Qantas ends the year on a high note

[Wirraway]

Thurs "Melbourne Age"

Qantas ends the year on a high note
By Scott Rochfort
Sydney
July 1, 2004

Falling oil prices and more passengers helped Qantas shares end the financial year on a high note yesterday, as two broking firms lifted their profit forecasts for the airline.

Buoyed by the airline reporting strong May passenger numbers on Tuesday, Qantas shares rose 7¢ to a two-month high of $3.55, before closing at $3.52 - a 13¢ rise so far this week.

The strong figures helped Credit Suisse First Boston upgrade its 2003-04 net profit forecast for Qantas by 6.1 per cent to $693 million, making it the most bullish of the brokers covering the airline.

Upping its rating on Qantas from "neutral" to "outperform", CSFB lifted its earnings forecast for the airline for the next three years.

"In our view, the stronger-than-expected earnings is being driven by the strongest volume growth the listed airline has ever reported in a quarter, excellent capacity management resulting in loads strengthening at unprecedented rates and a cost-cutting program providing incremental margin expansion on the strong top-line sales growth," CSFB said in a note.

In contrast to Virgin Blue, which recently reported a heavy dip in passenger load factors for May, Qantas reported a slight rise in load factors for the year to 74.1 per cent. The strong lift in yields for the month also gave Merrill Lynch confidence to lift its full-year net profit forecast by 9 per cent to $645 million.

ABN Amro analyst Jason Mabee said he would keep his prediction of a $660 million net profit.

JP Morgan expressed concern over Qantas's 1.5 per cent decline in revenue available seat kilometres (RASKs) for May, compared with the previous SARS-affected May. "This is significant in that it is the first month of decline since November, and throws in jeopardy our expectation of a continuing momentum in the international recovery," JP Morgan said.

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[Wirraway]

Thurs "The Australian"

Qantas treated to analyst upgrade
By Steve Creedy, Aviation writer
July 01, 2004

QANTAS shares continued to rise yesterday as analysts upgraded full-year earnings forecasts in a generally favourable reception of the airline's May traffic figures.

The shares consolidated a 10c rise on Tuesday to close up a further 4c at $3.52.

Merrill Lynch boosted its net profit forecast 9 per cent to $645 million, while Credit Suisse First Boston lifted its by 6.1 per cent to $693 million.

CSFB also upgraded Qantas to outperform with a 12-month price target of $4.30, saying the stock looked attractive in comparison with its peers.

The upgrades compare with a mean estimate of 13 analysts, compiled by research group IBES, of a full-year $645.5 million net profit.

The flying kangaroo on Tuesday posted traffic figures showing an overall domestic load factor, or proportion of seats filled, ahead of Virgin Blue and noting that new Qantas start-up Jetstar was filling planes in line with expectations.

The airline also boosted international capacity with only a marginal drop in load factor.

Macquarie Research Equities, which maintains an outperform recommendation with fair value of $4.20 per share, said demand was restoring international capacity and yields while the airline lowered its cost base.

UBS retained a buy on Qantas with a target price of $4.50, noting the airline's 74.1per cent domestic load factor compared well against Virgin Blue's 70.2 per cent.

Goldman Sachs JB Were said it expected underlying earnings momentum to remain intact "driven by cost reduction and capacity expansion".

The upgrades came as Air New Zealand Group reported the percentage of seats filled in May jumped 4.7 percentage points to 68.8 per cent.

Group traffic rose 13.7 per cent, passenger numbers increased 13.2 per cent but yield, excluding exchange movements, fell 2.1 per cent.

The figures showed mixed results for the airline's Express class low-fare initiatives on domestic, short-haul Pacific and trans-Tasman routes.

While domestic New Zealand traffic was up 17.3 per cent in May compared with a year ago, short-haul international routes rose just 4.5per cent.

Passenger load factors in the international short-haul sector dropped 2.4 points to 64.4 per cent and yield fell 7.6 per cent.

The airline said the lower international result was partly due to the launch of Pacific Express, which shifted traffic from May to later months.

"Increased competitive activity on the trans-Tasman routes also had a negative influence on traffic," it said.

In a rosier picture for long-haul flights, traffic rose 17.2 per cent on capacity growth of 4.1 per cent to push up load factors 7.8 points to 69.9 per cent.

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