Hold==QAN released its November Traffic figures. -- Moon

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Date Posted: 06:07:30 04/16/10 Fri
Author: 13th January 2006
Subject: Hold==QAN released its November Traffic figures.

QANTAS AIRWAYS LIMITED (QAN)
HOLD Opinion: Passenger numbers and revenue growth 'flying high'

Fundamental Analysis
EVENT

QAN released its November Traffic figures.

KEY POINTS

Total Domestic (Qantas, QantasLink & Jetstar) revenue seat factor (RSF) of 77.9%.

Total International (Qantas & Australian Airlines) RSF of 76.7%.

Total RSF for the group (Qantas Domestic, WantasLink, Jetstar, Qantas International and Australian Airlines) of 77.1%.

Total Domestic yield increased 5.8% over the year to November.

Total International yield increased 7.3% over the year to November.

COMMENTARY

Domestic capacity – as measured by Available Seat Kilometres (ASKs) – grew 9.5%, while traffic – as measured by Revenue Passenger Kilometres (RPKs) - grew 8.1%. The net effect was a 1% decrease in Domestic RSF from November 2004, to 77.9%

International traffic (RPKs) grew 1.7%, despite capacity (ASKs) shrinking by 1.2%. The net effect was a 2.2% increase in International RSF from November 2004, to 76.7%.

QAN is coming out all guns blazing on the revenue growth front, particularly on the domestic side. Revenue has grown at a staggering average rate of over 13.2% a month for the past five months. One of the most simple economic rules is that you can grow revenue by increases in quantity or price. Well QAN has managed to do both. In this financial year, traffic levels have risen 7% while yield (prices) has increased 5.8% over the same period. A significant portion of the yield increase is due to fuel surcharges.

Unsurprisingly, the strongest growth was seen at Jetstar. Passenger numbers were up 36.7%, ASKs increased 44% and RPKs jumped 49.7%. These growth rates are obviously unsustainable because the airline was still in its infancy a year earlier, but they are pleasing nevertheless – especially the PRKs increase.

Overall, another strong result showing that QAN is on the right track to increasing passenger numbers and revenues. However, QAN remains a hold at current levels after the share price appreciation of the last few months. Offers good long-term buying if the share price pulls back (subject to macro developments, such as Govt. aviation policy review).

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