Qantas Airways Ltd. (QAN) had its largest two-day loss since June 2012 after the nation’s biggest carrier said last week it expects the lowest yields in more than a decade for passenger flights.
The stock dropped 5.6 percent to A$1.35 at the 4:10 p.m. close in Sydney today. Qantas declined 3.4 percent on Oct. 18 after Chief Executive Officer Alan Joyce said he expects group yield, a measure of earnings for each kilometer flown by a passenger, to fall 2 percent to 3 percent in the six months ending December from a year earlier.
Joyce told shareholders last week the airline faces headwinds from a volatile economy, uncertain exchange rates, high fuel prices and intense competition. Qantas, which controls 65 percent of Australia’s local market, has added services after Virgin Australia Holdings Ltd. (VAH) vowed to take share in the profitable business-travel segment.
“It’s difficult to see international yields improving with the capacity growth from competitors,” CIMB analysts led by Mark Williams said in a note to clients today. Virgin’s “competition for domestic corporate accounts is likely to limit the recovery in domestic yields,” they wrote.
The yield decline guidance was “a surprise, given the apparent moderation in domestic capacity growth and the 3 percent decline for the same period last year,” UBS AG analysts led by Simon Mitchell said in a note dated Oct. 18.
Yield was 10.46 Australian cents in the six months ended December 2012, implying a range of 10.15 cents to 10.25 cents in the current period, based on Joyce’s estimate.
The average estimate from 11 analysts for net income adjusted for fiscal 2014 was cut by 85 percent after Qantas’s presentation to shareholders Oct. 18, according to data compiled by Bloomberg.
Qantas has declined 9.4 percent this year, compared with a 15 percent gain for the benchmark S&P/ASX 200 Index. It is the eighth-worst performing stock among industrial shares, according to data compiled by Bloomberg.
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