Qantas Airways Limited (ASX: QAN)
Qantas Airways Limited’s dual brand strategy is driving segment success in domestic sector besides sustainable industry-leading margins with leadership positions across all key market segments. Its current and future fleet provide flexibility, optimise route economics and operate a fit-for-purpose network. In international segment, it is consistently delivering revenue premium on Perth-London/Rome routes
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. Correspondingly, underlying earnings per share dropped to 88 cents, down from 94.9 cents in FY23. Statutory profit after tax also saw a decrease, coming in at $1,251 million compared to $1,744 million in FY23, with statutory earnings per share reducing to 75.9 cents from 96 cents.
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. As travel demand stabilizes and capacity recovers to pre-COVID levels, Qantas is well-placed for potential growth.
Source: Company’s Report
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