Why are the Qantas and Flight Centre share prices under pressure?
Shares in the national carrier are up 1% over the last 6 months, while Flight Centre is down 3%.
Shares in travel-related stocks, including Australia’s biggest airline Qantas (ASX: QAN) and travel operator Flight Centre (ASX: FLT) were under pressure on Wednesday. At the time of writing, Qantas was down 0.6%, while Flight Centre lost 1.3% and rival Helloworld was down 1.4%.
What is impacting the QAN and FLT stock prices?
Travel stocks are flying low after authorities extended a lockdown on Australia’s most populous city, Sydney, by another 4 weeks amid high COVID-19 infection numbers.
The decision comes after 4 weeks of initial restrictions that have seemingly had no impact in controlling the spread, with case numbers continuing to rise. New South Wales reported 177 new cases on Wednesday. The state has now reported nearly 2,600 cases linked to the current Delta strain outbreak.
The restrictions over the last month have already badly affected Qantas’ operations given that many of its key routes originate from Sydney. It has also triggered lockdowns, snap border closures and tightened restrictions in several other Australian states, hitting domestic air travel for companies like Flight Centre and Helloworld.
In a trading update in May, the pandemic-hit airline announced that it expected to be cash flow-positive for the second half of the current financial year, thanks to a sustained rebound in domestic travel, where it was hoping to reach 95% capacity of pre-pandemic levels in the June quarter.
That has all come under a cloud and is again prompting investor concerns over the airline’s financial health. It will announce full year results on 20 August.
International travel collapse
Qantas, which has been one of the hardest hit Australian companies due to the pandemic, posted a half-year loss of $1.47 billion. Flight Centre had expected to recoup the loss of the Jobkeeper wage subsidy by a rebound in domestic business if state borders stayed open. But that hasn’t happened.
The bad news on the domestic front comes at a time when international travel is continuing to weigh on the travel sector’s finances as borders remain shut.
The only available international route, a 2-way quarantine-free travel to New Zealand, has been shut down for at least 8 weeks given the outbreaks across Australia.
Last month the federal government revised the timeline for completing Australia’s vaccine rollout to end-2021, with international borders now not expected to open until mid-2022.
From an investment perspective, that has meant that despite brief periods of a run up, travel stocks have been unable to hold on to gains. The Qantas stock is up just 1% over the last 6 months, while Flight Centre slipped around 3% over that period.
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