Qantas (QAN) Update

Qantas has an Outperform recommendation and a 12 month share price target of $5.45 from Australian stock analyst Macquarie Research Equities.

QAN: “QANTAS” Vs “V Australia”

Macquarie Research Equities (MRE) continues to maintain an outperform recommendation for Airline industry baron Qantas (QAN) despite news of further competition from Virgin. V Australia, Virgin Blue’s newest international airline, has announced the commencement of daily Sydney to Los Angeles flights starting December 15th. What implications does this have for the airline industry?...

Qantas and Virgin Implications

The announcement by Virgin has been anticipated for some time and affirmed Virgin Blue’s strategic shift away from a low-cost carrier model towards a full service airline. Not only is does the shift deliberate a crucial paradigm to the evolving “V Australia” it boldly competes with one of QAN’s most lucrative routes. MRE estimates that QAN derives circa 56% of revenues on the US route from its business and first class offerings; with V Australia’s offering comprising three cabin classes of economy, premium economy and business class.

Qantas (QAN) Recommendation

MRE maintain their Outperform recommendation on the stock with a 12-month price target of $5.45. They further predicate no change in earnings given estimates already incorporated a 10% reduction in weighted US yields. The impetus for MRE’s 12 month view is a retraction in oil prices as well as the relaunch of the Frequent Flyer program in July.