Why the Qantas share price is down today

Posted: 28 June 2021 12:26 pm
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Shares in the national carrier have lost 4% over the last 6 months.

Shares in Australia’s biggest airline Qantas (ASX: QAN) are struggling to hold on to hard-fought gains amid the impact of the coronavirus pandemic on the travel sector. On Monday, the stock hit its lowest level in nearly 6 weeks after sliding nearly 5% to $4.51 at the time of writing.

What is impacting the Qantas stock price?

No real mystery here. Qantas shares are flying low after authorities imposed a 2-week lockdown on Australia’s most populous city, Sydney, to fight the latest outbreak of COVID-19 infections. The state has now reported nearly 140 cases linked to the current outbreak.

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.

The drama comes at a particularly bad time – school holidays started this weekend – meaning many families have been forced to scrap their travel plans at short notice.

Last month, the pandemic-hit airline announced in a trading update that it expected to be cash flow-positive for the second half of the current financial year, thanks to a sustained rebound in domestic travel, where it was hoping to reach 95% capacity of pre-pandemic levels in the June quarter.

That has all come under a cloud and is again prompting investor concerns over the airline’s financial health.

Qantas said in May that it expected underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for this financial year to be between $400 million to $450 million.

International travel weighs

Qantas, which has been one of the hardest hit Australian companies due to the pandemic, posted a half-year loss of $1.47 billion.

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

The opening of the 2-way quarantine-free travel to New Zealand as well as strong cargo demand was expected to help cut its nearly $3 million weekly cash spending at the international arm, but that route has been suspended for now given the outbreak in Australia.

Earlier this month the federal government revised the timeline for completing Australia’s vaccine rollout to end-2021, because of which international borders are now not expected to open until mid-2022.

From an investment perspective, that means that despite brief periods of a run up, Qantas shares have been unable to hold on to gains. The stock is nearly unchanged over the last 6 months, slipping around 4% over that period.

Think Qantas 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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