Tag: QAN

Qantas has announced a -23% cut to international capacity and a -5% cut to domestic. Guidance has been withdrawn because of the unknowns surrounding coronavirus.

Qantas will seek to reduce international capacity by -23% until September 2020, or at least until the operating environment is clearer. To ensure the balance sheet can withstand the challenges, the company is cancelling the $150m off-market buyback.

UBS believes there is an increasing likelihood that Qantas will pursue direct flights to New York and London. An increase in capital expenditure is expected as a result.

Qantas has deferred a decision on Project Sunrise to March 2020 as it narrows down the type of aircraft, advising there would be no regulatory obstacles from the Civil Aviation Safety Authority regarding non-stop flights.

UBS considers the most material disclosure at the company’s investor briefing was a five-year target for Qantas domestic earnings (EBIT) growth of 18% and 22% for Jetstar domestic.

UBS suspects changes in focus at competitor Virgin Australia ((VAH)) should mean Qantas will maintain an advantage and Virgin will not be able to rely solely on cost initiatives to improve profitability.

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.

Despite signs of consumer weakness in many other sectors, management considers the current demand environment is healthy. First half pre-tax profit was slightly below Credit Suisse estimates.

First quarter operating results were in line with expectations and Deutsche Bank notes forward bookings have increased to 8% from 6.2%. Management has also increased full-year fuel costs guidance.

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.

UBS upgrades revenue assumptions given the stabilising of international and a benign market capacity outlook. Despite sluggish domestic demand and industry-wide pressure on yields the broker observes underlying pre-tax profit was only slightly lower than the record FY16 performance.

The broker has decided the domestic airline duopoly between Qantas and Virgin Australia ((VAH)) is now a stable one, with Qantas’ loyalty program dominant within that duopoly. Domestic contributes 70% of value, with the more competitive international business only contributing 15%.