The travel industry generally has much upside in the post-COVID world, but one particular Australian business is looking especially good.
That's according to Montgomery Private Fund portfolio manager Stuart Jackson, who reckons Webjet Limited (ASX: WEB) could take off soon.
"With many economies re-opening, unleashing a likely tsunami of pent-up travel demand, the future is looking brighter," he said on a company blog post.
"While the current level of profitability remains impaired by the effects of the global pandemic, the market is looking for signs of sequential improvement as well as focusing on the company's rate of cash burn to ensure it has enough capital to make it across the great divide."
Webjet shares were up 2.94% on Wednesday to close the day at $5.26.
Webjet's recovery really ramping up lately
Jackson noted that April was a bumper month for Webjet, generating $86.1 million of the total transaction value (TTV) generated through its "over the air" (OTA), or wireless, business.
"This means Webjet generated 87% of its TTV from the whole of the March quarter in just one month during April," he said.
"TTV would have been around 75% of total 2019 levels in April, even without any international travel."
The frenzied consumer activity after Easter this year (start of April) matches up with Coles Group Ltd (ASX: COL)'s commentary during its quarterly update, according to Jackson.
Webjet's market share is actually higher than before COVID
Webjet's slice of the Australian OTA travel market is actually bigger than it was before the pandemic arrived.
In fact, it's doubled — from 5.5% average market share for the 8 months to May 2020, compared to 11% since then.
"This is partially due to bricks-and-mortar travel agent traffic continuing to be impacted by [lack of] consumer willingness to go to malls and other locations," said Jackson.
"However, there is likely to have been a structural shift in online share as a result of COVID given that it will have introduced more of the population to this distribution channel."
A competitive advantage for Webjet
Jackson pointed out that Qantas Airways Limited (ASX: QAN) is planning to reduce travel agency commissions for international flights from 5% to 1%, starting July next year.
The market has interpreted this as a headwind for all ASX travel shares, but it could turn out to be a boost for Webjet.
"In the case of Webjet it is important to recognise that it generates more of its revenue from domestic flights than international flights," said Jackson.
"Additionally, unlike its competitors, Webjet generates a material proportion of its revenue from booking fees, which will not be impacted by the change to commission rates."
Other travel agents would either need to take a hit in revenue or increase fares.
"This could end up representing a competitive advantage for Webjet over more traditional travel agents."
