Wed. May 25th, 2022

The difference is that during the first two waves of the virus, the airline went to sleep – the government helped through the provision of JobKeeper support, it cut off thousands of employees, and thousands more were laid off.

The airline negotiated injecting liquidity into its balance sheet and selling excess land for more than $ 800 million to gain access to additional firepower.

But in December, Qantas brought its workforce back in the expectation that capacity levels would return to normal by the start of the 2022 calendar year. Thus, it came out of cost hibernation.

Without meaningful state aid, Qantas now has to bear its full paycheck (albeit a smaller amount than the pre-pandemic level). In addition, Qantas (and other airlines) have been hit by the rise in fuel prices, which is now approaching a seven-year high.

These increased costs can only be met by a boost to revenue.

But the expected increase in capacity has not materialized. In December, Qantas had prepared for third-quarter domestic capacity levels (January to March) of 102 percent of pre-COVID levels.

Awaiting demand for Omicron launch.

Awaiting demand for Omicron launch.Credit:Jason Syd

It has now been revised to 70 per cent. for the quarter, but it is assumed that it will be weighed for more flight at the end of the period.

And capacity is one thing, load factors another. Qantas did not reveal how full its flights were on average when it updated the market last week.

Joyce is now in the shape of being overly optimistic about returning to flight – both domestically and internationally. Sure, his predictions are based on no new COVID waves, but even with this, his capacity announcement in December looks particularly heroic at the time.

Joyce expected a big boost in demand in response to the opening of state borders. But he underestimated the reluctance of the traveling public to play a game of chicken with Omicron.

On the international front, Joyce had previously expected capacity levels to reach 30 percent in the quarter to March 2022 – a forecast revised to 20 percent last week.

It certainly will not be helped by a “do not travel” to Australia announcement from the US Center for Disease Control issued on Wednesday or similar advice issued by Europe earlier this week.

Whether Joyce’s 70 percent domestic capacity forecasts will again turn out to be optimistic will become clearer after the January holidays and the shape of the Omicron infection curve.

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