Australia's Qantas to buy back shares as a sign of confidence

Qantas Airways Ltd said on Thursday it would buy back up to A$400 million ($276 million) of shares after the lifting of COVID restrictions led to a strong recovery in travel demand, boosting second-half performance and reducing debt levels.

The rush to travel after the borders opened has been so strong that Qantas said it had been forced to reduce domestic capacity by another 10 percentage points since its last update in June, mostly due to operational challenges associated with the surge in demand. "We always knew travel demand would recover strongly but the speed and scale of that recovery has been extraordinary," Qantas Chief Executive Alan Joyce said in a statement. The airline posted a pre-tax loss of A$1.86 billion for the 12 months ended June 30, up from an adjusted figure of A$1.77 billion a year earlier and slightly larger than analyst estimates. Most of the losses were reported in the first half, when domestic and international borders were closed as part of tight measures to contain the COVID-19 pandemic. "Our debt is now below our target range - so in addition to the investments we are making in our customers and employees, we are in a position to start paying back shareholders," Joyce said of the surprise buyback in the market. Investors had provided A$1.4 billion in equity capital to support the airline's balance sheet during the pandemic. While demand has improved, Qantas has in recent months been reducing its domestic capacity from previous forecasts due to widespread staff shortages at airports, high rates of crew sickness during the winter months and high fuel prices. On Sunday, Qantas said it would offer frequent flyers A$50 flight vouchers, loyalty status extensions and lounge passes to apologize for increased delays, cancellations, lost baggage and staffing issues since travel demand picked up. The airline is also facing industrial action, starting with a one-minute work stoppage by engineers who opposed the airline's offer to unions of a two-year wage freeze followed by a 2% annual pay rise in the face of rising inflation. Qantas said it expects to spend A$50 million this financial year on pay increases for employees covered by union contracts. The company has set aside A$200 million for A$5,000 in redundancy bonuses and A$1,000 in stock rights for its more than 17,000 employees.