The Worst Is Over?

The combined net losses of Australia’s two big airlines – some $3.15 billion – grabbed the headlines after Qantas Airways and Virgin Australia announced their latest annual results, painting a grim picture of the local industry. Are things as bad as they look? Behind the stark financial figures there may be reason for a degree of optimism.

Perspective. That’s what’s required in an analysis of Qantas’s seemingly disastrous record loss of $2. 8 billion in the financial year just gone. For Virgin Australia, which saw its net deficit treble to $356 million, the same applies. Both carriers are moving towards the latter stages of unprecedented transformation programs that have involved a great deal of pain, in a global industry going through some of its toughest years ever.

Whatever the depth of their latest losses one critical thinghas become abundantly obvious: Both Qantas chief executive Alan Joyce and Virgin Australia’s John Borghetti have extensive, definitive plans designed to haul them back to sustainable profitability and they are sticking to them with stubborn determination. It is a tale of no gain without pain and the truth is, behind the veneer of financial gloom, Qantas is a more than financially stable company, finishing the year with a strong cash position of $3. 0 billion and total liquidity of $3. 6 billion. It needs no major unsecured re-financing before April 2016. Virgin too has fundamentally sound financials.