Qantas Airways Ltd (ASX: QAN) shares aren't joining in the broader market rally today, down 0.2% in morning trade on Monday.
Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed Friday trading for $6.68. Shares are currently swapping hands for $6.67.
Despite this morning's dip, Qantas shares are up 5% since the closing bell on 23 May, while the ASX 200 has lost 0.5% over this same time.
23 May was the date, as you may recall, that the airline announced its record full-year profit forecast along with a very rosy outlook for the coming years.
What's driving the record profits?
Qantas shares have been flying high since the ASX 200 airline announced it expects to achieve an all-time high underlying profit before tax of $2.4 billion to $2.5 billion for the full 2023 financial year.
The record profits are being driven by soaring travel demand and sky-high ticket prices.
And Qantas is forecasting ticket prices will remain elevated over the coming years with demand outpacing supply.
At its investor day conference on 30 May, the airline revealed that revenue from domestic travel was now at 118% of pre-COVID levels. And revenue from international travel has leapt to 123% of pre-pandemic levels.
"I've never seen such favourable international conditions," Qantas head of international and domestic, Andrew David said.
With a bullish assessment on the outlook for Qantas shares, David added, "We can say that demand will outstrip supply for the immediate future and through to the end of the decade."
Are Qantas shares at risk of seeing these super profits slip?
That brings us to a potential risk facing Qantas shares.
Namely, super profits tend to garner the attention of the competition. Meaning more supply could come online to meet the high levels of demand faster than Qantas is expecting.
Indeed, as The Australian Financial Review reports, Qatar Airways is petitioning Federal Transport Minister Catherine King to double the volume of international flights allowed on the Sydney, Melbourne and Brisbane routes.
The petition is tied in with Australian trade negotiations currently underway with Qatar, negotiated by Trade and Tourism Minister Don Farrell.
According to the AFR, Farrell said that increasing capacity will help speed up the recovery of the visitor economy.
Economics 101 tells us increasing supply will put downward pressure on ticket prices. That's good news for travellers, but could also put some pressure on Qantas shares down the road.
A spokesman for King said the government will continue to work with its international partners "to ensure these agreements are fit-for-purpose and meet our national interest".
