Qantas Airways Limited (ASX: QAN) shares were on form on Monday and raced higher.

The airline operator's shares ended the day almost 5% at $5.69.

Investors were fighting to get hold of the Flying Kangaroo's shares amid news that it is making "one of the biggest ever expansions" of its frequent flyer program.

This will see Qantas add 200 million more reward seats with the launch of Classic Plus Flight Rewards.

Qantas' CEO, Vanessa Hudson, commented:

The Qantas Frequent Flyer program is an integral part of Qantas and has always been about recognising our customers for their loyalty. The widespread availability of Classic Plus means that frequent flyers have more options to fly where they want, when they want and more often, using their points.

Analysts at Goldman Sachs have responded to the news. And while the broker expects the change to have a slightly negative impact on its earnings this year, this will be offset by positive impacts down the line. The broker said:

We update our FY24E-26E estimates to reflect the latest updates in the Loyalty Program. Overall, our FY24E NPAT estimate reduces by 2%, while our FY25E estimate remains unchanged. Our FY26E NPAT estimate increases by 2%.

In light of this, Goldman has reiterated its buy rating and $8.05 price target on Qantas' shares. This implies potential upside of approximately 41% for investors over the next 12 months.

Goldman continues to believe that Qantas' shares are severely undervalued at current levels based on its structurally improved earnings. It also highlights that its market capitalisation remains lower than pre-COVID times despite this. Goldman explains:

Qantas Airways is the flagship carrier of Australia and is the largest airline in Australia by capacity share, serving destinations domestically and internationally. As a key beneficiary of the re-opening of the world post-COVID, we expect the airline's traffic capacity to return to 95% of pre-COVID levels by FY24e, with the airline's earnings capacity (EPS) expected to exceed that of pre-COVID levels by ~52%. We forecast a ~24% FY19-24e cumulative uplift in unit revenues (c. 4.4%pa), and ~50% drop-through of QAN's A$1bn+ structural cost-out program. QAN's current market capitalisation and enterprise value are 10% below and 11% below pre-COVID levels. As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity.