News coming out of the airline industry is that Qantas Airway Ltd [ASX:QAN] has announced it will lay off 6,000 staff.
At the time of writing, the QAN share price sat at $4.19, with the company now placed in a trading halt.
What’s taken place at Qantas?
The Australian airline is in crisis mode, with the COVID-19 virus wreaking havoc on the global travel industry. Many international carriers are finding themselves in dire circumstances.
Lufthansa — Germany’s national carrier — and Air France both are in line for government bailouts. In South America, both LATAM and Avianca filed for bankruptcy.
Even Airbus, a global leader in aerospace is requiring a government bailout.
Across the world, airlines are facing financial ruins — Qantas is in the same boat.
With COVID-19 placing immense financial pressure on international business, the airline industry is now trying to not only adjust but also survive.
Qantas recovery plan
Alan Joyce, Qantas Group CEO, outlined the measures taken to move through the pandemic, noting at the time:
‘We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term.
‘Most airlines will have to restructure in order to survive, which also means they’ll come through this leaner and more competitive. For all these reasons, we have to take action now.’
These actions will include:
- Reducing the Group’s pre-crisis workforce by at least 6,000 roles across all parts of the business.
- Continuing the stand down for 15,000 employees, particularly those associated with international operations, until flying returns.
- Retiring Qantas’ six remaining 747s immediately, six months ahead of schedule.
- Grounding up to 100 aircraft for up to 12 months (some for longer), including most of the international fleet. The majority are expected to ultimately go back in to service, but some leased aircraft may be returned as they fall due.
Drastic times call for drastic measures.
What’s next for the Qantas share price
With the company in a trading halt, there is no guidance right now as to when trading will resume.
Looking at the technical side of things will give a picture of what may take place.
It’s hard to see prices going to the upside as Qantas is in crisis mode, should they do so though, then the level of $4.99 may be the future resistance level, also the most recent high.
If prices were to fall back then the levels of $3.63, $2.84, and $2.32 may become the focus.
Worth noting is the GFC price level of around $1.38. Depending on how the future of Qantas plays out, we may see that price again.
For Money Morning