X

Qantas Airways Ltd (QAN) Q4 2021 Earnings Call Transcript

Qantas Airways Ltd (ASX:QAN) Q4 2021 earnings call dated Aug. 25, 2021.

Corporate Participants:

Filip KidonTreasurer Capital Markets

Alan JoyceChief Executive Officer

Vanessa HudsonChief Financial Officer

Andrew David — Chief Executive Officer, Qantas Domestic and International

Gareth Evans — Chief Executive Officer, Jetstar Group

Stephanie Tully — Chief Customer Officer

Analysts:

Jakob CakarnisJarden Australia — Analyst

Matt RyanBarrenjoey — Analyst

Justin BarrattCLSA — Analyst

Paul ButlerCredit Suisse — Analyst

Anthony LongoJP Morgan — Analyst

Anthony MoulderJefferies — Analyst

Andre FromyhrUBS — Analyst

Owen BirrellRBC — Analyst

Cameron McDonaldE&P — Analyst

Sam PaulCitibank — Analyst

Presentation:

Operator

Thank you for standing by and welcome to the Qantas Airways Ltd Full Year 2021 Results Investor Briefing. I would now like to hand the conference over to Mr. Filip Kidon, Head of Investor Relations. Please go ahead.

Filip KidonTreasurer Capital Markets

Good morning, and welcome to the Qantas Financial Year 2021 Results Webcast. My name is Filip Kidon and I am the Head of Investor Relations for the Qantas Group. Joining me today are Alan Joyce, the Group Chief Executive Officer; and Vanessa Hudson, the Group Chief Financial Officer. I would also like to take a moment to acknowledge the traditional custodians of the land on which we meet today, the Cadigal people of the Eora Nation, and pay our respect to elders past, present and emerging. For those dialing in and participating today, please note this webcast will be recorded and a replay will be posted on the Qantas website.

I will now hand over to Alan to commence the briefing.

Alan JoyceChief Executive Officer

Thanks, Fil. And can I thank you and your team, Fil is our new Head of Investor Relations, and him and his team have done an amazing job in the lockdown and getting this ready for today, so thank you guys. And I’m joined by Vanessa Hudson, Our Group Chief Financial Officer. So, welcome to our win zones presentation for the ’21 year. We’re doing this virtually and hopefully, this will be the last time we have to do that, and we can get everybody in this room next year in February for the half-year results. And because of COVID restrictions, it’s just myself and Vanessa that’s here in Mascot. And the rest of the GMC are joining us virtually. So we have Andrew David, who’s the Chief Executive of the Qantas Airlines and Head of Freight; Gareth Evans, Chief Executive of the Jetstar Group; Olivia Wirth, Chief Executive of Loyalty; John Gissing, Group Chief Executive of QantasLink and Head of our Support Service, including Safety and Security; Steph Tully, our Chief Customer Officer and well done to Steph this week, probably creating the best ad in Australia, an ad that’s gone viral, I think that will help us get those vaccine targets; Rob Marcolina, who is in charge of Strategy, IT and Transformation and our People Function; Andrew Parker, who is just appointed today to the Chief Sustainability Officer and he will talk about how we’re going to meet the challenges of sustainability and focus efforts post COVID and having a dedicated role on the GMC, we think is one of — shows the importance of this function of what we need to do in order to prepare for the future. And we have Andrew McGinnes, who is Head of Corporate Affairs and Government Affairs, just taken over the government affairs function and will report directly to me and the GMC; and of course Andrew Finch, who is our Legal Counsel who is in the room with us here today. So thank you for everybody for joining us, and I’ll be asking the GMC members to help answer the questions as we go through the presentation.

So the financial year of 2021 has brought the worst trading conditions in our history. International borders remained largely closed and domestic travel restrictions impacted all almost 30 days of the year, only 32 days had no travel restrictions in it. Millions of trips were canceled and thousands of our people were still down. We’ve managed huge operational challenges, but also managed to deliver on some key themes. We have implemented the first year of a three-year recovery plan. We have protected our balance sheets and we’ve maintained strong performance in loyalty and in freight. As we all know, the recovery has been choppy and we’ve said that all the way through this pandemic. But the green shoots are here. In May, domestic travel and domestic capacity was back at nearly 100% of pre-COVID level. Every time a lockdown ends, demand bounces back quickly. The next few months will not be without their challenges, but with the vaccine rollout setting a cracking pace, we are expecting a return to much better and more stable trading conditions by the end of the year. But business has been transformed and strategically we’re in a much better position than this time last year. Ultimately, this is good news for our people, our customers and our shareholders.

Now turning to the details of our results. Despite losing over AUD12 billion in revenue compared to financial year ’19, the Group’s disciplined cost control enabled it to deliver an underlying EBITDA of AUD410 million, within the guidance range provided in May. Allowing for substantial non-cost depreciation and amortization, the Group report an underlying loss before tax of AUD1.8 billion. The statutory loss before tax was almost AUD2.4 billion due to impairment of aircraft assets and previously announced restructuring costs. Underlying operating cash flow was positive. A record performance from Qantas Freight, strong cash contribution from Qantas Loyalty and a temporary recovery in domestic flying meant that the Group was statutory net free cash flow positive in the second half.

Our domestic airlines faced well documented challenges, but their contribution of over AUD200 million underlying EBITDA in the second half in the narrow windows they have to where they could actually fly, shows the earning potentials when lockdowns are behind us. Liquidity has continued to remain strong with AUD3.8 billion of cash and available facility. During the year, we processed substantial deferred payables, refunds and redundancies, which saw net debt increase to AUD6.4 billion in quarter three. Pleasingly, the return of domestic clients saw net debt rapidly decline from AUD6.4 billion in quarter three to AUD5.9 billion by the June 30. This was lower than the position at the half year. Debt reduction remains a key focus and our disciplined approach to capital expenditure shows that — this shows this commitment. Net capital expenditure for the year was AUD693 million, below the guidance of AUD750 million for financial year ’21. We launched our recovery plan a year ago and are proud to say progress is ahead of our target, delivering AUD650 million of benefits this year compared to our target of AUD600 million.

Our competitive position also remains very strong. We have around 70% of domestic capacity share, the leading premium service and low-cost carriers, the leading airline loyalty program, a cost base that has been structurally changed and record levels of customer engagement. Having shored up our liquidity at the start of the pandemic, we entered financial year ’21 with a dual focus of restructuring our business and restarting our domestic flying. Our focus has been getting our planes back in the air to generate cash and importantly to get our people back to work. With international borders closed, we saw periods of very high domestic travel demand. Our network teams managed to seize on that by announcing 46 new routes, which is frankly unheard of in such a short period of time. And it worked, because 95% of our domestic flying was cash positive, which is great news for supporting balance sheet repair.

Overall, the national carrier was also clear, as we conducted hundreds of charter and repatriation flights, many, to destinations we have never flown before. We maintained vital freight links for Australian exporters and ensured critical connectivity to our regional centers and towns. Throughout the year, we have had a clear focus on customers. We’ve helped customers with close to AUD1 billion in refunds and introduced unprecedented flexibility, so they could recover. Our Fly Well program and recent announcements on vaccine requirements and wards shows our commitment to creating a safe environment for our passengers and for our people. Qantas Loyalty expanded redemption opportunities in the air and on the ground and kept top-tier members engaged with staffing expansion. And all of the progress in financial year ’21 gives us confidence that we are — as we head into financial year ’22, we are well positioned to capture travel demand when it returns. We are now well on track to deliver AUD1 billion of permanent cost benefits by financial year ’23. Importantly, as we have done in the past, we’ve had a parallel focus on offsetting inflation to ensure these benefits are fully realized.

For financial year ’21, we achieved AUD650 million in benefits, which is ahead of the AUD600 million target we set ourself. With over 90% of the initiatives completed or initiated, we expect to achieve AUD850 million by the end of financial year ’22. Unfortunately, this has involved some very difficult decisions to reduce our workforce. It is the harsh reality of the impact the pandemic has had on our business. And we estimate that at least 8,500 people would leave the business by the end of June. This number are set up over 9,400 people. Whilst a small proportion may return with activity over time, the vast majority will be permanent reductions. The remaining transformation will come from digitization, automation and simplification across our supplier base. This includes benefits from technology transformation, reducing cost of sales, and shrinking our property footprint. All segments contribute to the AUD1 billion target. However, the vast proportion is allocated to Qantas Domestic and Qantas International, significantly improving the year on the cost performance once activity returns. We continue to measure our progress using a balanced score card. We are a year into our journey and have made good progress across our matrix. As we have outlined, our cost savings remain ahead of target and we are confident our unit cost reductions will be met once activity returns. Balance sheet repair has commenced and while the current lockdowns may delay this, we remain confident of meeting our leverage targets by the end of calendar year 2022. We have restructured our fleet, deferring the new deliveries, retiring the 747 and hibernating the A380.

The connection to our customers remains as strong as ever with record satisfaction across Qantas, Jetstar and Loyalty. Our customers trust us, and at the time of uncertainty, believed in our safety principles remains key. Understandably, employee engagement has been impacted by the uncertainty of stand-downs, but it is expected to improve. We know for our people there is nothing more important than seeing our planes back in the air. Our commitment to act responsible remains at the forefront of what we do. We know this is important to our shareholders, to our customers and to our people. We were one of the first airlines to commit to net zero emissions by 2050 and the first airline Group to cap net emissions at 2019 level. Our customer offsetting program uptake is amongst the highest in the world. Over the next 12 months, we plan to take this even further. We will review our pathway to 2050, updating our climate risk analysis and developing interim targets. We will continue to work with partners to investigate opportunity for the commercialization of sustainable aviation fuel in Australia. And there is no doubt the consequences of the pandemic have been profound, particularly on our people. We remain focused on getting all of our people back to work. And our focus on cash-positive flying ensures that we will do that sooner. For those impacted by stand-downs, we’ve applicated for industry and income support and partnered with over 300 organizations to assist with secondary employment of our staff. And, of course, nowhere was our community commitment more visible than working with the government on hundreds of repatriation flights to bring Australians back home. The spirit of Australia remains stronger than ever.

I’ll now hand over to Vanessa who will take you through the details of the Group’s results. Vanessa?

Vanessa HudsonChief Financial Officer

Thanks, Alan, and good morning everyone. Throughout this presentation, like we did in the first half, we will be comparing the Group and the segment performance to pre-COVID levels. FY ’19 was the last full financial year unaffected by the pandemic and will be used for comparison purposes. Despite the setback of multiple lockdowns during FY ’21, the Group reported an underlying EBITDA of AUD410 million. Depreciation and amortization non-cash charges continued to impact the Group’s profitability. Underlying EBIT was a loss of AUD1.5 billion. After interest charges, the Group reported an underlying loss before tax of just over AUD1.8 billion. At a statutory level, the Group reported a AUD2.4 billion loss before tax. This included AUD525 million of items not included in the underlying results.

The statutory operating cash flow was an AUD386 million outflow and net capital expenditure was AUD693 million. Liquidity remained strong at AUD3.8 billion, with cash of AUD2.2 billion at 30 June. We increased our revolving facilities to AUD1.6 billion in the first half and these remain undrawn and available should we need to use them. I will go into more detail on the key cash movements in a moment. Net debt reduced in the second half to AUD5.9 billion, above our optimal target range of AUD4.5 billion to AUD5.6 billion. Debt reduction is our main focus and we are confident of meeting our net debt target by the end of FY ’22. You can also see on this slide some key metrics compared to pre-COVID levels. ASKs were down 81% due to the low level of flying. Revenue was down AUD12 billion or 67%. Group operating expenses were also down 62%, reflecting our ability to variabilize cost when travel remained low.

Now turning to the profit bridge on Slide 11. Comparing to pre-COVID profitability in FY ’19, the overall decline in Group total revenue was approximately AUD12 billion. This was partially offset by an AUD8.9 billion reduction in expenses. Fuel, manpower, aircraft operating variable and other expenses all reduced. This included the benefits from the restructuring program. However, the savings could not offset the significant decline in revenue. So the result for the year was an underlying loss before tax of just over AUD1.8 billion. This compares with an underlying profit before tax of AUD1.3 billion in FY ’19.

This next slide shows the items not included in the underlying result for the year. The key callouts from this are, AUD319 million for redundancies and restructuring costs incurred as part of the recovery plan and non-cash impairments of AUD257 million, including a further impairment to the Australian dollar market value of the A380 fleet, inclusive of two hauls, which have been retired and will not return to service.

Now turning to slide 13, this shows the key movements in our cash position over the second half. With debt reduction commencing in the second half, financing cash outflows totaled AUD652 million, including a AUD330 million repayment of an Australian dollar bond, which matured in June. Through our disciplined approach to capital allocation, investing cash outflows for the half were limited to AUD208 million, the majority of which related to capitalized maintenance on aircraft. Like the first half, the underlying operating cash flow was positive at over AUD1.3 billion, including the strong contributions from Freight and Loyalty and the ongoing rebuild of revenue received in advance. The statutory net free cash flow was also positive, even after allowing for one-off outflows of AUD837 million for redundancies, refunds and deferred payables. Details of the movement in our net debt position are shown further on Slide 14.

Now turning to the detail of the segment performance, and I’ll hand back to Alan.

Alan JoyceChief Executive Officer

Thanks, Vanessa. We’re now on Slide 16 of the large presentation. Qantas Domestic generated positive underlying EBITDA of AUD159 million. In the context of only 50% of pre-COVID flying, it is a very good result and was underpinned by cost variabilization and network agility to respond to numerous border changes. The business saw a particularly strong fourth quarter when borders were opened and led by strong leisure and business demand growth. Capacity actually grew to 86% of pre-COVID levels and seat factor rose to 64%. Coupled with stability in average payers, it gives us great confidence in the future.

As outlined previously, approximately AUD300 million of the AUD650 million in restructuring benefits achieved in financial year ’21 were delivered in Qantas Domestic. The significant cost base transformation has improved its competitive position and its new premium compared to competitors has also grown. These measures will support our ambition of hitting an 18% margin target by financial year ’24. With the recovery in corporate and SME demand ahead of expectations, our corporate position has also improved. We’re winning a — we won a total of 34 new accounts. Off note has been the strength in resource markets, which has seen additional A320s deployed to the West Coast of Australia to meet the rising demand. The ongoing international border closures changed patterns of demand and with a flexible fleet that included access to Embraer E190s, Qantas Domestic launched 27 new routes. During the year, periodic border closures meant that many routes were uneconomical. With the support of the government’s regional and domestic aviation network support programs, we were able to maintain service to ensure vital links were maintained. And customer and NPS remained strong, driven by clear product offerings, including lounges and onboard free Wi-Fi.

Now on to International. Similar to the first half, Qantas International was profitable at the EBIDTA level as a record profit from Qantas Freight continued to provide a natural hedge to the passenger business. In an environment when almost all international passenger services stopped, demand for dedicated freighters remained strong. And the Group’s existing aircraft and the A330 passenger aircraft were deployed with greater frequency. This included flights to service the government’s International Freight Assistance Mechanism for key sectors like agriculture and fisheries, to ensure exports were maintained.

In the domestic market, surge in e-commerce trends also saw Qantas Freight maintain its leadership, underpinned by long-term agreements with its key customers. Given growing customer needs, it’s expanded its fleet with the first of three converted A321 freighters delivered during the year, and the second aircraft has just been delivered in recent days. Meanwhile, the international passenger business remained largely grounded, maintaining readiness for a restart, and progressing restructure program were approximately AUD250 million of benefits delivered in financial year ’21.

Trans Tasman flying was limited with capacities averaging 40% of pre-COVID levels in quarter four. The charter repatriation of freight services represented 8% of the flying performed pre-COVID and limited domestic flights by international aircraft were also operated. They provided work for our crew, maintaining their recency and continued to enable a substantial amount of the fleet to be operationally ready. Coupled with ongoing work on maintaining — expanding its joint business agreements, Qantas International remains well positioned for restart on which we will talk about shortly. The Jetstar Group reported an underlying EBITDA profit of AUD2 million, excluding its share of losses from Jetstar Japan. The Australian domestic business also benefited from strong leisure demand, the effect of cost variabilization and AUD70 million of recovery program benefits saw it deliver the positive EBITDA of AUD145 million for the full year.

The fourth quarter was particularly strong with capacity growing to 202% of pre-COVID levels in May and the domestic business has been profitable at the EBIT level for the quarter. Seat factors grew to 74% and pleasingly, ancillary revenue per passenger also grew 33% versus pre-COVID level. The EBITDA profit of the domestic businesses covered the losses from the Australian International and the Jetstar Asia businesses, which remained largely grounded. Combined with the New Zealand business, together they generated AUD143 million in EBITDA losses. Like many companies in the world, Japan has not been immune from multiple waves of lockdown. Despite consecutive years of profit prior to the pandemic, financial year ’21 saw Jetstar Japan generate losses. The Group’s share of the after-tax losses of financial year ’21 was AUD131 million. As such, inclusive of associates, the overall loss with the Jetstar Group was AUD129 million at the EBITDA level. Growth in the domestic market was supported by flexibility in fleet with 9 aircraft temporarily transferred to Australia from Jetstar Japan and Jetstar Asia. On-time performance remained strong, as well as NPS, which stood at record levels for the domestic business. With its low fare strategy, Jetstar remains well positioned to grow and to continue to benefit in the leisure-led recovery.

Now to Qantas Loyalty. Qantas Loyalty continued to provide strong and valuable cash flow to the Group with over AUD1 billion of gross receipts in financial year ’21. Pleasingly, its diversified portfolio strategy also saw a return to EBIT growth in the second half of the year. Spend on Qantas Points — spend on Qantas Points Earning Credit Cards returned to pre-COVID levels in the fourth quarter of financial year ’21 and overall share of credit card spend was maintained at an impressive 35%, as early indicators of the new credit care demand emerged. The Qantas Store and the Qantas Wine saw record points redeemed, while Qantas Insurance continues to grow.

Loyalty is continuing to do a lot to support its members and keep them engaged, things like an extension of silver, gold and platinum standard, a 50% increase in domestic redemptions, a series of domestic flights that struck a chord with high tier frequent fliers. And the recent points auction which maybe some of you took part in and had unbelievable points redemptions for things like Skybed seats and a special charter aircraft. We are confident, flight redemption activity will rebound strongly once borders open. And our new coalition partners continued to perform well with 500,000 members earning Qantas points with bp since the partnership was launched. This was launched during the pandemic, and it’s a great example of the incredible power that our program can drive for partners. We also expect an acceleration of earnings once travel activity resumes, and longer term we remain committed and confident of the target of AUD500 million to AUD600 million underlying EBIT by financial year ’24.

I now hand back to Vanessa who will take you through the Group’s financial framework. Vanessa?

Vanessa HudsonChief Financial Officer

Thanks, Alan. We are now on Slide 21. As expected, the recovery phase had a few ups and downs, and the financial framework continues to guide our decisions as we navigate this volatility to a more predictable future. The first pillar is about maintaining an optimal capital structure that minimizes the Group’s cost of capital. During the recovery phase, we have conservatively set the Group’s optimal net debt range at AUD4.5 billion to AUD5.6 billion, consistent with the invested capital position at 30 June, 2020. The second pillar is the delivery of ROIC above 10% through the cycle and the third pillar is disciplined allocation of capital. With net debt above the target range, capital has been and will be prioritized to debt reduction and investment will be constrained to minimum level.

The Group’s proactive and conservative approach to securing liquidity continues. During the year, committed undrawn facilities were increased by AUD575 million to provide access to cash liquidity for working capital shift. With title committed facilities of AUD1.6 billion remaining undrawn, this gives the Group significant financial flexibility to manage through any bumps in the recovery phase. The next material bond maturity is in May 2022, and funding markets remain open, and we will continue our approach of refinancing these bonds prior to maturity. We have retained our investment grade credit rating and we have no financial covenants, reflecting debt investor confidence in our strategy. And the Group retains a pool of unencumbered assets, including land valued at greater than AUD2.5 billion, providing another source of liquidity should we require it.

Looking at Slide 23, you can see, the Group has a track record of strong operating cash flows. The significant cash generated in the financial quarter of — the final quarter of financial year ’21 gives us confidence that future strong cash generation can return. The significant one-off outflows that impacted financial year ’21 are complete and operating cash flows can return to at least pre-COVID levels through growth in the domestic operations and the restart of international flying, recovery plan savings, cash flow benefits from deferred tax losses and working capital benefits including the ongoing rebuild of revenue received in advance associated with the return of full activity. Importantly, in line with the financial framework, management will prioritize balance sheet repair as positive cash flows return.

Financial ’21 fuel cost was AUD800 million, down AUD3 billion from financial year 2019. This included the benefit of a 74% reduction in consumption due to lower flying activity and the lower Australian dollar fuel cost. Looking ahead and subject to further border closures, the first half of financial year ’22 fuel cost is expected to be higher than the same half in the prior year, due to increased consumption.

Our fuel and foreign currency hedging is being actively managed to reflect changes in capacity that might occur due to ongoing border closures. The first half of financial year ’22, fuel is fully hedged, primarily in outright options aligned to current expectations for consumption, but providing protection from hedge losses should there be delays to the recovery. We have additional outright options to cover fuel price risk is flying increases under an accelerated recovery scenario. The financial year ’22 fuel and foreign currency hedging is consistent with our long-term approach to managing this Group. We have a bias to options to allow high participation to lower fuel prices and to accommodate a range of consumption profiles should they emerge

We have continued to be disciplined on capital spend and our capital allocation is being prioritized to debt reduction. Net capital expenditure was AUD693 million in financial year ’21, below our guidance range of AUD750 million. This primarily included capitalized maintenance on fleet and the delivery of one converted A321 freighter. Financial year ’22 capital expenditure is forecast to be around AUD800 million. Deliveries of three 789s and two A321neos have been deferred for another 12 months to meet the Group’s requirements.

During the recovery phase, our fleet strategic priorities will be focused on minimizing capital expenditure and redeploying existing fleet to where they are needed most. The core principle of the Group fleet strategy remains consistent and unchanged. The right aircraft for the right route, providing flexibility and maintaining competitiveness. During the recovery phase, we are dynamically shifting our multi-gauge fleet to meet demand. This includes the recently announced deal with Alliance Aviation to access up to 18 Embraer regional jets, the reallocation of A320s from Jetstar Qantas to service resource markets in the West, and deployment of 787s and A330 tails to support the Freight Assistance Program on behalf of the government, repatriations, or domestic flying. In short, the Group is well positioned to ramp up capacity in financial year ’22 to meet both domestic demand and the international restart.

I’ll now hand back to Alan.

Alan JoyceChief Executive Officer

Thanks Vanessa. Now turning to our outlook, now we’re on slides 28 and 29. The outlook we present today is based on the Australian government’s COVID transition plan, which sets out with the thresholds for lifting restrictions and borders opening. The important threshold in the plan is that 70% of vaccines of eligible Australians, we should see domestic borders open and by 80% conditions for an international lease standard should be met. Vaccination rates across Australia are ramping up and keeping pace with similar countries across each state. With vaccination supply plentiful from October, we believe that the threshold of 70% will be reached by the end of November and 80% by mid-December. These thresholds could be achieved earlier if rates of uptake remain at current levels. Together, this gives us confidence for network planning assumptions that all domestic borders will be open by December 1, and that gradual reopening of international borders will start from mid-December this year.

Now turning to the domestic market. State lockdowns and border closures have had a significant impact on previously disclosed Group capacity for first half of financial year ’22, with recovery delayed by approximately five months. Based on current case numbers, our network now assumes that Queensland borders will open from mid-September, while Victoria and the New South borders will open from December 1. What we mean by that is Queensland or other states not including New South Wales and Victoria. As a result, Group domestic capacity will operate around 38% of pre-COVID flying in the first quarter, 53% in the second quarter and growing to 110% in the second half of the year. Importantly, we retain agility to scale up should circumstances evolve and obviously scale down if they need to be. When borders open, we expect demand to be strong and also expect strength in the resource sector to continue through the first half of financial year ’22. Our Group domestic competitive position remains strong with leading position in the low fare and premium segments. We expect to maintain around 70% of domestic capacity share, and both Jetstar and Qantas plan to exceed pre-COVID levels in the second half of ’22.

Now turning to the International outlook, we expect international border closures and quarantine restrictions to ease once 80% of Australia’s eligible population is vaccinated in line with Phase C of the National Cabinet plan. We expect this to occur in December and as such, we are planning for the resumption of offline to key markets with a similar vaccination profile. From mid-December Qantas plans for international flying to Los Angeles, Honolulu, London, Singapore, Tokyo, Fiji, and Vancouver, as well as the resumption of the Trans-Tasman bubble. On the other hand, destinations that still have low vaccination rates, coupled with high levels of infections will now be pushed out until April 2022. This includes destinations such as Bali, Jakarta, Manila and Johannesburg. Importantly, levels of travel demand and therefore capacity levels will hinge on government decisions in accordance with the National Cabinet guidelines on alternative requirements to mandatory hotel isolation for fully vaccinated travelers. On the basis of these assumptions, The revised Group international capacity as a percentage of pre-COVID flying will be 30% to 40% in quarter three and 50% to 70% in quarter four, and accordingly, it’s an average of 40% to 55% in the second half.

Similar to approach on our domestic network, all capacity will be focused on cash generation and getting our people back to work by the end of financial year ’22. The cash burn until network restart is limited to AUD3 million per week and readiness calls covered by the government’s IAS program, the business is focused on a cost-effective approach to restarting the international flying. Supporting our intentions today, we’ve also announced that 10 of our A380s with cabin upgrades will return to service by 2024. Of these aircraft, 5 will return earlier than anticipated in financial year ’23. These aircraft will fly to Los Angeles and London via Singapore where we expect there will be enough demand to support the aircraft. The return of the A380 mean that the first class product will be returning to the skies and also means some more redemption seats will be available to our frequent flyer. It will also give us flexibility to grow capacity above pre-COVID levels on the Trans Pacific. Two of the A380s have been retired as they are surplus for the Group’s need. Well, the prospect of international travel might be a long way away. The current pace of vaccinations means we should have lot more freedoms in coming months. And we expect underlying demand to be strong, especially for people longing to see family and friends. With Australia’s only long haul premium and low-cost international airlines, we are well positioned to support that demand.

Turning now to freight on Slide 32. Qantas Freight is expected to continue to perform well. International belly space is expected to be negligible through the first half of ’22 and into the second half of ’22 until international capacity stabilizes and grows. As a result, strong international freight demand is expected to continue with peak levels expected in the lead up to Christmas. The Freight business will continue to support the International Freight Assistance Mechanism in the first half. Domestic demand for freight is also expected to remain strong due to e-commerce trends and a growing customer base. To support this, fleet growth will continue with two additional A321 freighters being added in first half of ’22. Given these trends and coupled with lower unit costs, freight profitability is expected to have structurally lifted from pre-pandemic levels. Qantas Loyalty will continue to deliver strong cash flow contributions and the earnings are expected to rebound as travel demand recovers and redemption opportunities increase. The business is positioned well with agreements with three major banks extended for multiple years. Demand for Qantas Points is expected to remain strong and this gives us confidence that Loyalty remains on target to achieve AUD500 million to AUD600 million underlying EBIT by financial year ’24.

Turning now to our outlook for financial year ’22. The Group existing undrawn liquidity facilities, proactive approach to secured funding and the ongoing strong contribution of Qantas Freight, Qantas Loyalty, and cash positive flying, ensures we have sufficient liquidity for a range of recovery scenarios. Through our improved network planning process, a multi-gauge fleet, we have the agility and flexibility to scale capacity and shift aircraft to capture changing demand patterns. Our clear brand positioning leadership in both the premium and price-sensitive markets and growing share in corporate and SME and leisure markets will ensure that we capitalize on domestic demand. We are on a path to recovery and the latest ad on vaccine effectiveness, increased supply and pace of rollout globally and across Australia gives cause for optimism. This along with our restructuring progress and the strong momentum we saw in quarter four ’21 gives us confidence that we are in the final stages of recovery and that the overall recovery plan remains on track. In addition to the information provided in the previous outlook slide, our key assumptions for financial ’22, including the estimated impact of border closures on first half, are outlined here on Slide 34.

Now, looking beyond financial year ’22, we remain committed to our long-term targets. Our ambition is to deliver best in class domestic margins for both Qantas Domestic and Jetstar Domestic businesses. We continue to believe the Australian domestic market can support these margins. When borders open, the international business will concentrate on where we have sustainable competitive advantage. This includes home market strength, taking Australians to where they want to fly and leveraging our partnerships and deploying aircraft technology that allows to efficiently fly longer distances. And for Qantas Loyalty, our growth ambition is still to achieve profits between AUD500 million and AUD600 million. And our progress on the recovery plan gives us increased confidence in the long-term future of the business.

Thank you. Vanessa and I are now happy to answer your questions. To give everyone a fair go, we’d ask you to limit your questions to one per person, though, I know with previous experience that may be a challenge. First question?

Questions and Answers:

Operator

Thank you. Your first question comes from Jakob Cakarnis from Jarden Australia. Please go ahead.

Jakob CakarnisJarden Australia — Analyst

Afternoon, Alan, afternoon Vanessa. Just on the lockdown timing and the domestic EBITDA impacts into the first half of ’22, can you just let us know how much of that is coming from forward bookings versus cancellations, and just maybe some flavor on how much is one quarter versus second quarter?

Vanessa HudsonChief Financial Officer

Jak, the EBITDA impact that was outlined of AUD1.4 billion is reflective of what we would have seen as being the actual flying revenue for the first half. It doesn’t include forward projections of revenue received in advance. We’ve calculated that based on where we felt that particularly the domestic airlines were going to be flying, which is above 100% capacity versus the prior year. So it’s a reduction in revenue of that flying to the new capacity that was outlined in the outlook statement, obviously, offset by the variable costs of that lower activity. Plus also we’ve incorporated an offset against mitigations to minimize the impact of that reduced flying, including stand-downs. So that’s the assessment that we have come up in the first half. Clearly, as our flying increases ahead of that we will have a better outcome or results in the first half.

Alan JoyceChief Executive Officer

Next question.

Operator

Thank you. Your next question comes from Matt Ryan from Barrenjoey. Please go ahead.

Matt RyanBarrenjoey — Analyst

Hi, Alan. Hi Vanessa. Just was hoping you could give us some color on what you were saying that period before the most recent lockdown. So I guess we’re talking about the Q4 period, and in particular what you were saying with your working capital/year-over-year balances. And as part of that are you sort of anticipating any changes to the booking curve, I guess people being — or booking any differently than how they used to?

Vanessa HudsonChief Financial Officer

Yes. Great question. So a couple of answers to that. First of all, what we did see in quarter four was the businesses performing incredibly well. We saw Qantas and Jetstar deliver really strong results across quarter four, and that’s very evident that we were increasing our capacity with an expectation that we were going to get very close to a 100% capacity by the end of June, and the forward bookings across both Qantas and Domestic was supporting that. We also saw a very strong EBITDA performance across the entire segments, including above-expectation performance in Freight. And also a very, very strong performance, particularly in the flying businesses in terms of cost performance. So that strength in the quarter four performance and the improvement in net debt was partially delivered by that very strong EBITDA performance. In terms of working capital benefits in quarter four, we absolutely did see a rebuild in domestic revenue received in advance. We were almost back to pre-COVID booking curves just before the Victorian lockdown at the beginning of June. And before that, just at the end of May, domestic revenue received in advance was almost back at pre-COVID levels at 80%. So I think what it does show to us that when domestic borders are open that the travel demand is incredibly strong and also that the rebuild in both working capital, particularly revenue received in advance, gives us a lot of confidence that we’ll see that when the state lockdowns ease.

Alan JoyceChief Executive Officer

Great answer. Well, to add to that is that what we’re also seeing is the recovery of different segments of the market in the order that we expected. Leisure was getting very rapidly back to pre-COVID levels. So we’re getting really strong bookings on Jetstar in May, we were back to 100% of pre-COVID levels. And we saw and had confidence if the borders have stayed open, we’ll get to that 120% that we were expecting. Pleasingly, the corporate market and the SME market was coming back. SME, somewhere between corporate and leisure, but we were seeing growth in the business market in the region of that 70% to 80% that we talked about. So what’s actually very pleasing is that we think all segments of the market has confidence from seeing — border stays open, we will recover to the levels that we were expecting and the potential to get beyond pre-COVID levels domestically is very real. Next question.

Operator

Thank you. Your next question comes from Justin Barratt from CLSA. Please go ahead.

Justin BarrattCLSA — Analyst

Good morning team. Thanks for your time today. I just wanted to ask about where booking curve sort of sits currently just in the context of vaccination rates ramping up with the potential for more of the domestic borders to be sort of more open from 2022. Are you seeing some resilience or strength in your longer-term bookings at the moment?

Alan JoyceChief Executive Officer

Well, I’m going to give Andrew David — give an opportunity for the guys to speak, Andrew David and Gareth just to talk about what we’re seeing on domestic bookings. As you could expect with the borders closed, they are not very good at the moment, which is not a surprise. But Andrew and Gareth, do you want to go? Andrew first.

Andrew DavidChief Executive Officer, Qantas Domestic and International

Yeah sure. I might go and echo the point you just made Alan. With all the borders that got close domestically and then internationally, no, we’re not seeing much in the way of long-term bookings at the moment. But we do expect that to change and we expect to see performance in domestic in line with the very encouraging growth we saw in quarter four of FY ’21. And just adding to that, I think the other factor that gave passengers, customers confidence to book was our Fly Flex and our Fly Well programs that was building our forward bookings. So, now at this stage, no, there is not a lot in the system, but we do expect it to change very, very quickly. Gareth?

Gareth EvansChief Executive Officer, Jetstar Group

Yeah, broadly the same here, where borders are shut was very little or no bookings, understandably. People do need a level of certainty to book. Where borders are — still there are markets here, we’ve got borders open; Queensland, Tasmania, South Australia, borders are open or restrictions are about to lift and bookings just remain strong for those. So at or about 2019 level. So it shows the resilience of the market. As soon as restrictions are lifted, people want to go and they are booking strong and the revenue is rolling in. But where restrictions are in place, understandably, bookings are very, very, very low.

Operator

Thank you. Your next question comes from Paul Butler from Credit Suisse. Please go ahead.

Paul ButlerCredit Suisse — Analyst

Hi there. Thanks for taking my question. Look, just given the rhetoric we’re hearing from state governments in Queensland and WA and sort of elsewhere, there seems to be some reluctance to commit to the national plan of reopening once vaccinations get to 70% to 80%. Just wondering, in the event that New South Wales state borders remain closed, and it’s the only state to stay open to international — or quarantine-free international travel, what does that mean for the viability of sort of cash positive international flying?

Alan JoyceChief Executive Officer

So I think the first thing to be said is that the National Cabinet have agreed to the framework, and I think the debate here in the last few days were over what the Gartner [Phonetic] report actually said that they wanted to make a difference with the case of starting in the 100s comparing to in the ’50s. And I think they’ve responded by saying it doesn’t make any difference and the framework for the National Cabinet still holds. So I think the federal government, the Prime Minister [Indecipherable] today made very strong statements that they believe that that will hold and that the assumptions that we’re assuming they are going to be valid. So we still see that as the prime and the key case of what will happen. And, of course, what we always maintain is the agility to be able to flex up and down if things were enough to come true that way. I do believe the upholding [Phonetic] of the motions from our advertising campaign this week, I think shows that the tide has turned on this, and is turning on this. People want to see their families for Christmas. People believe that when they hit the 80% vaccination levels, what else are we waiting to see? What else do we need in order to get our freedoms back, in order to allow us to travel again, in order to allow us to catch up again. So I think there will be massive grounds filed against these primaries, against the governments that will resist that, and so there should be because I don’t think another alternative plan that anybody else has put on the table. So, our base position is that we will get there with these borders opening up. And I will say that the bulk of our international operation is out of New South Wales pre-COVID. That’s where most of the demand, most of the traffic is. And when you look at the network that we’re proposing from the middle of December involves a daily Sydney-LA, Sydney-Honolulu, a four-a-week Sydney to Japan, and a daily from Sydney to London via Singapore or via Taiwan. So a massive part of the network is New South Wales. But if New South Wales opens up, we will get a massive influx of flyers, and that’s where the bulk of our network has always been, because that’s where the demand is. I know people in the past probably were Sydney-centric, is because of demand and the focus has always been — of the corporate market has been on Sydney, and that’s what we expect in the build-up of the network. Next question.

Operator

Your next question comes from Anthony Longo from JP Morgan. Please go ahead.

Anthony LongoJP Morgan — Analyst

Hi, good day Alan, good day Vanessa. I just had a quick question on the financial framework and confirmation around that guidance. So, I noticed there is expressions of interest to the sale of land. Is the attainment of that guidance for your net debt, is that contingent upon that sale of land ultimately happening, or is that largely based on your recovery profile?

Vanessa HudsonChief Financial Officer

Yeah, no, it’s not based on selling the land. If we get a good price for the land, because it’s not strategic we will sell, but simply, if we don’t get a good price we won’t sell. And our forecast is not based on that, it is based on the recovery plan and the outlook that we’ve presented and it will include the rebuild of revenue received in advance across both domestic and international.

Anthony LongoJP Morgan — Analyst

That’s great. So can I — just some follow-up in terms of — so I’ll take a note here of your capacity growth profiles across domestic and international. But just to remind us what maybe some of those upfront costs could be to reactivate the network please?

Vanessa HudsonChief Financial Officer

Yes. So for Qantas International, I think it’s really important to be clear that a lot of the restart costs and maintenance and training for cabin crew and also tech crew that is covered by the government’s International Aviation Support program. So if we were to see any of those slip, that cost is covered by the government, but I think that that’s actually really important. So our cost-effectiveness in restarting International is going to be very, very small. Any investments that we would be making attached to International, for example, the IATA travel pass is a part of our long-term strategic product offerings for International. So no sunk costs will be incurred.

Alan JoyceChief Executive Officer

And maybe just to emphasize there as well, I mean the government — we have been talking to the government about these plans for some time and continue to do and they’re very supportive. They think our logic is right, there’s still a lot of decisions to be made before international could open up. But the IAS program was designed to get Qantas, its people, its aircraft ready because we do need to start International as soon as we can once those decisions have been made and the government is happy to continue that support package. I will also say you will see in our statistics that we are saying that in the first half of this financial year, we’ll be operating 15% of our pre-COVID international schedule, that is under the IFAM repatriation and charter flight basis. That gets a lot of our pilots credence, gets a lot of our aircraft maintained and in fact in the next 90 days we’re doing a repatriation or charter flight every day to a range of locations around the world. So that is also a big part of us getting ready for this, and the costs that Vanessa outlined are very minimal to get our International business up and ready for the end of the year. Next question.

Operator

Thank you. Your next question comes from Anthony Moulder from Jefferies. Please go ahead.

Anthony MoulderJefferies — Analyst

Good afternoon all. If I could stay on international, obviously the recovery of international is I think something that we’re all hoping for in the timeframe that you’ve outlined. I just wanted to understand how you made the decision or the thinking behind the decision to bring back the 380s certainly earlier than we were expecting. Is that a function of demand, which would be the positive, and how do you think about the pricing of those aircraft and also what that means for the A350s? Appreciate the Project Sunrise is still a key part for international, but given the balance sheet repair is going to be the focus, are we pushing Sunrise out several more years from here?

Alan JoyceChief Executive Officer

Yeah, I might get Andrew David to answer the A380 part and I can answer, Andrew, the Sunrise part. Is it okay you start with the A380?

Andrew DavidChief Executive Officer, Qantas Domestic and International

Yeah, sure. Hi, Anthony. So, look, 380 is absolutely driven by demand in those two key markets of US, UK. So first two coming back middle of next year for the Sydney-Los Angeles operation. We believe that demand is there for the premium product bringing first class back on to that market. 74% of our demand internationally is leisure-driven and 58% of it in the premium cabin, that’s 63 first-class, about 56 business class, and that’s excluding redemptions and upgrades and I think there’ll be a high demand for redemption. So we are confident on that Sydney-Los Angeles sector. There will be demand for the 380. Similarly, for London, we’ll be bringing three more November next year to operate from Sydney through Singapore and up to London, and exactly the same drivers. A strong demand for premium product into that market and back to Australia. The other five we can flex either way depending on demand levels, bringing them all back by early 2024. The reason we’re only bringing 10 back in our 12 is simply because we’re using the opportunity to get the reconfigurations done, get the 12-year checks done and the landing gear changes done. And it means when we bring the 10 back, we can do the same level of flying we were previously doing with 12. Hence the reason for only needing 10 aircraft, not 12. Back to you Alan.

Alan JoyceChief Executive Officer

Thanks, Andrew. I might get Steph to come in and talk a little bit about the research we’ve done on the propensity to travel internationally, because there are some amazingly encouraging numbers once the borders open up. Steph?

Stephanie TullyChief Customer Officer

Yes, sure. Thanks, Alan. So we obviously been researching our customers throughout the pandemic on their desire to travel and doing that monthly and in the last couple of months, particularly for international, we’ve seen the highest demand levels we’ve ever seen. When you compare that to pre-pandemic levels of people that are likely to travel in the next 12 months, we’re seeing triple the amount of people looking to travel internationally in the next 12 months, which is extremely encouraging, particularly led by VFR and particularly led by those core markets of the US and UK, which gives us confidence to what Andrew is saying. Back to you, Alan.

Alan JoyceChief Executive Officer

Thanks Steph. And on the Project Sunrise, we’ve said that we wouldn’t revisit that until we can have certainty about the international borders opening up and so that looks like at the end of this year to early next year and we’ll be certain talking to Airbus and pilots and having a look at the business case again in the post-COVID world. And I will say that as times pass, this is pushed back anyway because of availability of the 350 and the earliest — possibly could start is ’24, ’25 and which we should be well on the way to repairing our balance sheet and should be significantly back, given our target that we set for ourselves in ’24, which we have confidence in at having a strong balance sheet by then. Next question.

Operator

Thank you. Your next question comes from Andre Fromyhr from UBS. Please go ahead.

Andre FromyhrUBS — Analyst

Hi, there. Just curious about the shape of the recovery plan. So it looks like the costs associated with implementing the restructuring has slowed down quite a bit in the second half. So should we assume that a lot of the work is done in particular at the headcount part of it and we are sort of waiting for the benefits to flow through, including sort of the comment of at least AUD1 billion by FY ’23, like what work is left to be done in implementing the restructure?

Vanessa HudsonChief Financial Officer

Yeah, I think a couple of comments on that is that we feel really confident on achieving the AUD1 billion on target by financial year ’23 and we’re ahead — and tracking ahead of target this year and also we believe will be ahead of target next financial year. The significant amount of cost associated with our recovery plan work through redundancies, of which the vast majority have already been paid, around AUD980 million last financial year. So in terms of those cash flows, they are now behind us and really it is about just fitting in the initiatives that we’ve got and seeing flying come back.

Operator

Thank you. Your next question comes from Owen Birrell from RBC. Please go ahead

Owen BirrellRBC — Analyst

Hi, Alan. So a quick question for you or maybe better for Andrew or Gareth. I’m just wondering if you can make a comment around what you’re seeing in terms of the rationality of the competitive landscape, particularly domestically. I mean, obviously, we had a period of time where a lot of people were fly again. Just wanting to get some comment on how the competitors have been performing or sort of acting in that environment.

Alan JoyceChief Executive Officer

Yeah, good question. I’ll get Andrew and Gareth. Andrew first and Gareth maybe again. Andrew?

Andrew DavidChief Executive Officer, Qantas Domestic and International

So what we are seeing from Virgin post administration is they seem to be much more focused on the middle ground with Rex and both competing for that space. The benefits we obviously have is Qantas Group is we have Qantas as a premium product at one end of the market and Jetstar as the largest and low-cost carrier at the other end of the market. We are seeing some competitive pricing out there, but what we’ve also seen is that the Qantas average fares are holding against pre-COVID levels. Our loads were down, but that’s to be expected, because we were chasing cash, we were getting aircraft in the air, as Alan said, we wanted to get our people back flying. So we would expect those large factors to build over time. As commented on before, encouragingly — the most encouraging thing out of the quarter four stats was the recovery for Qantas in the business purpose travel, back to levels of 75% of pre-COVID. And the other thing that of course gives the Qantas business a lot of confidence is the cost reduction program that we’ve driven through and that’s why we are still saying we will hit our FY ’24 target of an 18% operating margin. Gareth?

Gareth EvansChief Executive Officer, Jetstar Group

Yeah, look, I think you pretty much covered it there. Clearly, neither Rex nor Virgin are low-cost carriers. They have stated as such, they have both got business class cabins on their aircraft, they’ve both got lounges. They are both in the middle of the market and that’s probably where the competitive battle is going to take place longer term. With Jetstar, we have a significant cost — a significant cost advantage over both of those carriers and a lot of work that we’ve done as part of the transformation and the growth that will come in as the market rebounds will help us cement that position. Obviously, there’s going to be very competitive fares out there from all carriers as the market rebounds. That’s understandable. But again, as Andrew said, in that fourth quarter whilst we saw a lot of headlines about AUD39 fares from Rex and the like and we were absolutely being very competitive against them. We saw average fare very — overall, still very much in line with where it was in pre-COVID 2019.

Alan JoyceChief Executive Officer

I think that’s good. I might add to that. I think what we’re also seeing is that I think Virgin are a lot smaller than they were coming into this. So we are seeing capacity actually, even with the growth that we’re forecasting, being behind where they were pre-COVID levels, which indicates that there will be a continued discipline I think in the domestic market. And we know Virgin have been growing by private equity company, very different from the shareholders that they had previously, where they will have to make a return out of this. Same way Qantas has to make a return out of this. So I think that’s good for the medium to long term, operating in the domestic markets from a position of balance. And then Rex and Virgin, as Gareth and Andrew said, are competing in this middle of the market space. I’d say very aggressive activity between the two of them. And what we can say is that Qantas and Jetstar are out of this battle, they’re not being impacted by that battle. I’m sure that will continue. Given Jetstar such — as Gareth mentioned, such on lower cost base, and Qantas has — which is so much of its cost base, but has such a premium product and the market research is showing that already. And we won 34 corporate accounts. It will be all about margin, the margin in Qantas Domestic and the margin in Jetstar Domestic will be a lot superior we believe than the two competitors, which will allow as to maintain the strategic position of 70% market share going forward. And we have confidence that in the domestic market we will come out of it stronger than we went in with our performance. And I think we got time for one last questions. One last question. Yeah, two last questions. Okay. Second-last question next.

Operator

Thank you. Your next question comes from Cameron McDonald from E&P. Please go ahead.

Cameron McDonaldE&P — Analyst

Hi Alan. Quick question. Just to delve on the cash burn of AUD3 million for international as you go into the restart, with the subdued domestic operations at the moment, what is the current Group cash burn position? And secondly, you mentioned the IATA Passport. Can you and will you mandate vaccinations for passenger as well as mandating it for the staff that you’ve already done?

Vanessa HudsonChief Financial Officer

I’ll answer the first question and perhaps pass to Alan or Steph for the second question. In terms of the cash performance and how we’ve managed the business over the last 12 months, we’ve had a very intense focus on cash. Both the halves in FY21 were positive at the underlying cash position and we expect that that’s going to continue into the first half for next financial year. It is also I think really important to emphasize that we are in the final phases of recovery. We have given you an update in terms of capital and how that is skewed across both halves, but I think the most important thing is that we’ve got sufficient liquidity to manage through a range of scenarios that we might face in the first half, both with our ending cash position, but also our undrawn cash facilities of AUD1.6 billion and also unencumbered assets of 2.5. So we feel very confident that we’ve got sufficient liquidity to manage through a variety of recovery scenarios and that we were also really confident that when borders open that demand will return as we saw in quarter four.

Alan JoyceChief Executive Officer

And maybe a little bit, I’ll ask Steph to come in a second, but a little bit on requirements internationally. It’s gradually happening government by government. I think Joe Biden has said again the United States of the requirement people to be vaccinated. I think European countries are already there. And people are having to shoulder — the vaccination staff is able to get into sporting stadiums around the globe. So this is happening. We’ve always said as our conditions of carriage we will make the ones we started [Phonetic] we will make them a condition of carriage that people are vaccinated on our aircraft internationally. That we think is very important because 90% of our customers say it’s the protection that is most important for them, and it will allow them and give them confidence of traveling internationally again, given that we have some of the longest ones in the world. We think it’s a necessary requirement to maintain the safety of our passengers and our staff and all the aircraft and it would be something our customers would want to see. And I think at some stage, I think the Australian government is talking about having two different tiers, if you’re vaccinated that you may have no restrictions or very limited restrictions. If you are not vaccinated, having you in hotel quarantine and then at some stage the semi-hotel quarantine will end as well. So there won’t be too much demand from vaccinated travelers. Steph, you want to talk about the travel pass and how we are getting ready for it, and anything else you want to add to that?

Stephanie TullyChief Customer Officer

Yes, sure. Thanks Alan. So we’re well underway, as we announced with work with IATA to build out the travel pass product and that’s really important both for Australians going out of state, but also for customers ultimately coming to Australia from inbound. And it’s about being ready to show you proof of vaccination and the right vaccination date and time, but also testing. What we can say is, there might be different requirements, depending on which country people are traveling to. And what we want to do is get Qantas and Jetstar customers completely informed and ready and have a seamless experience, so that when they’re traveling that we can facilitate that and that helps to grow our brand preference as well. So we will be ready in line with the international visa plans that we outlined today. Thanks, Alan.

Alan JoyceChief Executive Officer

Thanks. Steph, and the last question.

Operator

Thank you. Your last question comes from Sam Paul from Citibank. Please go ahead.

Sam PaulCitibank — Analyst

Hey guys, thanks for taking my question. Look, I just quickly wanted to touch on the net debt guidance. I imagine historical lead times or booking behaviors are different, so would it be fair to say if people are booking shorter lead times, most of the heavy lifting I guess in the reduction comes from EBITDA, or is there any inbuilt assumption that lead times kind of return to normal?

Vanessa HudsonChief Financial Officer

Yeah, look, I think that a couple of points. If we look towards what we’ve seen in the first half, the underlying operating cash that we generated in the first half was AUD1.3 billion. AUD300 million of that came through the operation of the segments and AUD1 billion was through working capital movements. So we feel really confident that in the recovery phase, we have been saying now for many, many months that the working capital benefits will flow back. We saw domestically that when we were approaching May that booking curves were approaching pre-COVID levels across both Qantas and also across Jetstar. And my view is that when international opens up, the pent-up demand that will be there for people to visit family and friends and go on that — the holiday, I think that you will see very similar booking curves what we’ve seen in the past as well.

Alan JoyceChief Executive Officer

Thanks very much everybody. And that’s all the questions. We’ve answered everything. So thank you for your questions. Thank you for paying attention to us during this long presentation. I will look forward to hopefully seeing people in person when we get through to the half year results in February. Goodbye.

Operator

[Operator Closing Remarks]

Tags: Airlines
Related Post