Qantas Airways (ASX QAN) is the flagship carrier of Australia and the largest airline by fleet size, international flights and international destinations.
It is also credited as the third oldest airline in the world.
The QAN share price fell 11% in the past year. However, the share price is up 3.6% today after the company announced a 2.3 per cent rise in revenues. The company is forecasting a record year.
Third quarter FY19 result update
Total revenue increased by 2.3 per cent year-on-year to A$4.4 billion. The growth is very good in spite of the shift in the Easter Holidays to the fourth quarter of FY19.
The Easter holidays typically see a heavy rush in travel.
In the words of CEO Alan Joyce “The Group continues to perform well, with strength in key parts our portfolio helping to hedge against headwinds in other areas. Internationally, the outlook is positive and continues to improve. Domestically, demand is mixed. The resources sector continues to grow and we are capitalizing on that with a lot of extra flying in Western Australia and Queensland. Leisure demand was very strong over Easter and is holding up well.”
Source : Investing.com
Another important point to note for the investors is that Qantas overall market share in corporate travel increased by 2.5% in the quarter.
This is the highest level in three years. The market share of small-to-medium business travel is expected to grow assisted by initiatives from Qantas Loyalty.
Melbourne Terminal Update
Qantas and Melbourne Airport have reached an agreement for the sale of the airlines domestic terminal.
QAN has successfully settled the sale of the terminal and secured future access to Terminal 1.
The deal is valued at A$355 million, of which A$276 million will be received this year and the balance in the future period.
QAN announced a A$305 million share buyback in February 2019. As of 06 May 2019, 54 per cent has been completed.
The management is constantly working on improving the returns of the shareholders. A share buyback is one way to support the QAN share price.
Source: Company Investor Presentation
The company plans to retire another 747 which would leave eight in the fleet.
Sydney-San Franciso will be the next Qantas Dreamliner route from December 2019.
It has also signed a three-year wet-lease with Atlas Air to upgrade the two existing 747-400 freighters operated for Qantas Freight with two 747-8F aircraft from July 2019.
This would lead to an extra 20 per cent more carrying capacity. Some of the new Qantas routes planned are Sydney-Bendigo, Adelaide-Uluru, Darwin-Uluru, Cairns-Port Moresby and Sydney-Figi in response to market demand.
The results are positive in spite of the shift in the Easter holidays. They are also on track to have a record year in terms of annual revenue.
At the current QAN share price, the stock is trading at P/E ratio of 10.65, compared to the industry average of 5.94.
However, good management and strong future growth justify the stock trading at a premium.
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