Flight Centre, Qantas stocks rise on news of tourism assistance package

Investors piled in to aviation and travel-exposed stocks after the government announced plans to subsidise 800,000 domestic flights.

The federal government’s $1.2bn tourism assistance package provided an immediate boost for the travel and aviation industries. Picture: NCA NewsWire/Flavio Brancaleone

The under-pressure travel and aviation industries received a vote of confidence in their future prospects on Thursday morning, with the share prices of listed airlines and travel agents lifting after the federal government announced a $1.2bn tourism assistance package.

Although the broader market closed flat, the news that the government would subsidise half the ticket price of 800,000 domestic flights to tourism dependent areas and pay retention payments for stood-down international airline staff boosted travel-exposed stocks, with some reaching levels not seen before COVID-19 lockdowns.

Travel agent giant Flight Centre’s share price jumped as high as 11 per cent within the first hour of trading to $19.74 – a price not seen since last March – as its trading volume increased six-fold to 4.23 million.

The share price closed at $19.44, up 9.2 per cent, despite Flight Centre managing director Graham Turner downplaying the effectiveness of the government’s scheme and the extent to which his company would benefit.

“This really is targeted to the aviation industry and maybe some tourist destinations … it certainly does not help us at all,” he said. “Domestic tourism just can’t replace international travel.”

Citi Analyst Bryan Raymond said Flight Centre would be a “secondary beneficiary” of the scheme, but estimated domestic travel accounted for just 5 per cent of the company’s before-tax profit and maintained a “sell” rating on the stock.

“We note, however, that domestic leisure is a lower margin, online-driven business facing competition from direct bookings with airlines and hotels,” he said.

“While there is ample liquidity in place, execution risk exists around the significant changes to the store network, sales force, channel mix and cost structure.”

Online hotel and flight portal Webjet lifted to close at $6.08, up 3.75 per cent, a price last seen in November and before that, March.

Travel agent giant Flight Centre’s share price jumped as high as 11 per cent within the first hour of trading. Picture: NCA NewsWire/Sarah Matray

Corporate Travel Management lifted 4.33 per to close at $21.91, while HelloWorld Travel lifted 4.78 per cent to $2.41.

The airline ticket subsidy will target fares to tourism-dependent regions including the Gold Coast, Cairns, Alice Springs and Kangaroo Island.

Sealink Travel Group, which operates the Kangaroo Island Sealink alongside more than 60 vessels in tourist destinations across the country, had its recommendation upgraded to “outperform” by analysts at Macquarie. Trading ex-dividend, it had a share price gain of 3.1 per cent to a new record high of $9.15, before closing at $9.10.

Aviation companies made more modest gains: Qantas closed at $5.30, up 2.5 per cent, while its domestic competitor Regional Express ticked up by 1.82 per cent to $1.68.

Sydney Airport lifted just 2.15 per cent to close at $6.19.

Analysts at JP Morgan said the airport depended on international flights for revenue. “Recovery of international travel is key for Sydney given it generates three times the revenue per person than domestic and is reliant on successful vaccine rollout,” they said.

Casino operator SkyCity Entertainment lifted 3.34 per cent to $3.34 as investors anticipated their Adelaide venue would benefit from proximity to the subsidised destinations, but the eastern seaboard-focused casino operators Star Entertainment and Crown Resorts traded flat.

However, some industry associations felt the package left some parts of the country behind.

Accommodation Association CEO Dean Long said the government’s package overlooked tourism-reliant businesses in Sydney and Melbourne.

“For Sydney and Melbourne, where 80 per cent of the market is from international and corporate markets which are still not operating due to government restrictions, the lack of support in this package will result in a loss of jobs and slow our recovery once borders are open,” he said.

“Our hotels in these two major international gateways currently have a forward booking rate of less than 10 per cent for the next 90 days and desperately need immediate support.”

Australian Chamber of Commerce executive chairman John Hart said the package was too narrow. “We have identified three areas where the package fails to deliver,” he said.

“It fails to support the CBDs, especially Sydney and Melbourne, it fails to provide immediate cash support to distributors unable to wait for the loans to kick in, (and) it does not set out a road map to open the country to international visitors.”