Hi. I have to refrain from posting about WEB on the FLT forum,...

Hi. I have to refrain from posting about WEB on the FLT forum, else I will be pinged for cross-selling. Suffice to say, when I put the two alongside each other, I prefer WEB (based on their model and their numbers).

Interesting to hear Joyce say that QAN are expecting 68% of domestic capacity. I guess this is to be expected as business travel is lower, and domestic travel relating to international customers is almost zero. At 68%, this means that QAN's revenue is still well short of where they need to be, hence the additional debt being raised. GIven that 60% of gross revenue is domestic, this probably puts target revenue at around 40% (or pre-COVID levels) for Q1/2021. Joyce does not expect international travel until Q3/2021, and even that will be limited.

So when it comes to gross airline revenue (gross market revenue) It is probably fair to say it will be circa 50% (of pre-COVID levels) in H1/2021, and maybe a tad higher in H2/2021. You will need to wait until early 2022 to see much change imo.

I was chatting to someone close to the FLT coal face yesterday, and they commented that even though domestic is resuming, the percentages are not flowing through to FLT in quite the same fashion as before. They are seeing more on-line bookings (using various websites, some of them FLT, but some of them competitors), and a much higher percentage of direct bookings (with QAN and others). All hearsay though. Whether or not this becomes the new norm is anyone's guess.

So to that question of FLT revenue (that someone else posted) - It is an absolute guessing game. Even if I throw out a number, I am confident that it will be shot down (without reason or support) by one of the up-ramping cheer squad out there - so its almost pointless to even try to have that discussion here on HC. I have a view which is markedly different to the pom-pom wavers here, and probably have a central estimate (guess, right?) at about 50% of pre-COVID numbers in 2021, and 60-70% in 2022. But all guesswork, based on what I have seen and heard. Assuming that number is correct, using lower PE multiples (you would be nuts to use higher multiples post-COVID!), and using the diluted equity numbers (which may be diluted further in my opinion), I think a $10 target is very much justified (perhaps lower, if FLT comes to market again next year by way of another convertible or further equity raising).

Undoubtedly I have just lined myself up for criticism again with this post, but at least I have the guts to try to have a sensible discussion about the numbers involved. Fire away lads.


Best regards,
Kit