The Qantas Airways Limited (ASX: QAN) share price closed 1.08% higher at $4.69 today after one of its partially acquired companies posted optimistic FY22 results.
Alliance Aviation Services Ltd (ASX: AQZ) announced a 21% increase in total revenue to $369.4 million. For FY2023, it expects to see increased profitability due to the investments it made in FY2022 and a growing contract client base.
Qantas bought a 19.9% stake in Alliance Aviation in February 2019, and in May this year, the airline announced it would buy the remaining shares.
Letâs learn more about why investors were bullish today on this iconic ASX airline share.
What happened with Alliance?
Alliance Aviation said that in addition to its strong revenues, earnings were also stable from its contracted revenue clients.
Another positive highlight from the report was that flight hours grew 25% to 47,519, and this growth trend is expected to continue in the future.
However, its operating experiences and finance costs grew significantly during the same period, contracting its earnings before interest, taxes, depreciation, and amortisation (EBITDA) by 27%, for a $47 million total loss.
Other developments fueling a Qantas lift today?
Alongside the Alliance results, todayâs Qantas share price boost may be attributed to other developments impacting the airline industry. Airline rivals Southwest Airlines Co (NYSE: LUV) and Air New Zealand (ASX: AIZ) both made gains today, closing at 2.45% and 2.56%, respectively.
Shares in these companies might have lifted due to a reduction in the oil price, which is a major cost to airlines. According to Bloomberg, the price of WTI crude oil has fallen 0.41% today, while Brent Crude also fell 0.27%.
Jet fuel costs airlines around 11% of their operating expenses on average.
Travel takes off
On the demand side, there is also a major tailwind. According to the World Tourism Organisation, international travel is set to soar to 55% to 70% of pre-COVID travel this year. Thatâs a 90 to 140 per cent increase from 2021 levels.
The pent-up demand for travel may be unleashed during this period, similar to the post-pandemic spending spree seen in countries that spent months or longer under lockdown.
New Zealand, one of Australiaâs favourite travel destinations, fully reopened its borders to international travellers on 31 July and resumed the processing of visas.
On a global scale, Kayak reported that 167 countries are open to travel with no COVID-19 testing or quarantine required, while 32 are open to travellers with testing.Â
People now have the freedom to travel to most countries without the inconvenience of self-isolating, including the worldâs most popular tourist destinations. Many havenât visited these places in months or sometimes years.
Thus, the share price gains of major airlines such as Qantas could reflect these changes in the demand and cost of international travel.
Qantas share price snapshot
Gains made by Qantas today outperformed the S&P/ASX 200 Industrials Index (ASX: XNJ), which delivered a 0.09% return.
The Qantas share price is currently down 8.9% year to date, trailing behind the S&P/ASX 200 Index (ASX: XJO), which has contracted 6.84% over the same period.
The airlineâs market capitalisation is $8.85 billion from todayâs gains.
The post Why did the Qantas share price fly higher today? appeared first on The Motley Fool Australia.
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More reading
- Alliance Aviation share price lifts despite full-year loss
- Why is the Qantas share price beating the ASX 200 today?
- ‘Downside is less severe’: Why some brokers are still bullish on the Qantas share price
- Why Alliance, Aurizon, MVP, and Suncorp shares are dropping today
- Qantas share price descends as management recruited for ground-handling work
Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Alliance Aviation Services Ltd. 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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