Qantas Airways Ltd (ASX: QAN) shares have taken a sharp hit recently.
After ending yesterday's session at $8.43, the airline's shares are now down roughly 33% from their 52-week high of $12.62.
Most of that decline has come quickly, with the stock falling more than 20% since 20 February.
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What's behind the sell-off?
The main catalyst has been surging oil prices.
Escalating tensions in the Middle East and the effective closure of the Strait of Hormuz have sent energy markets higher. That's a direct headwind for airlines, where fuel is one of the biggest costs.
There are also concerns that the conflict could impact international travel demand, particularly given the importance of hubs like the UAE and Qatar.
Both of these are valid risks in the short term.
Higher fuel costs can squeeze margins, and any slowdown in travel demand would weigh on earnings.
But the key question is whether these are temporary issues or something more structural.
The long-term story looks intact
When I look at Qantas' recent performance, I see a business on the up.
In its latest half-year result, the company delivered underlying profit before tax of $1.46 billion and continued to invest heavily in fleet renewal and growth initiatives.
It also returned $450 million to shareholders through dividends and buybacks, highlighting the strength of its cash generation.
What stands out to me is that demand remains strong.
Domestic travel continues to grow, supported by business and premium leisure demand, while international travel is still seeing solid interest despite cost pressures.
On top of that, Qantas' loyalty business continues to expand, providing a high-margin earnings stream that is less exposed to fuel costs and cyclical travel demand.
Structural tailwinds vs temporary headwinds
There's no doubt that higher oil prices will impact earnings in the near term.
The company itself expects fuel costs to be significant even after hedging benefits, with second-half fuel costs forecast at around $2.5 billion based on estimated consumption of ~16.2 million barrels.
But I don't think today's oil price environment is necessarily permanent.
Energy markets have always been cyclical, and while geopolitical shocks can push prices higher quickly, they don't tend to stay elevated forever.
In contrast, Qantas' business model is arguably stronger than it has been in years.
Fleet renewal is improving efficiency, the dual-brand strategy is working well, and the loyalty division is becoming an increasingly important profit driver.
Those are structural positives that I think matter far more over a 5 to 10 year timeframe.
What does the Qantas share price valuation say?
Based on consensus estimates, Qantas is expected to generate earnings per share of $1.14 in FY26 and $1.29 in FY27.
At a share price of $8.43, that puts it on a forward price-to-earnings ratio of roughly 7 to 8 times.
That looks relatively cheap to me, even for an airline, especially for one that is still growing and returning capital to shareholders.
Consensus dividend forecasts of 39.7 cents per share in FY26 and 42 cents per share in FY27 also suggest 4.7% and 5% dividend yields, though these could change if fuel costs remain elevated for longer.
So, is it a buying opportunity?
This is where I think the market may be overreacting.
The current selloff appears to be driven largely by macro concerns rather than a collapse in Qantas' underlying business.
Yes, higher oil prices are a real issue. But they are also something the company has dealt with many times before through hedging, pricing, and operational efficiency.
If anything, this looks like a classic case of a cyclical headwind hitting a structurally improving business.
Foolish takeaway
The Qantas share price has fallen sharply, and there are legitimate reasons for that. But when I step back, I see a company with strong demand, improving operations, and multiple growth drivers.
The risks are real, particularly in the short term. But I don't think they are permanent. For me, this looks like a potential buying opportunity for long-term investors.
