As the world gets vaccinated and continues to open up after the pandemic, the prospect of interstate and even international travel becomes more real.
That creates an opportunity not just to travel for the first time in nearly two years, but also to make some profit from some of the major travel stocks which have been hammered as a result of the lockdowns.
This week the big news was the $23.6 billion sale of Sydney Airport to a consortium led by IFM Investors and some leading super funds, a deal which will take the stock off the ASX boards and into private ownership.
If you had shares in Sydney Airport, you would have done well because the bidders had to raise their offer a couple of times before it was agreed.
The bid began at $8.25 and was raised twice to $8.75 before it was accepted, a price very close to the highs of December 2019 when the shares were travelling at $9. In the “COVID Crash” of March and April 2020, Sydney Airport shares fell below $5.80.
A look at some of the other major travel industry shares on the ASX shows the same pattern. Riding high in 2018 and 2019, followed by a big slump in early 2020 when COVID hit, and followed by a gentle recovery.
With many of these stocks there is still a significant gap between their pre-pandemic highs and where they are now.
Market watchers say a big theme for the markets going forward is that COVID losers will become winners, and one of the biggest COVID losers was the travel industry.
Have a look at Qantas shares. The company made a whopping $2 billion loss last year and $1.73 billion this year, and yet there is a strong argument for buying the stock now.
Following the pre and post pandemic roller coaster, Qantas shares were at $7.35 in December 2019, fell to $3.11 in April 2020, and are now at $5.31 just as the world could be set to re-open.
It’s the same story over at Flight Centre, which is now ramping up its advertising as we contemplate a future where travel might again be possible.
Flight Centre just reported a $500 million loss, but there is a similar argument in favour of buying the shares.
They were $60 in July 2018, $10.52 in April 2020 and are now at $18.05. If you think that the shares should be worth north of $50 in a “normal world”, then there is significant upside to be had.
Two others to mention are Webjet and Hello World, both of which have followed the same trajectory.
Webjet has gone from $10.90 pre-pandemic to $2.71 at its height and is now at $5.96.
The graph for Hello World is even more extreme: $6.10 before the pandemic, then to a low of 98 cents and now at $2.10.
The pandemic has, often unfairly, created a financial gap between many people, with some struggling but many others cashed up due to low mortgage rates and a flow of free money from the Government, courtesy of the Reserve Bank of Australia.
Many of these people are cashed up, but have been cooped up. They are desperate to travel and leave the front doors of their homes once they are double vaccinated.
If you think that is a plausible scenario, and the RBA certainly does, then one of the main beneficiaries should be the travel industry.
So the time could be right to not only use the services of the travel industry, but also to invest in it.