Qantas has announced it has commenced a three-year recovery plan, after reporting its full-year net profit took a 91% nose-dive to AU$124 million at the end of June 2020, a AU$1.2 billion decrease from the AU$1.3 billion restated net profit that was reported last financial year.
Underlying earnings before interest and tax (EBIT) also came crashing down, closing at AU$395 million, a 75% difference from the restated EBIT of AU$1.6 billion during the same period last year.
Revenue for the national airline came in at AU$14 billion, a 21% dip from last year's AU$18 billion.
Qantas said its three-year recovery plan will be underpinned by the "strong foundation" the company has been building since FY15 until the first half of the 2020 financial year, which included delivering over AU$3.2 billion of transformation benefits and operational flexibility.
According to the company, part of the recovery plan will involve restructuring and resizing, including increasing cost variability for IT service models, ground services equipment, and security; implementing new digital and contact centre operating models; and managing demand for corporate and IT supplies and expenses.
Additionally, Qantas is focused on enhancing its loyalty program, highlighting its plans to both return to double-digit growth by FY22 and remain flexible for restarting flying based on travel restriction changes and border openings.
Qantas added it is also on track to reach 4,000 out of 6,000 redundancies by the end of September, which is around 20% of its entire workforce and about 25% at management level. Meanwhile, the standing down of around 20,000 employees until work resumes to normal remains ongoing.
Qantas expects to save approximately AU$15 million over the recovery plan's three years, as well as AU$1 billion in ongoing annual savings from FY23.
Despite the hard fall, Qantas said the company's strong first half -- where underlying profit came in at AU$771 million -- acted as a buffer for the "near total collapse" in travel demand and a AU$4 billion drop in revenue that occurred in the second half due to the coronavirus pandemic and associated border restrictions.
The company believes that its "fast action" to cut costs and place much of the flying business "into a form of hibernation" also helped minimise the financial impact.
"The impact of COVID on all airlines is clear. It's devastating and it will be a question of survival for many. What makes Qantas different is that we entered this crisis with a strong balance sheet and we moved fast to put ourselves in a good position to wait for the recovery," Qantas Group CEO Alan Joyce said.
He pointed out, however, that if the COVID-19 crisis had not occurred, Qantas was on track to achieve a strong financial outcome.
"We were on track for another profit above AU$1 billion when this crisis struck," Joyce said. "The fact that we still delivered a full-year underlying profit shows how quickly we adjusted when revenue collapsed."
Looking ahead, Joyce said there are expectations COVID-19 will continue to have an impact and expects to report a significant underlying loss in FY21.
"Recovery will take time and it will be choppy. We've already had setbacks with borders opening and then closing again … COVID is reshaping the competitive landscape and that presents a mix of challenges and opportunities for us," Joyce said.
"Most airlines will come through the crisis a lot leaner, which means we have to reinvent how we run parts of our business to succeed in a changed market."