Shareholders of Qantas (ASX:QAN) and Flight Centre (ASX:FLT) have been waiting for months for international travel to and from Australia restart and today they just might’ve seen the light.

Flight Centre said vaccinations were the key to unleashing pent up demand, after noting a pickup in business among countries with higher levels of vaccination including the US, China, France and Germany.

While FLT recorded an underlying loss of $507 million, it said demand rebounded towards the end of FY21.

In the US, Total Transaction Value (TTV) reached 40% of pre-COVID levels by June 30. Post year-end, China, France and Germany were at 80% of pre-COVID levels near the end of July.

The company admitted ongoing lockdowns were hurting in Australia, but it said removing restrictions were key to the restart of travel both domestic and international.

“FY21 was another challenging year for our industry but conditions have started to improve,” said Flight Centre boss Graham Turner.

“Looking ahead, we believe our position as a diversified global business with compelling customer offerings across three main travel divisions – leisure, corporate and supply – will be of enormous value and a great advantage to us and to our major suppliers.”

 

“Travel more complex post-COVID”

Turner thinks the company will return to monthly profitability later in FY22 and return to pre-COVID TTV by June 2024.

He also said services like Flight Centre will be more helpful than they were pre-COVID.

“Travel will inevitably be more complex in the post-COVID world and customers will require more assistance as they navigate new requirements and try to understand any restrictions that may still apply,” he said.

“In this type of environment, our people’s knowledge and our enhanced systems will prove invaluable at every step of the customer journey.”

 

Qantas results show the impact

Qantas results were far from pretty with an underlying loss before tax of $1.83 billion, blowing out to $2.35 billion on a statutory basis.

The Red Roo also revealed its revenue had been hit by $12 billion in FY21 – and $16 billion including the last few months of FY20 – but nonetheless said it was in a strong position with its restructuring program complete and similar to Flight Centre the evidence of demand when borders open.

“The trading conditions have frankly been diabolical,” said CEO Alan Joyce

“Despite the uncertainty that’s still in front of us, we’re in a far better position to manage it than this time last year.”

“We’ve been able to move quickly when borders open and close. We’re a leaner and more efficient organisation. And our requirement for all employees to be vaccinated will create a safer environment for our people and customers.

“When Australia reaches those critical vaccination targets later this year and the likelihood of future lockdowns and border closures reduces, we expect to see a surge in domestic travel demand and a gradual return of international travel.”

 

Qantas’ plan for the restart of international travel

Qantas is assuming travel out of Victoria and NSW would be restricted until the back end of the year and plans to bring back its international network gradually from this date.

The company plans to start with markets with high levels of vaccination singling out Singapore, the USA, Japan, the UK, Canada as well as New Zealand.

It pushed out plans to restart travel to regions with higher levels of vaccination and high infection rates to April next year  – naming Bali, Bangkok, Manila and Johannesburg among others.

From an aircraft perspective, it is bringing forward the reactivation of five of its A380s next year.

The first two are scheduled for July and the next three in November, although two will be retired and another five could take up until early 2024 to return.

It has also said it was investigating using Darwin as a transit point to London, as it briefly did in late-March 2020 — a practice it’s maintaining with repatriation flights in connection with the Howard Springs quarantine facility as well as “conservative border policies in Western Australia”.

Joyce admitted these plans could change, but claimed to have put his plans to the federal government and it had said the assumptions were reasonable.

“Some people might say we’re being too optimistic, but based on the pace of the vaccine rollout, this is within reach and we want to make sure we’re ready,” Joyce declared.

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