Qantas Airways Limited (ASX: QAN) has announced that its flagship airline Qantas, and its low-cost alternative Jetstar, will suspend international flights from late March and reduce domestic flight by 60%. Furthermore, two-thirds of employees will be stood down until at least end of May and dividend announced in 1H20 will be deferred until Sept 20.
The airline industry continues to be impacted by Covid-19, however this announcement was largely expected given previously flagged 90% reduction in international flying and 60% in domestic. The impact of Covid-19 is expected to be significant in the near-term for the whole sector.
The share price reacted negatively in light of the news, plunging over 11% down to $2.26 per share, as at midday.
Some investors believe the stock presents good value at these prices, following the saying “the best house on a bad street” or “the cleanest dirty sheet in the hamper”. It must be considered that the company is one the best positioned in the industry to weather the impact of a complete shutdown of passenger air traffic due to its relatively low debt and dominant home market advantage. The company also has full ownership of its loyalty program, Qantas frequent flyers, which is a significant cash generator for the business, and provides a buffer to the liquidity deficit from the situation.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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