Qantas will be dead in 6 months

[Gingerbread]

Seems not everyone thinks the Kangaroo is on its last legs?

According to Alan Kohler's Eureka Report today:

"Investors are advised to buy Qantas at current levels"

'Qantas has downgraded orders for its fleet, cancelling the delivery of 15 Boeing 787s and delaying the delivery of another 15 aircraft, which will reduce some of the pressure on the flying kangaroo’s balance sheet, giving many stock pickers reason to cheer.

However, with May traffic stats showing a decline in profit margins, some of them are also pointing out the greater risk that is now associated with airlines in general. One newsletter says the lower fleet orders will reduce group capital expenditure by about $3 billion, but the downgrade will delay the many of the airline’s highly anticipated initiatives.

While the lower traffic numbers may have already been factored in by management when they cut their full-year profit forecast by 80% and jettisoned almost 2000 staff, the recent entry of US carrier Delta Air Lines into the lucrative Australia-US route will certainly not be welcomed by Qantas, especially as demand for international travel remains weak.

The one thing in Qantas’ favour is that its management is continuing to prudently manage costs and capacity says one stock picker, who adds despite the impact of swine flu and general weakness in demand, Qantas stock represents good value and is well positioned to bounce back as market conditions improve.

Another stock picker says the airline is being priced more on an asset-based valuation rather than earnings potential, and although the valuation gap is closing the stock is still the best pick in the sector.'