Why are some ASX travel shares recovering slower than others?

What's impacting ASX travel shares Alliance Aviation, Apollo and Experience lately?

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Key points

  • While some ASX travel shares are soaring this year, others are sinking
  • Alliance Aviation reported COVID-19 had impacted its wet lease flying activity
  • International border openings appear to be helping some travel shares this week 

ASX travel shares may be on the rise this year, but it hasn't been smooth sailing for all companies in the sector.

The Alliance Aviation Services Ltd (ASX: AQZ) share price is down nearly 9% since market close on 31 December. In the same time frame, Apollo Tourism & Leisure Ltd (ASX: ATL) also fell nearly 9% and Experience Co Ltd (ASX: EXP) descended nearly 3%.

In comparison Qantas Airways Limited (ASX: QAN) has soared nearly 8% since 31 December, Webjet Limited (ASX: WEB) has surged nearly 18% and Flight Centre Travel Group Ltd (ASX: FLT) has also climbed 18%.

Omicron variant woes

Alliance Aviation is a Queensland airline operating both domestic and international flights in the mining, government, tourism, corporate, and private sectors.

In its HY 1FY22 results released after the market closed on Wednesday, this ASX travel share reported COVID-19 had caused a "significant ongoing delay" to its wet lease deployment. Alliance Aviation reported an underlying profit before tax of $20.7 million, a $6 million decline. The Alliance Aviation share price fell by 5% the following day.

Commenting on the results, Alliance managing director Scott McMillan said:

It is well known that there have been numerous impacts on the national economy brought about by COVID-19 and various government responses. As a result, the company has suffered a delay on wet lease flying activity.

Alliance maintains a very confident outlook and is of the view that significant additional flying will commence in April this year.

Alliance will continue to invest in fleet, equipment, spare parts and personnel to ensure the company has the required capacity to satisfy its contracted wet lease routes and other future growth post COVID-19.

Apollo and Experience have not released any price-sensitive news to the market this year. However, COVID-19 Omicron travel disruptions appear to have impacted investor sentiment.

Apollo is an Australian tourism leisure company operating in New Zealand, North America, Germany, the UK, and Ireland. Meanwhile, Experience is an adventure tourism and leisure company offering fun activities including sky-diving, reef and rainforest tours and island day trips.

Could better days be ahead?

Despite the tough start to the year, Experience and Apollo have made major gains this week on the back of the international borders opening. The Experience Co share price has surged 6% since the market closed on 4 February, while Apollo has gained nearly 11%.

As Motley Fool Australia reported this week, Australia's international borders will open to tourists on February 21 which could benefit ASX travel shares.

Forager Funds management analyst Alex Shevelev said tourism operators will now have more confidence to prepare for international arrivals. He added:

Companies like skydive and Great Barrier Reef tour operator Experience Co and recreational vehicle owners Tourism Holdings (NZE: THL) and Apollo have struggled through the COVID travel decimation for two years while working to improve their businesses.

When tourists return they will be well positioned to finally benefit.

While the recovery will be gradual, the industry will be hoping that the initial trickle of tourists will be followed by a torrent of arrivals. Importantly, many operators have lowered their cost bases and will be more profitable when arrivals approach pre-COVID levels.

ASX travel shares summary

The Alliance Aviation share price has slipped 14% over the past year while Apollo has skyrocketed 69%. Meanwhile, Experience has surged 82% in the last 52 weeks.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned 5% over the past year.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Alliance Aviation Services Ltd. and EXPERNCECO FPO. The Motley Fool Australia owns and has recommended Alliance Aviation Services Ltd. and EXPERNCECO FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and Webjet Ltd. 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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