Qantas – Do I Stay Or Do I Go

By Jason Fittler

I never really liked the idea of Airlines. Sure back in the 70's and 80's it was a growth business and seen as a mode of transport of the rich. Now, they are glorified bus services with massive competition and a heavy regulation burden.

QAN is now look to take operations off shore. Keep in mind that this is a private business but the government is looking to get involved. They are currently dealing with rolling strikes which happen to coincide with the AFL and NRL finals.

For this company to stay in the air in a very competitive business they need to move off shore. This is being blocked by staff and government, the end result is that shareholders will lose out.

QAN is aggressively reducing costs despite complex fleet and labour relations.

New management is relatively inexperienced though capable.

QAN will remain profitable but subject to volatile cyclical demand.

It is still to prove it can deliver sustained returns to justify longer-term investment.

Massive capital expenditure typical of the high fixed cost/commodity nature of the airline business will preclude dividend payments, at least in the medium term.

Given leverage, both ways, to the oil price and global growth, QAN is only suitable for investors understanding the high risks of this business, helped by occasional buy-backs.

For the sensible investor I would stay out of this stock for now.

For more information on QANTAS (QAN) please contact us on 07 4771 4577.