News & Analysis

Qantas shares price lift off, but Dividends on hold for FY22

18 October 2022 By GO Markets


Qantas Airways Limited (QAN:ASX) is the flagship carrier of Australia and the country’s largest airline by fleet size. The company has had a resurgence in 2022 and the share price has rebounded from the lows of the pandemic.

The “Flying Kangaroo” as it’s known throughout the industry, said that it would report an underlying pre-tax profit of up to A$1.3bn (US$815mn) in the six months to December, doubling market estimates, as strong demand for flights offsets higher fuel costs and inflation.

The improved financial performance has come from the company transferring the increased costs via increased fairs. The share price for the airline soared to $5.83, its highest level since November 2021, on the back of the strong profit forecast.

Qantas’s pre-pandemic share price was sitting at $7.35 AUD and saw its financial performance suffer with 3 consecutive years of more than A$1bn losses because of pandemic restrictions and lost A$25bn of revenue during the period.

Net debt, which spiralled to almost A$6.5bn during the pandemic, is expected to fall to between A$3.2bn and A$3.4bn by the end of the year, well below the airline’s A$3.9bn target range.

Alan Joyce, Chief Executive gave a promising statement on the company’s performance advising, “It’s been a really challenging time for the national carrier, but today’s announcement shows how far we’ve come. Since August, we’ve seen a big improvement in our operational performance and an acceleration in our financial performance.”

The report in profits has come too late for investors to receive a final dividend this year, with the company deciding not to reverse its decision to halt dividend payments. However, it’s not all doom and gloom for investors, as Alan Joyce has led a A$400mn share buyback this year.

Share buybacks do not put cash in the hands of investors as a dividend does. However, they do support shareholders by reducing the overall share count. This tends to boost the share price, given that under the laws of supply and demand, less supply leads to a rise in price.

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