Emerging Service Issues, page-15

Buybacks are usually announced at the time a company reports. Qantas has already been successful buying back 28% of its stock over the last 5 years cheaply (at a pe of under 10 the stock is cheap compared to the broader ASX). I think a lot of investors subscribe to the view that airlines are terrible investments due to high capital costs and the low margin nature of the business (which I don’t disagree). However, in my view it’s a good idea for qantas to continue to buyback its stock over the cycle - in another 5 years this could look very much like a CSL if that’s the case (stepping on the gas if there is a global Stockmarket sell down). Qantas does not have much competition in the domestic market. As Virgins fleet ages and profitability declines I suspect Qantas’ margins will only improve.

The current oil price is also helping qantas enter into hedging arrangements to lock in jet fuel prices over the next 12 months. Internal modelling planed for a significant increase in oil prices during the period ended 30 June 2019 which has not materialised. I’m subscribing to the view that next weeks result could be a banger!