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3 key takeaways from the Qantas (ASX:QAN) AGM

Female Qantas staff member holding AU and English flags in airport departure lounge
Image Source: Qantas

The Qantas Airways Limited (ASX: QAN) share price has been a positive performer on Friday following the release of its annual general meeting presentation.

In afternoon trade the airline operator’s shares are up 2.5% to $4.54.

Listed below are three key takeaways from today’s annual general meeting that I think investors ought to know about:

The reinvention of Qantas.

Noting that the IATA estimates that global travel demand could take up to four years to fully recover from the pandemic, Qantas’ CEO, Alan Joyce, spoke about the need to reinvent the airline following COVID-19.

He commented: “The only antidote when you’re faced with less revenue is to lower your costs. We have identified $15 billion in cost savings over the next three years, mostly through reduced flying activity. We’re also targeting $1 billion in ongoing cost improvements from Financial Year 23.”

The chief executive advised that Qantas has stopped cash spending on sponsorships, is renegotiating arrangements with travel agents, and reviewing its ground handling operations. The latter could help save up to $100 million a year.

Though, he stressed that the airline needs “to do this without losing sight of the things that make the Qantas Group an Australian icon and one of the world’s best airlines.”

International travel in 2021.

Qantas’ Chairman, Richard Goyder, revealed his frustration that certain domestic borders remain closed, but was encouraged by the New Zealand travel bubble and potentially others to come.

He said: “By contrast, the lifting of some restrictions with New Zealand is very encouraging. So, too, is the potential for travel bubbles with parts of Asia. Both Qantas and Jetstar are keeping a close eye on new markets that might open up as a result of these bubbles – including places that weren’t part of our pre-COVID network.”

“By early next year, we may find that Korea, Taiwan and various islands in the Pacific are top Qantas destinations while we wait for our core international markets like the US and UK to re-open. We’re already doing this domestically – adding new destinations that suddenly make sense – and it’s the kind of flexibility we need to make the most of any cash positive opportunities in the year ahead,” Mr Goyder added.

Domestic recovery behind schedule.

CEO, Alan Joyce, advised that Qantas was expecting the group domestic business to be operating at about 60% of pre-COVID levels by now. However, the continued border closures mean capacity is now below 30%.

This delay has resulted in a $100 million negative impact on earnings for the first quarter of FY 2021. It will also have an impact in the second quarter as well. However, Mr Joyce remains confident the recovery is coming and Qantas is well-placed to ride out the storm.

He commented: “Essentially, this is a timing issue. We know the upswing will materialise – just later than planned. Importantly, we have the liquidity to manage this. And, because our cash flow from continuing operations is positive before one-offs like redundancies, we could continue at this level of flying for a very long time – if we had to.”

“Assuming Queensland opens to New South Wales in coming weeks, we expect Group Domestic capacity to reach up to 50 per cent by Christmas,” he added.

Finally, Mr Joyce believes Qantas is well-positioned to grow its market share in the domestic market. He explained: “Over time, our domestic market share is likely to increase organically from around 60 per cent to around 70 per cent, as our main competitor changes its strategy.“

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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