Qantas Stock And 2 Shares Exposed To Ultra Long Haul Flights

Ultra long-haul flights are moving from concept to reality, and that shift is starting to matter for stock pickers. Qantas’s record 24 hour Project Sunrise test flight using an Airbus A350-1000ULR has put fresh attention on companies tied to next generation aircraft, engines and premium travel routes, as well as on rivals that could lose traffic to new non stop options. This article breaks down three stocks exposed to that news, showing how the same development can create opportunity for two and pressure for one, and why that mix could be useful for your watchlist.

Rolls-Royce Holdings (LSE:RR.)

Overview: Rolls-Royce Holdings designs and manages mission critical power systems, with its Civil Aerospace segment supplying large jet engines and aftermarket services for long haul aircraft, its Defence unit providing aero and naval engines including for submarines, and its Power Systems arm delivering mtu branded onsite power and propulsion solutions. The group serves airlines, governments and industrial customers in the UK and internationally.

Operations: Rolls-Royce generates most of its revenue from Civil Aerospace at about £10.4b, with Defence and Power Systems contributing roughly £4.8b and £4.9b respectively, alongside smaller items and £1.1b of unallocated adjustments.

Market Cap: £116.7b

Investors watching ultra long haul routes may consider Rolls-Royce Holdings because it builds the Trent XWB engines that power the Airbus A350-1000ULR at the heart of Project Sunrise. This links engine deliveries and long term service contracts to any changes in these routes. The company also reports a growing order book across Civil Aerospace, Defence and Power Systems and has tested its UltraFan demonstrator, which management indicates could influence future engine efficiency and time on wing. At the same time, high reliance on aftermarket strength, one off gains and debt funded leverage can reduce flexibility if demand cools. That mix of engines, leverage and financial complexity is a key consideration for long term investors in Rolls-Royce.

Rolls-Royce’s engine momentum on ultra long-haul routes is only half the story. See how its leverage, order book and cash flows fit together in the 4 key rewards and 2 important warning signs (1 is major!)

Singapore Airlines (SGX:C6L)

Overview: Singapore Airlines operates a full service flag carrier and the Scoot low cost airline, moving passengers and cargo across East Asia, Europe, the Americas and other regions, while also running engineering, maintenance, training and travel related services around its core aviation business.

Operations: Singapore Airlines generates most of its revenue from its Full Service Carrier segment at about S$17.4b, with the Low Cost Carrier contributing around S$2.6b and Engineering Services about S$1.4b, alongside smaller contributions and group eliminations.

Market Cap: S$24.5b

Singapore Airlines may appeal to ultra long haul investors because it already operates premium nonstop routes such as Singapore to Newark. It now faces a potential squeeze as Qantas prepares direct Australia to Europe and US services that could pull high yield travellers away from its hubs. Recent numbers show passenger and cargo volumes, but profitability has come under pressure, with profit margins at 5.8% compared with 14.2% the previous year and earnings declining 57.4%. The stock also trades on a P/E of about 20.7x, alongside high reliance on external borrowing and an unstable dividend history. For investors, the question is whether Singapore Airlines is being priced as a long haul winner just as competition on some of its key routes starts to intensify.

Singapore Airlines’ premium story looks stretched when profits have fallen, margins have compressed and competition on key routes is heating up. Before assuming the current P/E of about 20.7x is justified, review the 1 key reward and 2 important warning signs.

Qantas Airways (ASX:QAN)

Overview: Qantas Airways is Australia’s flag carrier, running domestic and international passenger and cargo flights under the Qantas and Jetstar brands, alongside its Qantas Loyalty frequent flyer program. The group links Australian cities with major global hubs and also provides freight and customer rewards services.

Operations: Qantas generates most of its revenue from Qantas International at about A$9.4b and Qantas Domestic at about A$7.8b, with Jetstar Group at about A$5.9b and Qantas Loyalty at about A$3.1b, offset by smaller corporate items and eliminations.

Market Cap: A$15.4b

Qantas Airways sits at the centre of the ultra long-haul theme because Project Sunrise directly ties its future to record length routes using Airbus A350-1000ULR aircraft, supported by data from existing point to point flights such as Perth to London and Auckland to New York. The current P/E of 9.6x is below both the Australian market and peer averages. This comes with high debt, non cash earnings and a dividend that is not fully covered by free cash flow. Together with a significant Qantas Loyalty program, additional cargo capacity at Western Sydney and rising competition on international routes, this creates a complex picture that may warrant closer examination beyond a quick headline view.

Qantas Airways’ low 9.6x P/E, heavy debt and powerful Loyalty arm could be masking where the real value sits for long haul exposure. Explore how these pieces fit together in the analysis report for Qantas Airways

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Seeking Alternatives Beyond Ultra Long-Haul?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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