Will the Qantas Airways Ltd (ASX: QAN) share price and other ASX travel shares crash back to Earth?
Forgive the terrible pun, but I think it's a question well worth asking today.
The Qantas share price has been on an absolute tear in recent weeks. Just today, the Aussie airliner's shares are up 3.9% to $4.66, at the time of writing. This follows a ~7% gain yesterday. Since 19 March, the Qantas share price has risen nearly 130% from its low of $2.03.
Other ASX travel shares have made similar movements in recent weeks. Webjet Limited (ASX: WEB) shares are up nearly 100% since late-April. And Corporate Travel Management Ltd (ASX: CTD) shares are up more than 180% since their 19 March closing price.
So what do these extraordinary moves tell us?
Well, at their lows, I think it's safe to say these companies were being priced for bankruptcy or something close to it which would have involved massive shareholder dilution. The market has rapidly moved away from these assumptions, particularly with the easing of coronavirus-related restrictions. Along with this, the conceptual floating of a return to travel explains the massive share price increases we have seen in recent weeks.
Even just yesterday, Qantas announced it would be increasing the availability of domestic flights over this month and next. According to the release, the new services will see Qantas' domestic capacity increase from 5% of pre-pandemic levels to 15% by the end of this month and even possibly up to 40% by the end of July, depending on state-level restrictions.
Is it too late to buy back into Qantas and other ASX travel shares?
On one level, I think the time for making massive gains in ASX travel shares is over. Opportunistic investors who bought in near the lows we saw in March and April would be sitting on handsome profits right now. But remember, these were high-stakes gambles, in my view. We are fortunate that coronavirus has not taken hold in Australia to the same extent as other countries around the world however the situation could have easily gone the other way.
Unfortunately, I don't see too much further upside for the ASX travel sector from here on in. Yes, domestic travel looks to be on the right track for recovery. But I believe international travel will still be off the cards for at least another year, if not longer. And that's where Webjet, Corporate Travel and, to a lesser extent, Qantas used to derive the lion's share of their business.
Foolish takeaway
The future is still highly uncertain for these companies in my view, so I won't be investing in them myself – especially at current prices. Warren Buffett's first rule of investing is 'don't lose money' and I don't think ASX travel shares can live up to this rule for investors today.
