1 00:00:04,800 --> 00:00:07,640 Speaker 1: Welcome to Fear and Greed summer investing series, brought to 2 00:00:07,720 --> 00:00:11,400 Speaker 1: you by VANT specialists in compliance led growth. I'm Sean Almer. 3 00:00:11,640 --> 00:00:14,880 Speaker 1: Quantus is one of, if not the most recognizable brands 4 00:00:14,920 --> 00:00:17,160 Speaker 1: in the country and in the last couple of years 5 00:00:17,200 --> 00:00:19,520 Speaker 1: it's gone through more than its share of turbulence. But 6 00:00:19,760 --> 00:00:22,439 Speaker 1: are there clear skys ahead now for the national carrier 7 00:00:22,480 --> 00:00:25,439 Speaker 1: and its investors? As always, this is general information only 8 00:00:25,800 --> 00:00:28,840 Speaker 1: and you should seek independent device before making investment decisions 9 00:00:28,920 --> 00:00:32,199 Speaker 1: at Jacob Kakanas is the director of equity research at 10 00:00:32,320 --> 00:00:33,199 Speaker 1: Jardin Australia. 11 00:00:33,240 --> 00:00:34,680 Speaker 2: Jacob, welcome back to Fear and Greed. 12 00:00:35,080 --> 00:00:37,760 Speaker 1: Hi, Sean, thanks for having me far too many puns. 13 00:00:37,840 --> 00:00:40,640 Speaker 1: When you're covering an airline like Quantus, I suspect, but 14 00:00:41,000 --> 00:00:43,680 Speaker 1: it has had an incredible run of challenges from the 15 00:00:43,720 --> 00:00:47,640 Speaker 1: ahable ce action over selling canceled flights that was a 16 00:00:47,680 --> 00:00:50,080 Speaker 1: couple of year or eighteen months ago, to the illegal 17 00:00:50,120 --> 00:00:51,880 Speaker 1: sacking of workers during the pandemic. 18 00:00:53,000 --> 00:00:56,520 Speaker 2: Then its share price ran hard last year late last year. 19 00:00:57,160 --> 00:00:57,800 Speaker 2: What's it up to? 20 00:00:58,920 --> 00:01:02,040 Speaker 3: Yeah, we're at this junk now Sewan where it's very 21 00:01:02,080 --> 00:01:06,280 Speaker 3: much a delivery issue for Quantus in the peak summer period. 22 00:01:06,720 --> 00:01:08,080 Speaker 3: You would have seen a lot of the press lately 23 00:01:08,200 --> 00:01:10,920 Speaker 3: talking up demand. It seems as though people are substituting 24 00:01:10,920 --> 00:01:13,080 Speaker 3: out other luxuries in life to make sure that they 25 00:01:13,160 --> 00:01:16,880 Speaker 3: keep on traveling. Airfairs seem to have tempered a little, 26 00:01:17,240 --> 00:01:19,600 Speaker 3: and where I talk about the tempering of airfares more 27 00:01:19,640 --> 00:01:22,559 Speaker 3: as international, we would have seen since we last spoke 28 00:01:22,640 --> 00:01:25,080 Speaker 3: that we did have that confirmation that Virgin and Katar 29 00:01:25,120 --> 00:01:28,560 Speaker 3: are getting together at the moment. That union's via a 30 00:01:28,600 --> 00:01:31,160 Speaker 3: code share very similar to what Quantus has with Emirates. 31 00:01:31,200 --> 00:01:33,920 Speaker 3: But it seems as though that Middle Eastern route into 32 00:01:33,959 --> 00:01:36,720 Speaker 3: Europe's going to be the hotbed of competition for twenty 33 00:01:36,760 --> 00:01:40,680 Speaker 3: twenty five. Domestically, things are going well. I think most 34 00:01:40,680 --> 00:01:43,240 Speaker 3: investors that I speak to are happy about the market structure. 35 00:01:43,760 --> 00:01:46,679 Speaker 3: We're still a little bit unclear about who leads Virgin 36 00:01:47,440 --> 00:01:49,720 Speaker 3: into an ICO process if that were to happen. So 37 00:01:49,880 --> 00:01:51,840 Speaker 3: as far as that stands at the moment, we've got 38 00:01:51,880 --> 00:01:56,240 Speaker 3: a rational domestic market and an international market which is 39 00:01:56,400 --> 00:01:58,720 Speaker 3: on a fine delicate balance at the moment. 40 00:01:59,240 --> 00:02:01,720 Speaker 1: How much of a different will Virgin Qatar tie up 41 00:02:01,840 --> 00:02:03,440 Speaker 1: make to Quantus. 42 00:02:03,800 --> 00:02:06,000 Speaker 3: That's a hard question to answer at the moment. Sean. 43 00:02:06,040 --> 00:02:10,560 Speaker 3: I think immediately what comes to mind is additional capacity, 44 00:02:11,240 --> 00:02:15,240 Speaker 3: more options for Australian outbound travelers, definitely by way of 45 00:02:15,400 --> 00:02:18,960 Speaker 3: incremental seats and capacity. But I think the thing most 46 00:02:19,000 --> 00:02:21,720 Speaker 3: important to remember for those Velocity members is now we've 47 00:02:21,720 --> 00:02:24,560 Speaker 3: got a redemption path for all those Velocity points that 48 00:02:24,560 --> 00:02:26,880 Speaker 3: have been accruing. And I think that that will be 49 00:02:26,919 --> 00:02:30,880 Speaker 3: the challenge for Quantus in twenty twenty five is how 50 00:02:30,880 --> 00:02:34,240 Speaker 3: does it supplement or complement its own frequent flyer offering 51 00:02:34,280 --> 00:02:38,200 Speaker 3: when it's having more competition from Virgin Velocity, particularly in 52 00:02:38,200 --> 00:02:40,000 Speaker 3: international redemption opportunities. 53 00:02:40,360 --> 00:02:41,639 Speaker 2: What about Project Sunrise? 54 00:02:41,680 --> 00:02:44,800 Speaker 1: Do we ever get the Sydney Sydney New York or 55 00:02:44,840 --> 00:02:47,239 Speaker 1: the Sydney London flight it's coming. 56 00:02:47,280 --> 00:02:50,400 Speaker 3: I think it's importance has increased since we last spoke. 57 00:02:50,480 --> 00:02:53,440 Speaker 3: I think we were kind of saying that it's largely conceptual. 58 00:02:53,480 --> 00:02:56,960 Speaker 3: I think now with potentially more hub based competition, and 59 00:02:57,600 --> 00:03:00,600 Speaker 3: as analysts talk about hub based competition, that's sing that's 60 00:03:00,600 --> 00:03:02,720 Speaker 3: Hong Kong, that's guitar. 61 00:03:03,240 --> 00:03:03,679 Speaker 2: That's vied. 62 00:03:03,760 --> 00:03:06,000 Speaker 3: You buy where you're stopping over on the way to 63 00:03:06,080 --> 00:03:10,240 Speaker 3: your final destination. Obviously Project Sunrise will overshoot all of those, 64 00:03:10,320 --> 00:03:13,120 Speaker 3: so you'll travel point to point, there will be demand 65 00:03:13,160 --> 00:03:16,280 Speaker 3: for that. It seems as though luxury cabin demand still 66 00:03:16,320 --> 00:03:20,119 Speaker 3: strong despite the eye watering airfares. I know last time 67 00:03:20,120 --> 00:03:23,760 Speaker 3: we spoke that they tempered somewhat down to eight to 68 00:03:23,800 --> 00:03:26,080 Speaker 3: twelve hours, but there's still a large chunk of money 69 00:03:26,120 --> 00:03:28,560 Speaker 3: to sit in a piece of metal for fourteen hours 70 00:03:28,560 --> 00:03:31,040 Speaker 3: plus to get to where you want to go. So yeah, 71 00:03:31,080 --> 00:03:34,160 Speaker 3: we're looking at that as being I guess the cabin 72 00:03:34,240 --> 00:03:37,560 Speaker 3: or the market that underwrites Project Sunrise. But there seems 73 00:03:37,600 --> 00:03:39,520 Speaker 3: as though there's still enough demand there for point to 74 00:03:39,520 --> 00:03:40,160 Speaker 3: point travel. 75 00:03:40,600 --> 00:03:43,440 Speaker 1: Okay, oil prices and fuel prices is the big cost 76 00:03:43,480 --> 00:03:45,080 Speaker 1: for quantas what's the outlook there? 77 00:03:45,640 --> 00:03:48,920 Speaker 3: That one's again really challenging what the forward curves showing us. 78 00:03:48,960 --> 00:03:52,240 Speaker 3: So there are derivatives in financial markets that we can 79 00:03:52,280 --> 00:03:55,360 Speaker 3: look at to guess the future. And instead of getting 80 00:03:55,400 --> 00:03:57,200 Speaker 3: my crystal ball out, that's what we look at. We 81 00:03:57,240 --> 00:03:59,840 Speaker 3: look at the oil futures. It's a pricing that traders 82 00:04:00,200 --> 00:04:04,840 Speaker 3: and demonstrate twelve twenty four months, even further out is 83 00:04:04,920 --> 00:04:07,200 Speaker 3: three years time where they think the oil price will be. 84 00:04:07,320 --> 00:04:09,880 Speaker 3: And what that's showing at the moment is a phenomenon 85 00:04:10,160 --> 00:04:12,800 Speaker 3: in finance that we call backwardations, So that's when the 86 00:04:12,880 --> 00:04:15,760 Speaker 3: current price is higher than what the traders are betting 87 00:04:15,800 --> 00:04:18,440 Speaker 3: at in the future, and that's what makes it challenging 88 00:04:18,480 --> 00:04:22,120 Speaker 3: at this point in time. Currently, there's a lot happening geopolitically. 89 00:04:22,160 --> 00:04:25,720 Speaker 3: We've got issues in Ukraine, We've got the Middle East 90 00:04:25,720 --> 00:04:29,240 Speaker 3: which keeps on flaring up in different parts, So it 91 00:04:29,279 --> 00:04:31,480 Speaker 3: makes guessing the oil price really challenging. And I guess 92 00:04:31,480 --> 00:04:34,840 Speaker 3: what's important then is how Quantus and Virgin manage that 93 00:04:34,960 --> 00:04:36,840 Speaker 3: and how that gets passed through to customers. And we're 94 00:04:36,880 --> 00:04:39,960 Speaker 3: still seeing some of the benefits from lower prices year 95 00:04:40,000 --> 00:04:42,159 Speaker 3: on year wash through to those lower airfares that I 96 00:04:42,200 --> 00:04:44,920 Speaker 3: mentioned earlier. So so far, so good. I guess it's 97 00:04:44,960 --> 00:04:47,320 Speaker 3: the scorecard shorn, but yeah, something to watch as we 98 00:04:47,400 --> 00:04:48,599 Speaker 3: head into twenty twenty five. 99 00:04:49,320 --> 00:04:52,560 Speaker 1: The twenty second elevator pitch the good and bad of Quantus. 100 00:04:52,640 --> 00:04:56,039 Speaker 1: If I'm an investor, the good Now, Really what's left 101 00:04:56,040 --> 00:04:58,400 Speaker 1: to play is execution, so you need to believe that 102 00:04:58,440 --> 00:05:01,760 Speaker 1: they can deliver earnings in line with market estimates. We're 103 00:05:01,800 --> 00:05:05,680 Speaker 1: still slightly below the COVID peaks that Quantus reported, but 104 00:05:06,480 --> 00:05:09,200 Speaker 1: in a really expensive share market. Now paying eight to 105 00:05:09,279 --> 00:05:12,760 Speaker 1: nine times price earnings for this company does seem reasonable 106 00:05:12,760 --> 00:05:17,120 Speaker 1: in a market that seems increasingly expensive by all accounts 107 00:05:17,680 --> 00:05:21,000 Speaker 1: that the bad really is incrementally Maybe we see some 108 00:05:21,000 --> 00:05:23,960 Speaker 1: more competition at the margin, like I said, more opportunity 109 00:05:24,000 --> 00:05:28,000 Speaker 1: definitely for frequent fliers to use their points to access flights, 110 00:05:28,400 --> 00:05:31,640 Speaker 1: and I think maybe that is going to eventuate, maybe 111 00:05:31,640 --> 00:05:34,640 Speaker 1: in some better service outcomes like we've been calling in 112 00:05:34,640 --> 00:05:37,400 Speaker 1: the last few sessions that we've had in these casts 113 00:05:37,440 --> 00:05:40,560 Speaker 1: for customers, so things I can prove gate service, improved 114 00:05:40,600 --> 00:05:43,560 Speaker 1: on time performance and maybe an upgrade to lounge and 115 00:05:43,640 --> 00:05:44,400 Speaker 1: in flight dining. 116 00:05:44,920 --> 00:05:46,240 Speaker 2: Jacob, thank you for your time. 117 00:05:46,760 --> 00:05:47,279 Speaker 3: Thanks Sean. 118 00:05:47,800 --> 00:05:51,960 Speaker 1: That is Jacob Kakana's director of equity research at Jardin Australia. 119 00:05:52,080 --> 00:05:54,880 Speaker 1: Remember to get your own independent advice before making decisions. 120 00:05:54,920 --> 00:05:55,920 Speaker 2: This is the fear and greed. 121 00:05:55,920 --> 00:05:59,440 Speaker 1: Some are investing series brought to you by Vanda Automates 122 00:05:59,440 --> 00:06:04,400 Speaker 1: Compliance for frameworks like ISO twenty seven one two, CPS 123 00:06:04,480 --> 00:06:07,520 Speaker 1: two three four and Essential eight saving time and money 124 00:06:07,560 --> 00:06:11,440 Speaker 1: while building trust. Join over eight thousand companies like Atlasian, Dovetail, 125 00:06:11,520 --> 00:06:15,400 Speaker 1: fire Ant and Tactic dot Io managing real time risk 126 00:06:15,440 --> 00:06:18,320 Speaker 1: get one thousand dollars off at vanta dot com backslash, 127 00:06:18,360 --> 00:06:18,960 Speaker 1: fear and greed. 128 00:06:19,000 --> 00:06:19,760 Speaker 2: I'm Seane Elmer. 129 00:06:20,120 --> 00:06:21,839 Speaker 1: Enjoy your day.