The Qantas Airways Ltd (ASX: QAN) share price is expected to trade lower on Tuesday, following falls of 10% on Monday, after the company announced it would cancel its share buyback and told investors to brace for more uncertainty.
For context, the broader Australian share market or S&P/ASX 200 (ASX: XJO) traded down 7.33% on Monday, one of its worst performances in recent years.
Who is Qantas Airways?
Qantas is Australia’s leading airline. It was founded in the Queensland outback in 1920, the Qantas name was originally Queensland and Northern Territory Aerial Services.
The company operates two main airlines – Qantas and Jetstar – and subsidiary businesses including other airlines, businesses in specialist markets such as Q Catering, Qantas Freight Enterprises and the popular Qantas Frequent Flyer program. It employs some 30,000 people with around 93 per cent of them based within Australia.
Qantas Airways Ltd’s bins buyback amid an uncertain outlook
This morning, Qantas provided a media release and ASX update on its performance following further news of a Coronavirus-induced travel slowdown. In its ASX update, Qantas said it has cut its international flights by nearly a quarter for the next six months on account of a “sudden and significant drop in forward travel demand.”
“In the past fortnight we’ve seen a sharp drop in bookings on our international network as the global coronavirus spread continues,” Qantas CEO Alan Joyce said. “We expect lower demand to continue for the next several months, so rather than taking a piecemeal approach we’re cutting capacity out to mid-September.”
Qantas has canceled all management bonuses, and the Chairman and Mr Joyce will not take director fees and a salary, respectively, for the remainder of the year.
This too shall pass
“Less flying means less work for our people, but we know coronavirus will pass and we want to avoid job losses wherever possible,” Joyce added.
“We’re asking our people to use their paid leave and, if they can, consider taking some unpaid leave given we’re flying a lot less.”
Qantas said it is not able to know exactly what the financial implications of its decision will be on its FY20 results due to the rapidly changing conditions. However, it said these decisions, along with its financially “strong position” and falling fuel prices will help.
“This improves our ability to reduce costs as well as giving more certainty to the market, customers and our people.”
Buyback gone, but the HY dividend remains
Qantas has binned its $150 million share buyback program amid the uncertainty but will pay its 13.5 cents per share half-year dividend.
Today’s announcement follows recent sell-offs to shares of rival airlines Virgin Australia Ltd (ASX: VAH) and Air New Zealand (ASX: AIZ).
QAN shares were last seen trading at $4.15, giving the company a market capitalisation more than $6 billion.
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