Qantas Airways share price has been in a strong bearish trend in the past few months as concerns about the cost of doing business rise. The stock is trading at A$4.42, which is about 25% below the highest level this year. This drop brings the company’s market cap to over A$8.3 billion. The shares have dropped by 12% this year and outperformed the US Global Jets ETF.
Is Qantas a good airline stock?
Qantas Airways is one of the biggest airlines globally. Its main goal is to connect all corners of the world to Australia. As such, it has routes that span all continents. Some of its most profitable international routes are those that connect Australia to China.
Qantas also helps to connect various parts of Australia. Indeed, its most lucrative route is from Melbourne to Sydney.
Like all airlines, Qantas has had a difficult past few years due to the Covid-19 pandemic. Qantas suffered more than other airlines because of Australia and Chinese lockdowns. China has maintained its strict quarantine measures for foreign arrivals.
Qantas saw its revenue drop from over $11.7 billion in 2019 to over $9.1 billion in 2020. At the same time, it moved from being a highly profitable company to generating a loss of over $1.3 billion. In 2021, Qantas revenue dipped to just $3.8 billion while its loss narrowed to $1.2 billion.
Recovery challenges remain
The Qantas share price has struggled as investors worry about the new challenges to reopening. The company has seen more demand in the past few months. In June, Qantas Group said that it had seen a surge in travel demand. As a result, the firm managed to reduce its debt to about A$6 billion. The management is targeting its net debt to be between $4.2 billion and $5.2 billion.
However, Qantas is also contending with the relatively higher prices of jet fuel. Recent data shows that jet fuel has more than doubled in the past few months. For example, in its earnings report, Delta Airlines said that it spent over $3.2 billion in Q2, which was about 41% above the same period in 2019. It paid an average of $3.82 per gallon.
Qantas has also seen the overall wage costs increase. The firm decided to give its employees a $5,000 salary boost in a bid to cushion them from inflation. The total cost of those incentives was over $87 million.
Like other airlines, Qantas has also seen flight cancellations rise. Recent data shows that on-time performance has dropped near their lowest level on record.
Qantas Airways share price
The daily chart shows that the QAN share price has been in a strong bearish trend in the past few months. As a result, the shares have moved below the 25-day and 50-day moving averages. It is also slightly below the important resistance level at A$4.48, which was the lowest level in January this year.
I believe that Qantas Airways’ worst days are now behind it as travel demand is expected to rise and fuel costs to ease. Still, I believe that the shares will continue dropping as investors target the key support level at A$4.