Qantas Completes Institutional Placement, Slashes Jobs | KOSEC

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Qantas Completes Institutional Placement, Slashes Jobs

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In the past week, there have been some significant developments concerning Qantas Group (ASX: QAN). On the 25th of June, QAN announced a trading halt in preparation of an equity raising announced on the 26th of June, with an AUD1,360 million fully underwritten institutional placement, and an AUD500 million non-underwritten share purchase plan. The purpose of this plan is to recover the company during uncertain macroeconomic conditions, with a concurrent plan to cut operational costs.

QAN on the 26th of June announced the successful completion of the placement, worth AUD1,360 million underwritten for 372.7 million new shares. This was available for institutional investors at AUD3.65 per share. Institutional shareholders that use medium-sized investment brokers got priority to bid amounts on a pro-rata basis. Smaller institutions gained allocations based on the fact that they have a higher likelihood to support QAN in the long term.

The aim of this equity raising was geared towards fast recovery and strengthening balance sheets. The move represents a 25 per cent increase in total shares on issue. However, this is not as drastic as it seems, with QAN buying back around a third of their shares over the course of recent years. 94 per cent of share allocation went to existing shareholders.

Plans for a post-COVID-19 recovery are said to span over three year period with aims of AUD15 billion dollars benefitting the business. Breaking this figure down, AUD2.4 billion will be accounted for through restructuring benefits, AUD2.6 billion saved on the reduced workforce, AUD4 billion saved in activity reduction, and AUD6 billion in fuel savings. Part of this plan is to ground roughly 100 aircraft from the international fleet for 12 months or longer, which can be returned to service once global travel is allowed. Six 747s will be retired immediately, which is six months ahead of schedule.

Unfortunately, this plan will result in reductions of around 6000 roles across all parts of the business. 15,000 employees associated mostly with international operations will also be affected by extended stand-downs until normalcy returns. At least 1,450 non-operational corporate roles will be lost, along with 1,500 jobs lost across airports, baggage handlings, fleet presentation, ramp operations, along with cabin crew seeing 1050 job losses due to the Boeing-747 retirements.

Meanwhile, engineering sections will see around 630 job losses due to the B-747 retirement with 220 pilots out of work and 2900 pilots currently on standby. This decision from CEO Alan Joyce considers an environment where revenue will be lower, and early adaptation will mean a more competitive airline in the long term. This new direction means the next dividend distribution is cancelled. Wielding the double-edged sword of cost-cutting and equity raising, QAN looks to have a good plan to weather the uncertainty in the aviation industry, despite the unfortunate human impact in doing so.

By Caroline Wong 

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Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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