Qantas Airways Ltd (ASX: QAN) shares have dipped into the red after opening up 0.5% this morning.
Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed yesterday trading for $6.01. In trade on Tuesday, shares are swapping hands for $5.97 apiece, down 0.75%.
That leaves the Qantas share price up 11.50% so far in 2024, handily outpacing the 4.71% gains posted by the ASX 200 over this same time.
Despite that strong year to date outperformance, Jed Richards, senior investment advisor at Shaw and Partners, has a buy rating on Qantas.
"We believe the outlook for Australia's national carrier is bright during the next few years," Richards said (courtesy of The Bull).
Four reasons Qantas shares can keep flying high
Richards's first reason for buying Qantas shares is the strong growth outlook for the ASX 200 airline's loyalty business.
"The company's loyalty business is expected to double earnings over the next five to seven years," he said.
Then there are the investments Qantas is making in next generation airplanes.
"It will benefit from new and more fuel efficient aircraft," Richards noted.
Indeed, jet fuel costs are the second biggest expense for global airlines. The only higher costs they face are buying and leasing new aircraft, which cost a pretty penny.
To give you some idea of just how much Qantas spends each year on jet fuel, it forecasts FY 2024 fuel costs will come in at $5.4 billion.
Which brings us to the third reason to buy Qantas shares.
"The company's Project Sunrise will enable direct flights between Australia's east coast, Europe and New York," Richards said.
Indeed, according to Qantas International chief Cam Wallace, the planned Project Sunrise flights between east coast Australia and London or New York show customers are willing to pay a premium of 20% to fly direct and avoid stopovers.
"What we're seeing is the business case for Project Sunrise playing out in real time. We do think it's going to be really compelling and we're really looking forward to broadening the network" he said (quoted by The Australian).
"I think the long-haul market has evolved and changed and people are wanting experiences, they're wanting point to point, and they are willing to pay," he added.
Which brings us to the fourth reason Shaw and Partners' Jed Richards has a buy rating on Qantas shares.
"Qantas has sufficient balance sheet capacity to continue buying back shares before resuming fully franked dividends in the future," he said.
Qantas made its last two annual dividend payouts in 2019 before COVID shuttered the travel industry.
In February, the Qantas board announced an additional on-market share buyback of up to $400 million.
