Why Flight Centre (ASX:FLT) and Webjet (ASX:WEB) shares are being hammered today

Flight Centre Travel Group Ltd (ASX:FLT) and Webjet Limited (ASX:WEB) shares are falling heavily after an update by Qantas…

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Sad family sit on the couch surrounded by bags, indicating travel restrictions hitting the share price of ASX travel companies

Image source: Getty Images

It has been a mixed day of trade for the travel sector on Thursday. In one corner you have the Qantas Airways Limited (ASX: QAN) share price ascending.

Whereas in the other, you have Corporate Travel Management Ltd (ASX: CTD), Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) shares tumbling lower.

What is happening?

Today’s movements all appear to relate to a market update out of Qantas this morning.

Positively, that update reveals that a sustained rebound in domestic travel demand is continuing to drive the airline operator’s recovery from the COVID-19 pandemic.

So much so, Qantas expects to be statutory free cash flow positive for the second half of FY 2021. Though, it is worth noting that this guidance assumes no further lockdowns or significant domestic travel restrictions.

So why are travel agents tumbling?

Given the above, you would expect all travel shares to be pushing higher today. However, a comment by Qantas in relation to its cost reductions has spooked shareholders of travel agents.

Qantas advised that it is aiming to reduce its costs of sale by lowering front-end commissions paid to travel agents on international tickets from 5% to 1%.

And while the change won’t take effect until July 2022, in order allow the industry to adapt, it will eat significantly into the margins of Flight Centre and Webjet when it does. There may also be concerns in the market that other airlines will follow Qantas’ lead and cut their own commissions to travel agents as well in the future.

At the time of writing, the Flight Centre share price is down 5.5% to $14.48 and the Webjet share price is 5% lower at $4.47. Elsewhere, the Corporate Travel Management is down 3% and the Helloworld Travel Ltd (ASX: HLO) share price has lost 6% of its value.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Helloworld Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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