The Qantas Airways Limited
(ASX: QAN) share price will be on watch today after the business announced an $802 million land sale.
Currently, the Qantas share price is up 2.69% to $5.73.
What was announced?
Qantas has agreed to sell 13.8 hectares of land in Mascot for $802 million.
For context, Mascot is the location of Sydney Aiport and about 8km from the Sydney CBD.
The buyer is a consortium led by LOGOS Property Group, a developer of logistics property solutions.
The fund proceeds from the sale will be used by Qantas to reduce debt and support the airline’s recovery.
As of June 30 2021, Qantas held interest-bearing liabilities of $6.83 billion.
The transaction should complete by the end of the year and will benefit Qantas’ half-year result in February.
In addition to the sale, Qantas has entered discussions with Logos for future development options for the land including a dedicated precinct for the airline. Qantas may also opt to sell another 3 hectares of adjoining land to the current sale.
An earlier review of the land concluded there was no long-term need for the land and was surplus to operations. However, Qantas will lease back some of the land for a period of time.
Why would Qantas sell the land?
Property has been running hot for the past 18 months, so why would Qantas choose to sell now?
It looks like the business is copying the playbook of Telstra Corporation Ltd (ASX: TLS) and trying to free up its balance sheet.
It makes sense for the business to monetise land it has no use for.
Most investors wouldn’t have even known the land existed until today, whereas now the business is able to reduce its debt and improve its gearing ratio.
Final thoughts
Today has been a double dose of good news for Qantas.
In addition to the land sale, New South Wales announced it would be abolishing quarantine for vaccinated overseas arrivals as of 1 November.
I don’t have a view on the Qantas share price, but the business is actually more expensive than it was pre-pandemic.
Since Qantas had to raise money while travel came to a halt, more shares were issued. Therefore each share now owns less of the airline.
If you’re looking for reopening plays, check out 3 ASX shares that will benefit from the reopening of borders.
