Qantas Airways Ltd (ASX: QAN) shares have started the year well and are already up more than 10% since January.

Shares in the airline staged a quick rally late last month and touched a 52-week high of $10.37 last week, before retreating to current levels.

But not all investors are sold on the airline's future prospects.

Hedge fund Arnott Capital, once a significant backer of Qantas, has decided to reduce its stake in the airline. Let's take a closer look.

Story in Qantas shares 'played out'?

Arnott, an active fund manager that focuses on "thematic opportunities that are not yet priced by the market" is bullish on the global aviation sector.

Speaking to The Australian Financial Review, portfolio manager Kenny Arnott said there will be "fleet shortages and pricing advantages for airlines with newer planes" in the future.

This has led the fund to purchase stakes in global airlines such as European carrier Ryanair, who Arnott says is "about to go through a big free cash flow cycle", alongside positions in British Airways and Japan Airlines.

But the fund has turned its attention away from Qantas shares in favour of these opportunities.

Arnott says the firm held large stake in Qantas last year, but has sold down its position due to the airline's mammoth capital expenditures planned for the coming years.

On Qantas, we believe the story with them has largely played out.

The fund sees Ryanair as having a better long-term outlook, saying it is "a highly attractive long-term investment, especially in an environment of solid pricing growth".

Will dividends save the day?

While Arnott Capital is reducing it's exposure, Qantas has announced several updates in recent weeks.

It reported a net profit of $1.4 billion in its H1 FY25 numbers, marking a full recovery from pandemic-era losses.

But more notably, Qantas is resuming dividend payments, with investors set to receive 26.4 cents per share in April.

This is a step higher than the last payout of 25 cents per share in 2019, right before the pandemic.

Goldman Sachs also reiterated its buy rating on Qantas shares in a note to clients last week.

In it, the broker said Qantas' earnings have "been sustainably reset to a higher base", and forecasts "total returns (ordinary dividends, special dividends & buybacks) of $2.5 billion".

Goldman values the airline at $11.80 per share.

Qantas shares takeaway

Qantas shares have left the runway and are in the green so far in 2025. But one fund is reducing its exposure.

Arnott capital sees better opportunities elsewhere in the global aviation sector. However, brokers still see value in the stock, with consensus analyst estimates rating it a buy, according to CommSec.

In the last 12 months, the stock has increased by more than 92%.