The ongoing COVID-19 pandemic has caused Qantas (ASX: QAN) to cancel all overseas flights until the end of October.
What is Qantas?
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.
Why has Qantas cancelled the international flights?
According to reporting by the Australian Financial Review, Qantas’ decision was due to Tourism Minister Simon Birmingham stating that Australia’s border for overseas travel likely wouldn’t open until next year.
In a statement, Qantas said: “With Australia’s borders set to remain closed for some time, we have cancelled most international flights until late October. We still have some flights scheduled across the Tasman in the coming months, with the expected travel bubble between Australia and New Zealand. Should travel between Australia and other countries open up and demand returns, we can add more flights back into our schedule.”
Qantas has already cut most of its international schedule for a few months. Sydney Airport (ASX: SYD) reports its numbers, with both international and domestic passengers down in the high 90%.
Qantas earnings probably won’t return to a more normal number until Australia’s borders open up to most of the high volume countries like the UK, China and so on. Qantas could have been an opportunistic buy a while ago when the Qantas share price was under $3 or perhaps just under $3.50. At around $4.40 I’m not sure it’s a contrarian opportunity.
It could take some time before an effective treatment or vaccine is produced. Even then, how many people are going to want fly with the pandemic still going on in many parts of the world?
The Qantas share price is currently down around 3% in response to this news. Qantas is in a strong position with Virgin’s (ASX: VAH) current troubles.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
