What's the outlook as Qantas launches $1.9 billion capital raise
We examine the key details behind the airline's just-announced three year recovery plan and capital raise.
Qantas (QAN) today announced the specifics behind a $1.9 billion equity raise as well as the details concerning the blue-chip airline’s three year, post-Covid-19 recovery plan.
Though currently in a trading halt pending the completition of the institutional side of that raise, the Qantas share price, last trading at $4.19 per share – is up over a 100% from the lows the airline recorded in March.
Qantas share price: the road to recovery
As part of the just-announced strategic three year plan, Qantas will reduce costs, cut jobs and ground a number of its aircrafts. Ultimately, this move aims at accelerating the Group's 'recovery from the COVID crisis and create a stronger platform for future profitability, long-term shareholder value.'
All up, the plan will see costs reduced by $15 billion over three years and deliver $1 billion in annual cost savings from FY23 onwards as a result of productivity improvements.
Unfortunately however, the immediate consequence will see Group's 'pre-crisis workforce' reduced by 6,000 employees. Not only that, but Qantas said it would continue to stand down 15,000 of its employees, with a focus of those holding positions in international operations.
Elsewhere, the airline noted that it would ground 100 of its aircrafts, for up to 12-months, or longer. Effective immediately, the airline said it would also retire the Group's six remaining 747s.
Overall, the implementation of this strategic plan is estimated to cost $1 billion.
The road to raising $1.9 billion
Looking at the specifics of the equity raise – Qantas is aiming to raise as much as $1.9 billion – made up of a fully-underwritten institutional placement ($1,360 million) and a non-underwritten share purchase plan (SPP), aimed at eligible shareholders ($500 million).
As a consequence of the institutional portion of the raise, Qantas intends to issue approximately 327.7 million new shares – representing ~25% of the airline’s shares on issue – at a fixed price of $3.65 per share. By comparison, under the SPP, eligible sahreholders will be able to subscribe to up $30,000 worth of Qantas stock. A SPP booklet will be released on 2 July.
Qantas said it would use the funds from the capital raise to support its three year recovery plan, strengthen the Group's balance sheet, help expedite the airline's recovery in a post-Covid world and capitalise on new opportunities where they arise.
Commenting on the outlook for the airline, the Qantas CEO, Alan Joyce said:
'The Qantas Group entered this crisis in a better position than most airlines and we have some of the best prospects for recovery, especially in the domestic market, but it will take years before international flying returns to what it was.'
'As a business, recapitalising means we can get ready sooner for the new opportunities, returning to profit and building long term shareholder value. As the national carrier, we remain committed to supporting tourism, connecting regional communities and safely flying millions of people every year.'
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