Broker downgrades Qantas to 'sell'

[RooFlyer]

Report in the Oz on-line that a broker analyst has downgraded Qantas shares down from neutral to a 'sell', contrasting to others.

Qantas’s financial recovery has been dealt a blow by poor on-time performance and high cancellation rates, analysts at Citi say – predicting the airline will have to increase costs to save its brand.

In a note to clients, the investment bank’s analyst Samuel Seow lowered his recommendation on the airline’s shares from neutral to sell, asking: “how much would it cost to improve performance?”

Mr Seow compared recent on time performance and cancellation rates for Qantas with other Australian and US carriers, finding the airline was falling well short.

In June, Qantas’s cancellation rate was 8 per cent, worse than its Australian and US peers at 6 per cent and 2 per cent respectively.

At the same time, Qantas had around 46 per cent of flights delayed, compared to an average of 38 per cent for other Australian carriers, and 22 per cent for US airlines.

UBS analyst Andre Fromyhr suggested Qantas’s strategy of reducing capacity to lower fuel costs and boost yields, was right for the current economic environment.

“Combined with the greater contribution from loyalty, this strategy would be more stable for profit even if it opens up some minimal risk to market share,” Mr Fromyhr said.

One can only hope that focussing on the impact of coughpy service may have on the share price, will get Qantas management's attention. Nothing else appears to have.

 

[Quickstatus]

broker analyst

He didn't take into account the power of DSC.

 

[Happy Dude]

I've read posts somewhere here claiming that it is VA 'leading the way' with on time performance and cancellation rates?

And this is just whack:

UBS analyst Andre Fromyhr suggested Qantas’s strategy of reducing capacity to lower fuel costs and boost yields, was right for the current economic environment.

So there exists an economic climate where not boosting yields is a good thing? QF have been axing routes or fobbing them off to Jetstar and/or "enhancing" everything including the kitchen sink to boost yields, presumably, for ages.

You'd think that if Mr Seow listened to Mr Fromyhr that he might have a different outlook. Shareholders love profits usually. Unless they're expecting more of it.