For travel stocks, it’s up, up and away

If you’ve travelled lately and felt stung by the big increases in airfares and accommodation prices, you might think about ‘revenge investing’ in some travel companies. Because, since the post-pandemic re-opening, many – like Flight Centre and Qantas – have seen a big increase in patronage, profits and share price.

Travel stocks are experiencing a strong start to the year. Flight Centre (ASX:FLT) is up 30 per cent year-to-date, Corporate Travel Management (ASX:CTD) is up 23 per cent and Auckland International Airport (ASX:AIA) is up 10 per cent. And until weakness in recent days, Qantas’s (ASX:QAN) share price was up 12 per cent since it upgraded guidance in November last year.

Over in the U.S., it’s a similar story. A raft of optimistic earnings calls from hotels and online booking marketplace operators reflect strong booking activity this calendar year and strengthening business travel data. The U.S. Transport Security Administration (TSA) has revealed the number of Airline passengers going through security checks surpassed pre-COVID levels in February.

Meanwhile, corporate results support survey data showing half of all Americans plan to travel before June. 

Back here at home, a number of travel-related companies have reported. 


Qantas’s first half 2023 results were in line with many expectations for a record profit before tax of $1.4 billion. Revenue hit $9.9 billion. The profit result was also at the upper end of the company’s own guidance of $1.35 – $1.45 billion. Investors might recall the company reported a loss of $1.28 billion in the previous corresponding period, which ended 31 December 2021 and took in COVID lockdowns.

Qantas’s domestic business revenue was up 222 per cent, and underlying Earnings Before Interest and Tax (EBIT) was $785 million, compared to a loss of $613 million in the previous corresponding period.

The international business saw revenue grow 189 per cent with underlying EBIT jumping from a loss of $238 million in the previous corresponding period to $464 million.

The oft-cancelled-flight business Jetstar recorded a 423 per cent jump in revenue and produced an underlying EBIT of $177 million compared to a loss of $417 million in previous corresponding period. Jetstar Asia is reported to be delivering strong profitability and core leisure routes are said to be experiencing strong capacity growth.

Qantas group capacity is a smidgeon under three-quarters of pre-COVID levels with Domestic at 94 per cent and International at 60 per cent.

In arguably yet another example of business-driven inflation, Qantas Revenue per Available Seat-Kilometre (RASK), which is the revenue Qantas makes on each seat kilometre flown (RASK = Revenue / (total seats X total kms flown), hit a record due to ongoing industry capacity constraints, enabling the company to extract higher fares. Indeed, RASK is nearly 50 per cent above pre-COVID levels, which helped offset the record fuel costs for the airline. 

Qantas also announced another share buyback of $500 million and while no specific guidance was offered, the company said the outlook is very strong and expects 2H23 domestic capacity to be around 101 per cent of pre COVID levels. 

Flight Centre Travel

Flight Centre Travel Group Limited had pre-reported its key numbers for the half, back in January, so there were few surprises. Investors should be mindful that Flight Centre reports a large second-half skew in its full year results. Typically, 35 per cent is generated in the first half and 65 per cent in the second half. 

Perhaps in contrast to the aggregate U.S. data noted above, FLT offered a weak report for its U.S. business, even though the U.S. finished just below its record 1H20 contribution. This was offset by strength in both Australia and New Zealand (ANZ) and Europe, Middle East and Asia (EMEA).

The company reiterated its FY23 guidance and a target for its net profit before tax (NPBT) target for FY26, which is based on a change in the business mix, and if achieved means quite material upgrades required from consensus.

Flight Centre’s Total Transaction Volume (TTV) was $9.9 billion, revenue was $1.0 billion and the revenue margin was just 10 per cent. FLT reported TTV of $1.6 billion from ANZ, $1.4 billion from EMEA, A$1.6 billion from the U.S. and A$0.6 billion from Asia.

Underlying EBITDA increased to A$95.1 million, but interest, tax, depreciation and amortisation were high, and the company reported an after-tax loss of $2.5 million. Importantly, for a business making losses, net cash was a comfortable $464.8 million, excluding the convertible notes.

Flight Centre’s numbers were aided by a strong performance from its corporate business which produced TTV of A$5.0 billion and is 103 per cent of pre-COVID. The Leisure business experienced a strong second quarter and TTV for the first half was $4.4 billion, which is just over 70 per cent of pre-COVID levels, but revenue margins were low thanks to a larger volume of lower margin products being sold.

Meanwhile, China’s reopening is having a positive impact on the business and the company noted volumes in Asia are now trending above pre-COVID levels. The Asia business could deliver record TTV in FY23, remembering in FY19 it was $8.9 billion.

Remember all those social commentators during the pandemic who predicted travel would forever change and business travel would be obsolete thanks to Zoom? Bunkum! In the U.S., Marriott said business travel is 90 per cent recovered. Meanwhile, almost a third of Americans are planning for more leisure travel this year and 52 per cent are planning to travel for leisure in the next six months. 

The Montgomery Funds own shares in Corporate Travel Management. This article was prepared 24 February 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Corporate Travel Management you should seek financial advice.


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