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)
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