Qanats Airways Edges Slightly Higher on Positive Trading Update
- Qanats share jumped 3.65 per cent at the market open today.
- Domestic capacity is expected to reach 95 per cent by the end of the fourth quarter.
- Macquarie has maintained an outperform rating on Qantas with 37 per cent upside.
Qantas Airways (ASX: QAN) has today released another key business update to the market regarding both its international and financial positioning. The company has focused on the steady and sustained recovery in expectations for future travel despite COVID-19 cases continuing to rise. Domestic travel has continued to pick up as Australian confidence in the management of the pandemic and vaccine distribution and encourages domestic travel.
The company’s most recent announcement has forecasted underlying earnings before interest, taxation and amortization (EBITDA) of $400-450 million for the full financial year. In its entirety, a loss in excess of $2 billion is still expected. Redundancies, write-downs, other charges and COVID-19 associated coats shave driven this result.
Nonetheless, Qantas has generated positive and strong, free cash flows for the period and has already contributed to a strong liquidity position of $4 billion. This includes $2.4 billion in cash and $1.6 billion in undrawn debt facilities. However, the forecasts revealed by Qantas are contingent on “no further lockdowns or significant travel restrictions,” a threat that very much remains alive. The impact of these lockdowns are significant, with the three day Perth lockdown in mid-April costing Qantas an estimated $15 million. According to the announcement, Qantas’ balance sheet “net debt has peaked and is starting to decline”.
Domestic capacity is expected to reach 95 per cent by the end of the fourth quarter and through FY22 capacity is expected between 107 and 120 per cent of pracademic levels. These positive, forward-looking statements have encouraged investors with the company’s share price jumping 3.65 per cent at the market open today.
International capacity will remain subdued, with Qantas expecting the first signs of recovering international travel in October to December of this year. Australian and New Zealand remains the only open channel and is still subject to lockdowns and sparks in cases.
International aircraft carriers such as American and Delta Airlines continue their own recovery from the industries general decimation. Both companies remain 25 and 26 per cent below their pre-pandemic highs, with current valuations continually pricing in a robust international reopening. Boeing and Airbus, however, have far bleaker futures ahead with a major expansion in aircraft fleets unlikely to occur in the near future.
A Plethora of major institutions still see significant upside for Qantas at current levels, with Ord Minnett, Morgan Stanley, Macquarie, Citi, UBS and Credit Suisse giving an average 22.1 per cent upside. Most notably, Macquarie has maintained an outperform rating on Qantas with 37 per cent upside, etching optimism in the future of international travel.