Airline stocks such as Qantas Airways (QAN) and Air New Zealand (AIZ) are on the radar of many investors right now, as the travel sector bounces back from the COVID-19 induced downturn.
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Domestic tourism is forecast to return to an average pre-pandemic level
in 2022-23, and to surpass its 2018-19 peak the following year, according to Australian Government figures.
According to the latest airline monitoring report from the Australian Competition and Consumer Commission, the cheapest flight ticket prices increased 56% in August this year, in comparison to just four months prior, when they fell to an 11-year low.
The strong demand for travel, but also high jet fuel costs, and reduced capacity are some of the factors contributing to the rising ticket prices.
Brisk business for airlines
After nearly two years in pandemic-induced lockdowns, people are eager to travel.
In July , about 4.7 million passengers flew domestically, which was the greatest number since the start of the pandemic, and 89 per cent of the passenger volume in July 2019.
Considering many airlines across were forced to scale back business operations as a result of the pandemic, there may be an element of reduced competition for airlines in strong operational health.
Qantas Airways and Air New Zealand are both national carriers, and among the airlines that weathered the pandemic storm; and now stand to benefit from the surge in travel demand.
Although Qantas has been experiencing customer service and employee issues of late, it controls the largest share of the Australian flight market and seems well placed to capitalise on the resurgent tourism market, which other adjacent companies in the travel industry are now seeing flow on to share prices.
Webjet Group (WEB) shares received a bump recently after the company announced its bookings are now tracking at 95% of pre-pandemic levels, bouncing back strongly from the COVID-19 induced tourism industry downturn.
Stock price prediction
Qantas Airways shares have dropped about 7% over the past year and analysts are recommending buying the dip. According to TipRanks’ analyst rating consensus, QAN stock is a Moderate Buy. The average Qantas Airways stock price prediction of $6.23 implies over 24% upside potential.
Qantas scores an eight of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Air New Zealand stock has dropped about 33% over the past year and analysts are sitting on the fence. According to TipRanks’ analyst rating consensus, AIZ stock is a Hold.
However, Air New Zealand stock is seeing some favorable mentions on financial blogs. TipRanks data shows that financial blogger opinions are 77% Bullish on AIZ stock, compared to a sector average of 67%.
Final thoughts
The strong travel demand and rising airfare prices mean that airline operators such as Qantas Airways may be able to both offset the high jet fuel costs and deliver strong returns. Qantas stock offers a decent upside potential at the current price.
