The Qantas Airways Ltd (ASX: QAN) share price is up 0.6% after the airline revealed a promising FY27 trading update.
Qantas is Australia’s largest airline business. It operates domestically and internationally, including its Jetstar brand, whilst also generating earnings from its loyalty and freight divisions.
FY27 update
Qantas told the market how it has performed in the 2027 financial year to date.
It said that demand remains resilient as customers continue to prioritise travel and it’s experiencing trading conditions in line with the outlook provided at its FY26 result in August, despite elevated fuel prices.
Qantas highlighted that international travel demand across Qantas and Jetstar “remains strong”, supported by customers redirecting travel away from the Middle East. Domestic leisure demand also remains strong.
The airline said that non-resource corporate and government travel remains stable and is being closely monitored.
Fuel prices and revenue
Qantas said that based on forward curves, fuel prices are expected to remain elevated through the rest of FY27.
Its fuel cost in the first half of FY27 is expected to be approximately $3.75 billion. Qantas has continued to extend its hedging and is approximately 85% hedged for FY27. This is predominantly in Brent crude oil, with significant participation in lower fuel prices.
Qantas noted that its domestic and international total unit revenue (TRASK) are expected to grow by between 8% to 10% in the first half of FY27. Guidance on TRASK for the second half of FY27 will be provided with its HY27 result in February.
It said it has and will continue to adjust fares and capacity in response to higher fuel costs.
Its FY27 net capital expenditure is now expected to be at the lower end of its previously guided range of between $4.3 billion to $4.6 billion.
Finally, the Qantas loyalty (frequent flyer points) segment is on track to deliver underlying EBIT (EBIT explained) growth of between 5% to 7% in FY27.
Final thoughts on the Qantas share price
Qantas is clearly exposed to the high fuel prices, but it’s also able to offset that with stronger revenue thanks to ongoing demand. If demand wasn’t strong enough, it’d be in trouble, at least in the short-term.
It has jumped 8% since the US election on hopes that the Middle East and fuel supply issues could be sorted.
I’m not sure if it’s the best valuation to buy today – it was cheaper a few weeks ago – but I think the market is underestimating it on a medium-term basis and it could still be an undervalued buy.
