ASX 200 travel shares slide as New Zealand closes travel bubble

Investors are weighing long-term value against mid-term operational shutdowns in the travel sector.

| More on:
lady walking through empty airport to travel indicating tough times for asx 200 travel shares

Image source: Getty Images

If shareholders of S&P/ASX 200 Index (ASX: XJO) travel shares needed anything more to fret over, they just received it. Courtesy of New Zealand’s Prime Minister, Jacinda Ardern.

With fresh COVID-19 cases reported in multiple states – New South Wales alone recorded 136 new daily infections at last count – Ardern likely had little choice but to close her nation’s vaunted travel bubble with Australia.

The travel corridor, which only opened 3 months ago on 19 April, enabled Aussies and Kiwis to fly back and forth like it was 2019 again. Well, almost. No quarantine was required. Though any sign of the sniffles and you were grounded.

But no more. For the next 2 months, at least, the trans-Tasman travel bubble has been deflated.

Citing threats from the more transmissible delta variant, Ardern said (as quoted by msn.com):

We’ve always said that our response would evolve as the virus evolved. This is not a decision we have taken lightly, but it is the right decision to keep New Zealanders safe.

Free travel between Australia and New Zealand ends at midnight tonight.

However, some flights will continue to operate for returning New Zealanders. “My strong message to every New Zealander in Australia right now who does not want to stay there long-term is come home,” Ardern said.

Short-term, of course, that will come as scant relief to ASX 200 travel shares struggling to revive their business models.

Domestic travel squeezed too

If ASX 200 travel shares were hoping to capitalise on domestic travel, that hope is fading in the short-term as well.

At the moment, some 14 million Aussies – more than half the population – are living under lockdown.

That’s 14 million potential travellers, including this financial reporter, discouraged from travelling. Except in emergencies, we can’t travel more than a few kilometres from home right now, let alone interstate.

With the latest case surge in New South Wales, and the closure of the travel corridor with New Zealand, it’s little wonder ASX 200 travel shares are under pressure today.

The ASX 200 itself is edging lower in afternoon trade and is down 0.01%.

The Flight Centre Travel Group Ltd (ASX: FLT) share price is down 1.06% at time of writing.

The Qantas Airways Limited (ASX: QAN) share price is trading 1.6% lower.

Qantas shares are likely facing further headwinds with news that the airline is flying at less than 40% of pre-COVID capacity. Qantas had earlier said it was back to 90% of domestic capacity, before lockdowns began to bite.

Meanwhile, the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is up slightly by 0.06%.

Sydney Airport shares are likely holding up better in light of the recent all cash buy-out offer from a consortium of infrastructure investors. These include IFM Investors, Global Infrastructure Management and QSuper.

The group of institutional investors valued the airport at $22.6 billion. Or $8.25 per share.

While that offer has been rejected by the board, investors appear to be keeping that value in mind. Shares are currently trading 5.6% below the takeover offer at $7.79.

How have ASX 200 travel shares fared since the pandemic outbreak?

ASX 200 travel shares have certainly had their fair share of woes over the past 18 months.

Every company in the large-cap travel space got absolutely hammered during the initial COVID-19 fuelled market meltdown in February and March last year.

The Sydney Airport share price plunged 42% from 21 February 2020 through to 20 March 2020.

The Flight Centre share price plummeted 75% in that same time. The Qantas share price crashed 64%.

Since the lows of 20 March, there’s been a huge rebound for all of these ASX 200 travel shares.

Sydney Airport is up 65% since then, and now only 5% below its pre-pandemic price. Year-to-date, thanks to the takeover offer mentioned above, the Sydney Airport share price is up 21%.

As for the Flight Centre share price, it has gained 68% since that March 2020 low. While that sounds impressive – and it is if you bought near the low – Flight Centre remains down 58% compared to 21 February 2020 before COVID struck.

Year-to-date, the Flight Centre share price has struggled and is down 7%.

Rounding off with Qantas, the airline’s shares have rebounded 94% since the March 2020 low. Today, the shares are still trading 30% below its 21 February 2020 level.

Year-to-date, the Qantas share price has fallen 7%.

Foolish takeaway

What’s next for ASX 200 travel shares?

Australians love to travel, both interstate and internationally. And foreign travellers love to visit Australia.

Once the coronavirus is finally brought under control, and hopefully vanquished, demand for the goods and services provided by ASX 200 travel shares should see a strong rebound.

The big question facing investors today is, just when can we expect that to happen?

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Travel Shares