Qantas (ASX:QAN) share price rises despite fears tourism will struggle after JobKeeper

Qantas (ASX:QAN) shares are rising despite an economist's warning tourism will struggle after JobKeeper, even with the new stimulus package.

| More on:
rising airline asx share price represented by boy playing with toy plane

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In an exclusive interview with The Motley Fool, UNSW Professor of Economics Richard Holden is warning the tourism sector will struggle when the JobKeeper payment winds up at the end of this month.

As the government looks set to introduce an airfare ticket subsidy to soften the blow, Qantas Airways Limited (ASX: QAN) and Flight Centre Travel Group Ltd (ASX: FLT) shares are both surging higher in morning trade. Experience Co Ltd (ASX: EXP) shares have failed to respond to the news and are currently trading nearly 2% lower. 

At the time of writing, the respective share prices of these companies are $5.35, $19.20 and 25 cents.

The federal government's new domestic tourism program

Announced last night, the government is set to introduce a $1.2 billion package aimed at the domestic tourism sector as it weens the industry off of wage subsidies.

The proposal would see domestic airline tickets cut by 50% to the following regional centres:

  • The Gold Coast
  • Cairns
  • The Whitsundays
  • The Sunshine Coast
  • Alice Springs/Uluru
  • Launceston
  • Devonport
  • Burnie
  • Broome
  • Avalon
  • Merimbula
  • Kangaroo Island

As The Guardian's political reporter, Amy Remeikis noted, most/if not all the towns listed are in marginal federal electorates. 

As a part of the package, Qantas and Virgin will need to provide monthly reports to the Commonwealth on international flight readiness.

Professor Holden does not believe the package is adequate.

"It's something but not nearly enough in my view." He told this reporter.

"It relies on a strong response from the rest of Australians and that is highly uncertain. It's very different [to] the kind of guarantee provided by JobKeeper."

Professor Holden warned generally about the government's proclivity for austerity.

"[The Morrison government's] fiscal policy has too much emphasis on a budget surplus sooner rather than later." "The economy [pre-pandemic] was not good. Per capita GDP growth was 0, inflation was below [RBA targets], and wages were stagnating."

"Until the economy can really open up – we can't be withdrawing fiscal policy. If anything, we should see more [government spending]."

Those in the tourism sector feel likewise. Talking to the Australian Financial Review (AFR), Tourism Australia and Experience Co. chair Bob East said he would prefer direct grants or a continuation of the subsidy.

"I'd love to say I'm hearing there will be direct grants for tourism operators, but I'm not."

Part of the scheme also entails granting small and medium enterprises loans of up to $5 million.

Quoted in the AFR, Queensland Tourism Industry Council chief executive Daniel Gschwind says debt is the last thing these businesses want.

"We can't get excited about no interest or low interest loans," he said. "I can't see a struggling tourism operator taking on more debt. The appetite for more loans is very low."

The head of Accor Group Australia told ABC Radio National the proposal wouldn't "deliver in a material way for the industry as a whole."

Others are predicting up to 100,000 jobs may disappear when the $1,200 a fortnight wage subsidy ends.

Australia's slow vaccine rollout

The Sydney Morning Herald (SMH)'s COVID vaccine tracker says around 86,000 vaccines have been administered in Australia as of writing. This is way down on Scott Morrison's target of having 4 million arms jabbed by the end of this month.

Professor Holden says the economy cannot recover, and therefore JobKeeper cannot be withdrawn until we have a critical mass of vaccinations.

As we've seen many times over the past year, states and territories are ready to close borders on a moment's notice.

"I worry about [another Melbourne/Northern Beaches like outbreak] a lot. We need to build confidence. "Every lockdown shatters business and consumer confidence." "It's incredibly shaky as it is now."

"We can't have [federal Health Minister] Greg Hunt saying we need to wait and see if the vaccine is killing people. That doesn't build confidence."

Share price snapshots

Qantas shares reached a 52-week low of $2.03 in March last year. Since then, the Qantas share price has rocketed 163%. Flight Centre shares reached a 12-month low at the same time – $8.56. While it's more than doubled since then, it is still lower than its pre-pandemic price of $21.59.

The Experience Co share price one-year low was 3.3 cents. At their current valuation, Experience Co shares have gained more than 650% since then.

The respective market capitalisations of these companies are around $9.8 billion, $3.6 billion, and $141.7 million.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of EXPERNCECO FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A young man in a city street with a hopeful look on his face.
Share Market News

Here are the top 10 ASX 200 shares today

It was a return to form for ASX 200 shares this Thursday.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Broker Notes

Morgans names 3 ASX stocks to buy following results

Here are three stocks that Morgans is feeling bullish on this week.

Read more »

A man stands in a building site featuring brick walls with building equipment in the background.
Mergers & Acquisitions

CSR share price jumps again as blockbuster bid confirmed

Investors are excited about a potential takeover.

Read more »

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Share Gainers

Why Bega Cheese, Domino's, Lovisa, and Universal Store shares are rocketing today

These ASX shares are catching the eye on Thursday. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Clinuvel, Medibank, Sayona Mining, and Tabcorp shares are sinking today

These ASX shares are out of favour with investors on Thursday. But why?

Read more »

rising asx share price represented by drone flying in the air
Technology Shares

How has the DroneShield share price gained 90% in a month?

DroneShield shares are once again at a new record high today.

Read more »

Woman smiles at camera at she buys greens from the supermarket.
Broker Notes

Are Woolworths shares dirt cheap following the selloff?

Is now the time to pounce? Let's see what one leading broker thinks.

Read more »

A bored woman looking at her computer, it's bad news.
Share Market News

Sayona Mining share price crashes 19% after Piedmont Lithium says sayonara

This lithium miner's shares are taking a beating on Thursday.

Read more »