Qantas 1H FY2022 Earnings Preview
1H FY22 Expectations
Qantas is an Australian airliner with more than 100 years of history. It operates domestically and internationally and is recognizable around the world. Apart from Qantas itself, the Group also includes the low-cost Jetstar Airways.
Qantas Group releases its financial results for the half half-year that ended December 2021 (1H FY22) on Thursday February 24. No specific time has been located, but the firm typically reports before the Australian stock market opens.
Based on the market update released in December [1], the company expects Underlying EBITDA Loss in the range of A$250 million to A$300 million for 1H FY2022, compared to an Underlying Earnings (EBITDA) of $86 million a year ago [2].
The Group's Domestic Flying Capacity is projected to be 43% of the pre-Covid levels and the International Capacity to be 5%.
The Qantas Group expects to finish the first half of FY22 with a materially better net debt position than it had prior to the start of Delta variant lockdowns in June, partly thanks to A$802 million sale of land.
Pandemic Impact
The Covid-19 pandemic devastated the industry as a whole and the Australian airliner took a hit on both its Domestic and International operations, due regional and international border closures in Australia.
During the last Fiscal Year (FY2021), it had a A$12 billion revenue impact from the Covid-19 crisis. The firm however had quickly announced, in June 2020, a post-Covid three-year recovery plan. Cost benefits from the program were A$650 million for FY2021, which is expected to rise to A$850 billion annual cost benefits by end FY22. [3]
Australia's international borders remained mostly closed throughout the pandemic, but the government announced earlier in the month, that it would welcome back all fully vaccinated visa holders, starting on February 21 – news that had benefited Qantas' stock.
The Qantas Group will fly more than 14,000 passengers into Australia this week, as per today's press release. CEO Alan Joyce noted that "We can clearly see from the Australian Government's announcement that people are very keen to come back to Australia, and we continue to see strong bookings out of the US and UK, as well as South Africa and Canada." [5]
Western Australia, which accounts for around 1/3 of the country's land, is still holding back on the domestic and international front. However, Premier Mark McGowan announced last week that the state will reopen on March 3. [6]
Fleet Renewal
The company seems ready to fire on all cylinders and recently announced a plan to renew its domestic narrow-body fleet, with the domestic business being traditionally the largest contributor to its earnings (EBIT).
This is a long-term plan that will bring more than 100 new aircrafts by 2034, to replace the Boeing 737-800s and Boeing 717s that currently form the backbone of its domestic jet operations. [7]
For this purpose, Qantas Airways chose Airbus and its A320neo and the A220 families of airplanes, with a firm commitment for 40 aircrafts expected to be placed by the end of FY22. [8]
The order is in addition to Jetstar's existing agreement with Airbus for over 100 aircraft in the A320neo family. Part of this new deal includes combining these two orders so that the Group can draw down on a total of 299 deliveries over the next decade and beyond for Qantas, QantasLink and Jetstar, which will be largest aircraft order in Australian aviation history.
Cargo Business
The firm estimates that its freight business will deliver record earnings for the first half of FY22, benefiting from the growth in e-commerce. To support this expansion Qantas announced in December the conversion of two of its passenger Airbus A330s into freighters. [9]
These are expected to become operational in 2023, while within the current year, Qantas Freight will be taking delivery of three new Boeing 787-9 Dreamliners.
CEO Alan Joyce had commented that "Our freight business has boomed during the pandemic and while some of that is temporary, COVID has accelerated the permanent expansion of eCommerce and online shopping in this country,".
Stock Movement
QAN.au had a mixed 2021, with losses of nearly 15% during the fourth quarter. The new year started with a decline, but the stock heads towards a profitable February - up more than 10% on the month, as of Monday's close.
The stock failed to benefit from the reopening of the border on Monday, but has been trading above its EMA200. This allows it to keep the 2021 high (6.03) in its crosshairs, but it may be early for a larger advance towards 6.93.
Despite this month's advance, QAN.au is still vulnerable to pressures and a return below the EMA200 would expose it to the ascending trend-line from its 2020 multi-year lows (at around 4.60-4.42), with the next support located 4.14-4.00.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.