It's up, up and away for the ASX travel sector continuing its Covid-19 recovery

Despite economic headwinds the travel industry on a global scale is in recovery mode in 2023 from the Covid-19 pandemic
Quickstep Holdings said maintenance of Australian domestic aircraft has strengthened with international also recovering
Camplify said the Aussie passion for road trips continues to be strong, especially as travellers seek out affordable holidays

Economic uncertainties have not dampened the desire to travel on a global scale. Whether it’s a road trip around Australia, business trip, interstate or international holiday, the travel industry is in recovery mode in 2023 after being hard hit by the Covid-19 pandemic.

On May 5 the World Health Organization ended the global emergency status for Covid-19 more than three years after its original declaration.

And in a positive for the travel industry, The International Air Transport Association (IATA) has revised its forecast for the airline industry, expecting stronger profitability in 2023 as travel returns to normal. Key highlights include:

Net profits projected to reach $9.8 billion, more than double the previous forecast
Operating profits expected to reach $22.4 billion, a significant improvement over the previous estimate
Anticipated travel volume of 4.35 billion passengers in 2023, closing in on pre-pandemic levels
Cargo volumes slightly lower than 2019 levels due to slower international trade
Total revenues predicted to surpass $800 billion, marking a positive milestone since 2019

IATA’s director General Willie Walsh attributed the improved financial performance to several factors.

“China lifted Covid-19 restrictions earlier in the year than anticipated,” Walsh said.

“Jet fuel prices, although still high, have moderated over the first half of the year,” he said.

There are several ASX companies which stand to benefit from a recovery in the travel industry. Here’s some we’ve noticed:

Quickstep Holdings (ASX:QHL)

Australia’s largest independent aerospace composite manufacturer recently announced findings of a detailed and comprehensive strategic review process of its Aftermarket business, which will be enhanced to capitalise on the growth of the domestic and regional aviation market.

QHL’s Aftermarket business was acquired from Boeing a couple of years ago and services major Australian airlines including Jetstar, Qantas and Virgin along with charter operators.

CEO and MD Mark Burgess said the business services, provides composite parts and repairs large components on commercial aircraft like 737s, A320s and 787s.

“We do things like the housing that goes around the engine (called a nacelle), radomes, rudders, wing flaps, door hatches, so large structures you don’t want to be flying around the world – avoiding unnecessary emissions is a huge thing for the airlines,” he said.

Burgess said the major Australian airlines will be the main revenue for QHL’s Aftermarket business now and into the future.

“Domestic aviation has continually strengthened over the last six to nine months and we do a lot work on the 737s and A320 aircraft which are the main players of domestic aviation,” he said.

“But there is also a significant amount of work associated with the larger aircraft which they call a wide-body or twin-aisle aircraft so the 787s or A330s, which are usually linked to long-haul travel which is still in recovery mode.”

He said domestic travel in Australia is almost back to pre-Covid flight levels but international travel is still taking some time to pick up.

“There’s still some way to go but the maintenance repair and overall activity on the larger aircraft is particularly lucrative,” he said.

“We are starting to see much bigger volumes on the smaller aircraft flown between capital cities and we hope to see a similar emergence of heavier workload with the larger aircraft as international travel continues to pick up and return to normal over the next 12 months.”

Jayride (ASX:JAY)

Airport transfers marketplace JAY enables travellers to easily compare and book rides worldwide. With a vast network of over 3,700 ride service companies, JAY caters to 1,600 airports in more than 110 countries, covering 95% of the world’s airlines. This extensive coverage ensures that you can use JAY regardless of your destination on the globe.

Notably, JAY recently acquired AirportShuttles.com, a move that has bolstered its customer base predominantly in Europe and the US, which together account for two-thirds of the company’s customer base.

The acquisition comes at an opportune moment, as the upcoming summer peak travel season in the Northern Hemisphere is anticipated to be exceptionally busy.

Co-founder and MD Rod Bishop said each year Q4 is JAY’s biggest quarter as the Northern Hemisphere summer peak season comes through, and they’re beginning to see that start to come through now.

“In each of the past two years Jayride grew trips 81% in Q4 vs Q3,” he said.

“Certainly, this Q4 promises to be the largest quarter in Jayride’s history.”

Camplify Holdings (ASX:CHL)

CHL said the Aussie passion for a campervan road trip has been boosted in recent years, due to travellers looking to enjoy the flexibility of travelling at their own leisure, affordability and self-contained accommodation.

Founder and CEO Justin Hales told Stockhead demand for domestic travel in Australia continues its strong performance as the country recovers from Covid-19, and with what they’re seeing it’s a trend that isn’t slowing down.

The campervan lending platform saw an exponential growth of bookings by 413.82% from the start of the pandemic until the end of FY22.

“In addition, despite the rising cost of living, Camplify is experiencing a continued strong global momentum for RV holidays with hirers continuing to enjoy longer trips leading to strong YOY growth in average booking length,” Hales said.

“In Q3 FY23, Camplify reported an average booking value of $1,777.69 which represents a growth of over 55.63% from the same period the previous year.

“In this quarter, Camplify grew 276.51% compared to the same period last year, with GTV growth for Australia representing 84.90%.”

In Q3 FY23, CHL recorded $25.8 million in future bookings, representing a 114% increase on Q3 FY22.

The average booking duration for Australia reported from this period was 9.48 days compared to 7.16 days in the same quarter in FY22.

“RVs can normally host between 2-6 people making it an ideal form of both transportation and accommodation for families looking for an easy and cost-effective way to travel,” Hales said.

“The average cost of a trip in a Camplify RV or caravan in Australia is just $1,609 based on Q3 FY23 reportings, for a family of four this equals a price per day per person of $42.

“On top of that, the average daily rate of a powered campsite is $47.72, resulting in an affordable holiday all around.”

Additionally, Hales said the Caravan Industry Association of Australia reports a transition from recovery to growth, with 2022 the most successful year recorded for the industry according to the ‘State of Industry 2023’ report.

With this incredible rise of interest in RV holidays, the camping and caravanning sector has become one of the largest providers of holiday accommodation in Australia.

Qantas (ASX:QAN)

In a recent market update Australia’s Flying Kangaroo said it’s on track to deliver a record net profit of up to $2.48 billion in FY23 amid surging travel demand.

QAN forecasts group domestic capacity will be above pre-Covid-19 levels at 104% by the end of H2 FY23, led by a significant increase in flying on key routes between Melbourne, Sydney and Brisbane.

The company expects its international capacity to reach about 100% of pre-Covid-19 levels by March 2024, with plans to add more seats and aircraft to its global network.

QAN’s forward booking trends indicate strong travel demand continuing into FY24.

“Revenue intakes are at 118% of pre-Covid levels for group domestic and 123% for group international,” QAN said.

QAN said jet fuel prices remain elevated but recent falls will deliver a cost improvement in H2 FY23, which is partly offset by adverse movements in foreign exchange for an overall benefit of $150 million.

“We’re seeing the broad trends we expected as the industry recovers and trading conditions remain very positive,” outgoing CEO Alan Joyce said.

“We’re on track to take delivery of another eight new aircraft before the end of this calendar year and we’re working hard to bring the last of our stored aircraft through heavy maintenance so we can get them back in the air.”

Flight Centre (ASX:FLT)

Despite hitting turbulence and remaining the most shorted stock on the ASX, FLT has risen more than 48% YTD after the travel sector continues its recovery from the Covid-19 pandemic.

At the start of 2023 FLT undertook a successful $240 million cap raise to buy Scott Dunn, a leading UK-based luxury travel brand specialising in tailor-made luxury holidays, for an enterprise value of £121 million ($211 million).

Despite headwinds of higher inflation and interest rate rises, FLT at a conference in May said the travel sector continues to be “holding up strongly”.

The company said it is targeting $270m-$290 million underlying EBITDA – previously $250m-$280m excluding Scott Dunn – for FY23.

FLT’s corporate travel sector is also outperforming with total transaction value (TTV) for 10 months to April 30, 2023 already in line with record FY19 full year results.

Webjet (ASX:WEB)

The travel bookings platform in May announced in H2 FY23 total transaction value (TTV), revenue, and earnings were all ahead of pre-Covid-19 levels and as a result it had reported a full-year profit of $14.5 million.

WEB, which also operates hotel booking platform WebBeds, delivered underlying FY23 EBITDA of $134.8 million, reflecting $150 million turnaround from FY22.

WebBeds is ahead of pre-pandemic levels on all key metrics for FY23 with momentum accelerating in H2 FY23, with FY23 EBITDA $117.1 million 22% ahead of pre-pandemic levels.

“Webjet has emerged from the pandemic better placed to deliver growth than even before,” MD John Guscic said.

“This reflects all the efforts we took to make sure we would not only recapture demand when travel returned, but also further accelerate our growth profile.”

He said the key driver of the results has been the performance of WebBeds.

“Executing against our transformation strategy is paying off – we have retooled that business, streamlined the technology platform, eliminated inefficiencies and found ways to service markets that had not previously been open to us,” he said.