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Will Qantas and Flight Centre take off as borders reopen?

aircraft on runway

The S&P/ASX 200 closed at the session high, up 44 points, or 0.6% at 7205.70, with blue-chip shares rallying into the end of the day. BHP, CBA and Telstra all gained. Data from the Australian Bureau of Statistics showed wages climbed by 0.7% over the three months to December, the fastest quarterly pace since early 2014. The annual lift in the wage price index remained well below inflation at 3.5%, reflecting a decline in real wage rates. The annual increase in private sector pay was 2.4% – steady on the September quarter – while public wages climbed by 2.1% year-on-year, up from 1.6%.

The Reserve Bank of New Zealand increased the official cash rate (OCR) by 25 basis points and indicated it plans to increase the OCR by a larger scale if required in the coming quarters. The Committee also agreed to commence balance sheet reduction under the Large-Scale Asset Purchase (LSAP). The New Zealand dollar surged on the RBNZ’s hawkish stance.

It is the third time the Reserve Bank increased the cash rate since October last year. RBNZ is ahead of all the other major central banks on the pace of rate hikes, with the benchmark rate leading the global benchmark rates at 1 full percentage.

Qantas (AU: QAN) is expected to release its half-year earnings results on Thursday 24 February.

Qantas has had to juggle ongoing uncertainty about border reopenings, and has been forced to delay the return of direct flights and services. It has cut capacity and is dealing with staffing issues as a direct result of the Covid-19 pandemic. The airline is expected to provide more details when it reports its half year earnings.

Qantas Airways reported a slightly narrower annual net loss of $1.73 billion in August when its international fleet remained grounded because of Australia's closed borders. The statutory loss for the 12 months ended June 30, including impairments and restructuring charges, was smaller than last year's $1.96 billion loss, which was its second-worst ever. Underlying earnings before interest, tax, depreciation and amortisation of $410 million for the full year.

On January 18 data from the Australian Bureau of Statistics showed that overseas arrivals and departures in December were at their highest volumes since March 2020 as a relaxation in Australia's tough border restrictions drives demand. So there is growing hope of a return to business as usual.

On CMC Markets Invest, 11 analysts have a Buy recommendation on Qantas, there are 2 Hold ratings and 1 Sell.

Flight Centre (AU: FLT) will report half-year earnings on Thursday 24 February.

Flight Centre reported an underlying pre-tax loss of $507.1 million in August 2021, in line with forecasts. The $601.7 million statutory loss compared with a loss of $848.6 million in FY20. An easing of restrictions and rising vaccination rates in some of its key markets saw travel demand surge in the fourth quarter. Its leisure and wholesale business in the US returned to profit by the end of FY21, with overall volumes in the US almost 70% of pre-Covid levels at the end of July. In China, France and Germany volumes reached 80% or more. The phasing out of the JobKeeper subsidy provided a $41 million hit to the company’s bottom line, along with a $42 million increase in underlying costs.

With the share price up  20.5% in the past month after a turbulent January, analysts are suggesting that the travel company’s recovery is already priced into the market. On CMC Markets Invest, there is 1 Buy recommendation, 6 Hold and 3 Sell ratings from analysts.

The Aussie dollar is at US72.23c against the US dollar.

Bitcoin is at $US37,916.

Gold is at $US1899.07 an ounce.

Brent crude oil is around $US96.55 a barrel.

WTI crude oil is at $US93.79 a barrel.

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