The Qantas Airways Ltd (ASX: QAN) share price is under the microscope right now after its main competitor, Virgin Australia Holdings Ltd (ASX: VGN), listed on the ASX this week. At the same time, there have been enormous changes in the oil price in the last few weeks.
The Qantas share price has risen 15% after everything that has happened this year.
Qantas and Virgin Australia are the main players in the Australian market, and now both of them are ASX-listed businesses following the difficulties during the COVID-19 pandemic travel disruption period.
I'm not particularly worried for Qantas about Virgin listing onto the ASX. Virgin was still flying planes and trying to win market share as a private business. Indeed, there may be more desire for Virgin to make stronger profits now that various investors are on the share register.
The most important question is whether the Qantas share price is attractive right now.
Let's take a look at what broker UBS thinks of the airline.
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Is the Qantas share price a buy?
UBS noted the recent move by Qantas to close the Jetstar Asia operations, which simplifies its portfolio, improves return on invested capital (ROIC), and relieves some capital expenditure pressure. That business was guided to deliver a $35 million loss before interest and tax in FY25.
While the move will cost Qantas $160 million, it is able to repatriate 13 midlife A320 planes over the coming months which have a market value of $500 million. The capital expenditure benefits are expected to be felt in FY27 and FY28.
After telling the market about its capacity guidance for the second half of FY25, UBS said that, combined with a lower fuel cost, the group fuel expense is forecast to be down 9% in FY26.
UBS said demand conditions look "relatively stable" with fares trending back to positive year-over-year growth, while lower fuel should allow for profit margin expansion.
The broker is expecting Qantas' earnings per share (EPS) to grow by 9% in FY26, but the stock is already trading close to a price-earnings (P/E) ratio of 9, which the broker thinks appropriately reflects a discount for its upcoming cycle of heavy capital expenditure.
The broker doesn't see "compelling upside" for the airline right now. It currently has a price target of $10.30 on the airline, implying no rise over the next 12 months.
