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Date : 20/05/2021

Qantas share price traded high following their market update

The flying Kangaroo has been doing well recently with Domestic travel across the country now successfully open. With the reopening of international borders now pushed to 2022, the stock has come under pressure in the past week, however, Qantas eased investor concerns this morning with a market update that contained details about the rebound in domestic travel, and their recovery from the pandemic.

Consumer confidence in domestic travel is proving more resilient compared with earlier in the pandemic, despite the temporary tightening of some border restrictions.

Qantas announced that a sustained rebound in domestic travel demand, and the performance of its Freight and Loyalty divisions, continues to drive the Group’s recovery from the impacts of COVID-19. Based on current trading conditions, Qantas expects to be statutory free cash flow positive for the second half of FY21.

Net debt levels peaked in February at $6.4 billion and are expected to be lower than they were in December ($6.05 billion) by the end of the financial year. Liquidity levels remain strong with total funds of $4.0 billion, including cash of $2.4 billion and $1.6 billion of undrawn debt facilities as at 30 April 2021.

The total revenue loss for the Group since the start of COVID2 is now projected to reach $16 billion by the end of FY21 –however the role of domestic travel demand in the Group’s recovery is highlighted by the fact revenue from domestic flying is expected to almost double between the first and second half of this financial year.

Assuming that there are no more outbreaks in Australia that will trigger lockdowns once again, Qantas is expecting their underlying EBITDA to be in the $400 – $450 million range for full year FY21. However, at a statutory level, Qantas is still expected to post a loss of over $2 billion given the high costs associated with redundancies, aircraft write downs and depreciation charges. The impact of lockdowns is pretty severe for Qantas. A three-day lockdown in Perth during April cost the Group an estimated $15 million in EBITDA. This follows the $29 million impact from the Brisbane lockdown in late March and the Sydney (Northern Beaches) outbreak that resulted in an impact of around $400 million in EBITDA for the period.

Qantas’ recovery is also going as planned. Their target of at least $1 billion in annual cost reduction by FY23 is well on track, with $600 million to be delivered this financial year. QAN shares were upbeat following the announcement as several investor fears were addressed in the market update. Qantas shares rose 3.54% and closed at $4.68 a share.

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