How Qantas shares soared ahead of the ASX 200 in May

Qantas Airways Ltd (ASX: QAN) shares just flew through a very strong month.

Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed out April trading for $8.41. On Friday, the last trading day of May, shares closed the day swapping hands for $9.44 apiece.

That saw the Qantas share price up a very impressive 12.3% in May, soaring ahead of the 0.8% one-month gains posted by the ASX 200.

But with no fresh price-sensitive news out from the Flying Kangaroo over the month, why were investors piling back into the stock?

Let’s find out!

Qantas shares rebound on Middle East peace hopes

The first welcome tailwind for Qantas over the month just past was the ongoing peace negotiations between the United States and Iran.

Hopes for an end to the war in the oil-rich Middle East saw the Brent crude oil price drop from US$114 per barrel on 30 April to trade for US$92 per barrel at the end of May, according to data from Bloomberg. That’s a decline of almost 20%.

As you’re likely aware, the price of oil – or more specifically jet fuel – can have a material impact on the performance of Qantas shares.

How material?

Well, on 26 February – right before the outbreak of the Iran war – Qantas forecast that it would spend some $2.5 billion on jet fuel in the second half of the financial year (H2 FY 2026).

But with oil prices surging amid the closure of the Strait of Hormuz, on 14 April Qantas increased its second-half jet fuel spend expectations to be in the range of $3.1 billion to $3.3 billion. At the higher end of that range, this would see the airline spend $600 million more to fuel its planes than management expected in February.

The rebound potential for Qantas shares from declining oil prices wasn’t lost on Mans Carlsson, co-portfolio manager at Ausbil.

In early May, Carlsson noted:

The market has priced an assumption that oil prices remain elevated, and we believe that investors need to look through the current geopolitical crisis. At present, Qantas is trading at an FY28 price-earnings ratio of approximately seven times, which is extremely low versus the market average.

We think that as we move beyond the oil supply shock, Qantas could be set for a significant re-rate on improving operating conditions.

ASX 200 airline moving in on Air New Zealand’s turf

Investor sentiment for Qantas shares also looks to have taken a positive turn in May after the company revealed expanded operations to and from New Zealand, potentially at the expense of Air New Zealand Ltd (ASX: AIZ).

“What we’ve learned over more than a century of flying is that when conditions are difficult, you back the relationships that matter most,” Qantas CEO Vanessa Hudson said.

Hudson added:

New Zealand s one of those relationships. And we are backing it…

Across Qantas and Jetstar, more than 800,000 seats have been added between Australia and New Zealand over the last 12 months.

The post How Qantas shares soared ahead of the ASX 200 in May appeared first on The Motley Fool Australia.

More reading

• 3 reasons I would buy Qantas shares under $10
• 3 ASX shares that could benefit most if the US-Iran peace deal holds
• Virgin Australia, Qantas shares jump 8% higher this week. Are the ASX airline stocks a buy, sell or hold?
• If you invested $1,000 in Qantas shares a decade ago, here’s what they would be worth now
• Why Charter Hall, Coronado Global, Meeka Metals, and Qantas shares are racing higher today

Motley Fool contributor Bernd Struben 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.