Qantas Airways Limited (ASX: QAN) shares are ascending on Friday.
At the time of writing, the airline operator's shares are up 0.5% to $7.95.
Why are Qantas shares rising?
The Flying Kangaroo's shares are rising today amid a flurry of news. This includes Qantas holding its annual general meeting and its engineers staging two four-hour stoppages across the country.
But the main impact on Qantas' shares is likely to have come from the release of a market update ahead of its annual general meeting.
According to the release, the company continues to see first half trading in line with expectations. It notes that both Qantas and Jetstar are seeing stable demand in their respective segments across the portfolio.
Some good news is that Jetstar Domestic's unit revenue is outperforming previous expectations. This is due to stronger than anticipated travel demand. Whereas Qantas Domestic's load factors and demand for corporate travel continue to improve year on year.
The sum of the above is management expecting group Domestic revenue per available seat kilometre (RASK) to increase 3% to 5% in the first half of FY 2025 compared to the prior corresponding period.
Elsewhere, Qantas's previous guidance for group International RASK remains unchanged and is still expected to fall by 7% to 10% compared to the prior corresponding period.
Finally, the Qantas Loyalty business is trading in line with expectations, with ongoing strength following the launch of Classic Plus Flight Rewards. Management continues to expect at least 10% underlying EBIT growth in FY 2025. Though, it is worth noting that the recent launch of Classic Plus Flight Rewards is expected to result in lower earnings in the first half relative to the prior year.
Fuel cost update
Qantas is of course a big spender on fuel. So, fuel prices can have a major impact on profitability.
The good news is that at current prices, the expected fuel cost for the first half is now estimated to be approximately $2.55 billion. This is inclusive of hedging and gross carbon costs. As a comparison, management was previously guiding to fuel costs of $2.7 billion for the half.
Management advised that it continues to maintain disciplined hedging in line with long-term practices, with strong participation should jet fuel prices fall from here.
These fuel savings have been put immediately to work. Qantas revealed that around 27,000 employees have been given a thank you payment. A $28 million cost will be recognised in the first half of FY 2025 relating to this.
