Oz air travel has returned to pre-COVID norms – and Webjet shares show it

Webjet (ASX:WEB) shares jumped as much as +13% in the first hour of trade on record earnings and a new corporate spinoff strategy.

Underlying earnings before costs for FY24 – which, for Webjet, was the 12 months to March 31 2024 – hit $188.1M with underlying profit after tax of $128.4M.

The company noted bookings and revenue were both ahead of FY23, up 21% and 29% respectively. Total Transaction Value (TTV) came in at $5.6B.

Webjet flagged a strong start to FY25 trading backed by a capital position of $116M in cash generated across FY24 to bring total holdings up to $630M. Investor excitement for the strong results is obvious.

However, Webjet’s desirable performance outlined on Wednesday is part of a larger story.

A day earlier, on Tuesday, the Australian Competition and Consumer Commission (ACCC) made a mostly-overlooked announcement that, not long ago, was seen by many as a definitive milestone for the end of the COVID-19 era.

As of 21 May, the Aussie regulator considers that Australia’s domestic aviation industry has returned to its pre-COVID status.

“After four years of instability, the domestic airline industry has returned to more typical seasonal levels that were last seen before the pandemic,” ACCC Commissioner Anna Brakey said.

Australia’s major airlines, which includes the drowning airline Bonza, carried 4.9M domestic passengers in March of 2024 – 98.8% of the figures from March 2019.

“The increase to airline seat capacity has contributed to lower airfares for consumers on domestic routes. We hope to see this trend continue as the airline industry returns to a more stable market,” Brakey added.

While the ACCC did not mention Webjet at all in its Tuesday report, the connection between the macroeconomics and Webjet’s fundamentals are clear. And for that reason, you can also see the link between a stronger airline industry and Webjet’s share price as of May 22.

Webjet also announced on Wednesday it wants to spin-off one part of its operations called WebBeds, which is an end-of-trip solutions provider, and proposed listing that, too, on the ASX.

“Having carefully weighed up the arguments for and against a demerger, the Board sees significant value enhancement through a potential separation of our two industry leading businesses and brands,” Webjet chair Roger Sharp said.

WEB last traded at $9.30/sh.