Can the ASX travel shares like Webjet Limited (ASX: WEB), Qantas Airways Limited (ASX: QAN) and Flight Centre Travel Group Ltd (ASX: FLT) fly higher?
What’s going on now?
The share prices of many of the ASX’s travel shares are drifting lower at the moment. There isn’t much long haul travel going on with Australia right now, apart from stranded Aussies steadily coming home.
Webjet, Qantas and Flight Centre used to make earnings from Aussies travelling everywhere in the world. Internationally, there is still some regional travel, but that’s heavily subdued. It’s a tough time for travel operators.
One of the few positives in recent months was that the border between New Zealand and Australia had partially come down. New Zealanders were able to come to Australia without needing to quarantine. But that very recently changed when a small number of South African COVID-19 variant cases were discovered, so Australia has temporarily paused that quarantine-free arrangement. The Australia – New Zealand link was one of the bright spots for travel shares. Hopefully New Zealand doesn’t have an outbreak on its hands.
The level of pain that the travel sector is experiencing can be seen in Sydney Airport Holdings Pty Ltd’s (ASX: SYD) passenger numbers. Total passenger traffic in December 2020 was 703,000 passengers, which is a decline of 82.2% from the prior corresponding period. Domestic travellers accounted for 659,000 passengers, down 71.9%. It saw a modest recovery in domestic travel numbers during a brief window of unrestricted travel between all states and territories during the month. International passenger numbers were 44,000, which is a decline of 97.3% on the prior corresponding period.
Is there good news on the horizon?
I don’t think so, not much, if any. A couple of months ago things were looking quite promising. Multiple vaccines were reported to be effective against COVID-19. But, and I’m no health expert, it seems it’s possible that the first generation of COVID-19 vaccines may not stop transmission of COVID-19, which would be bad for people who are unvaccinated, even if the vaccinated people themselves are (at least) largely protected from the coronavirus’ effects.
There’s also the danger that today’s vaccines may not defend well against one or more COVID-19 variants, such as the South African one. However, Moderna recently said its vaccine appears to work against the variants, though not as strongly against the South African one.
Australia’s health officials have commented that international borders may be one of the last things to open, rather than the first.
With all this in mind, I wouldn’t expect international travel to return to normal any time soon, which means no major recovery of earnings. The best thing ASX travel shares can hope for is a strong domestic Australian market. The whole country is on a run of 0 new daily cases, which may mean that there could be a strong domestic travel market in 2021.
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