you chose to be snarky.
We bought tickets to fly to NZ to visit our children before lockdown.Now we have flight credits and are waiting for Qantas to open up again. Would a flight with a stopover in Sydney also be treated as if Australia is the destination? Susan. South Africa
@ Katie
It is in English and quotation marks and probably wording taken directly from the notes to financial reporting to Qantas shareholders.
This is what it would look like in a non-English language:
“El valor en libros de la flota del A380, los motores de repuesto y las piezas de repuesto se reducirán a su valor razonable, lo que dará como resultado un cargo por deterioro no monetario estimado en el año...
@ Katie
It is in English and quotation marks and probably wording taken directly from the notes to financial reporting to Qantas shareholders.
This is what it would look like in a non-English language:
“El valor en libros de la flota del A380, los motores de repuesto y las piezas de repuesto se reducirán a su valor razonable, lo que dará como resultado un cargo por deterioro no monetario estimado en el año fiscal 2020. Esto representa la mayoría del cargo por deterioro de activos de 1.25-1.4 mil millones de AUD ".
Having flown the UK to Australia several times a year. I’m sure the ex pat population will definitely start flying again. Maybe not as much as before but that’s still a lot of volume.
“ The carrying value of the A380 fleet, spare engines, and spare parts, will be written down to their fair value, resulting in an estimated non-cash impairment charge in FY2020. This represents the majority of the asset impairment charge of 1.25-1.4 billion AUD.”
In English please Lucky!!
Australians had been starting to believe the worst is over; unfortunately an upswing in cases in Melbourne in the past week has eroded that optimism. Domestic flights had been increasing, but now some restrictions and travel warnings are back in place.
QANTAS has nowhere to go: the borders won’t open until there’s a vaccine. That has been confirmed by the national government. The ‘rivers of gold’ domestic routes MEL-SYD-BNE are operating at about 5%,...
Australians had been starting to believe the worst is over; unfortunately an upswing in cases in Melbourne in the past week has eroded that optimism. Domestic flights had been increasing, but now some restrictions and travel warnings are back in place.
QANTAS has nowhere to go: the borders won’t open until there’s a vaccine. That has been confirmed by the national government. The ‘rivers of gold’ domestic routes MEL-SYD-BNE are operating at about 5%, and even then largely on the basis of government funds for freight/essential services, rather than a commercial basis.
QANTAS has gone from being one of the world’s most profitable carriers to effectively broke in just 4 months. They’re not alone in that regard, but it’s hard to see a quick recovery given its unique circumstances.
I would say if they can keep the job losses at 6,000 , in the absence of a bailout, they’ll have done very well.
Regarding the major kangaroo route using the a380s. Over 1 million British born people live in Australia, then add a million more with the Germans, Italians and Greeks.
Nearly all of these people still have close family ties in Europe. So I cannot see long term the demand staying lowered. Many also have ageing parents etc who will miss seeing their grandkids this year if Australia remains closed off. We are talking about a lot...
Regarding the major kangaroo route using the a380s. Over 1 million British born people live in Australia, then add a million more with the Germans, Italians and Greeks.
Nearly all of these people still have close family ties in Europe. So I cannot see long term the demand staying lowered. Many also have ageing parents etc who will miss seeing their grandkids this year if Australia remains closed off. We are talking about a lot of people who will want to come and see family as soon as it is possible and safe to do so again.