The Qantas Airways Limited (ASX:QAN) share price could provide investors with long-term value if the airliner is successful in executing its post-COVID-19 recovery plan. Here’s why the Qantas share price could be poised for a stronger future.
What is Qantas’ recovery plan?
Late last week, Qantas released a market update that detailed the airliner’s 3-year strategy to recover from the pandemic. The plan revolves heavily around reducing costs by $15 billion over the next 3 years. More specifically, this includes cutting the company’s workforce and restructuring operations.
As part of the drastic plan, Qantas announced that 6,000 jobs would be axed. Qantas CEO, Alan Joyce, described the roles as “jobs we don’t see coming back for a long time”. In addition, another 15,000 of the airliner’s employees will remain stood down for the time being. Qantas also announced that 100 aircraft in its fleet will remain grounded for up to 12 months or face early retirement.
The company also announced a huge capital raising of $1.9 billion in order to accelerate its recovery and help the airliner capitalise on new opportunities.
Will the plan result in a stronger Qantas share price?
The COVID-19 pandemic is undoubtedly one of the biggest challenges ever faced by the aviation industry. Despite large-scale job losses and fleet reductions, Qantas could emerge stronger from the pandemic if its recovery goes to plan.
Recently, world renowned credit rating agency, Moody’s, tipped Qantas to recover more quickly from the pandemic than other airliners. Analysts noted that Qantas has made around 80% of its EBIT from domestic flights and its loyalty program. As such, the Aussie airliner could potentially boost its domestic capacity to help repair its balance sheet during the company’s recovery phase.
In its recent recovery plan announcement, Qantas also noted that the airliner may pursue its ambition of delivering more non-stop international flights. These could potentially improve Qantas’ efficiency and profitability. As a result, once international travel resumes, Qantas could find itself in a better financial and operational position than some of its competitors.
Is the current Qantas share price a buy?
In my opinion, there is no rush to jump in and buy shares in Qantas just yet. With the August reporting season still to come, and growing fears over a second wave of coronavirus, the sector looks extremely volatile in the short term. I think a prudent strategy would be to wait until after the August reporting season to get a better idea of how the company is placed before making an investment decision.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. 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 Scott Phillips.
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