Qantas Airways Ltd (ASX: QAN) shares enjoyed a strong run on Thursday.
Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed the day up 2.10%, changing hands for $10.72 apiece.
This followed Wednesday's 1.3% decline in Qantas shares, which came as investors digested the news that Qantas was closing down its intra-Asia airline, Jetstar Asia.
Prior to the closure announcement, Qantas forecast Jetstar Asia would post a $35 million underlying earnings before interest and tax (EBIT) loss in FY 2025.
The ASX 200 airline said its 13 Jetstar Asia Airbus A320 aircraft will be progressively redeployed to service routes in Australia and to New Zealand.
Qantas noted that all of its Jetstar Airways international services into and out of Australia remain unchanged.
How does this impact the outlook for Qantas shares?
Following the airline's Jetstar Asia closure announcement, UBS analyst Andre Fromyhr reaffirmed his neutral earnings outlook for Qantas shares (courtesy of The Australian Financial Review).
According to Fromyhr:
We have long held the view that, post-COVID, Qantas is more agile in managing its international network and focusing on improving [return on invested capital] – this decision, to exit loss-making operations, simplify the portfolio, and redeploy the fleet into (predominantly) domestic services, is another strategic move along those lines.
He added, "The announcements have not materially changed our view."
Commenting on the closure of Jetstar Asia this week, Qantas CEO Vanessa Hudson said, "We are currently undertaking the most ambitious fleet renewal program in our history, with almost 200 firm aircraft orders and hundreds of millions of dollars being invested into our existing fleet."
Now what?
Looking to what we might expect from Qantas shares in the year ahead, Fromyhr said, "As we look to FY 2026 earnings, demand conditions look relatively stable with fares trending back to positive year-on-year growth, and lower fuel should allow for margin expansion."
Although global oil prices spiked this week amid increasing tensions between the United States and Iran over Iran's nuclear ambitions, fuel costs have been trending lower for the past three years.
That's important for Qantas, as the airline forecasts its full-year FY 2025 jet fuel costs will come out to around $5.22 billion.
And I thought my last petrol bill was shocking!
Which brings us back to what UBS labelled the biggest question facing Qantas over the coming year.
According to Fromyhr (quoted by the AFR):
The biggest question for Qantas over the next six to 12 months will be how well loads and fares are supported in international markets against lower fuel costs and strong industry growth scheduled over FY 2026.
At yesterday's closing price, Qantas shares are up 75% over 12 months.
