The Qantas Airways Limited (ASX: QAN) share price could fly higher as it emerged that it’s winning business customers from Virgin.
Why would the Qantas share price go up?
According to reporting by the Australian Financial Review, Qantas has managed to pinch around 30 business clients from Virgin Australia in recent times. The CEO, Alan Joyce, wants to win even more market share in the business segment.
A source told the newspaper that BAE Systems and Suncorp Group Ltd (ASX: SUN) are two of the customers that have changed airlines because of concerns about the level of service this new Virgin would provide.
Qantas is expecting that total business travel is going to fall between 13% to 15% compared to pre-pandemic times, mostly as internal company meetings can be held via online video calls.
Where can Qantas win an even stronger position?
The airline believes there’s a good opportunity in the small and medium business space. The resources sector continues to perform well and government activity could be another help to the overall activity volume.
These smaller business customers are seeing a return to activity sooner than the large corporates.
It’s going to be an interesting upcoming period in the SME market for airlines, because Virgin has said it wants to target smaller businesses to help “value-conscious corporates”.
The AFR quoted Mr Joyce, who said: “There’s going to be a big battle for that small and medium sized enterprise. We’ve been growing market share the last decade. We have enough product and processes in play. We can grow that share even further“.
How big can its market share become?
Mr Joyce believes that Qantas’ market share would rise to above 70%, particularly with strength for Jetstar because of the demise of Tiger Air.
Qantas thinks that at some point, either Virgin or Regional Express Holdings Ltd (ASX: REX) will be forced out in the future.
Summary thoughts
The airline is still hoping that international borders can open later this year, but it looks less likely now with the COVID-19 vaccine delays.
Qantas could be a share to watch if passenger volume comes back and
Qantas can achieve higher profit margins. But an earnings recovery is not guaranteed, though there are plenty of other ASX growth shares that are seeing their profit surge higher in these strange times.
