Shares in Flight Centre Travel Group Ltd (ASX: FLT) have taken a 4.65% fall today on the back of the federal budget’s plan for international travel.
Most stocks in the travel sector are trading lower as a result of the news. Webjet Limited (ASX: WEB) is down 3.3%, Corporate Travel Management Ltd (ASX: CTD) is also down 3.3% and Qantas Airways Limited (ASX: QAN) is down 3.4% at the time of writing.
FLT share price
Borders to remain closed
The latest federal budget has indicated that Australia is likely to be closed off from international travel until at least mid-2022.
This prediction comes despite the assumption that Australia is apparently on track to fully vaccinate the population by the end of the year.
According to the budget, the gradual return of temporary and permanent migrants is set to commence from mid-2022, but international tourism is expected to return towards the latter half of the same year.
How has Flight Centre been performing recently?
Given the circumstances, Flight Centre has recently told the market that its operations remain stable and it’s starting to see improvement in some of its business segments.
Significant improvement has been from its US corporate business during the month of April as schools are now operating in person and clients are returning to offices.
Flight Centre’s leisure segment in the US has also been a strong contributor recently. The liberty leisure segment was profitable in March & April thanks to strong demand for core Mexico/Caribbean products.
The company’s monthly cash burn between $30 million to $40 million seems to be sustainable for the time being and has around $1.5 billion in cash at the end of Q3.
Time to buy Flight Centre’s shares?
As the world emerges from COVID-19, it makes sense that there will likely be a significant amount of pent up demand from customers who haven’t been able to travel since the onset of the pandemic.
Even if international travel were to open up towards the end of 2022, it would likely take even more time for this to translate through to significant earnings recovery in many of these travel companies.
For the time being, I think there are other opportunities with better growth prospects in the short term.
It’s also worth considering that many of these companies have doubled their shares on issue from capital raisings since the onset of the pandemic. This has a dilutive effect on existing shareholders, which you can read more about here.
If you’re looking for other ASX growth shares, I’d recommend getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
