Qantas Airways Limited (ASX: QAN)
In FY24, the Qantas group reported revenue of $21,939 million, marking an increase from $19,815 million in FY23. However, underlying profit before tax declined to $2,078 million from $2,465 million in the previous year, reflecting operational challenges.
From June 30, 2020, to June 30, 2024, the company's revenue fluctuated but overall increased. After falling from AUD 14,045 in FY 2020 to AUD 5,934 in FY 2021, it rose to AUD 9,108 in FY 2022, and surged to AUD 21,939 by June 30, 2024.
The statutory income statement for FY24 indicates a 12% rise in net passenger revenue, driven by a 21% increase in group capacity. However, unit revenue fell: domestic by 2% and international by 11%, despite stronger European demand. Net freight revenue dropped 12% due to intensified competition. Salaries and benefits rose 12%, while aircraft operating costs increased 21% from higher flying and maintenance expenses. Fuel costs grew 17% due to higher consumption and sustainability investments. Depreciation and amortization rose 1% due to new aircraft and capital maintenance, although investment performance improved, notably for Jetstar Japan.
Qantas expects stable travel demand with positive revenue momentum for 1H25. Group Domestic unit revenue is projected to increase by 2-4%, while Group International unit revenue may decline by 7-10% due to restored market capacity. International capacity to Australia is set to return to pre-COVID levels, with net freight revenue expected to rise by $20-40 million. Qantas Loyalty’s EBIT is anticipated to grow by at least 10% in FY25. Financially, 1H25 fuel costs are forecasted at around $2.7 billion, with FY25 depreciation at $2.0 billion and net finance costs at $0.27 billion. The Group aims for $400 million in transformation savings, with net debt maintained within the target range. The gross impact of SJSP is estimated at $60 million, with efforts to offset this through savings. EIS costs are projected to rise by $30 million due to accelerated fleet deliveries. Management remains committed to performance targets. Additionally, the Group completed $869 million of its $900 million buy-back program, purchasing 156 million shares at an average price of $5.57. The remaining $31 million is expected to be completed in 1H25, with an additional $400 million buy-back announced.
Qantas Airways offers an appealing investment opportunity, trading at a notably lower valuation compared to its industry peers. With an EV/EBITDA ratio of 3.63 versus the industry median of 4.15 and a P/E ratio of 7.21 compared to 10.22, Qantas is positioned attractively on both metrics. Despite recent profit declines, the company’s proactive buy-back strategy and cost management reflect a strong commitment to shareholder value.
WEB Travel Group Limited (ASX: WEB)
On September 23, 2024, Webjet Limited (ASX: WEB) underwent a demerger, which resulted in the formation of Webjet Group Limited (ASX: WJL). Every shareholder of Webjet Limited received one share of Webjet Group Limited for each share held in Webjet Limited.
The restructuring of Webjet Limited into two companies, presents a number of benefits, namely the emergence of two distinct entities which will be able to pursue separate strategic objectives and growth plans. Further, capital structures and financial policies can be adopted by each company in line with their specific attributes which would enable shareholders to pick the level of investment they would wish to commit to either company.
Webjet B2C has a strong and diverse revenue base, with strategies to optimize earnings and introduce higher-margin products, which help offset changes in airline commissions. Their Trip Ninja platform is boosting international market share and bringing in additional revenue. The company effectively manages costs, achieving record EBITDA margins of 44.7% for FY24. With a reliable cash flow, Webjet B2C is set for ongoing growth and plans to start paying dividends from FY26, with details to be shared at the FY25 results.
Webjet is focusing on key priorities like attracting more customers, optimizing revenue, and expanding its international market share.
By using technology and the Trip Ninja platform, the company aims to boost international flight bookings and enhance its presence in the US and Canada with GoSee. They plan to simplify customer service through automation and continue investing in innovative technology to improve their platforms. With travel bookings on the rise—thanks to increasing travel spending, a shift to online bookings, and a slow recovery in international travel—Webjet is in a great position to take advantage of these opportunities with its wide range of travel products.
Source: Company’s Report
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