So...lets have a little look at the main reason for this post...

So...lets have a little look at the main reason for this post earnings bounce:

Goldman Sachs upgrade:

"Notwithstanding a decline in unit revenues (and group capacity still at 96% of pre-COVID), our estimated FY24e EPS sits 65% above pre-COVID levels. Despite this, QAN’s market capitalisation is 1% below pre-COVID levels (EV 14% lower). We acknowledge broader macro uncertainty at this point in the cycle, but we believe the current share price does not reflect the group’s improved earnings capacity. Our 12m TP increases slightly to A$8.30 (A$8.20 prev.); retain Buy."

Lets put aside GS's long running history of legal pump and dump and assume they are not being disingenuous.....and its take on the recent earnings - they were indisputably great, but everyone expected them to be.

Without going into Goldman's analysis too deeply, I just cannot see it. Costs are rising quickly. Demand and airfare prices are falling quickly and passenger number were a long way off 2019 anyway. BITRE has just reported 4.56 million domestic passengers were carried in December 2022, compared to 5.26 million reported in pre-COVID December 2019, despite all that pent up demand.


Part of that shortfall in the lack of international visitors, particularly Chinese tourists (previously at 20% of Aussie visitors from overseas), who typically take 2 to 3 domestic flights as well, best exemplified by the Central Australia cut in capacity with fewer tourists visiting the red centre:

https://www.abc.net.au/news/2023-02-27/qantas-flights-cut-from-central-australia/102015444

Now the HY23 results were excellent, but they were at all time elevated fares, particularly to 2019, Goldman's comparison, with many fares at least 50% higher in Dec22 to Dec19 from my analysis:


This was what drove the result and extrapolated out, essentially drives Goldman's optimism, with Qantas' now post COVID, skinny cost (and alas obviously poorer standards) business.

Ironically these are not hard to monitor for the typical retail investor. Airfare prices have fallen quickly since December and pending consumer discretionary spending falls from fixed to floating mortgage trends suggest they will not tick back up any time soon. Honestly, do your own research. Airfare prices and business costs are easy to follow.

As ethically questionable as Qantas' business is, it is an undoubtedly lower cost more efficient business than it was in late 2019, but the demand environment both international and domestic lower and falling fast, whilst costs are rising rapidly, bar oil at present. That has abated, but then again Qantas has hedged those costs higher if it has indeed actioned its past strategic rhetoric (notice how airline companies, Qantas or otherwise, flip out the 'we are hedged', or 'fuel prices higher' arguments when it suits them?).