The Qantas Airways Limited (ASX: QAN) share price is up 2.7% thanks to two developments today.
Qantas is Australia’s leading airline. It was founded in the Queensland outback in 1920, the Qantas name was originally Queensland and Northern Territory Aerial Services. The company operates two main airlines – Qantas and Jetstar – and subsidiary businesses including other airlines, businesses in specialist markets such as Q Catering, Qantas Freight Enterprises and the popular Qantas Frequent Flyer program. It employs some 30,000 people with around 93 per cent of them based within Australia.
Why Is The Qantas Share Price Flying Higher?
One of the main reasons that the Qantas share price is higher is that the oil price has fallen after Saudi Arabia said its oil production would be back up to full speed by the end of the month.
Obviously fuel is the biggest variable cost for Qantas, so a reduction in the oil price is a boost for its future profit prospects.
Meanwhile, broker Morgan Stanley has upgraded its opinion on Qantas according to reporting by the Australian Financial Review.
Morgan Stanley said that Qantas had fully hedged/protected its fuel costs until the end of the year and therefore there would be limited near term impacts from oil prices.
The economic conditions that had caused the consumer to close their wallet, such as falling house prices, now seem to be getting better, which could be another positive for Qantas.
In-particular, Morgan Stanley highlighted the strength of its Loyalty business and it provides a different source of earnings away from the fairly unreliable airline industry earnings.
Morgan Stanley increased its price target to $7, being the share price it thinks Qantas will trade at in 12 months. Even after today’s rise, the current share price of $6.32 implies a capital return of over 10% (not including dividends).
Qantas may be a decent idea, but airlines just aren’t really my thing. It’s a very competitive industry with, at best, slow profit growth prospects.
I’d much rather go for businesses with exciting potential growth such as the ones revealed for free in the report below.
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