Equity Strategy
Does Omicron Quarantine the Recovery in Travel Stocks?
Thu 2nd December, 2021

Australian travel stocks have been beaten up over the past month over concerns around the pace of reopening and rising energy prices. The emergence of COVID variant Omicron as a potential threat to the travel recovery over the past week has taken the retreat in travel stocks to around 20% since mid-October.

At this stage, it’s difficult to be too definitive around the ultimate impacts of Omicron on economies and economic reopening until more data is available - likely mid-December. As a result, travel-related stocks will remain price sensitive to news flow surrounding the Omicron threat.

Our positive thesis on QANTAS (QAN - Wilsons Australian Focus List member) is based not so much around the international border reopening, but on domestic activity resuming. This is in contrast to travel peers Corporate Travel (CTD), Flight Centre (FLT), and Webjet (WEB) where the real value they create for clients is primarily attached to more complex forms of travel like overseas travel.

Whilst the recovery in travel will take some time, we outline how QAN can get back to earning >80% of pre-COVID earnings without any contribution from the international business, with QAN domestic and Loyalty continuing to be the key generators of income for the airline. In this report we cover:

  • The performance of Australian travel stocks
  • Why QANTAS is differentiated from travel agent performance
  • QANTAS divisional earnings
  • QANTAS International - COVID presents a pathway to reset
  • QANTAS valuation sensitivity

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    Written by

    John Lockton , Australian Equities

    John is a leading investment strategist with 20 years experience.

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