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Qantas struggles, Virgin progresses to ‘bidder shortlist’

As Virgin makes progress towards finding a potential buyer, investors continue to have mixed feelings about Qantas.

ASX airlines Source: Bloomberg

Up there with the most impacted industries as a result of the coronavirus pandemic are airline and travel companies. Indeed, as governments rush to cut off the spread of Covid-19, across the globe blue-chip airlines have seen their fleets grounded and aggressive, but necessary domestic and international travel restrictions put in place.

Qantas share price in focus

Overall, in the last few months – Qantas Airways Ltd (QAN) – Australia’s flagship carrier has extended its domestic and international flight cancellation programs, raised over $1.5 billion in fresh debt and stood-down around 25,000 of its staff.

In light of that, Alan Joyce, the Qantas CEO recently said:

'We're expecting demand recovery to be gradual and it will be some time before total demand reaches pre-crisis levels. That means we need to think about what the Qantas Group should look like on the other side of this crisis in order to succeed.’

At the time of writing and in the last month, the Qantas share price has fallen around 9%, and in the last three months, about 45%. The airline last traded at $3.385 per share, well off its 52-week high of $7.46 per share.

Virgin version two

Though its share price remains battered and its operations significantly impacted, according to the Qantas management team, the airline remains well-placed to weather the short and long-term impacts of Covid-19. Virgin Australia (VAH), by comparison has struggled, with the low-cost carrier entering voluntary receivership in late-April.

While the specifics of what Virgin as a company may look like in a post-receivership world – today the company provided the market with further details around the bidders currently vying for control of the airline.

Here, Vaughan Strawbridge Lead Partner for the Administrators, commented:

'We are delighted by the strength of each of those on the shortlist, with parties selected being well funded and possessing deep aviation experience. The parties have also worked constructively with the administration process and put forward credible indicative bids.’

'These parties enable us to seek the best available commercial solution which we are all looking for, while meeting our responsibility to maximise the outcome for creditors and see the airline continue as one of the country's two carriers serving Australians.'

Positively and framed against a backdrop of falling employment rates within Australia, Mr Strawbridge further stressed that:

'Importantly, each [bidder] has a plan for the business which can secure the future for thousands of Virgin Australia employees.'

Interestingly, while Virgin's media release today did not mention the names of those on the short-list due to ‘confidentiality commitments', according to the Australian Financial Review’s Street Talk column, the shortlisted parties include Bain Capital, BGH Capital, Indigo Partners and Cyprus Capital Partners.

Prior to Virgin Australia (VAH) entering voluntary administration, the airline traded at the 86 cents mark.

How to trade Qantas

You can use CFDs to trade Qantas and other airline and travel stocks – LONG or SHORT through IG’s world-class trading platform now. For example, to buy (long) or sell (short) Qantas, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Qantas’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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