The Qantas Airways Limited (ASX: QAN) share price has been having a good run in 2022 so far, but one top broker has flagged a potential weight on the airline's recovery.
Citi equity analyst Samuel Seow reportedly believes a lack of pricing power in Qantas' domestic operations could drag on the company's bottom line.
At the time of writing, the Qantas share price is $5.49. That's 6.6% higher than it was at the start of 2022.
For context, the S&P/ASX 200 Index (ASX: XJO) has slipped 4.6% this year, leaving Qantas' stock outperforming by more than 11%.
Let's take a closer look at what Citi predicts for the airline's future.
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Could this weigh on Qantas shares this year?
Australia's tourism sector is bouncing back in 2022. In fact, many ASX 200 travel shares – including Qantas – are expecting to return to profitability in the near future.
The 'flying kangaroo' recently told the market it's hoping to break even in financial year 2023.
Right now, its recovery is being led by demand for domestic travel. However, Seow is sceptical of the airline's pricing power in the domestic segment, as reported by The Australian.
While international competition looks limited, it appears the reverse is the case in domestic, which is a larger contributor to profit.
With relatively soft domestic passenger data and an element of over servicing, we expect pricing power to be constrained domestically despite rising fuel.
Citi's Samuel Seow, as quoted by The Australian.
The broker is also reportedly concerned that Qantas' recovery might be slower in its more profitable routes – those between Sydney, Melbourne, and Brisbane.
Flights between the nation's three largest cities are known as 'the golden triangle' of Australian aviation.
Perhaps unsurprisingly, other airlines – including Regional Express Holdings Ltd (ASX: REX) – have been jostling for a share of the lucrative market.
"Competition is picking up more market share on the golden triangle," Seow said, as quoted by The Australian. "[That implies] some if not the majority of [Qantas'] capacity gains have been on less profitable routes."
Citi reportedly has a $5.47 price target and a neutral rating on Qantas shares.
