View Full Version : Qantas shares plummet

30th Sep 2002, 06:52

Qantas shares plummet
September 30, 2002

SHARES in Qantas Airways Ltd have plunged to their lowest point in almost a year, amid ongoing war jitters and dark investor sentiment.

Qantas shares were four per cent weaker, or down 15 cents at $3.55 at 1349 AEST.

The stock has fallen for eight of the past nine days amid fears a US war against Iraq could send the price of oil - one of Qantas' biggest costs - soaring.

Any war is also likely to hit one of Qantas' biggest sources of income - international travel, which has struggled to recover following the September 11 terrorist attacks a year ago.

"If there is a war with Iraq, while the company is fairly well-hedged on fuel prices, you would expect to see a fall in international travel and that would have a fairly significant impact on Qantas' revenues," Shaw Stockbroking research director Scott Marshall said.

Qantas was believed to be well-hedged against any soaring oil price until June next year, Mr Marshall said.

"At this stage I dont see that (the price of oil) as a threat, but when you are talking about a war in the Middle East, that is very hard to predict."

Another factor weighing on Qantas was the threat of further competition in the domestic market, he said.

On September 16, the Federal Government announced Indonesian airlines would be allowed to fly into international regional airports, such as Cairns, under new air service arrangements.

The announcement was part of the government's plan to grant "unlimited capacity to all foreign airlines" to operate to international airports across Australia.

Mr Marshall said Qantas' share price had been weak since the announcement.

"The Federal Government has allowed Indonesian airlines to operate domestically within Australia, also the government has said they would open up the domestic industry to more international airlines," he said.

"It is just putting a bit of pressure on Qantas from a domestic front, because obviously those airlines would target the higher margin routes.

"Each airline probably won't cause any significant damage, but if you get a number of airlines being able to siphon people off the major routes, it is just another negative for Qantas."

There was also likely to be a little negative sentiment following Qantas' retail offer, which closed on Friday.

Qantas was likely to fall almost $100 million short of the $200 million it hoped to raise in the retail share offer, which was pummeled by the airline's sliding share price.

Qantas offered shares at $4.20 each during the offer - well above what they were worth on the market.


3rd Oct 2002, 05:16
Well it wasn't rocket science. One of the main reasons the price went up was due to many financial advisors recommending to buy, after a fantastic result in recent times. Well of course they were going to perform well!!!! They had no real competition. It would be a bold judgement to think they could produce a similar result with new competition, rising oil prices etc. The time to buy was when the price was pressured by the likes of VB Ansett and Impulse. The "experts" then recommended that it was too risky! Fundamentals would have said that there was not enough room for all 4-and Qantas was always going to be one of the survivors. Yes it is a case of sour grapes on my behalf because when my broker recommended to buy @ about $4.80 I suggested taking a put option for all the reasons mentioned above. I predicted the $3.80 mark but apparently it was "not necessarily as simple as all that". Thankfully we came to the agreement that a buy was too risky. Well I'm first to say I''m no expert- but frequently I have found that common sense and backing your own judgement on a subject you are informed on can go a long way! What will the price do in the future? Well it probably won't rise fast any time soon! It could drop further to the point where it will correct itself. Once it has corrected and stabilised, all things remaining equal it will show very modest growth which could be enhanced by the recovery of the stockmarket as a whole. Of course I could be completely wrong, putting me in the basket with 98% of growth stock advisors at the moment!:)