Qantas' wing and a prayer
By Justin Pyvis – Delivered on 27 Aug 2021
Good morning! The lockdown in regional NSW was extended to 10 September after the state reported 1,029 new cases yesterday, passing four figures for the first time this pandemic.

For context that means daily new cases in NSW are now equivalent to 'open' countries such as Norway, Austria and Finland, and about 20-40% higher than Germany and Sweden. But the real difference is in vaccinations – just 26.5% of NSW's population is fully vaccinated, against a low of 47% in Finland and a high of 59% in Germany.

Description here Australia and New Zealand are now waaaay down the rankings. Bloomberg
There was, however, a morsel of good news – and we mean morsel 🤏. After passing 6 million vaccine doses, the NSW government decided to grant an "additional freedom" to fully vaccinated adults: an extra hour of outdoor time for those in "LGAs of concern" and outdoor gatherings of up to five people for everyone else – but only within 5km of their residence. That's despite a warning from deputy Premier John Barilaro that regional NSW was "a tinder box waiting to explode". 😬

Moving south, Victoria reported 80 new cases, with over half of them in the community while infectious. The situation wasn't much better across the Tasman either, after New Zealand found another 68 cases. Another lockdown extension will almost certainly be announced later today.

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The US S&P500 fell 0.58% overnight after weekly jobless claims unexpectedly increased for the first time in five weeks, rising by 4,000 to 353,000. Jobless claims remain around 60% higher than the pre-pandemic average. Fed chair Jerome Powell will be giving a speech at the Jackson Hole Symposium later today, which could offer clues as to the Fed's tapering plans – if any.

Locally, the ASX200 (-0.54%) wiped out a few days' worth of gains following earnings misses for Appen, A2 Milk and Link Administration and declines for the big mining companies.

A notable gainer was Woolworths (+0.15%), which at one stage was up 1.4% after announcing 78% net profit growth to $A2.1 billion in 2020-21, along with a $A2 billion share buyback. However, chief executive Brad Banducci warned that the company was "anxious" about getting stock into the country ahead of Christmas due to difficulties in securing and processing shipping containers.
Recession avoided?: Australia's private new capital expenditure for the June quarter came in at a robust 4.4%, driven by a 6.0% quarterly rise in non-mining expenditure. Every state except for South Australia recorded a rise, with the three largest – NSW, VIC and QLD – all increasing by more than 5%.

Rate hikes are here: South Korea became the first developed nation to tighten its monetary belt, raising the benchmark rate by 25 basis points to 0.75%. Household debt in Korea is at a record high (+10.3% year on year in the June quarter) and property prices soared 14.3% in July from a year earlier, the most since 2002.
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Qantas' wing and a prayer
Feature image How and when Qantas plans to restart international travel. Nine News
The flying kangaroo announced its 2020-21 results yesterday, revealing a mammoth $A2.35 billion statutory loss for the financial year despite $A1.06 billion in federal government handouts. It estimated that when all is said and done, the pandemic will have cost it more than $A20 billion in lost revenue ($A12 billion so far).

Breaking it down: At the end of June Qantas had total liquidity of $A3.8 billion (cash of $A2.2 billion), which should be sufficient for it to ride out another financial year without having to fundraise again. It also lined up its resumption plans with the National Plan's 70-80% thresholds, predicting that domestic travel will resume in November with flights to New Zealand, Singapore, the US, Japan, UK and Canada by mid-December.

Why this matters: Travel stocks have surged in recent days – e.g. Qantas (+16.4%), Flight Centre (+20.3%), Webjet (+16.5%). Qantas is relatively well connected within government (Chairman's Lounge access, anyone?) and has shared its plan with political leaders, who "agree our broad assumptions are reasonable". However, it also has a massive interest in seeing the country reopened and has previously made erroneous predictions on borders and travel bubbles.

Our view is that Qantas' forecast is a bit of a wing and a prayer, as even if borders open by Christmas (a huuuuge IF), uptake could be limited because "one of the biggest unknowns is the quarantine requirements for fully vaccinated travellers entering Australia. If it's 14 days in a hotel, demand levels will be very low".

Looking forward: Qantas expects "a surge in domestic travel demand and a gradual return of international travel... later this year". We're less optimistic – the nation looks to be incredibly divided about how to reopen. Qantas is clearly reading from the same National Plan as ScoMo and Berejiklian, which is quite different to the one being cited by certain state Premiers. The Doherty Institute is expected to clarify the confusion at today's national cabinet.

Accordingly, it's no coincidence that Qantas "is investigating using Darwin as a transit point... as an alternative (or in addition) to its existing Perth hub given conservative border policies in Western Australia".

Make of that what you will...
The Wrap Up
  • 🍟 Taiwan's chipmaking giant, TSMC, plans to raise prices on products by as much as 20% due to "increased costs tied to ramping up production". It had already raised prices 10% earlier this year.
  • ✈️ From November, unvaccinated employees of Delta Air Lines will have to pay a $US200 monthly surcharge to be on its corporate health plan.
  • 🏨 Queensland will build a 1,000-bed dedicated regional quarantine facility in Toowoomba – without federal support, as the site was rejected by Scott Morrison – and expects it to be ready by the end of the year.
  • 🎙️ Beware the walled garden: Joe Rogan signed an exclusive podcast deal with Spotify and has since lost "impact and relevance" (but not dollars!).
  • 🇵🇭 Philippine President Rodrigo Duterte will run for Vice President at the next election, effectively bypassing presidential term limits.
  • 🏉 Carlton sacked coach David Teague a year before his contract expired, after a review found that "the team has underdelivered in its ability to consistently defend, win the contest and apply pressure".
  • 🤷‍♀️ Too many syllables? Kanye West has asked a judge to legally change his name to Ye (no last name), citing "personal reasons".
  • 🦘 The third and final Bledisloe Cup match between the Wallabies and All Blacks will take place in Perth on 5 September.
  • 💣 Suspected suicide bombings at Kabul airport in Afghanistan killed 12 US soldiers and 60 Afghans.
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