|Bid||3.9800 x 0|
|Ask||4.0100 x 0|
|Day's range||3.9600 - 4.0800|
|52-week range||2.0300 - 7.4600|
|Beta (5Y monthly)||1.08|
|PE ratio (TTM)||7.22|
|Earnings date||20 Aug 2020|
|Forward dividend & yield||0.27 (6.64%)|
|Ex-dividend date||02 Mar 2020|
|1y target est||7.08|
Qantas Airways Ltd <QAN.AX> could restart 40-50% of its domestic capacity in July if states relax border controls, and expects to offer low and flexible fares without social distancing measures to stimulate travel demand, its chief executive said on Tuesday. The airline will introduce measures on board from June 12 such as providing masks and cleaning wipes to ensure safe travel and give passengers peace of mind during the pandemic, but will not leave middle seats empty. "Social distancing on an aircraft is impractical," Qantas Chief Executive Alan Joyce told media.
(Bloomberg) -- Brookfield Asset Management Inc. and Indian aviation tycoon Rahul Bhatia are considering bids for Virgin Australia Holdings Ltd., joining a score of suitors seeking to capitalize on Asia’s first airline casualty from the coronavirus pandemic, people with knowledge of the matter said.The Canadian investment firm, which manages more than $540 billion, is planning to make its own indicative offer before the end of this week, according to the people. Brookfield could team up with other bidders later in the process, one of the people said, asking not to be identified because the information is private.Bhatia, the billionaire co-founder of Indian budget carrier IndiGo, is separately evaluating information on the Australian airline and finalizing his strategy for a potential bid, according to another person. The proposal is being prepared by Bhatia’s private holding company InterGlobe Enterprises Ltd. and doesn’t involve IndiGo, the person said.No final decisions have been made, and there’s no certainty the deliberations will lead to an agreement, the people said. Representatives for Brookfield and InterGlobe Enterprises declined to comment. IndiGo denied an earlier report it plans to bid for Virgin Australia.Brookfield’s interest was reported earlier by the Australian Financial Review, which cited unidentified people.Virgin Australia has attracted at least 20 potential buyers as its administrator, Deloitte, races to sell the airline within two months of its collapse. Deloitte is seeking indicative bids by Friday and binding offers in June, targeting a deal by the end of that month.The airline, which was started by Richard Branson, collapsed owing A$6.84 billion ($4.4 billion) to more than 10,000 creditors, overwhelmed by a near-halt in revenue as the coronavirus shut down travel.Virgin Australia reported seven consecutive annual losses before it folded. At the time of its first flight from Brisbane to Sydney in 2000, Virgin had just two aircraft and one route.Under Chief Executive Officer John Borghetti, who took over in 2010, the airline transformed itself into a full-service carrier, selling business-class seats across its domestic network. Borghetti went head-to head against his old employer, Qantas Airways Ltd.The huge investment required for the battle, and a capacity war with Qantas, spawned almost endless losses. Borghetti’s successor Paul Scurrah, who took the helm in 2019, was in the middle of a turnaround plan to reduce debt and costs when the coronavirus emerged and swamped any hopes of a recovery.A plan to operate Virgin as a low-cost carrier may run into opposition in Australia. Such a strategy would hand almost all the corporate and business-class market to Qantas, which itself owns budget carrier Jetstar. The head of Australia’s competition watchdog, Rod Sims, has already called for Virgin to return as a full-service carrier. The government also said it wants the country to have two competing airlines.(Updates the story throughout with Brookfield’s plans to lodge an indicative offer)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- What do you get for the airline magnate who has everything? If he knows what’s best for him, the answer isn’t “another airline.”Rahul Bhatia, the biggest shareholder in India’s biggest carrier, InterGlobe Aviation Ltd., is evaluating data and considering a bid for Virgin Australia Holdings Ltd., a person familiar with the matter told Anurag Kotoky and Angus Whitley of Bloomberg News. He would bid via the vehicle he uses to invest in IndiGo, as India’s biggest budget airline is known, the person said.It’s not hard to see the attractions. IndiGo’s home market is fiercely competitive, with half a dozen major carriers duking it out even after Jet Airways India Ltd. was forced into bankruptcy last year. Jet was squeezed between the loss-making full-service flights offered by state-owned Air India Ltd. and IndiGo’s own devastatingly cheap fares. Australia, on the other hand, is more or less a duopoly between Virgin Australia — which was itself put into a coronavirus-induced administration last month — and a dominant Qantas Airways Ltd. That should offer the opportunity for the two carriers to cozily carve up the market between themselves.Opportunities to break into the Australian airline game don’t come along often. The last time was when Ansett Australia Ltd. collapsed just days after the Sept. 11 attacks. A fledgling Virgin Australia, at the time a budget carrier named Virgin Blue, was perfectly placed to capitalize.Despite the vast disparity in population, Australia isn’t that much smaller than India as a market, thanks to greater wealth and a higher propensity to fly. Traffic last year came to about 71 billion revenue passenger kilometers, roughly the size of the fast-growing Indian aviation market five years ago. It also has close links to India, raising the prospect that an Australian network could feed passengers via international flights into IndiGo’s domestic web of destinations. Indian-Australians make up close to 2% of the population, and the number of non-resident Indians — the subset of the diaspora who are most likely to take regular flights back to the motherland — is the largest after the U.K., U.S., Singapore, Nepal, and the Persian Gulf countries.(1)For all that, Bhatia should pass up the chance to have a crack at Virgin Australia. In its ruthless efficiency in controlling its home turf, Qantas behaves a lot like IndiGo, one reason that Australia has for a decade been a graveyard for ambitious foreign airlines. His best opportunities lie closer to home.Both Qantas and IndiGo exploit a rare and priceless phenomenon known as the S-curve, by which dominant airlines end up with more connections and a greater share of traffic the more planes they add. That makes life extremely difficult for competitors.Singapore’s attempt to set up a bridgehead via an outpost of its budget carrier Tiger Airways Holdings Pte. ended up being sold to Virgin Australia back in 2014 at a valuation of A$2.50 ($1.62), after years of struggle. AirAsia Group Bhd. showed fitful interest in establishing a bigger presence Down Under, but ended up mostly steering clear.Virgin Australia itself spent years trying to break the Flying Kangaroo’s dominance with the backing of strategic overseas players. Ordinary shareholders hold less than 10% of the now-worthless stock, with the balance being held by a rotating cast of carriers including Etihad Airways PJSC, Singapore Airlines Ltd., Hainan Airlines Holding Co., Qingdao Airlines, Air New Zealand Ltd., and Richard Branson’s Virgin Group itself. Their indifference to profits enabled Virgin to compete against Qantas for longer than many would have thought possible, but it hasn’t been enough to win the battle.The distance between Australia and India is too great to make connecting the two markets an easy play, too. IndiGo’s aircraft of choice is the Airbus SE A320neo, which some budget carriers have been using to open up longer-range routes — but it would be operating at its limits even on flights between India and Perth, which is a long way from Australia’s more populous east coast. That would necessitate Bhatia either using an unfriendly hub airport in Southeast Asia, or investing in bigger, more expensive twin-aisle jets.IndiGo is so powerful in its home market that it’s natural its owners should be looking at overseas expansion — but as we’ve argued, the better place for that is in the Persian Gulf, where a far bigger Indian diaspora is closer to home and largely flown across the Arabian Sea on Gulf carriers such as Emirates.With a pandemic-induced passenger drought threatening most non-state-backed players in the global aviation market, this is no time for Bhatia to go planting seeds in Australia’s barren soil.(1) India also counts foreign citizens with Indian ancestry as "Persons of Indian Origin" but they're as a group probably less likely to travel to the subcontinent frequently.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Large institutions resist change, and nowhere more so than in the way they pay their bosses.Despite scandals and crises, executive compensation has remained too generous, too opaque and too loosely linked to long-term goals. The upheaval wrought by the Covid-19 pandemic provides the opportunity for a remake: Simpler, smaller packages with a more significant non-financial component would mark a welcome shift.The figures are stark. Inflation-adjusted pay for chief executives at the largest U.S. companies climbed 940% between 1978 and 2018, the Economic Policy Institute found, using the more conservative of two methodologies, in a report published last year. The S&P rose about 700% over the same period. Worker wages, meanwhile, increased by less than 12%.The size of pay packages is only the most eye-catching part of the problem: Far more important is how corporate leaders are remunerated, and whether that lines up with long-term goals, financial and otherwise. As a gauge, consider the increase in attention paid to environmental, social and governance, or ESG, targets. This has permeated incentive plans in only a minority of cases. A mere 9% of FTSE All World companies link executive pay to ESG criteria, mostly occupational health and safety concerns, according to Sustainalytics. Even for those, only a tiny proportion of total remuneration is affected.The good news is that the current cataclysm is prompting better behavior than we saw during the 2008 financial crisis, with at least some leaders moving swiftly to share the pain of employees. Qantas Airways Ltd. Chief Executive Officer Alan Joyce, whose airline has furloughed most of its workforce, won’t take any salary until the end of the financial year in June. Elsewhere in aviation, Ryanair Holdings Plc CEO Michael O’Leary has taken a steep pay cut, along with staff. General Electric Co.’s Larry Culp will forgo his full wage for the rest of 2020.Granted, they have better cushions than most employees and there is self-interest here, given the outsize importance to corporate valuations of intangible assets like reputation. Yet these are welcome gestures, not least when compared to those who have rushed to cut costs and take government help without trimming at the top. They aren’t markers of real change, though. It will be far more significant to see how boards manage short- and long-term incentive decisions for 2020. Shareholder advisers are already warning against excesses in variable pay. There is one bigger reason to anticipate substantial change: timing. The coronavirus has hit at a critical moment for shareholder capitalism. It’s been two years since BlackRock Inc. co-founder Larry Fink told CEOs to contribute to society. The Business Roundtable last year had executives pledge to build companies that serve “all Americans.” ESG demands are louder, as seen at last month’s annual general meeting of Australian oil and gas outfit Santos Ltd. It was happening already; now it’s happening faster.Xavier Baeten, professor in reward and sustainability at Vlerick Business School in Belgium, says companies are likely to see pressure from at least two quarters. First, shareholders may well balk at remuneration that rises when dividends dissipate. Second, governments could make aid dependent on firms not paying bonuses. Society may also find hefty bonuses more unpalatable after months of clapping to support underpaid nurses and carers.So what are the changes to aim for? Pay is inherently complex, and investors can make multiple and often competing demands of one board. It’s also true that despite plentiful research demonstrating that pay isn’t a significant motivating factor for chief executives, the quantum is unlikely to change dramatically. There is, though, plenty of scope to improve structure.Most obviously, a post-pandemic world could do with a stronger push from board members (and investors) for increased transparency and simplicity, with fewer, more individually tailored goals. Then, we need share allocations that encourage executives to think over longer time-frames, and don't just result in colossal pay awards in boom years. This could mean more restricted stock that has to be held for a period even once employment has ceased. It could mean extending ownership requirements. There are plenty of pitfalls: Proxy advisers will need convincing, and long holding periods can mean executives discount the perk. The advantages are significant, though.A third step could be to increase the non-financial portion of targets to as much as half of the total. Again, these aren’t popular with advisers who dismiss what they see as soft goals. Still, as compensation consultant Seymour Burchman of Semler Brossy argues, they reinforce strategy if tailored, specific and measurable. Dutch bank ING Groep NV, for example, uses retail customer growth as one measure. Others might use customer satisfaction, investment targets, total recordable injury frequency rate or, as Semler Brossy’s Kathryn Neel points out, corporate reputation, as gauged by a third party. ESG would be part of this, in a testable and appropriate form that measures opportunity as well as risk. For resources companies, that could be a multiplier that nullifies all bonus in the event of an accident. For a drinks company, it might be water management, or reducing plastic. Combined with the obligation to hold shares for longer, the incentives align.Shareholders’ meetings globally have been delayed or moved online because of the coronavirus, but there is plenty more disruption to come. Boards, the ultimate arbiters, will find decisions this year have lasting consequences. In a crisis, underestimate pay at your peril.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Qantas Airways Ltd said on Monday it had advised Airbus SE and Boeing Co that it did not expect to take delivery of any new planes in the near term as it grapples with a plunge in demand due to the coronavirus pandemic. The airline had expected to add three Boeing 787-9 jets to its fleet by the end of 2020 and to start taking delivery in August of the first of 18 Airbus A321neos due by 2022. There is no longer a specific timeline for them to arrive because the market is too uncertain, a Qantas spokesman said, confirming a report on travel website Executive Traveller.
(Bloomberg Opinion) -- These are the most consequential months in the Reserve Bank of Australia's 60-year life, but the economic downturn of historic proportions means nobody is celebrating this diamond jubilee. So deep is the damage inflicted by the Covid-19 pandemic that the central bank's greatly enhanced profile in the economy and markets will be with us for years. That's consistent with a tremendous expansion in the role of the state as leaders Down Under endeavor to simultaneously restore growth and contain infections. The combative relationship between the federal and powerful provincial governments has given way to national priorities, blurring distinctions between responsibilities. In effect, the modus operandi of what was once seen as an economic nirvana has undergone a revolution. Projections suggest much of this is warranted; that makes it no less momentous. Gross domestic product may shrink 10% before bouncing in the second half of the year, the central bank warned Friday in its quarterly outlook. The late growth spurt won't be enough to prevent an annual retreat of 6%. Australia’s GDP hasn't gone south by anywhere near that much since the RBA opened its doors in early 1960. Prior to the central bank’s inception, monetary policy was conducted by the government through what’s now the publicly traded Commonwealth Bank of Australia. The last recession produced a decline of 1.1% in 1991, which seemed severe living through it. The growth streak that followed has gone down in global economic folklore. Buoyed by closer trading ties with China and an unparalleled resources boom, Australia even skated through the Great Recession without two consecutive quarters of contraction. That’s over. The unemployment rate will climb to 10% over coming months and still exceed 7% at the end of next year, under the RBA’s main scenario. It was 5.1% at the end of 2019. The profound shock of the pandemic quickly pushed the bank to cut borrowing costs to almost zero and undertake quantitative easing to suppress the yield on government bonds. Governor Philip Lowe signaled that ultra-easy policy will remain until the country is well down the recovery road. The RBA is also purchasing bonds sold by state governments, saying Tuesday that it will further expand the range of securities eligible for its market operations to include investment-grade debt issued by non-bank companies. While the bank makes its monetary-policy decisions independently, this effectively leaves the six state and two territory administrations more dependent on national authorities and extends the reach of the public sector into corporate life. The former diminishes, at least temporarily, pretensions that local administrations have of separation from the center. The latter is a step toward reversing the intellectual and policy thrust of successive governments since the 1990s, when assets like Qantas Airways Ltd. and Telstra Corp. were unloaded.This rebellion against precedent extends to the political process. Prime Minister Scott Morrison has created a so-called national cabinet to deal with Covid-19. The team of rivals brings state premiers and chief ministers into the federal sanctum, meeting to co-ordinate on business and school closures and prospective re-openings, as well as hospital operations. During the emergency, this elite group has become the core Australian decision-making body. Several of the regional premiers are from the Australian Labor Party, which opposes Morrison’s conservative bloc in the federal parliament. To appreciate the radicalism, imagine Donald Trump bringing New York’s Andrew Cuomo and California’s Gavin Newsom, both Democrats, to the cabinet table in Washington. An effort at seamless decision making addresses the needs of the moment. The public rightly has little time for jurisdictional disputes, even through the constitution gives states a lot of authority. Critics contend that the new set-up is eroding democracy: The national cabinet makes decisions, yet is accountable to no single legislature. Such unity of purpose likely has a finite life. At some point, the electoral cycle will resume. Templates for new national political and economic structures now exist that would have unthinkable a year ago. Catastrophic bushfires over the Christmas-New Year holiday period midwifed a big federal intervention in firefighting, an area states have historically dominated, and led to the biggest military deployment since World War II. In the monetary arena, the ground has been laid for long-term policy activism and rock-bottom rates with potentially far-reaching consequences. Consumers, businesses and governments now know the RBA will backstop them in ways few contemplated not so long ago. And the longer Lowe and his successors keep rates low, the greater the risk of a backlash should they have to change course and begin withdrawing stimulus — an antipodean taper tantrum. Not the anniversary year the RBA anticipated. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Australia on Wednesday said it has reached agreements with Singapore Airlines <SIAL.SI> and Qantas Airways Ltd <QAN.AX> to carry foods to Asian markets, part of a government initiative to help businesses hit hard by the new coronavirus. Qantas from Thursday will begin a weekly flight from the country's north to Hong Kong carrying seafood and other produce from Queensland state, while Singapore Airlines will carry food from the state of South Australia, the government said. Australia's trade minister, Simon Birmingham, said the agreements would help re-establish direct freight routes for exporters who have been struggling to ship overseas during the pandemic.
Qantas Airways Ltd said on Tuesday it had secured enough funding to last it through the end of next year, boosting its shares, as it reviews its fleet with the expectation that most international travel could take years to rebound. The Australian carrier secured A$550 million ($352.99 million) against three of its Boeing Co 787-9 aircraft and said it could raise another A$2.7 billion from other aircraft assets if needed. "This means we are very well placed to ride this out and to take part in the recovery when it arrives," Qantas Chief Executive Alan Joyce told reporters.
(Bloomberg) -- Qantas Airways Ltd. warned public appetite to fly overseas could take years to return as the airline borrowed yet more funds to weather aviation’s biggest-ever crisis.The Australian carrier said Tuesday it raised an additional A$550 million ($354 million) to ride out a near-halt in passenger revenue because of the coronavirus. Qantas shares climbed after the airline said it now has enough liquidity to withstand current conditions until December 2021.“It will be some time before total demand reaches pre-crisis levels,” Chief Executive Officer Alan Joyce said in a statement. “With the possible exception of New Zealand, international travel demand could take years to return to what it was.”Governments worldwide have devoted more than $85 billion to propping up airlines as the virus wipes out travel demand and grounds fleets. With a drawn-out recovery looming, Joyce said Qantas’s fleet, routes and expenditure will all have to reviewed.“We need to think about what the Qantas Group should look like on the other side of this crisis in order to succeed,” he said.Qantas in March furloughed most of its 30,000-strong workforce and scrapped virtually all international flights. On Tuesday, the carrier extended international flight cancellations until the end of July and put on hold its Project Sunrise plan for direct services connecting Sydney with New York and London.Still, new infections in Australia have slowed to a trickle and the government is due to discuss a potential international air corridor with New Zealand on Tuesday. Both countries have managed to avoid the explosive growth in cases seen in other nations.New Zealand Prime Minister Jacinda Ardern has labeled the proposal a “trans-Tasman travel bubble.” If successful, the agreement could be a model for other countries to restart international services once the pandemic is over.Qantas said it borrowed against three wholly owned Boeing 787-9 jets in its latest round of fundraising. That followed the A$1.05 billion raised in March against seven planes. Domestic flight cancellations were extended by a month to the end of June.Qantas shares were up 2.4% at A$3.65 at 2:09 p.m. in Sydney, paring an earlier gain of 5.6%.Click here to read details from the statementThe crisis hitting the sector has already claimed Qantas’s main domestic rival Virgin Australia Holdings Ltd. The Brisbane-based carrier collapsed into voluntary administration last month under A$6.84 billion of debt and administrators are looking for new owners.Virgin Australia Becomes First Asia Airline to Fail After VirusCost cutting at Qantas should reduce its weekly net cash burn to A$40 million by the end of June, the airline said. As of May 4, total short-term liquidity stood at A$3.5 billion, including a A$1 billion undrawn facility.Qantas said it’s currently operating around 5% of its pre-crisis domestic passenger network and 1% of its international network.(Adds Project Sunrise in sixth paragraph and updates share price.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
May.04 -- Alan Joyce, chief executive officer at Qantas Airways Ltd., discusses raising an additional $550 million in liquidity, the potential for opening up markets outside of Australia and New Zealand, consolidation and what the airline would look like after the coronavirus pandemic. He speaks on “Bloomberg Markets: China Open.”
May.04 -- Alan Joyce, chief executive officer at Qantas Airways Ltd., discusses raising an additional $550 million in liquidity and the potential for opening up markets outside of Australia and New Zealand. He speaks on “Bloomberg Markets: China Open.”
Mark, 34, quit his job as a town planner in London last year to start flight-training school, buoyed by a conditional offer of employment with budget carrier easyJet at a time when the airline industry was desperately short of pilots. The coronavirus pandemic has changed all that, with carriers furloughing pilots by the thousands and airlines including easyJet, Delta Air Lines Inc and Germany's Lufthansa forecasting they will be smaller for years until demand fully returns.
The Qantas Airways (ASX:QAN) share price has risen by 19.5% over the past month and it’s currently trading at 3.62. For investors considering whether to buy, h8230;
Virgin Australia's <VAH.AX> entry into administration could give any successful bidder for the country's second-biggest airline the chance to free it from a complex ownership structure that has slowed decision making and been blamed for years of losses. Hit hard by the fallout from the coronavirus pandemic, Virgin appointed an administrator on Tuesday to try to sell the airline and more than 10 parties have expressed an interested in recapitalising it. Its losses are largely down to its international and budget divisions and efforts to turn the airline around have been often stymied by a board that includes representatives from the five foreign investors who control more than 90% of the company.
Momentum is sticky and persists for longer than investors tend to anticipate. The downside of this is that stocks with recent negative momentum are likely to c8230;
Australia's Qantas Airways Ltd <QAN.AX> said on Monday that pilots had voted in favour of a pay deal that would pave the way for the airline to fly the world's longest non-stop commercial flights from Sydney to London. Due to the coronavirus pandemic, the airline has cancelled all its international flights through at least the end of May and pushed a decision on whether to order up to 12 Airbus SE <AIR.PA> A350-1000 planes for the Sydney-to-London flights to the end of the year from an earlier deadline of end-March. "The extraordinary circumstances facing aviation has seen Airbus agree to extend the deadline on our decision to purchase the A350s so we can both focus on navigating the coronavirus crisis," Qantas Chief Pilot Dick Tobiano said in a statement.
Qantas Airways Ltd <QAN.AX> on Wednesday secured A$1.05 billion ($627.8 million) against its aircraft fleet to help it ride out the coronavirus crisis, sending its shares soaring, as airlines in the Asia-Pacific region sliced away capacity and jobs. Qantas raised the financing against seven of its Boeing Co 787-9s for up to 10 years at a 2.75% interest rate, showing there is still low-cost funding available to airlines with strong fundamentals even as the global industry calls for more government aid to help replace an estimated $250 billion of lost revenue in 2020. "Over the past few years we've significantly strengthened our balance sheet and we're now able to draw on that strength under what are exceptional circumstances," Qantas Chief Executive Alan Joyce said in a statement.
Taxiways, maintenance hangars and even runways at major airports are being transformed into giant parking lots for more than 2,500 airliners, the biggest of which takes up about as much room as an eight-story building with a footprint 3/4 the size of an American football field. The number of planes in storage has doubled to more than 5,000 since the start of the year, according to Cirium data, with more expected to be parked in the coming weeks as carriers like Australia's Qantas Airways Ltd and Singapore Airlines Ltd proceed with further announced cuts to flight schedules. Its northwest landing runway, including taxiways and bridges, has been converted to an aircraft parking lot for Lufthansa, Condor and other airlines.
(Bloomberg Opinion) -- Much as Pan Am Corp. was an emblem of the first wave of global aviation, Emirates has dominated the world airline industry for a generation. Its announcement that almost all passenger flights will be suspended from Wednesday marks the death knell of that era.The Dubai-based carrier is the largest airline by international passenger traffic, with the capacity to move its customers 391 billion seat-kilometers last year. In terms of cross-border traffic, that’s twice the capacity of any U.S. airline and about a seventh more than the three European carriers that are its closest international competitors in terms of scale.The shutdown of that vast network is a hammer-blow not just for the industry but for people around the world. There’s a reason so many airlines are (like Emirates) state-owned, or have special rights and duties to their home countries written into their constitutions. They aren’t just a leisure service, they’re a piece of vital national and international infrastructure that can provide an airlift service in an emergency. Emirates’ initial announcement of a complete suspension of flights Sunday was subsequently updated to say that some destinations would remain open “having received requests from governments and customers to support the repatriation of travellers.”Businesses that thrive on bustling cross-border traffic are inevitably going to struggle in current conditions. Cathay Pacific Airways Ltd., another carrier that, like Emirates, has no domestic aviation market, last week announced it was cutting 96% of capacity in April and May, which is as close as you can get to shutting down. Qantas Airways Ltd. is also ending international flights and Emirates’ local rival Etihad Airways PJSC has made drastic cuts to its schedules.We’ve seen something like this before. Pan Am went bankrupt amid the collapse in air travel that accompanied the 1991 Gulf War; its competitor Trans World Airlines Inc. entered the first of many Chapter 11 processes around the same time. Another wave of bankruptcies and rescue takeovers followed after the Sept. 11 attacks, and again after the 2008 financial crisis. More than a decade on from that, we’re probably overdue for another shakeout.That certainly looks like what we’re going to get. “Most airlines in the world” will be bankrupt by the end of May at current rates of cash burn, according to consultants CAPA Centre for Aviation. The industry needs about $200 billion in bailout money if it’s to survive, according to the International Air Transport Association, the largest group representing airlines.Emirates has some serious weaknesses as it approaches this perfect storm. Dubai’s status as the preeminent hub in the global network of transfer passengers, and its fleet of capacious twin-aisle jets, are as much a product of the recent era of promiscuous globalization as Pan Am’s fleet of gas-guzzling early-model 747s were a product of the era before the 1973 oil crisis.On an immediate level, that means it lacks even the meager domestic aviation cashflows that rivals in the U.S., China and elsewhere can fall back on. In the longer term, there’s the risk that Covid-19 and the Trump-driven trade wars that preceded it raise drawbridges across the world, leaving behind a dark mentality of xenophobia as gates are closed to outsiders. In that grim future, Emirates’ Benetton catalog-tinged vision of a multicultural world shaking hands at Dubai airport looks as outdated as, well, shaking hands.Even if things return to a semblance of normalcy at some point, Emirates’ golden years are behind it – a fact that neatly coincides with the upcoming retirement of Tim Clark, who led the airline since its inception.Rivals with bigger domestic markets have already been looking to use longer-haul 787s and A350s to skip past hub airports like Dubai altogether. The A320neo and the 737 MAX, should it recover from its current woes, will also bite off pieces of medium-haul traffic with budget carrier-style prices, undermining key routes into Europe and South Asia.Emirates still has some advantages in facing the coming conflagration. Unlike Etihad and Qatar Airways, it has never reported a loss in financial reports dating back to 1989. That’s a fairly extraordinary result for an airline that’s been around for so long — although there’s still a week still to go on its current financial year.Most importantly, though, the only shareholders it answers to are Dubai’s ruling Al Maktoum family. For decades, they’ve regarded the carrier as a crucial element of their oil-poor emirate’s strategy for a long-term economic future. With crude prices currently south of $30 and Gulf monarchies edging alarmingly close to burning through their own petrocash piles, that bet looks as sound as it’s ever been.If aviation is about to be crippled by a virus-driven resurgence of nationalism, it’s the carriers most closely bound up with their governments that stand the best chance of survival.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
SYDNEY/SINGAPORE, March 20 (Reuters) - The collapse in global passenger flights has left airlines with fresh challenges: how to manage overhedged jet fuel positions as oil prices crashed to just a third of some contracts agreed in anticipation of rising prices and solid air travel demand. With a sharp plunge in oil prices and the rapid spread of the flu-like virus globally raising uncertainty when and how strongly air travel demand will recover, airlines are now left counting the cost of their heavy fuel hedging. "Given the substantial reduction in our capacity, we do have an overhedged position and that will come at a cost... that we'll realize in the next couple of months," Australia's Qantas Airways Ltd Chief Financial Officer Vanessa Hudson told analysts this week.
(Bloomberg Opinion) -- One of the biggest repercussions from the Covid-19 outbreak in Australia ought to be the end of its island mentality. A near three-decade expansion fed a myth of invincibility that now seems to be coming to an end. Luckily, central bank chief Philip Lowe never fully bought into this hype, and has rightly accelerated plans that he'd been considering for some time to restore the economy. Let’s hope he’s not too late.On Thursday, the Reserve Bank of Australia deployed its remaining conventional monetary ammunition to offset a slowdown, amid predictions that gross domestic product would shrink this quarter and next. The RBA cut its main rate to almost zero, announced it will try to hold the three-year government bond yield at about 0.25% and unveiled a raft of support for banks. The federal government — long averse to the idea of prolonged deficits, and convinced surpluses equate to economic awesomeness — has also pledged to do its part.In response to the pandemic, Australia has effectively closed its borders, banned most gatherings of 100 people or more and declared a human biosecurity emergency. The country has 565 confirmed cases of the virus and six deaths. Cruise ships are clogging Sydney Harbor, Qantas Airways Ltd. furloughed most of its 30,000 employees, the cricket season has been curtailed and the southern island state of Tasmania has all but shut itself off from the mainland.Even before the virus arrived, it was a tough start to the year. A horrific bushfire season killed at least 28 people, destroyed an area almost the size of England and left thousands with respiratory issues. Fire has long been part of life on the continent, but with a population concentrated in cities and towns along a sliver of the east coast, it rarely touched the lives of urban Australians. Many saw their childhood seaside vacation spots ravaged and cities blanketed with noxious haze, as I’ve written.It’s not that a three-decade expansion shouldn’t be lauded — it even captured the attention of big names at the Federal Reserve — but the hubris surrounding it ended up blinding some officials to the crumbling economic conditions around them. The idea that the ultra-easy monetary policy deployed in the world’s biggest economies during the Great Recession would one day be required in Australia was met with disdain. The country basked in the new model it represented: a developed-world economy, with Western institutions, at home in the Asia Pacific and buoyed by proximity to China and other fast growing Asian markets.The Kool-Aid wasn't just being guzzled in economic circles. Hollywood stars, feted novelists, chefs and the 2000 Sydney Olympics fueled this sense of a magical wonderland. Australia even had a world-beating cricket team from about 1989 until fairly recently, trouncing the old rival England consistently until 2005. The team won five World Cups between 1987 and 2015, more than any other nation. Indeed, the idea Australia is somehow set apart from the rest of civilization has been a recurrent theme since British settlement in 1788: Early Sydney was largely built by convict labor.The one person who never appeared to buy into the propaganda, however, is RBA Governor Philip Lowe, who began his stint in 2016. Lowe has made the point in speeches that, within those sacramental recession-free decades, there have been distinct periods when activity had slackened and sped up. He has said that immigration has played a big role in keeping GDP expanding.The decision-making time frame has collapsed upon Lowe, as it has with his counterparts abroad. He spent a lot of time worrying about the consequences of too-low inflation and began laying the groundwork for the possibility of zero rates last year, when many people thought rate hikes were surely the next step. Lowe also tried to steer the public toward the idea that something more might also be needed, be it QE, yield-curve control or negative rates.Thursday's actions were a vindication of Lowe's foresight. But the crucible arrived far sooner, because of a public-health emergency, than anyone could have anticipated.With the Reserve Bank of New Zealand also considering QE, zero rates and unconventional policy — mainstream in Europe, Japan and the U.S. — will now be taken out for a spin in countries that are light on manufacturing and without a long history of big deficits. Perhaps a new kind of antipodean exceptionalism is emerging.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.