The Skies Are Clearing for Qantas as the Vaccine Rollout Progresses

We maintain our AUD 5.20 fair value estimate for Qantas following the release of fiscal 2021 results. It was a challenging year for the no-moat rated airline as domestic and international border restrictions weighed heavily on air travel. Underlying EBITDA declined 83% to AUD 410 million, slightly behind our AUD 420 million forecast, reflecting the first full-year impact of COVID-19. Qantas' domestic business gradually recovered to pre-COVID-19 levels toward the end of fiscal 2021 as domestic borders eased, driven by local leisure demand amid international border restrictions. By contrast, the international business remained subdued, with limited repatriation flights partially offset by the Trans-Tasman travel bubble and countercyclical freight earnings amid surging e-commerce demand. Qantas' net statutory loss came in at AUD 1.7 billion--less than last year's AUD 2.0 billion. As expected, Qantas declared no full-year dividend--we expect dividends to stay suspended until the firm returns to profitability, which we expect in fiscal 2023.