The new financial year is looking bright for ASX travel shares. Some of the market's favourites are getting ready to rake in earnings after a disastrous few years for the industry.
And one top broker is also expecting big things from ASX-listed travel stocks despite notable headwinds.
Let's take a look at what the market might expect from S&P/ASX 200 Index (ASX: XJO) travel giants such as:
- Qantas Airways Limited (ASX: QAN)
- Webjet Limited (ASX: WEB)
- Flight Centre Travel Group Ltd (ASX: FLT)
- Corporate Travel Management Ltd (ASX: CTD).
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Broker bullish on ASX travel shares in FY23
Despite outlining numerous risks facing ASX travel shares in FY23, broker Morgans is still expecting strong growth from the sector.
Last week, senior analyst Belinda Moore tipped the time to climb aboard travel shares has arrived, despite the sector taking longer than expected to recover, saying:
Despite travel demand recovering strongly, in recent months the travel sector globally has derated due to concerns about a weak macro outlook. We think share price weakness represents a buying opportunity and see the quarterly reporting season in the US and Europe during July and then the Australian reporting season in August as a catalyst for a rerating.
Though, the broker noted numerous factors might "impact the extent of the earnings recovery" this financial year.
These include total transaction values growing faster than volumes due to higher airfares, more domestic travel than higher-margin international travel, limited international airline capacity in Australia and New Zealand, and high fuel prices.
What are these travel giants expecting from FY23?
Many ASX 200 travel shares have recently returned to profitability, while others can nearly taste the green.
Flight Centre returned to the earnings before interest, tax, depreciation, and amortisation (EBITDA) green in March. The company expects its total transaction revenue to surpass its FY19 levels sometime this financial year when the market's recovery reaches around 70%.
Meanwhile, Webjet was cash flow positive over the second half of financial year 2022. It expects to be back at pre-COVID booking volumes by the second half of FY23.
On that note, Corporate Travel Management is targeting EBITDA of $265 million when the market fully recovers.
Finally, Qantas is slightly less optimistic for FY23. The airline expects to return to profit this financial year. However, it has also cut domestic capacity in a bid to battle high fuel prices.
