Qantas Airways Shares Rebound Strongly Into Overbought Territory

Qantas Airways shares (ASX: QAN) have reclaimed the A$10.50 level after a powerful second-quarter rally, driven by easing geopolitical tensions and a sharp retreat in oil prices that has transformed the airline’s cost outlook and reignited investor confidence in its earnings trajectory.

The Australian flag carrier’s shares have climbed 24.56% through the second quarter of 2026, pushing the stock positive for the year-to-date with a 2% gain after languishing in negative territory for much of the first quarter. The most recent leg of the rally has been particularly pronounced, with Qantas shares up 13.8% over the past month as Brent crude settles near US$70 per barrel following the de-escalation of US-Iran tensions that had previously sent jet fuel costs soaring.

A glance at the 1 year chart makes the Iran-US conflict incredibly easy to spot, with the trough that began at the start now fully reversed after a difficult four months for holders.

Driving the shift in sentiment in Qantas shares

The momentum surge has pushed the stock into overbought territory on technical indicators, with the relative strength index now reading 78.32, well above the traditional 70 threshold that typically signals overheated conditions. The share price has ended positive in 13 out of the past 15 sessions, giving holders plenty to cheers after a difficult start to the year.

The rally marks a dramatic reversal from the caution that gripped the stock in April, when Qantas issued a market update warning that jet fuel prices had more than doubled versus assumptions used in its half-year results presentation. At that time, the airline projected second-half FY26 fuel costs of A$3.1 billion to A$3.3 billion, representing an incremental hit of A$600 million to A$800 million. In response, management announced a 5 percentage point cut to domestic capacity for the April-June quarter and implemented fare increases across both domestic and international networks to offset the margin pressure.

Yet what initially appeared as a significant headwind has morphed into a tailwind as geopolitical risk premia have unwound. With the oil price now tracking materially below the assumptions embedded in that April guidance, markets are pricing in the possibility that Qantas will undershoot its elevated fuel budget while retaining much of the fare increases already implemented, creating powerful operating leverage.

Fundamentals solid

The fuel relief comes atop what was already a solid operational foundation. Qantas reported first-half FY26 results in February showing revenue and other income of A$12.9 billion, up 6.3% year-on-year, and underlying profit before tax of A$1.456 billion, a 5.1% increase. Statutory net profit after tax came in at A$925 million, with passenger load factors holding firm around 84% to 85% and yields remaining robust across key routes.

Management underscored its confidence in the business by declaring a fully franked base interim dividend of A$300 million and launching an additional on-market share buyback of up to A$150 million, returning a combined A$450 million to shareholders despite the capital-intensive fleet renewal program underway. The company framed the results as delivering profit growth in the face of significant cost pressures and the largest fleet modernisation in its history, with net debt rising from approximately A$5.0 billion at June 2025 to A$5.6 billion at December 2025 to fund aircraft deliveries.

Critically, even as Qantas flagged the fuel shock in April, it simultaneously upgraded certain revenue expectations.

Group international unit revenue growth for the second half of FY26 was lifted to 4% to 6%, roughly double prior guidance, while group domestic revenue was forecast to grow around 5% in the second half and 6% in the fourth quarter as fare increases took effect. The upgraded revenue outlook, combined with disciplined capacity management, reinforced a narrative of demand resilience and pricing power that has become central to the bull case.

A view from the street

However, the rally has not been without sceptics. Some analysts caution that the share price move is predominantly a factor-driven trade rather than a fundamental shift of Qantas’s structural earnings power. The stock’s elevated RSI reading suggests vulnerability to near-term profit-taking, particularly given that the April capacity cuts remain in place and the absolute fuel budget remains elevated by historical standards.

Bears also point to rising net debt and heavy capital commitments as constraints on financial flexibility should macro conditions deteriorate. The 5% domestic capacity reduction, while framed as margin-protective, also signals sensitivity in lower-yield demand segments and reinforces the cyclical nature of airline earnings. Legal and reputational overhangs persist as well, including a A$105 million settlement over unused COVID flight credits earlier in March and ongoing consumer criticism of fare increases linked to the Middle East conflict.

What To Watch

The combination of solid first-half profits, upgraded revenue guidance, and the macro tailwind from lower fuel costs has shifted sentiment decisively in Qantas’s favour through the second quarter.

With trailing twelve-month earnings per share above A$1.06 and strong revenue per available seat kilometre of approximately A$15.60, bulls argue the airline is trading on an attractive mid-cycle price-to-earnings multiple if the current earnings base proves sustainable.

Qantas’ share price is back above A$10.50, into positive territory YTD, and with 11 out of the past 12 sessions ending green. Momentum remains firmly with the bulls for now, but the overbought technical picture and inherent volatility of fuel costs suggest the path higher may be bumpy, with the risk of consolidation or pullback ever-present as markets weigh the durability of this quarter’s impressive gains against the cyclical headwinds that have historically constrained airline valuations.