Australian Listed Airline Companies

Qantas (QAN) and Virgin Blue (VBA) are two airline companies listed on the Australian Stock Exchange (ASX). Stock analyst, Macquarie Research Equities (MRE) have noted the dramatic decline of the oil price as of late. This is a positive catalyst for airline companies with oil comprising about 30 percent of an airline company's cost base. MRE have updated their QAN and VBA forecasts in light of this recent trend in the oil price. MRE has a Neutral rating with a 12 month share price target of $4.17 for Qantas with share price catalysts including: "Fuel price falling, evidence of a yield strength and cost savings off-setting competitive pressure ." On the other hand, Virgin Blue has a share price target of $1.80. "MRE believe that Virgin’s share price will be weak until fuel stabilises and management demonstrate a significantly higher level of sustainable profitability." "MRE have upgraded FY07 earnings forecasts for QAN (+7%), and VBA (+30%) to reflect the current forward curve." The sensitivities of the airlines differ substantially given the varying levels and forms of hedging.

Qantas (QAN) is 80% WTI hedged at ~US$71/bbl with about two thirds of this hedging in the form of options. MRE estimate that QAN’s sensitivity to a US$1/bbl fall in the fuel price (below US$69/bbl) is A$14–17m, ie 2–3% (depending on magnitude of the fall in the fuel price given varying strike prices).
Virgin Blue (VBA) remains largely unhedged. MRE estimate VBA’s sensitivity to a US$1/bbl fall in the fuel price is ~A$2.8m (or 2%).

Qantas Limited is listed on the Australian Stock Exchange (ASX) under stock code QAN. Other Qantas recommendations. QAN was listed on the ASX on 31 July, 1995. Qantas is involved in the operation of international and domestic air transportation services, the sale of worldwide and domestic holiday tours and associated support activities including catering, information technology, ground handling and engineering and maintenance. You can view the Qantas (QAN) investor website here. Virgin Blue Holdings Limited is listed on the Australian Stock Exchange (ASX) under stock code VBA. VBA was listed on the ASX on 8 December, 2003. The company is involved in airline operations in Australia. You can view the Virgin Blue (VBA) investor website here. Find out the meaning of the recommendations in this primer. Browse for other broker recommendations. Check your charts and good luck with your share trading!