Could the Qantas Airways Limited
(ASX: QAN) share price fly in 2021? The opening up of borders could make a big difference.
Qantas to make a turnaround?
The Qantas share price is still down 41% from the level where it was in the middle of December 2019. But it has made a good recovery from the bottom of the COVID-19 crash, it has risen 104% from that time.
Airlines across the world have obviously been heavily impacted by COVID-19 and related restrictions. Qantas has been in a particularly tough position because international borders have been almost completely shut. Flights are still happening within Europe and the US. Within Australia, some borders have been shut to different states for months. The key Sydney – Melbourne route (previously one of the busiest in the world) has obviously seen a dramatic reduction in activity.
Qantas recently raised around $1.9 billion to ensure the stability of the business and make sure it was well positioned to do well on the other side of this crisis. With any thoughts of Qantas being ‘cheap’, you have to remember the large number of new shares on issue which will be entitled to a part of the recovered earnings.
Why the Qantas share price could fly
There are number of positives opening up for Qantas. A number of the interstate borders are starting to open up, such as South Australia’s. The Victoria COVID-19 situation is looking a lot better and once things open up there, the domestic travel market could boom as people look to go on holidays after a long period of staying at home.
New Zealand travellers are now able to come to Australia which could add a few more passengers too. In normal times, New Zealand passengers were one of the biggest international passenger sources.
Australia is also looking at opening up borders for Japan and South Korea passengers, which could be another boost for Qantas earnings.
A vaccine could be a big deal for airlines like Qantas. It will be interesting to see what the new Virgin airline looks like – if it turns into a low cost airline then Qantas could win the higher-service market.
According to CommSec it’s priced at around 9 times the estimated earnings for the 2023 financial year. But who knows how long it will take passengers to return? For me, there are ASX growth shares with a simpler path to earnings growth like Pushpay Holdings Ltd (ASX: PPH).
