The Qantas Airways Limited (ASX: QAN) share price will be on watch today after the release of a market update by the airline operator.
What did Qantas announce?
This morning Qantas revealed that it has continued to strengthen its ability to deal with the short and likely long-term impacts of the coronavirus crisis.
According to the release, the company has secured a further $550 million in funding against three of its wholly-owned Boeing 787-9 aircraft. This follows the $1.05 billion raised in March against seven aircraft.
This means that its net debt is now within the middle of its target range at $5.8 billion. Pleasingly, the company has no financial covenants on any existing or new debt facilities and no significant debt maturities until June 2021.
Furthermore, management believes it has sufficient liquidity to respond to a range of recovery scenarios. This includes even the most extreme scenario of current trading conditions persisting until at least December 2021. This is based on its net cash burn rate reducing to $40 million per week by the end of June 2020.
Management also notes that it has $2.7 billion in unencumbered aircraft assets and can raise funds against these if required.
Flight cancellations extended.
In addition to the above, the company revealed that it has extended its flight cancellations from the end of May through to the end of July.
At present it is operating around 5% of its pre-crisis domestic passenger network and around 1% of its international network on an Available Seat Kilometre basis.
Though, this could change if domestic and Trans-Tasman restrictions ease in the coming weeks. Management intends to monitor the situation carefully and can increase capacity with a minimum lead time of around one week.
As a result of this, Qantas advised that the current stand down of employees will now be extended until at least the end of June.
Outlook.
Qantas Group CEO Alan Joyce said: "Our cash balance shows that we're in a very strong position, which under the circumstances we absolutely have to be. We don't know how long domestic and international travel restrictions will last or what demand will look like as they're gradually lifted."
Mr Joyce suspects that international travel markets may be weak for some time to come.
He said: "Australia has done an amazing job of flattening the curve and we're optimistic that domestic travel will start returning earlier than first thought, but we clearly won't be back to pre-coronavirus levels anytime soon. With the possible exception of New Zealand, international travel demand could take years to return to what it was."
In light of this, Joyce and his team are working hard to prepare Qantas for what comes next.
"We're expecting demand recovery to be gradual and it will be some time before total demand reaches pre-crisis levels. That means we need to think about what the Qantas Group should look like on the other side of this crisis in order to succeed. Fleet, network and capital expenditure will all have to be reviewed but our commitment to serve communities across Australia will not change," he explained.
