S&P/ASX 200 Index (ASX: XJO) travel shares descended today amid a wider market sell-off.
The share prices of Flight Centre Travel Group Ltd (ASX: FLT), Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) all plunged today.
So why did ASX 200 travel shares struggle on Tuesday?
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Qantas share price takes a hit
Flight Centre shares dropped nearly 5%, Webjet shares fell almost 8% while Qantas shares descended 6%. For perspective, the S&P/ASX 200 Index (ASX: XJO) closed 3.55% in the red today.
ASX 200 travel shares appeared to follow the footsteps of US counterparts. In US markets on Monday, Delta Airlines Inc (NYSE: DAL) fell 8.29%, American Airlines Group Inc (NASDAQ: AAL) shares dived 9% while United Airlines Holdings Inc (NASDAQ: UAL) shares tumbled 10%.
Shares tumbled in the United States overnight amid higher than expected inflation figures and speculation that the US Federal Reserve would lift rates by up to 0.75%.
Sky high interest rates increase the cost of borrowing, potentially leading to higher costs for the airlines. Consumers could also have less money to spare for travel.
ASX2 00 travel shares could soon face more competition from Virgin Australia Holdings. The airline, not currently listed on the ASX, is planning direct flights between Gold Coast and Bali, Sunrise reported. Virgin is owned by Bain Capital.
In news on the weekend, Flight Centre is reportedly planning to take high achieving staff at the company to a Las Vegas conference, The Australian reported.
Meanwhile, Qantas has again faced accusations of "predatory" entry into the regional airline market. However, QantasLink CEO John Gissing hit back in comments reported in the Sydney Morning Herald. He said:
What Rex calls predatory behaviour is actually competition which provides these regional communities with choice, more services and lower fares.
Share price snapshot
Flight Centre shares have surged 17% in a year, while Qantas shares are up 3%. Meanwhile, Webjet shares have leapt 6% in the past year.
For perspective, the benchmark ASX 200 has shed 9% in the past 12 months.
