The drop in oil prices has been a huge boost to tourism across the world. With jet fuel being one of the largest expenses for airlines, its rapid drop in cost means airlines have been afforded the luxury of reducing airfares whilst still producing stronger profit growth.
In fact, in its interim results Qantas Airways Limited (ASX: QAN) reported a year-over-year drop in fuel costs from $2.1 billion to $1.7 billion for the period. That's a massive 21% decline and a huge boost to its margins.
It is not surprising then to learn that the share price of Qantas Airways has been one of a number of stand out performers in the last 12 months with a gain of almost 20%.
Furthermore, consumers are making a lot of savings when filling up their cars at their local Caltex Australia Limited (ASX: CTX) service station. This has been a big contributor to the rise of disposable income levels in Australia.
With more money in consumers' pockets I feel it is likely that consumers will have been taking advantage of cheaper airfares and flying off somewhere sunny for a well-earned holiday.
For these reasons I believe Flight Centre Travel Group Ltd (ASX: FLT) is a fantastic investment today with the potential for strong gains in the future.
Things have been looking positive for the company. In its half year results the company reported record global sales which saw total transaction value exceed the previous first half record by more than $1 billion to $9.2 billion.
Perhaps the most impressive takeaway from its results was that the company managed to grow its sales in all countries and regions that it operates in.
Although Flight Centre's strong bricks and mortar presence is often criticised for being in danger of losing relevance in the digital age. I believe it is the company's competitive advantage over a company such as Webjet Limited (ASX: WEB).
But management isn't resting on its laurels. Flight Centre's recent acquisition of BYOjet will help it compete online. Management has explained that it intends on growing BYOjet through metasearch sites such as Skyscanner. It is early days, but eventually I expect it to become a force in the industry online.
With cash assets totalling just short of $1.2 billion, the company certainly is in a strong position to make further acquisitions when necessary. Especially when you take into account the fact that the company only has $21 million worth of debt to its name.
According to CommSec, analysts are expecting earnings to grow by an average of 7% per year through to 2018. Unusually for a company with strong growth prospects, it also pays a great dividend which presently provides shareholders a fully franked yield of 3.7%.
Foolish takeaway
In my opinion Flight Centre is one of the best companies on the Australian Stock Exchange. Like Qantas Airways and Caltex, I would expect it to outperform the market by some distance, whilst oil prices remain low. Buying today at 16 times earnings could prove to be a great investment.
