2 things dragging the Qantas share price lower on Thursday

It's a crummy day for the Flying Kangaroo.

| More on:
a passenger plane is on the tarmac with passenger shute attached with a view of the surrounding land and sunset in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Qantas Airways Ltd (ASX: QAN) share price fell 2.9% to an intraday low of $9.23 today.

The ASX 200 airline stock has since rebounded to be trading at $9.34, down 1.8% for the day.

Let's find out why Qantas shares are in the red.

Qantas share price dips following broker downgrade

One possible factor driving the Qantas share price lower is a downgrade from top broker, Macquarie.

According to The Australian, Macquarie has lowered its rating on Qantas to neutral.

However, the broker has increased its 12-month share price target by 11% to $9.30.

Analyst Ian Myles said Qantas faces more competition on international routes from Qatar and Virgin, as well as Delta Air Lines Inc (NYSE: DAL) in the US, amid a weak Australian dollar.

He notes that Qantas's EV/EBITDA has returned to previous highs, and says:

Reports of falling domestic prices, competitive capacity on larger routes like US and Europe (are) clouding the FY26 outlook.

EV/EBITDA multiple is now at a 10-year peak (ex COVID) which captures the structural changes to the cost base.

He comments that Qantas aircraft is three to four years older, and this is reflected in the company's share price discount to international competitors.

Alliance Aviation disappoints the market

The Qantas share price may also be falling after fly in, fly out (FIFO) company Alliance Aviation Services Ltd (ASX: AQZ) reported its 1H FY25 results after the market close yesterday.

Qantas is a minority shareholder in Alliance, which provides contract, charter, and allied aviation services.

Investors were apparently unhappy with the report, with the Alliance Aviation Services share price falling 10.5% to a 52-week low of $2.48 today.

The stock has recovered slightly to be trading at $2.51, down 9.39%, at the time of writing.

Alliance reported total revenue from operations of $333 million, up 11.3%, and EBITDA of
$101.2 million, up 25.9%.

Flight hours increased to 58,362, up from 50,793 in the prior corresponding period. About 97% of those hours were under long-term contracts.

Alliance's Managing Director, Scott McMillan, said the company had delivered a "solid performance" despite rising costs and increased industrial relations activity.

He also noted that three aircraft were damaged during the period in incidents "beyond the company's control".

What's next?

Qantas will report its 1H FY25 numbers and announce its interim dividend on 27 February.

Macquarie expects a 21% increase in first-half profit for Qantas.

The broker says the FY25 outlook is strong given optimal load factors, lower oil prices, and the benefits of the share buyback.

The Qantas share price hit an all-time high of $9.64 on 6 February.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Delta Air Lines. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Alliance Aviation Services. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Travel Shares

Man sitting in a plane looking through a window and working on a laptop.
Travel Shares

What does Macquarie think Web Travel Group shares are worth?

Is the broker bullish or bearish? Let's find out.

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Web Travel share price rockets 13% on market leading full-year growth

Investors are sending Web Travel shares soaring today. Here’s why.

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

$10,000 invested in Qantas shares 5 years ago is now worth

Let's see what happened if you were brave and bought the Flying Kangaroo's shares in 2020.

Read more »

Woman on a tablet waiting in for her flight in an airport and looking through a window.
Travel Shares

Why have Qantas shares outperformed Flight Centre shares by more than 100% over the past 12 months?

The two share prices are travelling in opposite directions.

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Qantas share price slips amid looming $121 million fine

Qantas continues to face legal issues stemming from the Covid pandemic years.

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a young woman looks at here phone as she strides out in an airport dragging her wheelie bag behind her and smiling widely.
Travel Shares

Would I buy Qantas shares right now?

This ASX travel share has flown higher. Is it a buy?

Read more »

a woman drawing image on wall of big fish about to eat a small fish
Mergers & Acquisitions

Guess which ASX All Ords stock just received a takeover offer

A private equity firm has its eyes on this stock.

Read more »