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Qantas Cuts Domestic Capacity; Announces A$5,000 Bonus For 19,000 Employees

Australian airline Qantas Group (QAN.AX,QUBSF.PK) said it cut its domestic capacity levels for fiscal year 2023 to assist with the recovery of sustained high fuel prices. But it did not change to its international capacity plans. It is on track to return to underlying profit in fiscal year 2023. About 19,000 employees will receive a A$5,000 bonus. Qantas plans to start direct flights from Perth to Jakarta and Perth to Johannesburg in November 2022. Jetstar CEO Gareth Evans has made the decision to step down from his current role in December 2022.

Qantas said it is adjusting its domestic capacity levels. For July and August, an additional 5 percentage points of capacity will be removed on top of the 10 per cent announced in May. The total 15 per cent cut will also be applied to September. A cut of 10 percentage points will be applied to schedules from October through to the end of March 2023. This brings the Group's planned domestic flying down to 106 per cent of pre-COVID levels for the second quarter of fiscal year 2023 and 110 per cent for the third quarter.

However, the Qantas did not change its international capacity plans, with flying steadily increasing from around 50 per cent of pre-COVID levels currently to around 70 per cent by the end of the first quarter of fiscal year 2023 to help meet demand. This growth will continue as additional A380s are returned to service, with total Group international capacity reaching 90 per cent of pre-COVID levels by the fourth quarter of fiscal year 2023.

Qantas has announced plans to start direct flights from Perth to Jakarta and Perth to Johannesburg in November 2022. This brings the total number of new destinations the national carrier has added since Australia's borders reopened late last year to eight.

Qantas said that Gareth Evans will step down in December 2022 as the chief executive officer of its low-cost arm Jetstar. He will remain with the Group into next year to work on key projects before leaving during 2023.

Evans has served 23 years at the group, including as Chief Financial Officer, CEO of Qantas International and, CEO of Jetstar since 2017.

An internal recruitment process for the Jetstar CEO role is underway, with a handover of several months expected.

Qantas group released a market update showing its net debt - which rose to more than A$6.4 billion as the company borrowed heavily to survive the pandemic - had fallen well below pre-COVID levels to around A$4.0 billion. Travel demand remains strong and the Group is on track to return to underlying profit in fiscal year 2023.

The group still forecasts a significant full year Underlying EBIT loss for fiscal year 2022 that includes the worst of the Delta and Omicron impacts as well as restart costs, the business remains on track for the second-half of 2022 underlying EBITDA of between A$450 million to A$550 million.

Qantas Group said it will offer a one-off boost of A$5,000 to about 19,000 enterprise bargaining agreements-covered employees as the national carrier shares the benefits of its recovery.

The one-off recovery boost is in addition to permanent wage increases of two per cent currently being negotiated across the Group, which follow a two-year wage freeze for all personnel.

The payment also comes on top of 1,000 share rights awarded to non-executive employees - worth around A$4,500 per person at Friday's share price - as part of a Recovery and Retention program announced earlier this year. The shares will vest in August 2023 if key conditions are met.

Management and senior executives are not eligible for the payment.

The Qantas Group has announced cumulative losses of around A$6 billion since the start of the pandemic and expects to post another significant annual loss for fiscal year 2022 but has seen a material improvement in the second half of the year as travel demand rebounds.

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