Why is the Qantas share price under pressure again?

Posted: 3 August 2021 1:59 pm
News
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Shares in the national carrier are down 2.5% over the last 6 months.

Shares in Australia’s biggest airline Qantas (ASX: QAN) are among the most impacted from the coronavirus pandemic. On Tuesday, the stock is again under pressure amid another round of bad news, down nearly 2% to $4.47 each.

What is impacting the QAN stock price?

Qantas shares are flying low after the carrier announced on Tuesday that it would stand down around 2,500 employees for at least 2 months, as fresh COVID-19 restrictions across Australia keep a lid on domestic flights. This is on top of the 7,500 workers it stood down previously.

The decision will directly impact domestic pilots, cabin crew and airport workers, mostly in New South Wales. The airline, which last year axed 8,500 jobs, said it doesn’t expect job losses from the current move.

Qantas warned last month that this move was likely, but the actual decision is a measure of the havoc that a 5-week-long COVID lockdown of Australia’s most populous city, Sydney, has had on domestic travel. The restrictions are set to go on for at least another 2 months.

This has badly affected Qantas’ operations given that many of its key routes originate from Sydney. It has also triggered lockdowns, snap border closures and tightened restrictions in several other Australian states, hitting domestic air travel.

“We’ve absorbed a significant amount of cost since these recent lockdowns started and continued paying our people their full rosters despite thousands of cancelled flights,” Qantas CEO Alan Joyce said in a statement to the ASX.

“Qantas and Jetstar have gone from operating almost 100% of their usual domestic flying in May to less than 40% in July because of lockdowns in 3 states,” he added.

Looming losses

In May, the pandemic-hit airline announced in a trading update that it hoped to be cash flow-positive for the second half of the current financial year, thanks to a sustained rebound in domestic travel. That expectation is now gone, again prompting investor concerns over the airline’s financial health.

Qantas posted a half-year loss of $1.47 billion. It will announce full year results on 20 August.

The bad news on the domestic front comes at a time when international travel is continuing to weigh on the travel sector’s finances as borders remain shut.

“The challenge around opening international borders remains. There are still several thousand Qantas and Jetstar crew who normally fly internationally and who have been on long periods of stand down since the pandemic began,” Mr Joyce acknowledged.

The federal government revised Australia’s vaccine rollout to complete by the end of 2021, which means international borders are now not expected to open until mid-2022.

From an investment perspective, that has meant that despite brief periods of a run up, the Qantas stock has held on to gains. It is down 2.5% over the last 6 months.

Think QAN shares could be a buy?

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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