There is no doubt that with the economy tightening airlines will have a tough time going forward.
Qantas is currently fighting some tough head winds. They are fighting Unions about moving servicing off shore as well as Pilots looking for pay rises in the Jetstar service. All of these issues will dog Qantas for some time to come.
Their costs are increasing and although $350 million profits after tax seems like a large sum when you take into account the size of Qantas it is not that great.
When we take a closer look at this business the figures do not get our investment grade rating.
The business has an average return on assets of 2.99%. The company has not paid a dividend since 2009 and although it has a forecast dividend of 3.8% in 2012 I prefer to see the money before I count it.
The company is trading below its intrinsic value which makes it more appealing but the upside in my opinion is not worth the risk.
Given that the market is trading at low levels I feel there are better quality businesses to invest in at present.
I place Qantas in the Hold basket, looking to sell at a higher price if they achieve their forecast but for people looking to invest cash there are better businesses to buy.
For more information on Qantas Airways Limited please contact us on 07 4771 4577.