With just one week left in FY 2024, we polish our crystal ball to gauge what investors can expect from S&P/ASX 200 Index (ASX: XJO) travel shares in FY 2025.
Before we turn to that, though, here's how ASX 200 travel shares have performed over the past 12 months:
- Qantas Airways Ltd (ASX: QAN) shares are down 5%
- Flight Centre Travel Group Ltd (ASX: FLT) shares are up 1%
- Webjet Ltd (ASX: WEB) shares are up 25%
- Corporate Travel Management Ltd (ASX: CTD) shares are down 27%.
This very mixed bag of results compares to a one-year gain of 6% posted by the ASX 200.
Now, here's what could help or hinder the big Aussie travel companies in the year ahead.
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A new financial year for ASX 200 travel shares
Looking ahead to FY 2025, each of the ASX 200 travel shares will obviously face its own company-specific headwinds and tailwinds.
But all of them depend on a robust travel sector to keep their customers and revenue flowing.
With that in mind, the first thing to keep an eye on is fuel costs. Jet fuel accounts for some 20% of airlines' annual expenses, so higher or lower fuel costs will impact Qantas shares directly.
But Webjet, Corporate Travel Management and Flight Centre will also be impacted as airlines will pass on any major cost increases or declines to travellers, influencing the amount of business these companies can expect.
On that front, the Brent crude oil price ended the week back above US$85 per barrel. With record US output balancing out the current OPEC+ production cuts, and with OPEC+ intending to ease out of those cuts in Q2 FY 2025, I don't expect the oil price will sustainably hold above US$90 in the year ahead. Keeping a cap on fuel prices should help support the outlook for ASX 200 travel shares.
The industry is also susceptible to what happens with the global conflicts currently raging in various corners of the world. Should these escalate or new conflicts erupt, that would likely put a dent in international travel. And it could drive energy costs higher as well.
Growing tailwinds?
All of the ASX 200 travel shares are likely to get a boost from various government cost-of-living relief measures and the stage 3 tax cuts in FY 2025. If inflation comes down and the RBA begins to cut interest rates, it could usher in a big boost for the sector.
And another potential boost across the board for ASX 200 travel shares in FY 2025 is the potential for a big uptick in travellers to and from China.
This comes after China just agreed to add Australians to those citizens who can travel to the Middle Kingdom visa-free for up to 15 days. Australia's government is offering some reciprocal measures.
