The Qantas Airways Limited (ASX: QAN) share price is currently down around 2% after a strong update.
Strong Qantas update
The airline has revealed that it’s expecting to make an estimated underlying profit before tax of between $2.425 billion to $2.475 billion in FY23.
This will help reduce the net debt to between $2.7 billion and $2.9 billion at 30 June 2023. The net debt range is “significantly below the bottom of its revised target range of $3.7 billion to $4.6 billion.”
Flying activity has increased in the second half of FY23 as new aircraft arrive, more widebody jets return from long-term storage and operational reliability improves.
By the end of the FY23 second half, domestic capacity will “be above” pre-COVID levels at 104%, thanks to a significant increase of flying between Melbourne, Sydney and Brisbane, while international capacity will grow to greater than 80% of pre-COVID levels, though there was a delay in restarting the Melbourne-Hong Kong route due to a “shortage of ground handlers” in that overseas port.
What’s the outlook for the Qantas share price?
International capacity will reach around 100% of pre-COVID levels by March 2024. Qantas did say that airfares have moderated from the peaks in the first half of FY23, but are still expected to remain “materially above” pre-COVID levels through FY24, particularly internationally. The CEO said that there’s still a mismatch between supply and demand, and “that’s likely to persist for some time, especially for international flying.”
The airline said that forward booking remains “indicate strong travel demand continuing into FY24”. Revenue intakes are at “118% of pre-COVID levels for group domestic and 123% for group international.”
Jet fuel prices have reduced, which should be an overall benefit of “$150 million”.
The Qantas Loyalty division is “on track” to reach the top end of its FY23 underlying EBIT (EBIT explained) target of $425 million to $450 million.
The Qantas share price could be boosted by the announcement that the board has increased the existing on-market buyback by up to $100 million.
I think this update is very promising for the long-term success of the Qantas share price, I’d be happy to own it with a three-year investment in mind as it continues to make strong revenue from the travel demand.
