Qantas Airways Limited (QAN) operates international and domestic air transportation services, the provision of freight services and a frequent flyer loyalty program. We recently lifted our Qantas fair value estimate by 3% to $6.10 per share, based on the time value of money. FY23 was a record year for Qantas, with an underlying pretax profit of $2.5 billion in line with our forecast and guidance. This is a dramatic turnaround from underlying losses of $3.6 billion in the prior two years which were ravaged by COVID-19 restrictions on flying.
Air travel demand has returned strongly, while capacity is still constrained by the availability of aircraft, labour, and parts. With full planes and expensive tickets, Qantas is enjoying tremendous profitability. But we think this is about as good as it gets for Qantas, with pretax earnings softening by around 4% by FY25. We expect pricing competition to return as capacity bottlenecks ease for Qantas and its competitors. Rather than a dividend, Qantas announced another $500 million buyback—in addition to $1 billion bought back during FY23.