Qantas is Just the Beginning of the Australian Dollars Trouble

Qantas is Just the Beginning of the Australian Dollars Trouble

#FX #AUDUSD #AUD #AUSTRALIA

Already over taxed and under serviced the Aussie worker is taking on an increasing amount of debt via Government bail-out and assistance programs. Afer making themselves dependent on China they now find themselves at odds with their self appointed benefactor.

Australia Government Debt to GDP

Government Debt to GDP in Australia averaged 24.41 percent from 1989 until 2019, reaching an all time high of 45.10 percent in 2019 and a record low of 9.70 percent in 2007.

Government Debt to GDP in Australia is expected to reach 50.00 percent by the end of 2020, according to our global macro models and analysts expectations. In the long-term, the Australia Government Debt to GDP is projected to trend around 52.00 percent in 2021 and 56.00 percent in 2022, according to our econometric models.

Australia Government Spending

Government Spending in Australia is expected to be 89102.00 AUD Million by the end of this quarter, according to our global macro models and analysts expectations. Looking forward, we estimate Government Spending in Australia to stand at 99182.00 in 12 months time. In the long-term, the Australia Government Spending is projected to trend around 101094.00 AUD Million in 2021 and 107371.00 AUD Million in 2022, according to our econometric models.

Australia begins to feel the Covid pain

Australia’s Qantas is cutting 6,000 staff and grounding 100 planes for up to a year in a US$10 billion cost-cutting blitz in response to the COVID crisis, the airline announced Thursday.

CEO Alan Joyce said the three-year plan to save Australia’s flag carrier from “the biggest crisis our industry has ever faced” would also see more than half the company’s remaining 23,000 staff remain on leave for months.

“This year was supposed to be one of celebration for Qantas. It’s our centenary,” Joyce said in a statement. “Clearly, it is not turning out as planned.”

The coronavirus pandemic had already forced Qantas to cancel nearly all its international flights until at least October and slash domestic routes.

While domestic travel is beginning to pick up as most Australian regions have successfully contained the epidemic, the country’s international borders are expected to remain closed to most passenger traffic until next year.

And a recent surge in new COVID-19 cases in Melbourne, Australia’s second-biggest city, has served as a reminder that the pandemic remains a threat.

“We have to position ourselves for several years where revenues will be much lower. And that means becoming a smaller airline in the short-term,” Joyce said in unveiling the “post-COVID recovery plan”.

In addition to the Aus$15 billion in cost-cutting, the plan includes raising up to Aus$1.9 billion (US$1.3 billion) in equity.

The company also announced that it would extend the contract of Joyce, Australia’s highest-paid CEO, until the completion of the plan.

– Unions slam move –

The 6,000 job losses will hit both Qantas and its budget subsidiary Jetstar, while the company hopes half of the 15,000 staff placed on leave since March will be back at work by the end of the year, Joyce said.

He acknowledged the recovery plan’s “huge impact on thousands of our people”, but said “the collapse in billions of dollars in revenue leaves us little choice.”

Prime Minister Scott Morrison, whose government has spent billions trying to mitigate the economic impact of the pandemic, called the Qantas job cuts “heartbreaking”.

“These are hard days, Australia. They’re very hard days,” he said during a press conference.

The Australian Council of Trade Unions slammed the move and called on Morrison to extend the “JobKeeper” payments programme that helps employers maintain workers during the crisis to the airline’s staff.

“If it’s good enough to secure Alan Joyce’s job, why isn’t it good enough to reverse these decisions, sit down with unions, ensure the federal government extends JobKeeper and save these jobs,” ACTU president Michele O’Neil said.

Qantas grounded around 150 aircraft in March, including most of its wide-bodied planes, and 100 of those will remain out of service for up to a year, including all the company’s double-decker A380s, it said Thursday.

It also deferred new orders for Airbus A321neo and Boeing 787-9 Dreamliners.

In addition to a gradual recovery of domestic flights, which Joyce said should be up to 40 percent of pre-COVID levels in July, there are hopes for a limited resumption of international flights this year between Australia and neighbouring New Zealand, which has also successfully contained the disease.

Australia’s second full-service airline, Virgin Australia, went into voluntary administration in late April.

Two US-based investment companies have put in rival bids to rescue that airline.

The following two tabs change content below.
S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

Latest posts by S. Jack Heffernan Ph.D (see all)