Is the Qantas (ASX: QAN) share price a bargain after releasing another market update?
What is Qantas?
is Australia’s most popular 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.
Qantas update
Qantas announced today that it is extending its flight cancellations for June and July, which were still set at pre-coronavirus levels. This has been extended from the end of May.
However, Qantas does have the ability to add back capacity if domestic and New Zealand restrictions ease in the coming weeks.
Qantas balance sheet
The airline said it has announced another $550 million in funding against three wholly-owned Boeing 787-9 aircraft. That follows the $1.05 billion in March against seven 787-9s.
Qantas’ net debt is now at $5.8 billion, which is the middle of its target range. But, there are no financial covenants on any of its debt facilities and significant maturities until June 2021.
Management believe the company has enough liquidity to respond to a range of recovery scenarios, including one where the current conditions last until December 2021. Qantas has $2.7 billion of aircraft it can raise funds against.
Qantas has already stood down employees, paused all capital and operating expenditure, and revised supplier agreements. It’s aiming to reach a net cash burn of $40 million a week by the end of FY20.
At 4 May 2020 it had short term liquidity of $3.5 billion including a $1 billion undrawn facility.
Is Qantas a buy?
The Qantas share price has already gone up 66% since 19 March 2020. It could be a long time before normal travel comes back. Warren Buffett recently sold out of his US airline shares. I don’t think Qantas is a great long term buy, though it may do reasonably well if domestic travel comes back sooner rather than later.
I would rather buy these technology shares:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
