ASX travel shares could get more investor attention as the sector experiences more of a recovery from COVID-19 impacts.
Investors got an insight into conditions with an update from Corporate Travel Management Ltd (ASX: CTD).
What did Corporate Travel Management tell the market?
Corporate Travel revealed that it is seeing strong domestic demand in the ANZ region with total client activity climbing to 85% of FY19 booking levels as of last week. It also said that New Zealand continues to be a standout and, as of last week, was trading at above 160% of FY19 booking levels. It also said that the US is experiencing positive signs of activity recovery.
On a more company-specific note, despite lockdowns in the UK and Europe, significant essential travel client wins in the region contributed to profitability.
It broke-even in March 2021 and expects positive underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in the fourth quarter of FY21.
The business also said that the UK and US have among the most advanced vaccination rollouts and are on track for all people over 18 years of age to be vaccinated by the northern hemisphere summer (June or July). The speed of rollouts supports expectations of a rapid return to corporate domestic travel and meaningful levels of pan-European and trans-Atlantic travel after the northern hemisphere summer holiday period.
Can other ASX travel shares take positivity from that?
Each ASX travel share has a different business model and generates a different level of earnings from the ANZ region, the US, Europe and so on. There’s also different levels of exposure to the corporate market and the leisure market.
However, a return of significant volume doesn’t mean that profit is going to return to normal. Corporate Travel only said that it had reached breakeven status. Businesses like Qantas still have large cost bases, though it is working on reducing that expenditure.
Is it plain sailing for ASX travel shares?
The Corporate Travel Management boss said that there are three key drivers that will continue to help economic growth in Australia and New Zealand.
He said that borders must remain open to restore confidence and maintain economic momentum. Mr Pherous pointed out that tracking and tracing capability is now at a very high standard.
The next point was that the vaccination rollout must be the priority for the government, with a sense of urgency to vaccinate the entire population over 50, those at risk and particularly frontline workers.
Finally, the government must establish and clearly communicate a framework for re-opening international trade, including clear metrics, benchmarks and timelines.
UBS rates the Corporate Travel Management share price as a buy, with a price target of $22.