Qantas Earnings: Competition Is Returning

Qantas’ profitability is normalizing following an exceptional fiscal 2023. Interim fiscal 2024 profit before tax fell 13% on the previous corresponding period to AUD 1.2 billion. Pent-up demand is largely exhausted, capacity constraints have eased, and competition is intensifying. Both internationally and domestically, the Qantas brand experienced a sharp drop in margins, while budget brand Jetstar is pulling ahead. Profits are normalizing faster than expected. We lower our fiscal 2024 underlying pretax profit forecast by 5% to AUD 2 billion, which is 19% lower than fiscal 2023. However, our longer-term forecasts remain largely intact, and we make no changes to our fair value estimate of AUD 6.10.