Travel companies are embracing encouraging transitions to boost the overall tourism industry. A mixed bag seems obvious currently- while Webjet posted over 90% decline in the revenue amid the fierce COVID-19 headwinds, vaccination programs are a bright spot for international border relaxations.
A pandemic hit hard sending travel fears beyond marks in a contemporary world where xenophobia seemed to be finally shrinking with augmented travel facilities. Consequently, the Government’s border restrictions came as a severe blow for the travel sector, which saw a steep decline in frequent flyers.
But not all is grim. Australian air carriers are fighting back strong to come out stronger from the crisis.
Slightly bright silver linings gleamed when ahead of Easter holidays, Virgin Australia launched direct flights and expansion of flight frequency in a bid to increase flyers’ number. Following similar suit, Qantas Airways Limited (ASX:QAN) may receive support from Queensland Government to create a new Brisbane-based flight training centre.
However, troubles have not entirely stopped for the Australian travel industry.
Webjet Limited’s (ASX:WEB) half-yearly result for FY21 (1H21) is a validation of the pandemic’s continued impact on the travel industry. There was a deplorable fall of over 90% in the Group’s revenue while the total transaction value dwindled by 89%. In response to the worsening situation, the air carrier has embraced several cost-cutting measures leading to a 52% decline in the expenses during 1H21 over the prior corresponding period.
1H21 highlights, Source: WEB ASX Presentation, 17 February 2021
However, the stock market front scenario was at odds with the worrisome financial outcomes, as WEB shares managed to edge up by over 7% in two days since the results.
Webjet’s results, one of the first from the genre, have caused high anticipation in the market.
Investors are eagerly waiting to review other air-travel companies’ comprehensive performance, which will be soon announcing their results too.
Sydney Airport (ASX:SYD)
Sydney airport plans to unveil its full-year results for the period ended 31 December 2020 on 24 February 2021. Interestingly, the relaxations between Australian states and territories have driven modest domestic traffic recovery.
In December 2020, the total passenger traffic was down 82.2% compared to December 2019.
Traffic performance Dec 2020, Source: SYD’s ASX Announcement, Jan 2021
Nevertheless, the international travel scenario continues to brace severe headwinds which can persist until the Government eases travel restrictions. The Company has confirmed no final distribution for 2020 due to severe pandemic-induced impact on its business performance.
SYD shares closed at $5.52 on 18 February 2021. The share price has dwindled by 10% in the past month.
Qantas Airways Limited (ASX:QAN)
Qantas Airways’ 1H21 results are expected on 25 February 2021. They would shed further light on how the air travel industry is undergoing the paramount transition phase amid COVID-19.
For December 2020, Group Domestic capacity may increase to 68% of pre-COVID levels, rising to approximately 80% for Quarter Three.
The Company has been able to advance into recovery mode owing to several developments, including:
• Re-opening of domestic borders.
• Advancement in cost reduction programs.
• The continued strong performance of Loyalty and Freight divisions.
As per a business update from December 2020, a significant statutory loss is anticipated for FY21.
Nevertheless, Qantas expects to be close to break-even at the Underlying EBITDA level for 1H21. Net free cash flow (excluding redundancies) is expected to be positive in 2H21.
Notably, a Wet Lease Agreement has been inked between Qantas and Alliance Group for up to fourteen E190 aircrafts. Three E190 aircraft are expected to commence operations in mid-2021.
Qantas stock price dwindled by 3.7% in one month and traded at $4.70 on 18 February 2021.
The double whammy of health-related risks and border restrictions has crippled air travel industry, with players on pins and needles, awaiting recovery. Significantly, globetrotters’ travel apprehensions are exceptionally high as they are keen to dodge off uncertainty in the foreign lands.
Notably, vaccination programs have emerged as the knight in shining armour for the air travel industry ready to chart out a successful path due to technological transitions, cost savings and dynamic shifts in business models.
Source: Kalkine Media
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