The Qantas Airways Limited (ASX: QAN) share price is in focus after the airline gave a market update for September 2023.
Qantas has been going through a lot of pain as it faces scrutiny for a number of things, including allegedly selling tickets for flights that had already been cancelled, according to the ACCC.
Qantas market update
Qantas said that it’s going to “invest” a further $80 million in customer improvements across FY24, in addition to the $150 million previously budgeted, which it said would be funded from profits.
With this extra money, Qantas is aiming to address a number of customer pain points, by investing in “better contact centre resourcing and training, an increase in the number of seats that can be redeemed with frequent flyer points, more generous recovery support when operational issues arise, a review of longstanding policies for fairness and improvements to the quality of inflight catering.”
Demand levels
Qantas said that, in terms of its trading, travel demand “remains strong”, with trading conditions in the first quarter of FY24 “similar” to the last quarter of FY23. That’s helpful for the Qantas share price.
It said that Qantas and Jetstar expect to carry more than 4 million passengers over the September/October school holidays and football finals period on 35,000 domestic and international services. A year ago, it was approximately 3.7 million passengers on approximately 28,000 services.
The airline also said that the latest survey data shows that travel remains a “top spending priority” among Qantas frequent flyers over the next six months.
By the end of 2023, the business is aiming to boost international capacity by 12 percentage points. Both the international and domestic capacity for the first half of FY24 is “materially unchanged” from estimates given in August 2023.
Fares and costs
Qantas noted that fuel prices have increased by around 30% since May 2023, including a 10% increase since August. This was caused by a combination of higher oil prices, higher refiner margins and a lower Australian dollar. That’s bad news for the Qantas share price.
If sustained, this is expected to increase Qantas’ fuel bill increase by approximately $200 million to $2.8 billion after hedging. A further $50 million impact is expected due to non-fuel related foreign exchange changes.
Qantas said that it will continue to absorb the higher costs, but will “monitor” fuel prices in the weeks ahead and, if the fuel price is sustained, it will “look to adjust its settings.”
It said any changes would look to balance the recovery with the importance of affordable travel in an environment where fares are already elevated.
Final thoughts on the Qantas share price
The airline said it’s still in a very strong financial position, including its debt levels.
It also said that its $500 million share buyback is 10% completed. Shareholder approval will be sought at the upcoming AGM to increase the headroom for further share buybacks.
The Qantas share price has fallen 20% since 24 July 2023. The lower it goes, the more likely it is to be a decent opportunity, though it seems to be going through some pain right now.
