The Qantas Airways (ASX:QAN) share price rose 2.5 cents or 0.67% to $3.79 in Thursday morning trade after reporting a $124 million underlying profit before tax for the 12 months ended 30 June 2020, down 91 per cent on the prior year.
It was a tale of two halves in what Qantas said “has been the most challenging period in its long history.”
A strong first half of the year – delivering $771 million underlying profit before tax – was followed by a “near total collapse in travel demand and a $4 billion drop in revenue in the second half due to the COVID-19 crisis and associated border restrictions.”
At the statutory level, Qantas reported a $2.7 billion loss before tax due mostly to a $1.4
billion non-cash write down of assets including the A380 fleet and $642 million in one-off
redundancy and other costs as part of restructuring the business for recovery.
Looking ahead, Qantas said that “despite significant uncertainty across most markets, the Group remains well positioned to take advantage of the eventual return of domestic and, ultimately, international travel demand.”
Qantas CEO Alan Joyce said “Recovery will take time and it will be choppy. We’ve already had setbacks with borders opening and then closing again.”
He went on to say COVID-19 will continue to have a huge impact on the Qantas business, with the company “expecting a significant underlying loss in FY21.”
The Qantas recovery plan assumes 20 per cent of pre-COVID domestic capacity is scheduled for August.
The international network is unlikely to restart before July 2021.
Like the airline itself, the Qantas share price has been on a roller coaster ride in 2020, having started the year at $7.16 before collapsing to low of $2.03 at the peak of the stock market panic.
With Qantas shares trading at $3.79, Qantas is currently capitalised at just over $7 billion. That valuation relatively modest when considering pre-COVID Qantas said it was on track for another profit above $1 billion.
Of course, uncertainties abound about the timing and extent of any travel recovery.
Earlier this month a note out of UBS revealed that its analysts retained their buy rating and $4.60 price target on Qantas shares. The broker said it sees the sweeping changes that Virgin Australia is making as a positive for Qantas and could lead to market share gains in the future.