It often feels like one step forward and two steps back for the Qantas Airways Limited (ASX: QAN) share price.
This week alone, investors had to juggle concerns that international travel is likely to remain limited until 2024, the cancellation of the AstraZeneca vaccine for under-50s and an upbeat business update from Qantas.
While it might be a tug-of-war between the bulls and bears for where the Qantas share price will go next, brokers believe the company’s shares are in a position to outperform.
Qantas business getting back on its feet
Yesterday, Qantas provided a number of updates regarding the ramp-up of its services. To recap its update, the company estimates that domestic travel can reach 80% of pre-COVID capacity in Q4 FY21. Looking ahead, it believes domestic travel levels could reach more than 90% by 4Q21 and 107% in FY22.
To meet increased demand for domestic travel, Jetstar will deploy six Airbus A320 aircraft on loan from Jetstar Japan. It will also redeploy up to five of its Boeing 787-8 aircraft, usually flown on international routes, to the domestic market from mid-year until international flying returns. Overall, 90% of the group’s aircraft will be active in the fourth quarter, up from 25% during mid-2020.
Brokers are bullish on the Qantas share price
Macquarie has come out with an outperform rating and a $6.45 target price for Qantas shares. The broker expects FY22 domestic capacity to be approximately 110% of pre-COVID levels, supported by pent-up leisure demand, the government’s $1.2 billion aviation support package and recovering corporate travel volumes.
Despite warnings that international travel could be off the cards until 2024, Qantas is optimistic about international borders re-opening from October 2021.
The broker continues to monitor the COVID vaccine roll-outs in key destinations like the United States and Singapore that formed a big proportion of FY19 available seat kilometres.
Similarly, Morgan Stanley is overweight on Qantas shares with a $5.90 target price. The broker believes the recovery in domestic capacity will allow for an organic repair to take place in its balance sheet but with a relatively small impact on profitability. Morgan Stanley says this will be supported by strong leisure figures assisted by government incentives and an early recovery in corporate travel.
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- Qantas (ASX:QAN) share price edges higher on business update
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- Trashed COVID-19 vaccine targets hit ASX travel shares
Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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