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Qantas Orders Airbus Aircraft For World's Longest Non-stop Flight; Sees Profit In FY23

Qantas Group (QAN.AX,QUBSF.PK) confirmed an order for 12 Airbus A350-1000s to conquer the final frontier of long-haul travel and enable non-stop flights to Australia from any other city including New York and London from late 2025. It also announced the renewal of its narrow body jets with firm orders for 20 Airbus A321XLRs and 20 A220-300s as its Boeing 737s and 717s are gradually retired. The company expects return to profitability in fiscal year 2023.

In its trading update for third quarter of fiscal year 2022, the Australian national carrier said it expects a strong, sustained recovery in travel demand as Australia transitions to living with COVID.

The return of domestic travel demand ahead of expectations, solid international performance, and strong contributions from Qantas Loyalty and Freight drove significant levels of positive free cash flow in the quarter. Free cash flow is expected to increase further in fourth-quarter of fiscal year 2022.

Revenue growth during the third quarter has led to a rapid reduction in the Group's Net Debt, from A$5.5 billion at 31 December 2021 to A$4.5 billion by the end of April 2022 to below pre-COVID levels. This compares to a peak of more than A$6.4 billion at the height of border closures.

The Group still expects to post a significant full year Underlying EBIT loss for fiscal year 2022 that includes the worst of the Delta and Omicron impacts as well as one-off restart costs. But its business is on track for the second-half of 2022 Underlying EBITDA of between A$450 million to A$550 million based on current expectations.

The Group's capital expenditure forecast for fiscal year 2023 is unchanged at A$2.3 - A$2.4 billion.

Group domestic capacity is expected to be 105 per cent of pre-COVID levels in the fourth quarter of fiscal year 2022, rising to approximately 110 per cent (revised down from around 115 percent) for the first quarter of fiscal year 2023. Group international capacity is expected to be just under 50 percent by the end of the fourth quarter, rising to around 70 per cent for the first quarter of fiscal year 2023.

In addition, Qantas Group has announced several major fleet decisions that will reshape its international and domestic networks over the next decade and beyond. The decisions will also improve journeys for millions of people every year, and create over 1,000 jobs as well as many career progression opportunities at the national carrier.

Domestically, Qantas will take delivery of 20 Airbus A321XLRs from fiscal year 2025 and 20 A220s from fiscal year 2024. The order also includes 94 purchase order rights as the airline's existing 737s and 717s are gradually retired over the next decade.

Internationally, Qantas will order 12 Airbus A350-1000s to operate Project Sunrise - the long-held plan for non-stop flights from Australia to destinations including London and New York from fiscal year 2026, starting in Sydney.

Jetstar is on track to take delivery of 18 Airbus A321LRs from July 2022. In addition, 20 of Jetstar's existing A320neo orders will be converted to A321XLRs for delivery from the second half of calendar 2024. Qantas expects to take delivery of its three remaining Boeing 787-9s in the second half of fiscal year 2023. Two of Qantas' Airbus A380s have returned to service with a total of six reactivated by the first half of fiscal year 2023.

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