The Qantas Airways Limited (ASX: QAN) share price has dropped by a quarter so far this year, losing 26% to trade at around $3.00 in lunchtime trading.

The moves over the past 4 weeks or so have also been dramatic, sinking from $4.22 or 28%. That comes after a dramatic turnaround saw the share price rise from a 3-year low of 95 cents in December 2013 to $4.22.

Here are 3 reasons why the share price is now sinking…

1. The oil price has recovered

The Benchmark Brent crude oil was at US$49.72 a barrel overnight, after hitting a low of under US$30 a barrel in mid-January. Fuel is the airline’s largest expense – after the planes themselves – and the halving in the oil price over the past two years has played a huge part in Qantas’ turnaround. There are signs now that the oil price may have stabilised and potentially could go higher. Qantas hedges much of its fuel purchasing, so the oil price movement can take some time to have an impact on the company’s financial results.

2. Weaker consumer confidence

Qantas announced in April that it was cutting back on domestic and international flights due to weaker than expected demand. The airline said that there was a fall in demand over Easter and recent school holidays and facing turbulence ahead of the Federal election and also weak consumer confidence. Qantas domestic flights booked for April were down 8%, and flights for May 15% down over last year, according to Deutsche Bank.

Domestic capacity growth over the second half of the year is now expected to be virtually flat, down from the previous estimate of 2%, and negative over the April, May and June months.

Virgin Australia Holdings Ltd (ASX: VAH) announced last month that it was reducing capacity by 5.1% in the fourth quarter of FY 2016, also citing weak consumer demand and the resources sector downturn. Travel agent Flight Centre Travel Group Ltd (ASX: FLT) has also marked down its growth for similar reasons.

3. Cheap flights aren’t working

Both Qantas and Virgin had also been cutting airfares, partly as a response to cheap international airfares to and from Australia by competitors, but also to entice customers to fly more. Australians can fly from Sydney to Los Angeles, USA return for less than $1,000 or London return for as little as $1,079 according to current deals on Flight Centre’s website.

That doesn’t appear to have worked. Despite cheap flights, the airlines have both still been forced to cut capacity. With high fixed costs and substantial leverage, if cheap airfares don’t work, the airlines will still be flying aircraft around, so expenses don’t fall much, while revenues do.

Foolish takeaway

Despite the share price fall, Qantas could still post a profit after tax of more than $1 billion for the 2016 financial year, which would represent a fairly low P/E ratio. It’s currently at just 6x, suggesting the share price is currently very cheap. But uncertainty over issues the airline has no control over clearly has the market worried.

Forget Qantas when you can take less risk investing in this cheap company.

This "dirt cheap" company. is growing like gangbusters, and trading on a fat dividend yield, FULLY FRANKED. With interest rates set to stay at these low levels for years to come, for income-hungry investors, including SMSFs, this ASX company could be the "Holy Grail" of dividend plays for 2016. Click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required.

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.