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Qantas: FY21 result – Continued to be heavily impacted by COVID restrictions

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Qantas Ltd (ASX: QAN) is the market leader airline operator in the Australian domestic market and a significant airline operator in the international market. Qantas has a market capitalisation of A$8.5 billion.




What are the key features of Qantas FY21 profit result?

Qantas reported underlying loss before tax of $1.8 billion and a statutory loss before tax of $2.35 billion. Management notes that COVID has impacted revenue by $12 billion in FY21. Net free cash flow for HY21 of $267 million.

Regarding Qantas operations, Group Domestic reported Qantas and Jetstar’s combined underlying earnings before Interest and tax (EBIT) of $699 million after non-cash depreciation and amortisation. During May 2021, domestic capacity peaked at 92%, until the Delta variant triggered a series of lockdowns in NSW and Victoria. Group International and Freight reported EBIT loss of $1 billion after depreciation and amortisation. International flying during FY21 was largely grounded. Some international flights occurred between Australia and New Zealand, but this was short-lived once NSW and Victoria went into lockdown. Qantas Loyalty performed well with generating over $1 billion in gross cash, resulting in underlying EBIT of $272 million.


What is the outlook for Qantas?

Qantas management did not provide specific guidance for FY22. However, management noted that Group Domestic capacity is expected to increase from 38% in Q1 FY22 to 53% of pre-COVID capacity in Q2 FY22 and rise to around 110% in the second half of FY22. International border closures are expected to ease once 80% of Australians are vaccinated. Once this occurs, international flying in the first half of FY22 is expected to be around 15% of pre-COVID levels. Once borders re-open, Group International capacity is expected to be 30% to 40% in Q3 FY22 and 50% to 70% in Q4 FY22 compared with pre-COVID levels.

However, in the current environment, the outlook for Qantas’ FY22 earnings is highly uncertain and Qantas may not return to profitability until FY23 instead of FY22 as previously expected.

What is the market reaction to Qantas?

The market reaction to Qantas profit result is positive with the share price up around 3% to A$5.02 while the market is down by 0.4% (26 August 2021). This suggests that Qantas FY21 result is better than market expectations.


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purposes only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceedings. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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