Qantas shareholders take cautiously to the skies

Qantas shareholders take cautiously to the skies

MELBOURNE, Oct 13 (Reuters Breakingviews) – Shareholders have become accustomed to bad news from airlines. So it’s only fitting that Qantas Airways’ (QAN.AX)prediction on Thursday of bumper earnings prompted a somewhat muted response.

The $6 billion Australian carrier reckons its underlying pretax profit for the six months to the end of December will be between A$1.2 billion and A$1.3 billion ($753 million and $815 million). At the midpoint that’s some A$800 million more than the mean estimate of sell-side analysts, per Eikon, and more than they expected for the full year. Thursday morning’s share jump of up to 13% was the biggest gain in nearly two years. But it implies investors are factoring in just A$130 million of additional earnings on an annual basis, after applying the stock’s almost 10 times forward earnings multiple and assuming a constant tax rate.

There’s turbulence ahead, though: ticket prices may fall as pandemic-restricted capacity increases; inflation could hamper growth; and Chief Executive Alan Joyce faces criticism over poor customer service and fights with unions about pay and conditions. Some caution is warranted. (By Antony Currie)

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Qantas’s bumpy flight: The Aussie airline’s stock has yet to reach its pre-pandemic altitude

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own. Updates to add chart.)

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Editing by Robyn Mak and Thomas Shum

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