The Qantas Airways Ltd (ASX: QAN) share price has fallen 12% since 26 March 2025 and 17% from 4 March 2025, as the chart below shows. A good business that's down is usually more attractive because it's better value. Let's consider whether Qantas is worth a buy.
While there is a lot of volatility on the stock market, passenger travel may not be seeing as much change.
The company's most recent update was the FY25 half-year result for the six months to December 2024, which highlighted strong travel demand across all customer segments. Qantas and Jetstar's domestic and international businesses delivered increased profitability and carried almost 10% more customers.
Premium and corporate travel remained strong for Qantas, while Jetstar carried a record number of customers in a high-cost-of-living environment. The company's loyalty division saw an 11% growth in membership, and that segment is expecting growth for underlying operating profit (EBIT) of 10% in FY25.
It generated $1.4 billion of underlying profit before tax and $923 million of statutory net profit.
Is the Qantas share price a buy?
There are a number of attractive things about the company.
It has started paying dividends again to unlock the franking credits that it's now generating because of the taxable profit it's making following the COVID-19 pandemic impacts. Broker UBS is projecting Qantas could pay an annual dividend per share of 33 cents in FY25. At the current Qantas share price, that translates into a grossed-up dividend yield of 5.5%, including franking credits.
I also like that Jetstar is clearly excelling during this period as it serves customers looking for cheaper flights. According to UBS, in the HY25 result period, Jetstar "significantly beat expectations", and it increased its capacity by 20%, while EBIT was up 35% year over year. It was a record half for both Jetstar's domestic and international segments.
As long as the cost-of-living remains an issue for households, I believe Jetstar's demand and profitability could remain high.
Another big benefit right now for Qantas is that oil prices are reducing. If fuel prices are lower, this could help Qantas' profit in the medium term. However, I'm not going to try to predict what Qantas' fuel price could be in a year from now because so much is changing at a rapid pace.
UBS also expects costs to be "contained" as capacity growth stabilises, on-time performance improves, and the benefits from Qantas' transformation and fleet renewal are seen.
The one major negative for me, aside from a possible global downturn from tariffs, is the strengthening of the Virgin Australia business. Increased competition could be a headwind for Qantas' profitability. Time will tell how much Virgin wants to compete (on airfare prices).
Valuation
According to the broker's profit forecast, the Qantas share price is valued at 8x FY25's estimated earnings.
I wouldn't call the Qantas share price the most attractive investment on the ASX, but I think it could be undervalued if travel demand remains solid for the long term.
