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Why did Qantas (ASX:QAN) shares soar 4% on Tuesday?

asx share price rise represented by red paper plane flying away from other white paper planes
Image source: Getty Images

Qantas Airways Limited (ASX: QAN)’s share price shot up 4.36% on Tuesday, as the market awaited its financial results to be revealed on Thursday.

The airline itself didn’t make any announcements to the ASX on Tuesday. 

But investors could have been reacting to rival Regional Express Holdings Ltd (ASX: REX)’s revelation 12 hours earlier. In this release, Rex announced that it was withdrawing from 5 routes that it previously held a monopoly on.

Ever since Rex announced its intentions to compete in the golden Sydney-Melbourne-Brisbane triangle this year, Qantas started flying to regional airports. Previously, these were Rex’s sole domain.

Rex complained to the Australian Competition and Consumer Commission (ACCC) in December, claiming Qantas was indulging in anti-competitive practices.

The smaller airline stated then that the regional routes that Qantas was stamping in to did not have sufficient demand for 2 carriers.

It accused Qantas of “choosing to incur huge losses” on rural routes to “destroy incumbent regional operators”.

On Monday, the cash-bleed became too much to bear. Consequently, Rex announced it would stop flying the following routes, leaving Qantas as the sole provider:

  • Sydney-Bathurst
  • Sydney-Cooma
  • Sydney-Lismore
  • Sydney-Grafton
  • Adelaide-Kangaroo Island

Rex’s share price was down 2.65% on Tuesday, to close at $1.66. It was $1.13 one year ago, just before the coronavirus market crash. 

Another reason why Qantas share price might be spiking

Revenues for the entire aviation industry obviously depends on people being willing to travel again.

Therefore, the rollout of the COVID-19 vaccines in Australia this week could be providing confidence to stock investors that Thursday’s outlook could be very positive.

Earlier this month, The Motley Fool reported that Goldman Sachs had put a $7.05 price target on Qantas. This compares to $5.03 even after Tuesday’s 4.36% jump.

Other ASX-listed companies involved in the travel sector also climbed Tuesday. Corporate Travel Management Ltd (ASX: CTD) was up a whopping 9.82% and Webjet Limited (ASX: WEB) gained 2.79%.

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Motley Fool contributor Tony Yoo owns shares of Corporate Travel Management Limited, Qantas Airways Limited, and Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Tony Yoo