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Why Qantas Airways Limited (ASX:QAN) and Webjet Limited (ASX:WEB) just hit share price highs

Buoyant conditions in the international travel market have seen these three travel stocks take off as Australians are travelling more, while we’re also opening our doors to welcome in more tourists.

Qantas Airways Limited (ASX: QAN)

Qantas shares hit a 52-week high this week to close off June 12 at $6.47 after plenty of ups and downs in the past 12 months and the usual exposure to volatile industry conditions.

Last month Qantas revealed it expected to post a record pre-tax profit of between $1.55 billion and $1.6 billion, causing a share price surge of 10% over the month, despite a $200 million increase in total fuel bills over FY18.

But while the company believe it is “positioned for growth and sustainable returns”, with third quarter revenue jumping up 7.5% to $4.25 billion, some investors will be wary of previously turbulent times experienced by the airline, with competitor discounting always threatening to undercut the Australian airline stalwart.

For now, Qantas certainly appears to have a strong balance sheet with net debt in target range and all segments delivering return on invested capital, but it’s unclear how long the upside will continue.

Webjet Limited (ASX: WEB)

Online travel agency Webjet Limited shares are in all-time high territory, closing off June 14 at $13.46 after a steady price incline from mid-April.

Webjet has been soaring ahead of industry peers Flight Centre Travel Group Ltd (ASX: FLT) and Corporate Travel Management Ltd (ASX: CTD) of late, backed by an overall shift to online booking by consumers as they move away from bricks and mortar travel agents to take control of their own itineraries.

Flight Centre has a strong history of booking gains, but as with most travel stocks, they’re the first to take a hit during a market downturn and are definitely feeling the competitive heat from Webjet.

Webjet is continuing to assert itself in the segment with no signs of a slow down on the cards yet, so investors looking for an in might be waiting a while for a drop in price.

Air New Zealand Limited (ASX: AIZ)

International airline group Air New Zealand Limited yesterday announced an upgrade in earnings for FY18 despite taking on board an extra $100 million in fuel costs over the period.

Air New Zealand fuel costs rose from $880 million as at August 2017 to $990 million at June 2018, but the $3.3 billion market cap company based in Auckland is still expecting to maintain earnings stability due in part to customer loyalty, its alliance-driven Pacific Rim network and a simplified fleet and cost structure.

The launch of an Auckland to Chicago route should also prove profitable for the carrier.

Peer Sydney Airport Holdings Pty Ltd (ASX: SYD) shares have been back on the incline of late after a slow start to the calendar year with many optimistic about its growth prospects in the long term and capacity to boost earnings with retail rents and car parking fees.

Online players have certainly been disruptive to the traditional travel segment.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Sydney Airport Holdings Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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