NEUTRAL: I am not an investor in airlines however, Qantas have Alan Joyce. If you want anyone running your airline surely it's Alan Joyce. He makes decisions other avoid. I think his record speaks for itself. Virgin might well return back to their early days (virgin blue) when they focused on that area of the market that wanted value for money with no frills. They made money and were successful. REX is an unknown quantity. They have come out of their comfort zone where they were a profitable regional airline (with a bit of government support at all levels to encourage them to maintain a service) to battle against the big boys on the major routes. Many have tried and most have failed. We will see how deep their investors pockets are.
One of the key component is the all important link up with international routes to bring people onto your domestic route (Qantas almost has a monopoly on this).
If everyone checks there ego and the system runs 70:20:10% (Qantas:Virgin:Rex) domestic share then all 3 can be very profitable. However, if like we saw with virgin they decide to pick off a little more the result could be terminal.
I am looking forward to seeing how the challengers come out to battle the reigning champion and what tact they take in the battle for $$$.
For a little more colour on how Qantas do business, looking past the jazzy reports released to the ASX, Qantas also release an annual Data Book. This years has not yet been posted.
It's very interesting to see which other businesses they have a major stake in. I only went looking for this information as I was delving into Alliance Aviation's major shareholders for a straw I'm working on (privately) and discovered that Qantas is their largest shareholder at almost 20%. The operational deal between Qantas and Alliance of Alliance's newly purchased Embraer E190 aircraft certainly makes more sense.
Having looked through the 2020 document, in addition to the Qantas Domestic and Qantas International airline revenue, the business also creates revenue through subsidiaries: QantasLink, Qantas Loyalties, Qantas Freight, Jetstar, Jetconnect and Express Ground Handling.
In addition to these subsidiaries, Qantas also owns the majority stake in Taylor Fry (51%), the pre-stated ~20% ownership of Alliance Aviation and an ~46% ownership of Fiji Airways. The document also states Qantas acquired a 29% ownership of Jetset Travelworld Limited in 2010. This company then amalgamated with Harvey World Travel, Travelscene and Travelworld to form Helloworld Travel, with no mention in the Qantas Data book of how many shares Qantas retained. I couldn't find any further information on transactions, other than a MF article from 2018 which states that Qantas retained an ~15% holding in the company.
As for reporting this information on their company balance sheet or updating how these investments are performing, I'm unable to ascertain this information without diving deeper.
Qantas also have multiple network partnerships, government and community initiatives, affiliations with partner loyalty programs and a plethora of other partnerships.
I'm not drawing any conclusions from this information but hope it can help to make a more informed opinion on the company.
As someone who works in the industry I would love to see all airlines thrive, sadly however, I think Qantas comes out of the pandemic in the weakest position of the major airlines. My reasons for why I wouldn't invest in QAN this is below:
Positives for Qantas:
Overall, I can't tell which airline is the winner and which is the loser coming out of the pandemic so I thinking investing would be just taking a punt.
Kaboom - thanks for the response, will put some more thought into my bear case. Your points about Qantas being the strongest in the market are not lost on me. Rex into the mix will upset Virgin and JetStar, assuming they can stay vaible. I do agree with you there are other things that make better investments.
One thing that surprised me is that no one that is a bull is treating it as a long term hold. I think everyone has said they are treating it as a trading sock.
Glad I made you laugh about the Dash8, and thanks again for the constructive post.