Qantas Airways Limited (QAN) Earnings Call Transcript & Summary

Thanks, Izzy, and good morning, everybody. I'm joined here by Vanessa Hudson, the Qantas Group CFO; and Fran, our Head of Investor Relations. And welcome to the Qantas analyst and investor call for today's market update. As you know, we decided to reschedule our usual third quarter trading update and refocus on the key issues of how we are positioned to manage through the coronavirus crisis and the recovery plan. Hopefully, you've had a chance to read through our announcement, so I won't go through that in detail. However, I would like to make some broader comments. And then Vanessa and I will be happy to take your questions. It's been around 5 weeks since we last provided an update to the market, and a lot has happened since then. In fact, yesterday was the 100th day of the -- from the reported first case of COVID-19 in Australia. In some ways, it feels like 100 years. The work that we have done over the last 5 years to strengthen the balance sheet and to transform the business has brought us in good stead. And the swift action we have taken since the crisis commenced has continued to strengthen our ability to withstand the short- and long-term impacts of the coronavirus crisis. In March, we raised $1.05 billion against 7 of the Dreamliners we previously bought with cash. And today, we're announcing a further $550 million of funding secured against a further 3 Dreamliners. Consistent where our -- consistent with our existing debt, this debt has no financial covenants. With the additional funding and the $1 billion in undrawn revolvers, short-term liquidity now stands at $3.5 billion. Our substantial cash balance and reducing cash burn, which is reducing to $40 million per week by the end of June 2020, will provide sufficient liquidity to at least December 2021 under a range of recovery scenarios, including if the current trading conditions persist. And our unencumbered aircraft value now at $2.7 billion provides us with flexibility to secure more funding in the future, and the funding markets still are remaining open to Qantas as we speak. The group is currently operating around 13% of the pre-COVID domestic network and 6% of the international network measured by block hours. This represents some of the manpower obviously that we're employing to do this flying. But we are flying the smallest aircraft typically in our fleet. And so by ASKs, the numbers are a lot smaller than that at 5% of domestic ASKs and 1% of international ASKs. And I should say, obviously, the domestic and the international network is supported by the government's minimum viable network program, and that's covering the cost of those services. Flying for the resource sector is at about 75% of the pre-COVID-19 base. And with demand still at very low levels, we will extend the existing domestic and international cancellations beyond mid-May. Regrettably, with virtually no demand, the current stand-down of employees will be extended to at least the end of June. For our customers, credits can now be used over multiple future flights, improving flexibility. And combined with the extended period to use the credit, which goes all the way to the end of 2021, we have seen significant take-up of credits rather than refunds. The group has also closed out its over-hedged position through to September 2020, with the cash outflows for all foreign exchange and fuel hedging between now and the end of September 2020 of approximately $145 million as of last night. I should say that our treasury team and finance team have done a great job with this, closing out the hedging before the significant drop in fuel that occurred and allowing us to make sure our exposure is a lot less than other airlines in the space. It's also a credit to the team that they typically use a full option premium instead of swaps in this situation, which has also minimized our exposure to an over-hedging position. As a result, the group's exposure to future hedging losses associated with that fall in oil prices, we think, is also going to be significantly lower going into 2021. Amongst the crises, though, there are a number of bright spots. Qantas Loyalty continues to perform well, and the new partnership with BP is taking off on a running start. People are still very keen to earn their points. Our partnerships like Woolworths through this period of time has seen significant improvement in volumes. Qantas Freight has enjoyed a significant increase in volumes. Some days of the freighters have been as big as the key Christmas period whereas people are ordering online and getting online deliveries to their houses. And we have received tremendous support from a range of stakeholders, including the government, suppliers, customers, and of course, our own people, many of whom have taken up secondary employment opportunity whilst stood down. We've entered this crisis in a very strong position, and circumstances have shown that we absolutely needed to be. We don't know how long travel restrictions will remain or what demand would look like through the recovery phase, but we remain ready to respond to the easing of restrictions with a minimum lead time. We're optimistic that domestic travel will start returning earlier than first thought, earlier than we were planning. And international travel to New Zealand would likely be the first tentative steps in opening our borders. And we note that the New Zealand prime minister is meeting with the National Cabinet today, I think, to discuss this issue, which is a very positive sign. We strongly encourage all Australians to continue to download the COVIDSafe app as one of the public care health initiatives that will help us to start traveling sooner. And we've been active in e-mailing our frequent flyers and telling our employees that this is, as the prime minister said, the ticket out of this, and we encourage as many people as possible to download our app. And when demand returns, we will be fairly well placed to take advantage of the opportunities, and we see significant opportunities going forward from where we're positioned. So thank you, and we now will open to your questions. So over to you, Izzy. First question?

[Operator Instructions] Your first question today comes from Matt Ryan with UBS.

Just hoping that you could talk through any inefficiencies involved in increasing domestic flights while keeping international grounded and in particular, I guess, any shared infrastructure or shared cost centers that might be an issue.

Yes. So the way it works, we have -- for the few aircraft in the air, we have an overhead structure like the operations center and support here. That's already active for the network that we have in place. So the actual overheads involved in incrementally increasing domestic is relatively low. And there's no inefficiencies related to international in that mix. In fact, when you look at it, our crewing, our pilots, our cabin crew, even a lot of the engineering work are isolated completely for those fleets. And so we think we can bring domestic back very efficiently. And certainly, the work that we're seeing on international won't return for a period after domestic. So the employees that are associated with that business, unfortunately, will probably continue to be stood down. They'll have the support of JobKeeper until September. They have access to their leave. But we think we can do it in a pretty efficient way. And we've got to be very cautious, Matt, in getting the domestic market up and running. We obviously will be very focused on cash. And we'll be putting domestic flights in the air where we believe there is sufficient demand and we can generate cash costs around it. And we do believe that there will be some very attractive airfares out there. We have been working through what's the incremental cash cost of putting an aircraft in the air, what the airfares would have to be to stimulate demand, encouraging people to travel again and to get as much of our fleet domestically in the air to cover that cash contributions, which I think is the way we'll approach at the start. And we think it could be very cash positive. We're very tight on cash. Cash is king. We're managing the business on cash. And you can see from the numbers of how we ramp down the airline to get cash burn down to $40 million a week is amazing outcome and allows us to have a long runway. And we're not going to lose that discipline where we're putting aircraft back in the air. If anything, we're going to be tighter on that discipline, making sure everything is significantly cash positive before we do it.

And what are your thoughts around having to space passengers out on the aircraft? Can you ramp up flying activity with social distancing rules still in place?

So our prime focus will be on making sure the safety and the health of all of the passengers that are being carried, being put through airports is there. And we are talking to the government. We are talking to the airports, and we are looking at the medical advice. And we're looking at studies that IATA and our own people have done of the transmission of COVID-19 on aircraft. We don't know of any case, confirmed case. So there's a lot of tracking being done even before social distancing came in of any cases that were there. But I think the medical evidence needs to support this, and that needs to feed in to our decision and the government decision. And as you can imagine, we would take safety as the #1 caution. We are looking at a range of other measures, supplying passengers with facemask, potentially doing heat tests as people board the aircraft. And there are some other sophisticated tests that our medical team are looking at to ensure that we can get that confidence back in for people flying again. And so you'll hear a lot more about that as we start ramping up the domestic network again. And we're pretty confident we can do it extremely safely, but at the same time, managing people's confidence to get back on aircraft.

Your next question comes from Jakob Cakarnis with Citi.

You guys have said that you're intending to reach a cash burn level of $40 million per week by the end of June 2020. Can you tell us what it is currently or give us a feel for what it is currently? It looks to be, on some rough calculations, around potentially double that level currently. And then can you just let us know what the hedging closeouts have been prior to today? So you said $145 million going forward. I'm just wondering how much is already in the base that you've closed out, please.

Yes. So look, I think that, that cash burn that you were talking to in the preceding months has been higher than the run rate of an average of $40 million from June. What has actually been -- and the way I talk about it is we've been coming down the edge of the [ bathtub ], the $40 million of average ongoing from June is that burn rate of being in hibernation based on current levels. If you think about the cash burn up until now, though, it has been higher. We have been paying leaves for our people that have been stood down. We've also paid the JobKeeper in advance of getting any rebate from the government, which starts in May. We're also winding down our working capital from our balance sheet, particularly trade creditors for activity relating to February and March flying. That also includes refunds to customers as well as we've provided very generous credit options for customers. So we feel like really comfortable where we are with refunds, and customers in the main have been taking credits over refunds. So as we come down to that minimum burn, they are the substantial part of what has been driving the higher cash burn up until now. Your point on the hedging number, so the $145 million is the total cash outflow from the beginning of the crisis impact through to September. So that will be a part of the burn up until now but also incorporated as a component of the $40 billion from June -- $40 million, I'm sorry, I was getting carried away. And what -- as Alan said in his opening remarks is that as soon as that we could see with our reduction in flying and a proportion of our hedging become ineffective, we closed out that quickly before the fuel significantly reduced in April. And that is well offset with foreign currency gains. It's how we arrived at the $140 million total net cash flow between the beginning and the 30th of September.

And we did have a bond payment.

That's right. And we have also as well had a bond payment during that period up until today, which is $250 million in April. So that is also a part of the cash burn from the beginning up to the update that we've given today.

And so if you take, Jason (sic) [ Jakob ], the $250 million of the bond payment there, you take what we have to pay for previous activity in February and March, what we're paying on leave because a lot of people are now deferring their leave and are taking the cash burn on that, they eventually may come back to it after JobKeeper that we put in place. Because of the advanced payment of JobKeeper, we are very confident that the underlying cash burn of the business is that $40 million. And going forward, that's a number we can maintain. And there's upside if domestic starts traveling earlier. It will be done in a cash positive position, which will reduce that number even further. So we're more optimistic that won't be the number that will go all the way through to 2021. If it goes through to 2021, under current circumstances, we have enough cash to last the full year, which I think is most at any other airline in the world. It's a lot stronger than any other airline in the world. That gives us confidence that, that won't be needed because we are seeing some white light of what would happen domestically and maybe with New Zealand.

Your next question comes from David Fabris from Macquarie.

Look, I know you've touched on this a little bit, but how do we think about the weekly cash burn once the business restarts? Because I would assume it will get a lot worse than $40 million before it gets better because the load factors are going to be impacted by that social distancing. And I also assume you'll have to be careful with flight cancellations and rescheduling. So how do we think about that?

I was just going to just reiterate what Alan was saying is that our focus on cash coming into the crisis is going to be the same focus we have coming out. So our view is that the resumptions of flights, we will focus very much in ensuring that they are cash positive. And that will be in terms of how we work with the government. It will also be in terms of how we bring capacity on, and it will also be in terms of how and which we price the capacity through that period. So we're absolutely going to be focused that we are only going to improve that situation coming out on the other side.

The cash costs of putting an aircraft back in the air are actually quite low compared to what the traditional airfares have been. So we have utmost confidence that we can manage it very effectively to make sure that we are adding cash-positive flight. And the way it will work, obviously, you will have the forward bookings coming in because part of what happens with airlines is that we get positive working capital for the forward booking curve. And so when people are starting to book again, that will come in before the operation ramps up. That will be a very positive impact on our cash burn. And then when the aircraft aren't in the air, our intent is that the cash and the revenue we're generating is way in excess of the cost and the incremental costs. With low fuel prices at the moment down low, the government, we're talking to about the package that they announced earlier in the year in air services and other charges being applied to future activity. So that probably helps with that ramp-up as well. And so we have confidence we can do the ramp-up in a very cash positive position.

Okay. And just to round out one last question, I know there's lots of variables on cost and revenue here, but what sort of load factors you will be thinking about to get sort of a cash flow-neutral flight?

Look, I'll give you an indication that the cash flow-neutral flights are Melbourne-Sydney Jetstar flight. And typically, it could be half the airfares that Jetstar would typically operate. So some of the airfares, all of them are at $39, and we could be seeing $19 airfares still being cash flow positive on that flight.

Your next question comes from Anthony Moulder with Jefferies.

So if I could start with the 787s, the additional 3 for $550 million. Was that done at a similar kind of mortgage as the previous 7? And related to that was the unencumbered value has actually come down by more than that $550 million. Has that included a reset of the value for the remaining aircraft unencumbered?

Yes. So just in terms of the total funding program, you need to look at the 2 combined funding announcements that we've made, so the original $1 billion and this recent $550 million. So circa $1.6 billion against 10 Dreamliners is approximately $160 million in total. We obviously don't secure 100% of the value against each aircraft. So that is obviously a component of the reduction in the unencumbered value that we've disclosed today of $2.7 billion. In terms of the funding that we've got for both of those tranches, very similar in terms of rate, both 10-year amortizing debt as well. And we have also got a floating rate. So as we come out of recovery and we start to generate cash again, we've got the ability to pay that off early.

All right. So similar kind of LVR as the first 7. That's good. And Alan, I guess, a lot of focus is just going to be on the recovery. How plugged in are you to the federal cabinet as far as their ability or their willingness to see people traveling domestically, short-haul internationally? You've obviously called out things stood down until the end of June. Have you started to see people becoming a lot more positive in the forward booking profile, booking beyond June for domestic travel in particular?

So I think what we're seeing, Anthony, I mean we have regular dialogue with the government, obviously, and good relationships with the government. And we're talking to them about a range of options. And I think those develop every week, and I think the government is very conscious of trying to get the COVIDSafe app numbers up as well to inform them about how they release the restrictions, whereas the soundings generally have become a lot more positive than they were a few weeks ago. And I get more positive all the time. I mean even the dialogue about New Zealand wasn't happening a couple of weeks ago, and it's now on the table. And I think New Zealand is good as an example for both markets. It's the second largest tourism intakes into Australia after the Chinese. And I think Australia is the largest tourism market into New Zealand. So I think that benefits both countries significantly if that's opened up as well. So we are seeing more positive signs all the time on it. I think what's really key is to maintain this flexibility. We are taking with the schedules of -- keeping the schedules intact for as long as we can. So we've announced today that we are taking the schedule for essentially June domestically down to this full stand-down position without minimum network in place. For July, we're leaving domestic and New Zealand intact. And we'll see what happens over the next couple of weeks and then make a judgment on that. For international, it's clear. The rest of international is clear. That's going to be longer. So we're taking the schedule down to this minimum networks from June and July, and that will probably be longer, but we're doing it in phases. So we keep the schedule available for people when they want to book. And as you can imagine, at the moment, now the forward bookings are minimal. I think people will want certainty about when the borders open up before they make those bookings in place. And that's the way we expect it. And then from all research, there's certainly, in certain sectors, probably some pent-up demand like the VFR market. There'll be people that want to do that. And there's a lot of people, 90% of our frequent fliers have said that they're very keen to travel once this opens up. So we know there will be some pent-up demand in some sectors. There will be other sectors that are maybe weak for some time that we'll have to manage, but that's the way we're looking at the market at the moment.

Very good. And lastly, how much is actually held in credit? How much will need to be earned through before you start getting the cash inflow?

So we haven't disclosed those credit, but you can imagine a lot of people have converted their credits to cash. But Anthony, that's over a long period of time. A lot of people, particularly on international, won't probably use those credits until the end of 2021. And what we are doing today announcing that you can now take the credit in batches, so that you have an international ticket of $2,000, you can use it as a $200 ticket on domestic and so on. So you will get -- but it's no different. And our forward advance revenue is a lot lower than it normally is. And so when it ticks back up again, there is expected to be an influx of a significant amount of cash that will come in. And then as we normally do, forward bookings are traditionally credit. They are there in the mix, and we expect them to be burned over a long period until the end of 2021, and that's what our research is telling us.

Your next question comes from [ Ben Hon ] with Vanguard.

Just one question from me. My other questions are answered earlier. With credit card transactions soft and people keeping their points for a little bit longer, can you just give us some color around where you see Loyalty faring now and going forward?

Yes, absolutely. Thanks for the question, [ Ben ]. I think that we're obviously working very closely with our partners, our banking partners, Woolworths, and obviously now BP coming online. And we've continued to see strong earnings behavior, particularly through Woolworths and also BP. We have actually in our forecast some continuing to see really good performance through credit cards. We're working with our banking partners as well obviously to continue to stimulate that. And also the research that we've done with our frequent flyers really continues to see good engagement across the program and also really great aspirational connection to flying in the future as well. So we're not seeing any change in engagement because of, one, obviously, we're not flying but then, obviously, continuing to see that really strong buying behavior through everyday rewards part of our program as well.

The next question comes from Andrew Peros with Ausbil.

Just one question from me. Wondering what you are doing to tackle the fixed cost base of the business. I guess the current situation would give you the opportunity to really think about and assess every dollar that you spend. So I'm just wondering what you're doing on that front and how you would expect the fixed cost base of the business to change as you get to the other side of the current crisis.

Yes. So obviously, it's a very big part of what will happen in the recovery phase. So we've managed the business into this hibernation mode very well. We've been very focused on cash and getting our cash down. And as we start the business back up again, we're going to be very focused on what we need to spend in order to get that back in the air. And we think there are opportunities. We've stopped all nonessential activity, as you can imagine. And there will be opportunities for us to significantly review that. We're also very conscious of what happens through the Virgin administration. And like in any real change to the marketplace, Qantas in the past has responded really well. We soared out of the ashes of Ansett, a low-cost carrier called Virgin, take it to the air. And that meant that Qantas became a lot more competitive, a lot more competitive on its cost base for creating Jetstar. It was an extremely successful strategy to keep with that. And then Virgin had to change its strategy. It went up market, and we all know how that story played out. So we are very conscious of making sure that we adapt. We're aggressive on our costs. We make sure that we are managing our reentry. And the Qantas of 2021 and 2022 will be a very different Qantas of '19. And we are -- as you could imagine, I've always been aggressive in this space. We will be aggressive when the airline comes out of this to make sure it is very competitive and make sure it is the biggest airline in the world as we clearly have been over the last few years, and we make sure that we maximize our position in what will be very competitive markets, and we have no doubt about that.

Your next question comes from Paul Butler with Credit Suisse.

I just had a couple of questions. One is when you make the decision to start up an additional service, what sort of lead time is that going to have? So like how many weeks or whatever are they going to be where you're selling tickets for that service before it actually starts operating?

So the way we've approached it, Paul, we've stood down, as we announced here for June, a significant proportion of our people, again, the same 25,000 that have been stood down up until now. We have that minimum network operating domestically and internationally. We then have late notice if we see demand appearing, like within a week, we can add another 10% of schedule; within 2 weeks, 25% of schedule to take advantage of demand. So we have fairly significant flexibility. And of course, we need to see the demand before we reactivate people and reactivate aircraft because we need to know that we're not going to burn cash on it. So we've brought in a huge flexibility into the organization. And we would now very fast from the forward bookings, from the demand and the restrictions with the government what do we need to do that. And then we can -- and we don't have to do it in chunks of that big. We could do it small and see how they sell and then add more. So that's the way we're planning to do it.

Okay. So just to confirm, you're very confident that once you start increasing capacity, the cash burn gets better, not worse.

Yes, that's absolutely the way we're planning it, the way we're looking at it. We're managing the business on cash. We don't want to be putting aircraft back in the air that are losing those cash. We are very conscious that we want to, as we start flying, getting that $40 million down, not increasing that $40 million.

Your next question comes from Owen Birrell with Goldman Sachs.

Just a first question for me on freight. There's a lot of moving parts in that space. International network is obviously down; and domestic demand, obviously going up. I'm just wondering if you can give us a sense of what the earnings and the cash flow run rate is at the moment, either in absolute dollar terms or a percentage of change. Just trying to get a sense of what's the freight income now versus where it was, say, 12 months ago.

Well, obviously, we're not giving earnings guidance for freight and haven't in the past. But if you actually look at the 2 components of the freight business, one is obviously the freighter activity that we actually have across domestic and international, and that is where we're seeing a significant uptick in terms of demand and yield. Obviously, though, we're not flying the majority of our passenger services. Our belly revenue and earnings have fallen because of that. In terms of, though, where we're seeing demand, we're putting on additional services that are now flying predominantly for freight, both in terms of using that belly space, but we're also -- the team in the freight area are being quite innovative in using the cabin space as well to be able to move freight on A330 from Asia down into Australia. So with the Loyalty and also that freight activity, that does underpin our net cash inflow that we're continuing to get across the network.

And can I -- just looking forward, more people are living at -- obviously staying at home and ordering online and so parcel volume is going up. Is there any changes in the front half going forward that are likely to change the way you go about doing a business? Like are you looking to invest in new freighters and so forth?

Well, we already had a plan as part of our deal with Australia Post to convert some A321s into freighters. Given that maybe there is a change in behavior and a lot of retailers say people have gone online, that looks like it's still the plan, and that's covered by the agreement with Australia Post. And I think we've seen the other freight operators seeing equivalent increases in volume. So I think we'll be continuing with our plan and using our 321s more as the freighter network. And if Australia Post gets more comfortable with more of them flying, we have the ability -- because we're certainly not going to be using all the passenger aircraft, we have the ability to convert more to freighters to help in the freighter space. So there's huge flexibility there indeed.

And just one last question, if I may. When -- just on the level of government subsidies and how that is impacting that $40 million per week cash burn, if the government subsidies were removed, what would your cash burn rate be?

Owen, just a general comment on the government subsidy. So we had, obviously, the industry announcement of the $715 million. In terms of our cash burn to date, we've not been able to enjoy a significant amount of that because it was activity-based. So we're obviously not seeing that flow the way we thought it would. But probably, once we start operating again, we will see that triggered beyond here. The other, obviously, subsidy that we're getting from the government, which has been incredibly helpful to us, is the JobKeeper rebate. And that is, in our assumption, to continue through to the end of September. So there is a portion of that between June and September that is incorporated within the average of the $40 million. And we are, to a smaller extent, now continuing to fly the minimum viable schedules that the government are underwriting for international and also domestic. And we have assumed that, that is continuing if the current conditions persist.

And I think it's worthwhile saying that, that $700 million of the initial package, so far we have received less than $50 million of that. It's been fairly minor in terms of the cash flows, and it is dependent on future activity. So it does help. So you -- the $40 million, assuming the current state and no future activities, so there's no benefit essentially from that in there. So if activity does increase, it helps. We're making sure that, that activity is cash flow positive. And most of the JobKeeper, it's been a fantastic scheme. I think it's been good for companies like ours. But with standing down 25,000 people, most of that benefit, 25,000, is going to the employees directly. And it's the people we have working still, which is around 7,000 to 8,000 people that we get the benefit for while they're flying. So that's the amount of money that's included. And that will be there, we know, until September, and it's not included all September.

Our next question comes from Cameron McDonald with E&P.

Two questions from me. With the increased or the -- effectively, the financing against the 787-900s, how do we think about the obligations on the back end of that? So how does that increase either your financing costs or your lease obligations?

So none of the 787s are leased. They're fully owned. So could you...

So it's the financing cost. So I would -- so once the -- essentially, the terms of the financing.

Yes. So we've -- basically, both tranches are very similar terms. So it's amortizing over 10 years with very similar rates that we've had before but also floating rates so that if and when we move back into cash generating, we can pay those off early without penalty. And there's no covenants across any of that funding, which is the same as our existing debt book.

Okay. Great. So that -- yes, okay. So it's effectively like a credit point type line.

Yes, basically. It's -- and you can imagine, I mean, we said the last time, the interest rate is not too dissimilar to that. So Qantas has availability to good tenured debt, unsecured assets, have very low interest rates compared to other people out there with no covenants. And as Vanessa said, we can pay it back early, so if things did improve earlier. And we have a complete flexibility to get those financing costs out if we wanted to pay that debt back earlier, which is the ideal way of having it because hopefully, we'll see this business fare, and which it always does, generating significant positive cash, particularly domestic and Loyalty. And so that will help us get sort of this debt paid down, hopefully, more rapidly than we were planning.

And Alan, you talked a lot about the sort of level of flexibility the business has. How -- can you just sort of delve into under the scenario where we sort of come out and then have a secondary peak or -- and we have to go back and reverse some of the loosening of restrictions and they reimpose further restrictions on the Australian public, either nationally or on a state-by-state basis? Are you actually able to bring staff on and then stand them down again? And so just in terms of bringing -- ramping up operations and then having to sort of withdraw operations again, what's the sort of flexibility around the arrangements of doing that?

Yes, we can, Cameron. The way it works is if the work is there, we can stand people up and ask them to work. And we -- as you can imagine, most people are -- really want to grab that when it's there. If the work doesn't exist, we stand people down. So it's determined whether the work is in existence or not. We do, do rosters on periods. It can vary from 2 weeks to 4 weeks in terms of the rosters. So we will be making a call on the basis of -- as we've done now, we've taken the rosters down for June. We've kept demand domestically for July. We can, in late -- in middle of June, make a call for July and step that down if we need to. So you can imagine us doing this on a rolling month-by-month basis domestically. International is a little bit more like a 2-month roster. That's why we've taken June and July out. So the flexibility is quite strong. And at late notice, the stand-up scaling down is that, that month-to-month basis. Standing up, as we mentioned, we can do it. We have been doing it within a week. So we've gone to people and say there is demand from the government to do charters. We're doing 3 charters to India this week as an example. We've asked people if they wish to stand up and do the work. Within a week, we've gotten the volunteers of the people to do that, and we paid them for it. So there's complete flexibility in the stand-up process. And in the stand-down, we need to do it from these rostering periods, so on a month-by-month or double month in a row. But that gives us huge flexibility to meet the demand that's out there.

Is there any trigger for the -- in the Fair Work provisions that mean you have to either then make a decision once you get to, pick a number, 50%, operational capability that you then either got to put everyone back to work or make people redundant?

So our intent on this, Cameron, is that we want to protect as many jobs as possible. And this is a good way, and the government has said it, of keeping people connected with the organization. And it's not the same people that are doing all the flying at the same time. We're spreading the rosters between people to give people an opportunity to come in. We're doing that on check-in staff and staff at the airport. The pilots that are flying the 787s and the 737s, we're doing that as well. That's already interesting to spread the work as much as we can. But there has to be, and it continues to be, under the -- complete flexibility. You can't be in a position where if you only have 50% of the work [ i.e., say, ] domestic and there's no international work, you have to stand anybody or everybody up, that doesn't work that way.

[Operator Instructions] Your next question comes from Chris Schade with Martin Currie.

So you've held off on paying some suppliers, obviously, most prominently, airports, presuming that they're not insignificant amounts. So ultimately, that must mean there's a backlog. When do you expect those payments to recommence? And what does that profile look like?

So we have been doing deals with airports, and a significant number of them now have been arranged. So we have 60 airports domestically. We are in a position where, for February and March, we paid a lot the airport or in the process of paying a lot of the airports the money for that period of time. And we've gotten alleviation as all landlords to take -- and have been asked for businesses that are being impacted. And we've gotten alleviation from those sensible airports. And the vast majority of them -- I think it's 55 of them now. There are 5 in dialogue. Four of them, we're still in good dialogue with about getting similar arrangements. And there's one problematic, fairly noisy airport that seems to take a very aggressive approach with all of its customers, whether it's putting a bulldozer in front of an aircraft or whether it's attacking its major customers for not paying its bills. That airport, Perth Airport -- probably nobody's missed which airport it is. But Perth Airport, in fact, owe us a significant amount of money as well. So they owe us up to $180 million, we believe, for the purchase of our terminal, which they took possession of July of last year and I think getting rentals from the franchises, the shops and cafes there ever since then. But for whatever reason, they've decided to take a very aggressive attitude with a lot of its customers, Virgin and ourselves. So we're hopeful that we'll close everybody else. We can see that gives us payments, and some of the payments have already gone to the numbers we have and are included in our $40 million. That goes forward, and those deals are locked into those airports for this period of time, and our team have made good progress. And I kind of thank those airports. They've been really sensible, really accommodating, very positive. Some very big airports as well, very accommodating. We are sharing the pain. They know we stood down 25,000 of our people. They know that the senior management here is not getting paid. They know the Board's not getting paid. And some of these airports are open to share the pain with us. Unfortunately, Perth Airport doesn't seem to be open. They think they live on a different planet, and they're not impacted by aviation's downturn. They've gotten more flights than any other airport in the country, given the fly in, fly out market, given the fact we're flying from Perth to London a couple of times a week. But unfortunately, we can't seem to get sense prevailing there. We can't seem to close the deal. But you can have absolutely no doubt, on every single other airport, very good progression has been made with a sensible arrangement put in place, which means there won't be a big balloon period at the end of this.

Yes. I think as well, just on another note, for other suppliers, both engineering and technology suppliers, very similarly to the good progress that we've been able to make with the airports, we've made with other suppliers. And that just demonstrated to us the collaboration and support that we have from all of our supplier groups. Particularly, our ongoing run rate has been enabled by the work of our technology suppliers to accept renegotiation of minimum volumes, to accept renegotiations on rate based on lower activity. And that's been the same as well across our engineering suppliers. So it's just not being limited to airports. Every day, I'm quite amazed at what the team has achieved in the collaboration that we've been able to achieve right across all of our supplier base.

Your final question comes from Richard Jones with JPMorgan.

Just in light of the uncertain environment, are you seeing, in relation to Loyalty, a higher level of point redemption to all retail vouchers? And can you probably touch on the cash flow impact of this maybe?

Yes, absolutely. So we have seen a higher-than-normal redemption through our store, not a lot. And we actually are very supportive of that because this is the way in which our members can redeem and use their points. So I think that based on normal, we're about 1.3x higher than what we would burn when we have flight redemptions available. So we feel really comfortable with that, and that is incorporated.

And that's just the stores. So it's 1.3x normal activity in the store. Obviously, there's a lot less points being redeemed because people aren't flying.

Yes, exactly. But it's as well just underpinned by the engagement that we're seeing across our member base. And that's a key part of our forecast going forward as well.

Can I say, I mean I think it's -- we're keeping an eye on the engagement of our customers, as Vanessa said. And people are very engaged to still want to add -- the research is telling us they want to use the vast majority of the points for flying again. They're planning the holiday already in 2021 and are planning to use it. And I certainly -- with the lack of not being able to use my points for flying, I've been buying Qantas Wine. It's a very good service for those that don't know about it. They deliver -- I don't know if it's just for me, but they deliver the wine within 48 hours from when you ordered it. When you stick at home, it's actually fantastic. It's some of the best wines in the world. It's won a lot of awards on Qantas. So I'm plugging everybody to go into Qantas Wine and buy some of that wine. It's really good. Thank you very much, everybody, and I appreciate -- and hopefully, we can come back with some updates. I think the next update will probably be at the full year. We may see if there is any major development, if there's any developments with us, seeing the business start operating again and that we think that it's worthwhile giving a market update, we'll do that at the appropriate time. So we'll try and keep you involved as best we can in these uncertain times. So thanks very much, everybody. Thanks for joining us today, and we'll speak to you all, maybe Fran individually and myself and Vanessa, over the next few months. Thank you again.