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LET’S get one thing straight - the “Great Easter Getaway” didn’t end up being all it was cracked up to be. The strain of trying to get back to normal was painfully obvious. The hundreds of thousands of eager passengers clambering to get onboard did appear, but airline crews, decimated by pandemic lay-offs and a new wave of Covid infections, simply struggled to keep up.
Before the war in Ukraine began and the cost-of-living crisis started to bite, the World Travel & Tourism Council suggested the recovering UK travel and tourism sector could generate revenue of £192 billion by the end of 2022.
I look at the travel sector and pick out some runners and riders in the latest episode of Monty. Markets. Money
Don’t write-off easyJet
EasyJet (EZJ) has been one of the worst-hit airlines; forced to cancel hundreds of flights in recent weeks following a shortage among Covid-hit staff.
However, a total of 11.5 million passengers flew with easyJet in the first three months of this year, which compares with just 1.2 million during the same period last year - and has beaten all expectations. It flew at 80% of its equivalent 2019 capacity in March, and that’s expected to rise to 90% of capacity from now until June; so things are looking up.
EasyJet is well placed in the short-haul market, which itself has fared better than long haul. The ability to jet off on a cheap flight at a moment’s notice has played into its hands, with travellers keen to seize the day and travel when they can, rather than plan long-term.
As a result, first quarter pre-tax losses have near-halved to £213 million and so has the rate at which it was burning through its cash reserves at the height of the pandemic. The airline says it expects to post a pre-tax loss of between £535 million and £565 million in its full six months to the end of March, down from a loss of £701 million over the same period last year.
Competition will always remain fierce in this sector, but easyJet’s boosted flight network should also work in its favour. The price of fuel is another issue, but analysts at Goodbody are forecasting a return to a small profit by the full-year end.
Keep an eye on Expedia
Independent travel could buck the consumer spending crunch in what has been dubbed a summer of “revenge travel”. If that’s the case, US-listed Expedia (NASDAQ: EXPE), which owns a number of travel sites, such as Trivago, could be well placed to cash in.
The last set of full-year earnings were much better than expected, and with travel back on, so too should be Expedia’s trading and profits. Analysts are expecting full-year sales to come in between $10.70 billion and $12.61 billion. They are also largely bullish on the share price. Analysts at Citigroup has a $200 target on the shares, while Deutsche Bank has initiated coverage with a “buy” rating and a $218 price target. Bank of America says they could be worth $226 and Credit Suisse has upped its price target on to $231.
Expedia’s first quarter results for 2022 are due out on 2 May.
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