Further Coronavirus Capacity Cuts as Qantas Cancels Buyback

We maintain our AUD 5.00 fair value estimate for shares in no moat-rated Qantas following further capacity reductions flagged across its network. The impact of novel coronavirus, or COVID-19, is weighing on air travel demand across the globe, and Qantas is not immune. Despite announcing reductions to capacity and an off-market buyback on Feb. 20, 2020, the COVID-19 impact is proving highly disruptive, and Qantas has now earmarked deeper cuts and cancelled its buyback. We lower our fiscal 2020 net profit after tax, or NPAT, forecast to AUD 647 million, from our previous estimate of AUD 787 million, representing a 30% drop compared with fiscal 2019. However, we don't expect this to persist in the longer term and anticipate air travel demand recovery from fiscal 2021.