The Qantas Airways Ltd [ASX:QAN] share price fell 2% today after it was announced 2,500 Qantas and Jetstar front-line crew would be stood down.
QAN shares were trading for $4.50 a share at time of writing.
It’s the air giant’s most recent attempt to salvage its losses from COVID’s devastation on the aviation industry, in particular the recent border closures enforced across the entire country.
Source: Tradingview.com
Qantas has estimated that employees will only be stood down for two months, but if the virus continues to wreak havoc around the world and stop us from flying, then there’s no telling when all of this will come to an end.
In recent company announcements, Qantas revealed how they were coping and what we can expect to happen next…
A difficult but necessary decision
Qantas Group CEO Alan Joyce expressed sorrow over the stand down, yet was also adamant in pressing the reality of the situation.
‘This is clearly the last thing we want to do,’ Joyce commented, ‘but we’re now faced with an extended period of reduced flying and that means no work for a number of our people.’
Joyce suggested that the company had been bearing the brunt of lockdowns since the COVID crisis first hit. As a result, they could no longer afford to comfortably absorb this cost.
Allegedly, the company ‘continued paying [their] people their full rosters despite thousands of cancelled flights.’
Several thousand Qantas and Jetstar employees who usually work on international flights are still on standby in the wake of the global pandemic.
Is this the final quandary for Qantas?
Qantas believes that when borders do reopen, travel will be in huge demand.
But the key question is when?
At this stage, no one knows.
We do know, however, that once other states open back up to South Australia and Victoria — and this is rumoured to happen in the next week or so — domestic travel should resume.
Joyce estimates this will ‘come back to around 50 or 60 per cent of normal levels.’
Whether that’s enough to keep investors holding on is another story.
Qantas concluded their announcement optimistically and encouraged Australians to take full advantage of the vaccine rollout and get the jab.
‘“Higher vaccination rates are also key to being able to fly overseas again” Joyce added, “and finally getting all our people back to work.”’
The road to recovery appears long and hard not just for Qantas but for every single company dealing in aviation, events, entertainment, hospitality, and other major industries most affected by the pandemic.
But does this mean that investors should run for the hills?
The answer is not clear.
Those who have stuck by for the long haul could potentially benefit when the world resumes normal operations.
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Regards,
Lachlan Tierney,
For Money Morning
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