The Qantas Airways Limited (ASX: QAN) share price is up 0.6% after the airline gave a FY25 update.
FY25 update
The company said its first-half trading is “in line with expectations”, with both Qantas and Jetstar seeing “stable demand in their respective segments across the portfolio.”
Qantas revealed that Jetstar’s domestic unit revenue is outperforming expectations because of stronger-than-expected travel demand.
Qantas’ domestic load factors and demand for corporate travel continue to improve year on year.
The airline’s domestic revenue per available seat kilometre (RASK) is now expected to increase between 3% to 5% year on year in the first half of FY25. Group international RASK guidance is unchanged, with a fall of between 7% to 10%.
The Qantas Loyalty division is trading in line with expectations, with “ongoing strength” after the launch of its classic plus flight rewards. This division is expected to grow underlying EBIT by at least 10% in FY25.
The $400 million Qantas share buyback announced with the FY24 result is approximately 45% complete at an average price of $7.23. It’s expecting to complete the share buyback before 31 December 2024.
Costs
Qantas noted that geopolitical events are creating ongoing volatility in fuel prices which would have “an immediate impact if they were to escalate or de-escalate”.
At the current prices, the airline is expecting the fuel cost for the first half of FY25 is estimated to be approximately $2.55 billion, including hedging and gross carbon costs. Qantas said it “continues to maintain disciplined hedging in line with long-term practices, with strong participation should jet fuel prices fall from here.”
Qantas also said that around 27,000 employees were advised today of a ‘thank you’ payment for their contribution over the past year, with a total cost of $28 million.
Final thoughts on the Qantas share price
Amazingly, the Qantas share price has risen more than 60% in the past year. I think the airline has risen to a valuation that reflects its earnings potential in FY25, but it could struggle to rise much more from here, particularly with a resurgent Virgin following the investment by Qatar Airways.
I wouldn’t call it an obvious buy right now.
