SYDNEY (BLOOMBERG) - It is the final Wednesday of January 2020, the coronavirus has yet to claim anyone outside of China, and Qantas Airways chief executive officer Alan Joyce is all smiles and handshakes. He has flown almost two hours north from Sydney to the mining town of Toowoomba to open a pilot academy. In the sweltering heat of the open hangar, he tells the crowd that graduates will one day captain the giant Airbus A380s or Boeing Dreamliners that anchor the iconic Australian airline's long-haul network.
There is little mention of the virus that weeks later would lay waste to global aviation. Yet on the plane trip back to Qantas's headquarters that afternoon, Mr Joyce is already focusing on the looming battle. In an interview from his usual seat - 1A - he says he will do whatever it takes to come out of the pandemic on top.
"It's survival of the fittest," he predicts.
That was an early glimpse of the determined, even ruthless, approach that has seen Qantas not just survive the biggest crisis in aviation history, but become almost unassailable in its home market.
While losses at airlines globally from Covid-19 are set to surpass US$174 billion (S$234 billion) by the end of 2021 - wiping out half a decade of profits - Qantas has become one of the most financially secure carriers anywhere in the world. Its stock has surged 120 per cent from a March 2020 low - almost double the return of the Bloomberg World Airlines Index - and its market value has swollen to A$8.9 billion (S$9.1 billion). Qantas says net debt has peaked and it is on track to deliver an underlying profit for the year ending this month.
The 100-year-old carrier's market position, Mr Joyce declared on May 20, "is stronger than it has ever been".
Qantas' muscular recovery from a crisis that was terminal for many of its peers is a tale of commercial opportunism and political guile. Australia's improbable feat of almost eliminating Covid-19, not to mention subsidies for fliers, created a haven for air travel that Mr Joyce has exploited to its fullest.
His springboard was Australia's shutdown of its international borders in March last year. The government did not just stop visitors coming in - it also barred citizens from leaving. So within months, travel-loving Australians who would normally jet off to Aspen or the Mediterranean started emptying their wallets at home in a domestic vacation bonanza.
Qantas, by far Australia's largest airline, was one of the biggest beneficiaries. The boost was turbo-charged this year when the government started subsidising 800,000 half-priced airfares to support tourism. Air travel in Australia has become so popular that Mr Joyce said in May demand was about to surpass even pre-Covid-19 levels.
"I don't see any way Qantas won't come out of this very strongly," Mr Ian Chitterer, a vice-president at Moody's Investors Service in Sydney, said in an interview. "You can't imagine the opportunities would have presented themselves to the same degree were it not for the pandemic."
Mr Joyce, 54, has not held back. A former flight scheduler himself, he has been busy orchestrating Qantas's biggest network expansion in a decade, adding 45 routes during the pandemic.
The holiday boom has been enabled by an unlikely victory over a virus that has killed almost 3.9 million people in the rest of the world. Australia, which has suffered fewer than 1,000 deaths, only has about 150 active cases and life has largely continued as normal. The country came in third out of 53 nations last month in Bloomberg's Covid Resilience Ranking of the best places to be during the pandemic.
Self-containment is not the only thing underpinning Qantas's recovery. Australia's vast land mass - more than double that of India - makes flying the only practical way to travel between most major cities. The 26-million-strong population also puts a limit on viable airline competitors.
And Mr Joyce, who has led Qantas since 2008, has been merciless. When Qantas's closest rival Virgin Australia appealed for government help just a few weeks into the crisis, Mr Joyce argued successfully against rewarding "badly managed" companies. Without the kind of aid that propped up carriers across Europe and the United States, Virgin collapsed in April last year, riddled with debt after trying in vain to go head-to-head with Qantas.
While Bain Capital rescued Virgin two months later, the buyout firm shrunk the airline's fleet and relaunched it with more modest ambitions. Mr Joyce soon went after Virgin's frequent fliers - the core of any airline - with an offer to fast-track their loyalty status with a switch to Qantas.
Those efforts are bearing fruit. Qantas's market share touched 74 per cent in December and was 69 per cent in March, up from 61 per cent before the pandemic, the competition regulator says. That is a degree of dominance unthinkable in the US, where American Airlines Group leads with a 20 per cent market share, according to March data from the Department of Transportation.
To be sure, Covid-19 did not bypass Qantas. The airline estimates the pandemic has cost it A$16 billion in lost revenue, and its pretax loss for the year ending June will be more than A$2 billion, a figure that includes plane writedowns and redundancy costs. Mr Joyce has had to deploy the bare-bones budgeting skills he later honed as the head of Jetstar. He is cutting 8,500 jobs from Qantas and carving out AUS$15 billion in costs.
In a statement, Qantas said: "We've been clear that we have to make fundamental changes to our business in order to survive. Our focus has to be making sure we're in a position to repair and recover."
Ms Teri O'Toole, federal secretary of the Flight Attendant's Association of Australia International, says Qantas is taking advantage of the crisis to part with some of its best-paid cabin crew and reduce their influence on salary negotiations. "They're using the pandemic," said Ms O'Toole, who is also a Qantas cabin-crew member. "They're telling employees how bad it is, but they're telling the market they're making money."
In response, Qantas said in its statement that revenue losses have been so large that "difficult decisions" have been necessary. "Job losses have unfortunately been part of that," it said.
Australia's Transport Workers' Union National Secretary Michael Kaine says state funding to Qantas should be conditional on keeping its workers. Most of the A$1.2 billion in government aid given to the airline in 2020 was designed to keep staff in their jobs, filings show.
"Mr Joyce seems to have quite a capacity to be able to move this current federal government wherever he wants them to go," Mr Kaine said in an interview. "He's persuasive."
Mr Joyce's biggest test may come from the Australian policy that Qantas has so benefited from. While the US and parts of Europe are reopening to foreign travel, Australia is in no hurry. The government says borders are likely to stay shut until the middle of 2022, with public support for the closure still high and vaccination rates slower than elsewhere. International business generated about a third of group income before Covid-19. Just before the pandemic, Qantas was poised to push ahead with Project Sunrise - the first non-stop services linking Sydney with New York and London. That's now on ice.
To get back on track, Qantas set out a three-year plan last June that included raising A$1.4 billion from institutional investors and grounding its entire fleet of 12 A380 superjumbos for at least three years. The airline expects its cost-cutting program to deliver A$1 billion in annual savings from June 2023.
The plan suggests Qantas could come out of Covid-19 not only stronger at home, but also to be able to gain market share against international rivals that have become weighed down with debt during the health crisis, according to JPMorgan Chase & Co. Qantas looks set to "capitalise on the relatively soft competitive landscape", analyst Richard Jones said in a June report.