Travel and leisure stocks rally on vaccine hopes

Pfizer said its COVID-19 vaccine may be 90 per cent effective in stopping the virus.

Wish you were here? Picture: Supplied

Travel and leisure stocks surged on the prospect of a faster than expected recovery in their business models after drug giant Pfizer said its COVID-19 vaccine may be 90 per cent effective in stopping the virus.

Flight Centre stocks jumped 9.3 per cent to $15.70 on the back of the pharmaceutical group’s vaccine revelations, after closing the previous day at $14.37.

Webjet shares rose 13.6 per cent to $4.86, while Helloworld surged 19.2 per cent to $2.24. Corporate Travel Management shot up 15.6 per cent at $19.83.

Flight Centre managing director Graham Turner said a vaccine efficacy of 90 per cent was probably good news but there was still a way to go.

“If it is 80-90 per cent efficacious as people get vaccinated they will be able to travel,” Mr Turner said. “The virus will still be around for years, and I presume you will have to be vaccinated to travel to most countries.”

He believes the leisure sector will move quicker than corporate travel to return to profit because there is so much pent-up demand for a holiday in Bali or Phuket.

“It will move quickly but it will take two to three years … there will be a lot of corporates struggling from the economic fallout and some businesses will have learnt to communicate without travel,’’ he said.

Mr Turner said that, due to pent-up demand, trips to Bali and Southeast Asia would be the first ports of call for Australian travellers, followed by Britain and Europe, as soon as people could get vaccinated. “All these travel restrictions are not caused by COVID-19 but more by government restrictions,” he said. “As soon as they release those rules, there will be no reason for people not to travel.”

He said “green zone” countries for travel would also include New Zealand, Taiwan, Vietnam and China, and said he expected they would start back within six months.

Meanwhile, Flight Centre on Tuesday night announced a further capital raising offering $400m worth of unsecured convertible notes to investors in a bid to repay $100m of its existing debt and to further strengthen its liquidity.

Mr Turner said the travel agency was seeing a gradual improvement in revenue trends albeit at a modest level.

“The recent easing of lockdown restrictions in Australia, our largest market, gives us confidence of further improvement in the near term,” he said.

As a result of the offering total liquidity will increase to $1.3bn with total cash increasing to $2bn. September 2020 sales were 12 per cent of normal levels.

In Brisbane, Corporate Travel Management chief executive Jamie Pherous said the stock was being driven up “obviously by the vaccine”.

“From our point of view anything that makes travel safer is a good thing. There is so much pent-up demand from corporates, not only domestically but internationally so they can get on with running their businesses,” Mr Pherous said.

In Adelaide, Sealink acting chairman Jeff Ellison said shares in the tourism and transport group had been rebounding strongly due to the vaccine news and also the Adelaide-based company’s transport acquisition in Singapore earlier this year. Its shares rose 3 per cent in early trade on Tuesday, before closing down 1.1 per cent at $6.49.

Sealink’s ferry operations to Kangaroo Island that relies on the domestic tourism market were doing extremely well, but its Captain Cook dinner cruises on Sydney Harbour and Western Australia were “doing it tough” given their heavy reliance on international tourists.

“There was a spike to $6.90 today. It is not that long ago the share price was $6. We hit a low of $2.75 in March,” Mr Ellison said.

“We have won substantial new bus contracts in Singapore and with the recent news about the vaccine people are very confident the vaccine will rebuild our tourism operations,” he said.