Flight Centre shares are in focus on reports that the international border could soon open.
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The Flight Centre Travel Group Ltd (ASX: FLT) share price is currently up as international borders may reportedly open sooner than expected. That compares to the S&P/ASX 200 Index (ASX: XJO) which is currently down around 2.2%.
What’s happening with international borders?
It is being reported across the major media outlets, such as the Australian Financial Review, that Prime Minister Scott Morrison is going to announce that international travel is soon going to open up for fully vaccinated Aussies.
The reporting says that Australians will be able to leave Australia. People stuck in other countries will also be able to return easier.
However, this is only when the double vaccination rate of 80% has been reached. The international borders will lift on a state by state basis when that region reaches its own 80% level. NSW and ACT are expected to be the first two places to reach the required vaccination rate to allow international travel.
The plan is that the international border is going to be open before Christmas. Part of the plan could include arrivals going through home quarantine rather than hotel quarantine.
The Flight Centre share price is still down almost 40% from the pre-COVID level, so international travel may have its part to play in a recovery.
Not all state leaders have signed up to the international travel plan just yet.
The Guardian quoted Queensland Premier Ms Palaszczuk from her news conference, she said:
I’m not going to agree to anything when I haven’t seen any formal paperwork. It would be irresponsible and I think that Queenslanders would expect me to see some paperwork, to understand the issues before an announcement is made. So it’s a bit disappointing that we haven’t been given that due courtesy before National Cabinet.
What I’ve said clearly and Dr Young has said this and the Health Minister has said this. We need to be in a situation where every eligible person, so every eligible person in that cohort is offered a vaccine.
How is Flight Centre’s profit going?
There wasn’t a profit in FY21. It made an underlying loss of $507 million, with almost $4 billion of total transaction value (TTV).
However, it did say that the recovery is gaining momentum, particularly in the corporate sector and in the US. In its FY21 result, it said that it was seeing month-on-month sales revenue growth despite lockdown and heavy restrictions, ending with a COVID-period record in June 2021.
By the year end, corporate TTV was tracking at 40% of pre-COVID levels globally.
Flight Centre is targeting a return to monthly profitability in both corporate and leisure during FY22. The company is looking to the resumption of further global international travel, with a potential material benefit from the trans-Atlantic route opening.
Its profitability hopes rely on vaccination efficacy, governments reopening borders and keeping them open.
Is the Flight Centre share price a buy?
Citi isn’t sure that it is, with a neutral rating and a price target of $16.94. That suggests the broker thinks Flight Centre shares could fall around 20% over the next 12 months.
Whilst Citi is expecting Flight Centre to benefit from the travel recovery, it doesn’t think the old Flight Centre model will be as effective.
Should you invest $1,000 in Flight Centre right now?
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.