There’s one sector that’s springing back to life from the COVID-19 pandemic – and no it isn’t residential property.

Sales volumes for homes may be on the increase, but that doesn’t constitute a recovery as prices can (and are likely) to fall even as the number of transactions grow.

This is because turnover is primarily driven by first home buyers, and this segment alone cannot do the heavy lifting as local and international investors flee the market.

If there is one group of shares on the S&P/ASX 200 Index (Index:^AXJO) that will experience the much-touted but elusive V-shape recovery, it’s transport, according to the analysts at Macquarie Group Ltd (ASX: MQG).

Revving for V-day

This rebound is happening happening right before our eyes. The traffic around the local streets around my neighbourhood have been steadily increasing over the past few weeks – even before the lockdown restrictions were eased.

We won’t need to wait for Transurban Group (ASX: TCL) to provide its quarterly traffic update before getting excited.

Private cars vs. public transport

Macquarie believes that commuters would much prefer the safety of driving their own cars than to risk catching coronavirus on public transport. This includes flying on the likes of Qantas Airways Limited (ASX: QAN).

“A change in car use behaviour could be a tailwind for car sales,” said the broker.

“There is no recovery in official data yet. But Google Searches for new and used cars have risen rapidly in recent weeks and this could signal material pent-up demand for new and used car dealers.”

This will be great news for auto dealership group AP Eagers Ltd (ASX: APE), which was already battling slumping car sales well before we even named the dreaded pandemic.

Hertz crashes recovery party

However, the collapse of the car rental industry, which sent Hertz Global Holdings Inc scurrying into bankruptcy protection, may be a new headwind.

Hertz is likely to be forced to sell most of its automobiles to raise much needed cash, according to CNN. It’s rivals like Avis Budget Group Inc. may be better placed financially, but they too could be forced to downsize their fleet.

The report was focused on the US market but a similar trend could emerge here where relatively new vehicles are put on the market at discount prices. That won’t be good news for new or used car dealers.

ASX shares best placed to benefit

Macquarie’s analysis didn’t dwell on the impact of the car rental market, but it coincidentally picked three transport-linked stocks to buy that aren’t car dealers.

These stocks won’t be impacted by rental car liquidations, and may even benefit!

These are aftermarket auto parts group Bapcor Ltd (ASX: BAP), online car classifieds group Carsales.Com Ltd (ASX: CAR) and Transurban.

More reading

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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Bapcor and Macquarie Group Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The airline industry has buckled itself in for turbulent times amidst the coronavirus pandemic. Virgin Australia Holdings Ltd (ASX: VAH) has tragically tumbled into voluntary administration. Qantas Airways Limited (ASX: QAN) has continued to strengthen its ability to deal with the impacts of the coronavirus through increasing its liquidity position and employee stand downs. Could the recent recovery of the Qantas share price and its leading position in the market make it a buying opportunity? 

What has been priced in? 

It’s a very important question. Whether it is the broader S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO), or individual shares, has the market priced in a recovery before it has even happened? Or do asset prices reflect a more pessimistic outlook? 

The newly announced easing of lockdown measures is a reflection of Australia’s improved coronavirus situation. Some changes that Victorians can look forward to on 1 June include overnight stays allowed at private residences, accommodation, campgrounds and caravan parks, community sport and a suite of leisure-related activities reopening. New South Wales residents will also be able to travel and holiday anywhere within the state. 

Unfortunately, this does not mean that people will boarding planes. But it does show that there is a light at the end of the tunnel. If sectors such as sports, recreation, community spaces and retail can open successfully without a second wave of infections, then we can look forward to further easing measures in the coming months. This easing will no doubt include domestic travel. 

Domestic flights

Qantas’ domestic flights have been a key driver of its earnings. In 1H20, domestic flights delivered an underlying EBIT of $645 million compared to group international underlying EBIT of $162 million. My key concern is if domestic travel was allowed, are consumers eager to travel or still cautious about going outside? 

The Australian Financial Review (AFR) reports that Australia’s biggest hotel operator, Accor, has started to see new bookings exceed cancellations. The AFR quotes Accor’s chief operating officer Simon McGrath as saying that its main booking platform, pre-pandemic, would “bring in about $1.6 million in bookings a day. That got back down to $100,000 but this week it went up to $400,000 to $500,000 a day.” 

Will cheap oil help? 

Oil has made a significant recovery following its absurd dip to -US$40 a barrel. Current prices are approximately US$33, which is still down 40% since March and down 50% since January. 

Qantas’ first half FY20 fuel expense accounted for $1.975 billion of $8.564 billion total expenditure, or approximately 23%. I believe a combination of significant employee stand downs and cheaper oil prices should see improved margins should domestic flights continue. 

Foolish takeaway

Potential pent-up domestic travel demand, cheaper oil prices and much leaner business could be driving factors of a Qantas share price recovery. While much is still unknown today, I would rather be for, than against a Qantas share price recovery. 

More reading

• The one sector that could experience a V-shape COVID-19 recovery
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 jumped higher, rises more than 2%
• Why Flight Centre and Webjet shares are zooming higher today
• 5 ASX 200 winners and 4 losers of last week

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Could low oil prices and domestic flights make the Qantas share price a buy? appeared first on Motley Fool Australia.

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