Why the Qantas share price has lifted 22% in the past month

The Qantas Airways Limited (ASX: QAN) share price is up 22% over the last month. And this during a month where Victoria remains in lockdown, most states maintain strict border controls, and international travel is all but off the agenda.

As you’d expect, the Qantas share price was savaged by the measures put in place to control COVID-19, alongside the panic selling that gripped the wider market earlier this year.

From 20 February through to its low on 19 March, Qantas’ share price dropped a gut-wrenching 68%. Long-term investors who kept the faith – or lucky punters who bought shares on 19 March – have enjoyed an 85% share price leap since that low.

Still, Qantas’ share price remains depressed, down 45% year-to-date. For comparison the S&P/ASX 200 Index (ASX: XJO) is down 9%.

What does Qantas do?

Qantas was founded in Queensland in 1920, making it the world’s second oldest airline. Today the company is Australia’s largest airline for both regional, domestic and international travel. Qantas launched the low-cost carrier Jetstar in Australia in 2004 in answer to Virgin Australia’s low-cost offerings. Jetstar-branded airlines now operate across Asia Pacific.

The company’s subsidiary businesses include Qantas Freight Enterprises, Qantas Frequent Flyer and Qantas Loyalty. Qantas shares began trading on the ASX in 1999.

Why is the Qantas share price up 22% over the past month?

The high-flying Qantas share price over the past month has nothing to do with a return to business as normal. Rather it has a lot more to do with forward-looking investors eyeing that eventual return to normal, alongside Qantas’ own cost-cutting strategies.

On 25 August, in the company’s latest attempt to slash its budget so it can emerge from hibernation in viable shape, Qantas announced it planned to outsource its ground staff. The plan would eliminate more than 2,400 jobs, which Qantas estimates would save $100 million in operating costs annually. The impacted employees have until 9 October to put together their own bid if they wish to keep their positions.

At the moment, Qantas has already stood down 20,000 of its staff due to the impacts of COVID-19. At some stage, hopefully soon, most of those staff will return to their posts, joined by new colleagues as Australia’s biggest airline returns to the skies.

Australia is a vast and geographically isolated nation, after all. No one is going to drive from Perth to Sydney for business and most rarely for pleasure. And business and tourist travel in and out of Australia will resume once the virus is controlled or eradicated.

The Qantas share price closed up 0.3% today.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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