Australia’s adept handling of Covid-19 and tough calls made by Qantas management have positioned the airline to break even and come out of the pandemic ahead of its rivals, the carrier’s chief executive has said.

Alan Joyce told the Financial Times he expected seat capacity to return to half of its pre-virus levels by Christmas, as state borders reopen with the nation on the brink of eliminating local transmission of the virus.

That should enable the Australian to achieve cash breakeven, begin rebuilding its balance sheet and target opportunities following the worst crisis in aviation history, he said.

“We are very optimistic. When we open up borders we’re seeing this massive surge in pent up demand,” said Mr Joyce, who on Monday will launch Qantas’ centenary celebrations in Sydney.

Mr Joyce said passenger numbers for European, US and Middle Eastern carriers were dropping due to surging Covid-19 cases while domestic rival Virgin Australia is still recovering from administration. The re-opening of Australia, which contributes two thirds of Qantas’ profit, should enable the carrier to claim 70 per cent of the domestic market, up 10 percentage points on pre-Covid-19 levels, he said.

“We think we could be way over our 50 per cent [seat capacity] target by the time we get to Christmas, and that by far is one of the leading amounts of capacity being added anywhere in the world at the moment,” Mr Joyce added.

Qantas has been hit hard by the virus, which prompted Australia to close its international borders to non-residents and restrict travel between states. In May the airline revealed it was burning A$40m ($29m) per week and that most international routes would remain closed until mid-2021.

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Until last month, 70 per cent of domestic travel was either banned or subject to hotel quarantine, which meant capacity ran at just 25 per cent of pre-Covid levels — the lowest in the developed world, according to UBS.

The restrictions have prompted the carrier to implement A$1bn cost cuts: furloughing 18,000 staff; raising A$3.5bn from shareholders and debt markets; and slashing 8,000 jobs. Trade unions accuse Mr Joyce of using Covid-19 as an excuse to downgrade working conditions.

Mr Joyce said management had to act decisively during the crisis, otherwise Qantas could be among the 40 per cent of airlines that some analysts have warned could go bust.

“Qantas has survived for 100 years because it adapts it evolves, it changes its model when it has to, and it takes the necessary action,” said Mr Joyce.

He said low prices would tempt passengers back to air travel and downplayed concerns fear of the virus would stop people flying. A study by the International Air Transport Association detected just 44 cases of inflight transmission of the virus among 1.2bn travellers, he said.

“The risk is 1 in 27m people,” said Mr Joyce, who opposes implementing social distancing on flights, a move that dents profitability, and says pre-flight testing in Australia is not needed due to low case numbers.

He added that in a post-Covid world, more international passengers would embrace direct ultra-long haul routes, which could allow Qantas to reboot its delayed “Project Sunrise” strategy of launching direct flights from Sydney to New York and London.

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Via Financial Times