Here's why the Qantas (ASX:QAN) share price rallied 10% in August

Despite ongoing lockdowns and surging COVID-19 cases, Qantas shares managed to hit a 4-month high in August. Here's why.

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A jet plane takes off representing the qantas share price rising on the ASX this week

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August marked a V-shape recovery for the Qantas Airways Limited (ASX: QAN) share price.

Shares in the Aussie airline staged an almost vertical recovery after sliding to a 10-month low of $4.24 by 20 August.

The Qantas share price surged in the lead up to its FY21 results on 26 August and continued to rally despite posting major losses for the year ended 30 June 2021.

Qantas share price rallies despite posting $1.7bn loss

The Qantas share price managed to close out the month of August 10.89% higher to a 4-month high of $5.09.

This is despite its FY21 results revealing a statutory loss after tax of $1.72 billion.

Qantas flagged that total revenue loss from COVID-19 amounted to $16 billion as "the full year impact of minimal international travel and multiple waves of domestic border restrictions continued to hit travel demand".

Encouragingly, the company said that the periods of open domestic borders in the second half saw significant cash generation by Qantas and Jetstar. Perhaps signalling that there is a light at the end of the tunnel for the Qantas share price.

The Group's domestic capacity steadily recovered to a peak of 92% of pre-COVID levels in May 2021, until outbreaks of the Delta variant triggered a series of lockdowns across major cities.

Any positive takeaways?

Qantas Group CEO Alan Joyce was optimistic about the outlook in the tourism industry, saying that the company is "geared to recover quickly, in-line with a national vaccine rollout that is speeding up."

"Despite the uncertainty that's still in front of us, we're in a far better position to manage it than this time last year. We're able to move quickly when borders open and close. We're a leaner and more efficient organisation."

"When Australia reaches those critical vaccination targets later this year and the likelihood of future lockdowns and border closures reduces, we expect to see a surge in domestic travel demand and a gradual return of international travel," Joyce said.

Joyce's optimistic outlook might have taken the spotlight away from the company's $1.72 billion loss. Surprisingly, the Qantas share price rallied 3.49% on the day of its full year results announcement.

Looking ahead, Qantas expects vaccination rates to reach 70% of the eligible population by November, enabling domestic knockdowns and border restrictions to be steadily eased.

The company's key assumptions for FY22 include a strong uplift in Group domestic capacity, from 38% of pre-COVID figures in the first quarter of 2022 to 53% in the second quarter of 2022, as well as a rise to 110% in the second half of FY22.

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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