The Qantas Airways Ltd (ASX: QAN) share price has seen its fair share of volatility of the last several weeks. Airlines are among the most affected businesses amid the events of the Middle East.
Fuel prices have soared in the last few weeks, but the company had hedged its fuel costs, minimising that specific element. But, it is more exposed to the jet refining margin, which jumped from US$20 per barrel to a peak of around of US$120 per barrel.
Time will tell what happens with fuel prices and travel demand in the coming weeks.
We're going to look at what experts from L1 Group Ltd (ASX: L1G) think of the business in the current climate.
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Expert views on the Qantas share price
In recent market commentary, L1 noted that ASX travel shares fell sharply in March because of higher oil prices and fears of a reduction in global travel demand.
But, L1 said that company-specific fundamentals remain attractive, with travel demand outside of the Middle East appearing resilient. The fund manager said that fuel hedging provides some short-term cost protection.
L1 noted that Qantas has responded to the volatility with a recovery through higher ticket prices and select trimming of capacity where appropriate. The fund manager said that travel demand has remained resilience so far.
Putting the Middle East conflict aside for a moment, L1 also noted that the RBA's review of card payment costs and charges have created a modest overhang for the loyalty business, with key changes being the removal of card surcharges and the reduction in the interchange fee cap on domestic credit cards.
L1 said that investors have focused on softer trends in select international markets.
The investment team at L1 Group concluded their thoughts on the Qantas share price with the following:
All up, the [Qantas] share price declines appear to reflect nearer-term earnings volatility rather than any deterioration in the group's underlying competitive position.
Final thoughts on the market
L1 gave some of the following commentary on the stock market, which I think many investors could benefit from:
Moments of heightened uncertainty in markets have historically created some of the best investment opportunities for the Fund. Accordingly, we have been using this period of elevated volatility to identify high quality companies that are now trading far below fair value, even assuming a less favourable macro outlook.
These changes include adding to our positions in gold, construction materials, travel-related stocks and copper, while trimming exposure to some of our energy and infrastructure names which have outperformed.
…While periods of elevated market volatility can be unnerving in the short-term, they provide outstanding medium-term opportunities to invest in great companies at exceptional prices.
Overall, L1 seems to think the Qantas share price can fly again.
