Crisis over - Joyce
FY22 RESULT
Need to know:
- $400m on-market share buyback announced
- Higher FY23 fares likely as fuel cost heads to $5bn on 60% increase in jet fuel price cf 2019
- Domestic capacity reduced another 10% due to high fuel prices
- Staff incentivised with cash, shares, cheap travel
- Net debt down to $3.94bn, below target range $4.2-5.2bn
Investment implications
QAN CEO Alan Joyce has pronounced “the existential crisis posed by the pandemic is now over”. FY22 was buried under COVID-19 disruptions and a stuttering return to domestic and international flying due to labour and capacity issues.
The $400m on-market buyback is a surprise (still no dividend) but reflects very strong balance sheet with net debt well under target range. A sweetener for shareholders.
Customers get a $50 apology travel voucher for poor operational performance since borders re-opened Nov 21 and a promise that on-time performance and baggage handling will be fixed by October.
Staff get a cookie too with even more generous fare discounts and better access for family members. As a shot at the unions, QAN said the average non-executive salary at QAN is now more than $100k pa. Staff also got a $5k recovery bonus and 1,000 share rights during the year.
More domestic routes (20) will ensure the group keeps a stranglehold on the domestic market. 4Q22 revenue from leisure bookings was 125% of pre-COVID levels.
International recovery has been hampered by slow opening of key markets, NZ and Indonesia. Capacity at 49% at June 2022. JetStar International hammered in NZ, Singapore and Japan from border restrictions.
Group domestic capacity lowered ~10% due to fuel costs and operational challenges. QAN expects 2H23 106% of pre-COVID levels.
Group International capacity 2H23f expected to be 84% of pre-COVID.
The recovery will keep improving. Retain Buy recommendation.
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Stock overview
Key properties
Financial Forecasts
Share Price
Company overview
A dual-branded airline (Qantas, Jetstar) with ~65% domestic market share and a strong Asian presence. Loyalty program is one of the largest in Australia. Owns 19.99% of Alliance Aviation Services (AQZ) and has bid to acquire the balance.
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Related Reports
Taming the outback
The ACCC has delayed its decision on the QAN proposed takeover of Alliance Aviation (AQZ) until 20 April. QAN currently owns 19.99% of AQZ but has no Board representation. AQZ has massively upscaled its fleet which will most likely be wet leased to QAN.
In the jetstream
Qantas has emerged from the pandemic in perhaps the best shape of its corporate life.
QF23
From the depths of the pandemic, Qantas has navigated its way to a healthy balance sheet and quickly improving earnings. With operating costs $1bn lower, future plans such as Project Sunrise are back on the agenda.