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Date : 01/06/2023

Qantas Airways Projects Record Profit as Recovery Takes Flight, Share Price Faces Headwinds

Qantas Airways Limited (ASX: QAN), the esteemed Australian airline, is on the verge of achieving a landmark financial milestone. Despite the positive news of its expected record-breaking profit for the fiscal year 2023, the Qantas share price has encountered a slight setback. This article explores Qantas’ impressive recovery program, its promising financial outlook, and the factors influencing its share price performance.

QAN: Market Response

Despite the positive news, Qantas’s share price has experienced a modest decline of around 1% in response to the update. Nevertheless, the QAN stock has shown resilience, boasting a 7% increase since the beginning of the year, outperforming the ASX 200, which has seen a 5% year-to-date rise and a 2% increase over the past 12 months.

asx qan shares news forecast

 

QAN: Reaping the Rewards of a Resilient Recovery Program

Qantas Airways’ comprehensive three-year recovery program yields promising results, positioning the airline for a strong financial performance. The company forecasts an underlying profit before tax ranging between $2.425 billion and $2.475 billion for the fiscal year 2023, marking a significant achievement for this iconic Australian brand. The recovery in travel demand and the normalization of aviation supply chains is the driving force behind Qantas’ improving bottom line.

The airline has experienced a surge in flying activity during the second half of the year, owing to the addition of new aircraft, the return of wide body jets from long-term storage, and enhancements in operational reliability. As a result, Qantas expects its domestic capacity to surpass pre-COVID levels, reaching 104% by the end of the second half of 2023. Simultaneously, the company projects its international capacity to surpass 80% of pre-pandemic levels, with a target of reaching nearly 100% by March 2024.

QAN: Navigating Airfare Challenges and Financial Projections

Despite the positive momentum, Qantas acknowledges that airfares will likely remain “materially” higher than pre-pandemic levels throughout the next fiscal year, particularly for international travel. The company anticipates benefiting from capacity improvements and falling jet fuel prices. However, it also expects negative foreign exchange rates and bond movements to pressure its financial performance.

Qantas aims to conclude the fiscal year with a net debt position ranging from $2.7 billion to $2.9 billion, significantly below its target range of $3.7 billion to $4.6 billion. Additionally, the company has allocated between $2.6 billion and $2.7 billion for capital expenditure during the same period. The airline is actively working to reintroduce the remaining stored aircraft into service, with five reserved aircraft set to resume operations by the end of the current half and an additional eight new aircraft scheduled for delivery by the end of 2023.

QAN: Expanding On-Market Share Buyback Program

Qantas has extended its on-market share buyback program in line with its commitment to rewarding shareholders. Following a $400 million buyback completed the previous year and an additional $500 million announced in February, the ongoing buyback is now 78% complete, with shares purchased at an average price of $6.49 per share. Qantas has decided to augment the buyback by an additional $100 million to further enhance shareholder value.

Considering the airline’s already reduced debt levels, some analysts view this expanded buyback as symbolic. Speculation has arisen regarding potential fleet capital expenditure or further capital management actions following the release of the FY23 results.

QAN: CEO’s Perspective

Qantas CEO Alan Joyce commended the progress made in the recovery program, emphasizing the gradual return to normalcy across various components of the aviation supply chain. He highlighted the reintroduction of spare aircraft and crews into the flight schedule and lower fuel prices as factors exerting downward pressure on fares—a customer benefit. However, Joyce cautioned that the industry continues to grapple with a supply-demand mismatch, particularly in international travel, a challenge likely to persist for some time.

Conclusion

Qantas Airways’ projected record profit for FY23, supported by its robust recovery program, signals a promising outlook for the company. While challenges like higher airfares and external financial factors persist, Qantas can capitalize on the rebounding travel demand. Extending the on-market share buyback program further underscores the company’s dedication to shareholder value. Investors with a long-term perspective may find Qantas an appealing investment opportunity, given the positive revenue indicators and the potential for future capital returns. As the travel industry continues its resurgence, Qantas is poised to reclaim its pre-pandemic strength and deliver sustained growth in the coming years.

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