New CEO, new broom, new guidance, lower profit, kitchen sink to come? Sound familiar? Well, that’s what we got from Virgin Australia on Friday morning and it raises questions about the health of the domestic and international aviation markets.
Virgin has just upgraded its outlook despite higher fuel costs, yesterday Qantas said it is looking at a rise in first-half revenues because of a rise in forward bookings and higher airfares have helped offset rising fuel costs.
Morgan Stanley assesses, while some early demand indicators for FY20 are subdued, there is more confidence the downside risks are captured and there is limited near-term impact from volatility in the oil price.
The US government has tentatively approved Qantas' proposed expanded alliance and revenue pooling agreement with American Airlines. The arrangement will mean the two carriers co-ordinate flight schedules, pricing and capacity and share revenue on international routes between the US, Australia and New Zealand.
Qantas was able to produce another strong result, at the top end of guidance, through unit revenue growth and prudent capacity growth in the face of higher fuel costs and wage inflation. Hence, the broker notes, shareholders were again rewarded with capital returns.