Great news! Looks like Qantas will bounce back nicely!
Excerpt from the Australian 17th December
Qantas flying high after Covid: analysts
Qantas will emerge from the pandemic with higher earnings than before Covid-19, according to equities analysts at Macquarie.
In a note following the airline’s investor update on Thursday, the investment bank’s research team said Qantas had become “a structurally better business, considering cost-out and cash generation will continue to reduce debt levels, also supported by recent land-sale proceeds”.
Despite the gradual easing of international travel restrictions, the analysts expect the airline to only recover to 90 per cent of pre-pandemic flight capacity in the 2023-24 financial year.
“We continue to push the rerating thesis, considering the improving outlook and structural business improvements that have been made through COVID – this will eventually support higher profitability,” the note reads.
“Whilst we are positive ... the high operating leverage within the business, and ... delays in easing travel restrictions across both domestic/international could derail the thesis. “
In the update, Qantas said domestic capacity was expected to exceed pre-pandemic levels by 2 per cent by early next year and 17 per cent in the three months to June 30, 2022.
Delivering the update, Qantas chief executive Alan Joyce said the airline would lodge its biggest aircraft order with European manufacturer Airbus.
A fleet of 134 A320neo and A220 jets will replace Qantas’s existing domestic Boeing 737s and 717s over the next decade.
But the airline also unveiled an expected loss in excess of $1.1bn for the first half of the 2022 financial year due to the crippling of travel by the pandemic.
The last six months had been the worst of the pandemic for the company, Mr Joyce said, with Qantas and Jetstar reduced to just 18 per cent of earlier levels.
“We think by April Jetstar will be back to 120 per cent and Qantas will be around 115 per cent, and by June international flying will be up around 50 per cent,” he said.
UBS analyst Andrew Fromyhr said current financial year earnings were less important for Qantas than expectations for the state of the market after recovery.
“Today’s commentary on Qantas’s liquidity position in our view confirms that the upside in Qantas is a ‘when’ not an ‘if’ story,” Mr Fromyhr wrote.
“Overall the stock is largely in wait and see mode, as we watch how demand comes back with open borders,” Citi’s Samuel Seow wrote to his clients.
“Nevertheless we see a few factors that skew towards a positive stance on the stock.
“Early website traffic suggests a bounce-back from Omicron fears, while planned capacity remains strong.
“Additionally at these levels we largely think international is not priced in.”