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 Advisory 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

    About Wilsons: Wilsons is a financial advisory firm focused on delivering strategic and investment advice for people with ambition – whether they be a private investor, corporate, fund manager or global institution. Its client-first, whole of firm approach allows Wilsons to partner with clients for the long-term and provide the wide range of financial and advisory services they may require throughout their financial future. Wilsons is staff-owned and has offices across Australia.

    Disclaimer: This communication has been prepared by Wilsons Advisory and Stockbroking Limited (ACN 010 529 665; AFSL 238375) and/or Wilsons Corporate Finance Limited (ACN 057 547 323; AFSL 238383) (collectively “Wilsons”). It is being supplied to you solely for your information and no action should be taken on the basis of or in reliance on this communication. To the extent that any information prepared by Wilsons contains a financial product advice, it is general advice only and has been prepared by Wilsons without reference to your objectives, financial situation or needs. You should consider the appropriateness of the advice in light of your own objectives, financial situation and needs before following or relying on the advice. You should also obtain a copy of, and consider, any relevant disclosure document before making any decision to acquire or dispose of a financial product. Wilsons’ Financial Services Guide is available at wilsonsadvisory.com.au/disclosures.

    All investments carry risk. Different investment strategies can carry different levels of risk, depending on the assets that make up that strategy. The value of investments and the level of returns will vary. Future returns may differ from past returns and past performance is not a reliable guide to future performance. On that basis, any advice should not be relied on to make any investment decisions without first consulting with your financial adviser. If you do not currently have an adviser, please contact us and we would be happy to connect you with a Wilsons representative.

    To the extent that any specific documents or products are referred to, please also ensure that you obtain the relevant disclosure documents such as Product Disclosure Statement(s), Prospectus(es) and Investment Program(s) before considering any related investments.

    Wilsons and their associates may have received and may continue to receive fees from any company or companies referred to in this communication (the “Companies”) in relation to corporate advisory, underwriting or other professional investment services. Please see relevant Wilsons’ disclosures at www.wilsonsadvisory.com.au/disclosures.

    • Share This Article

    Written by

    John Lockton, Australian Equities

    John is a leading investment strategist with 20 years experience.

    Related articles