Qantas (ASX:QAN) share price falls as capacity drops below 40%

A resurgence of COVID-19 cases, the delta variant and continued lockdowns. Things aren’t looking great for Qantas shares.

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The Qantas Airways Limited (ASX: QAN) share price is back to November 2020 levels in wake of rising COVID-19 cases and ongoing lockdown measures.

At the time of writing, the Qantas share price has edged 1.40% lower to $4.58.

Yesterday, ABC revealed that Qantas chief executive Alan Joyce has “warned staff to brace for the potential of renewed stand downs, as closed borders and lockdowns smash domestic travel.”

Why the Qantas share price is under pressure

ABC reported an email to Qantas staff saying:

… the airline said it was running around 90 per cent of pre-COVID capacity before Sydney’s lockdown took that to around 60 per cent.

Now, adding in the Victorian and South Australian lockdowns,the Qantas boss said the airline had reduced domestic capacity to less than 40 per cent of what it was pre-COVID.

Mr Joyce said he was hopeful that lockdowns would end soon, allowing the airline to get back up to 60 per cent of pre-COVID domestic capacity by August and 80 to 90 per cent by spring.

The commentary from ABC is in stark contrast to Qantas’ most recent market update on 20 May.

The upbeat update said that the company was on track to reach 95% of its pre-COVID domestic capacity in the fourth quarter of FY21. The outlook was even more positive for the new financial year.

“Qantas and Jetstar expect to average 107 and 120 per cent respectively of their pre-COVID domestic capacity in FY22.”

In addition, to meet both present and future demand, Qantas advised that it brought all domestic aircraft back into service.

Foolish Takeaway

The ABC report looks like an effective 180 to Qantas’ positive market update.

With major states including Victoria, Sydney and South Australia in lockdowns until the last week of July and increasing concerns about the delta variant, the Qantas share price might have to buckle up for increased volatility in the near term.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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