It often feels like one step forward and two steps back for the Qantas Airways Limited (ASX: QAN) share price.
This week alone, investors had to juggle concerns that international travel is likely to remain limited until 2024, the cancellation of the AstraZeneca vaccine for under-50s and an upbeat business update from Qantas.
While it might be a tug-of-war between the bulls and bears for where the Qantas share price will go next, brokers believe the company's shares are in a position to outperform.
Qantas business getting back on its feet
Yesterday, Qantas provided a number of updates regarding the ramp-up of its services. To recap its update, the company estimates that domestic travel can reach 80% of pre-COVID capacity in Q4 FY21. Looking ahead, it believes domestic travel levels could reach more than 90% by 4Q21 and 107% in FY22.
To meet increased demand for domestic travel, Jetstar will deploy six Airbus A320 aircraft on loan from Jetstar Japan. It will also redeploy up to five of its Boeing 787-8 aircraft, usually flown on international routes, to the domestic market from mid-year until international flying returns. Overall, 90% of the group's aircraft will be active in the fourth quarter, up from 25% during mid-2020.
Brokers are bullish on the Qantas share price
Macquarie has come out with an outperform rating and a $6.45 target price for Qantas shares. The broker expects FY22 domestic capacity to be approximately 110% of pre-COVID levels, supported by pent-up leisure demand, the government's $1.2 billion aviation support package and recovering corporate travel volumes.
Despite warnings that international travel could be off the cards until 2024, Qantas is optimistic about international borders re-opening from October 2021.
The broker continues to monitor the COVID vaccine roll-outs in key destinations like the United States and Singapore that formed a big proportion of FY19 available seat kilometres.
Similarly, Morgan Stanley is overweight on Qantas shares with a $5.90 target price. The broker believes the recovery in domestic capacity will allow for an organic repair to take place in its balance sheet but with a relatively small impact on profitability. Morgan Stanley says this will be supported by strong leisure figures assisted by government incentives and an early recovery in corporate travel.
