Travel shares are again challenged by extended periods of shuttered state borders.
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The Qantas Airways Ltd (ASX: QAN) share price is down 1.86% in morning trade as the company announced it is standing down 2,500 crew for a likely period of 2 months.
Qantas is currently trading for $4.47 per share.
Why the temporary stand down?
The COVID-19 outbreak in New South Wales has seen domestic borders between the nation’s biggest states sealed.
While there is hope that travel between Victoria, South Australia and Queensland will resume once new community infections are eliminated, Qantas Group CEO Alan Joyce believes the Greater Sydney area won’t open for 2 or more months.
According to Joyce:
Based on current case numbers, it’s reasonable to assume that Sydney’s borders will be closed for at least another two months. We know it will take a few weeks once the outbreak is under control before other states open to New South Wales and normal travel can resume.
Qantas stressed that there will be no job losses for the 2,500 frontline Qantas and Jetstar employees being stood down.
The domestic pilots, cabin crew and airport workers impacted are mostly based in New South Wales. However, Qantas noted that employees in other states will also be affected due to the nature of its travel business. Employees will receive 2 weeks’ notice and paid through mid-August during the stand down.
“This is clearly the last thing we want to do but we’re now faced with an extended period of reduced flying and that means no work for a number of our people,” Joyce said. “Qantas and Jetstar have gone from operating almost 100 per cent of their usual domestic flying in May to less than 40 per cent in July because of lockdowns in three states.”
Joyce voiced hope that domestic travel levels may return to 50–60% of normal if Victoria, South Australia and Queensland reopen for travel.
He also noted that while the new stand down is “extremely challenging” for the 2,500 people involved, that things look very different to last year when the airline was forced to stand down more than 20,000 people, with most of its aircraft mothballed for months.
On the domestic front, Joyce sounded an optimistic tone, pointing to the importance of the national vaccine rollout. “Fortunately, we know that once borders do reopen, travel is at the top of people’s list and flying tends to come back quickly, so we can get our employees back to work,” he said.
Internationally, the outlook is murkier. According to Joyce:
The challenge around opening international borders remains. There are still several thousand Qantas and Jetstar crew who normally fly internationally and who have been on long periods of stand down since the pandemic began. Higher vaccination rates are also key to being able to fly overseas again and finally getting all our people back to work.
Qantas share price snapshot
Qantas’s share price has gained 41% over the past 12 months, compared to a gain of 26% on the S&P/ASX 200 Index (ASX: XJO).
Year-to-date, the Qantas share price has struggled, currently down 8% in 2021.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.