Qantas shares lead ASX gains after axing of Jetstar Asia
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The news: Qantas shares were leading gains on the ASX 200 in morning trading, reversing losses on Wednesday after the airline announced loss-making Jetstar Asia will be shuttered, a move that has received a positive response from analysts.
The numbers: Qantas shares fell 3% to close at $10.50 after the announcement on Wednesday, but at 11:18am AEST on Thursday they had risen 4.4% to $10.96.
The context: Qantas said it is closing its intra-Asia airline amid strong competition in the region.
The closure will enable $500 million of capital to be recycled and its fleet to be redeployed to Australia and New Zealand. It will also result in the loss of 500 jobs, with the final day of operations scheduled for 31 July.
The combined financial impact of the closure is estimated to be $175 million in underlying earnings, with around a third in FY25 and the rest in FY26.
UBS analysts have raised their target price for Qantas from $9.30 to $10.30 because of “a higher earnings forecasts (mostly due to lower fuel costs rather than Jetstar Asia impacts), lower capex in FY27 and FY28, and some [discounted cash flow] roll-forward”.
Morgan Stanley analysts also lifted their share price target, from $11.50 to $12, while stockbroker Morgans’ analysts raised their position on the stock from ‘trim’ to ‘hold’ and lifted their target price from $9.40 to $10.80.
The sources: UBS research, Morgan Stanley research, Morgans research
