Qantas Airways Limited (ASX: QAN) shares are edging higher in early trade following an update on the company’s business operations. At the time of writing, the Qantas share price is trading 0.58% higher at $5.24. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.29%.
Let’s take a look at the company’s update.
What’s boosting the Qantas share price?
Qantas shares are in the green on Thursday morning after the airline announced a number of updates in the ramp-up of its services.
According to this morning’s release, Qantas’ domestic travel segment is on the road to recovery. This comes despite receiving setbacks throughout the Christmas and New Year period, and the Easter holidays. The first of these impacted FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) to the tune of $400 million. The latter, a much shorter domestic travel halt, cost the group $29 million in EBITDA for FY21.
Qantas highlighted that the federal government’s plan to incentivise domestic leisure travel is promising. Half-price fare offers and the return of a large portion of corporate and small-to-medium sized businesses have boosted domestic travel demand.
Qantas is estimating its domestic travel levels will reach 80% of pre-COVID capacity in Q4 FY21. Furthermore, provided there are no significant border closures, the company believes domestic levels could hit more than 90% by Q4.
Looking ahead, current forecasting models suggest that Jetstar can achieve 120% of domestic pre-COVID levels, with Qantas at 107% for FY22.
In further news boosting the Qantas share price, Jetstar will borrow six Airbus A320 aircraft from Jetstar Japan to cater for the sudden surge in Australian domestic travel. In addition, five Boeing 787-8 aircraft will be pulled from international routes to service the domestic market from mid-year.
The group is also in discussions with Alliance Airlines to operate three Embraer E190 aircraft from May. The planes will look after existing Qantas routes in northern and central Australia.
As a result of the sweeping changes, the company noted that by Q4 FY21, 90% of its fleet will be active. This compares to 25% of its aircraft during the height of the national lockdown in the middle of 2020.
Since the announcement of the trans-Tasman bubble, Qantas has recorded over 250,000 bookings in just two weeks. While flight bookings are expected to remain high for the initial period, demand is anticipated to reduce over the longer term. In response, the company stated that it will cut capacity to reflect ongoing demand patterns.
International travel reset
Preparations are underway for the reopening of international borders and the resumption of international flights in late October 2021. The group is reactivating long-haul aircraft and training employees.
Qantas revealed that it maintains the flexibility to align with the Australian Government’s international travel approach.
Accor lounge agreement
Lastly, Qantas welcomed a new 7-year deal with Accor to manage the Qantas lounges in Australia and abroad. The renewed agreement follows a 14-year partnership involving the management of food and beverage services and employee training at Qantas lounges by Accor.
Qantas CEO, Alan Joyce commented:
We’re now seeing really positive signs of sustained recovery.
This is the longest run of relative stability we’ve had with domestic borders for over a year and it’s reflected in the strong travel demand we saw over Easter and the forward bookings that are flowing in each week from all parts of the market.
The two-way bubble with New Zealand is great news for the tourism sector as a whole. It means we can bring other parts of our business out of hibernation, like our aircraft and First lounges in Australia.
It’s important to keep this uptick in perspective. We are still facing a massive financial loss this year, which will be the second one in a row. We’ve lost more than $11 billion in revenue since the pandemic started and that number will keep growing until international travel recovers.
Qantas share price snapshot
Over the past 12 months, the Qantas share price has gained close to 50%. Year to date, Qantas shares have gained around 6%. The airliner has a market capitalisation of around