Owners of Qantas Airways Limited (ASX: QAN) shares may be able to gain insights from the recent Air New Zealand Limited (ASX: AIZ) update.
Qantas is the leading airline in Australia not New Zealand, but we may be able to learn some things from what’s going on with the main airline from that country.
Air New Zealand update
The company has seen softening in revenue conditions over the fourth quarter both domestically and on the North American market.
Domestic performance in New Zealand has seen “ongoing softening, with challenging economic conditions and ongoing cost-of-living pressures.” The company said government and corporate demand remains “subdued”.
The company’s North American performance continues to be impacted by “very competitive pricing pressures, as the market adjusts to the significant capacity added into the New Zealand market by US carriers.”
The weaker conditions are expected to result in lower underlying profitability for FY24 between $40 million to $50 million.
Air New Zealand also pointed to the cumulative impact of significant inflation of the cost base.
What can owners of Qantas shares take from this?
New Zealand and Australia are two different markets with different economies and different airline demand.
However, it’s not surprising to me that demand for air travel may be reducing because many households may be facing hard choices when it comes to their finances. A year or two ago, people had more money for travel. Now many budgets are tighter.
Following the suppressed travel period due to COVID-19, people made up for lost time and travelled. How many more trips can people take? In New Zealand at least, that demand seems to be reducing.
Flight demand may remain strong in Australia, and Qantas shares are not necessarily expensive on an earnings multiple basis.
However, I’m not interested in buying the Aussie airline because it has rallied more than 10% in the last few weeks – it’s not as cheap. Plus, there’s a danger the oil price could increase because of the troubles in the Middle East.
For me, there are other ASX dividend shares that could provide better returns.
