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Qantas makes plea for border reopening as it warns of $1.5bn loss

Qantas has appealed to Australia’s government to reopen international borders by the end of the year, warning that the country risks being left behind as other parts of the world begin easing Covid-19 restrictions.

The airline made the plea on Thursday as it forecast a more than A$2bn (US$1.5bn) loss in the 2021 financial year ending in June, hundreds more job cuts and a two-year wage freeze. But it also disclosed that it had stopped burning through cash thanks to a rebound in its domestic operations.

“No one wants to lose the tremendous success we’ve had at managing Covid but rolling out the vaccine totally changes the equation,” said Alan Joyce, Qantas chief executive.

“The risk then flips to Australia being left behind when countries like the US and UK are getting back to normal.”

Canberra plans to keep Australia’s borders closed until mid-2022 even though it expects to complete its vaccination rollout by the end of the year. The country remains largely free of Covid-19 infections owing to border closures and strict hotel quarantine.

But the airline industry has intensely lobbied authorities to speed up the border reopening, arguing that delays risk hampering the post-pandemic recovery. Jayne Hrdlicka, Virgin Australia chief executive, sparked controversy this week by calling for the border to reopen even if “some people may die”.

“Covid will be part of the community, we will become sick with Covid and it won’t put us in hospital, and it won’t put people into dire straits because we’ll have a vaccine,” Hrdlicka said, adding that the number of people who died would be “way smaller than with the flu”.

Joyce told reporters that the border closure was hitting the 50 per cent of Australians who were either born abroad or whose parents were. He said a successful vaccine programme should enable borders to reopen safely by the end of 2021.

Qantas said domestic operations were operating at 95 per cent of their pre-Covid capacity and the airline expected growth in travel within Australia in 2022.

Assuming no future lockdowns, Qantas forecast underlying earnings before interest, tax, depreciation and amortisation to be A$400m-450m this year. The figure excluded items such as writedowns and costs associated with job cuts.

Shares in Qantas, which has received more than A$2bn in taxpayer funds through Covid-19 support programmes, jumped almost 4 per cent on Thursday.

Angus Hewitt, an analyst at research group Morningstar, said the domestic business appeared on target to recover completely by the end of the financial year.

“But the big question is around the return of international travel,” he said. “We forecast negligible international travel [outside a travel bubble between Australia and New Zealand] in fiscal 2021 and expect the recovery of international flying to prove considerably more gradual.”

“While Qantas are expecting borders reopening from December 2021, we anticipate international capacity not recovering to fiscal 2019 levels until fiscal 2024,” said Hewitt.

Qantas has twice pushed back the resumption of international flights because of border closures. It hopes to begin flying internationally in January, although this target hinges on a change of heart from Canberra.

The airline said it would implement a wage freeze and seek several hundred additional redundancies as it aims to cut A$1bn in annual costs by 2023.

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