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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Scentre Group (ASX: SCG) shares surged 3.57% higher yesterday as the S&P/ASX 200 Index (ASX: XJO) climbed 2.16%. But can Scentre continue to outperform in 2020 and is it worth investing $1,000 into the ASX REIT right now?

Why is the Scentre share price climbing higher?

There were no announcements from the Aussie REIT in yesterday’s trade. That makes me think it’s due to investor optimism about an Aussie retail sector rebound in 2020.

Coronavirus restrictions are starting to ease around the country, which is good news for landlords. More foot traffic in shopping centres means more earnings for tenants and stable rental payments for Scentre.

Scentre shares surged higher and are now valued at $2.32 per share. It wasn’t just Scentre on the move yesterday, with the Stockland Corporation Ltd (ASX: SGP) share price also jumping a solid 4.23% higher.

But for all the positive sentiment, will Aussie REITs really bounce back in 2020?

Why ASX REITs could be in the buy zone

One argument is that the retail sector could strengthen in 2020. Aussies have been cooped up at home and could relish the chance to get back to brick-and-mortar retail stores.

However, the pandemic isn’t going away overnight. That means that even with the easing of restrictions, many people are doing it tough right now. Shopping centres rely on discretionary spending to prop up many tenants.

That means that a reduction in spending could be bad news for Scentre shares. Government stimulus measures have propped up the economy in the short-term but the medium to long-term impact remains unknown.

Foolish takeaway

I think Scentre will continue to be a strong ASX dividend share in the decades to come. However, the short-term outlook is a little more uncertain.

If you’re bullish on real estate or retail, Scentre or Stockland shares could be a great buy – both have been hammered in 2020 and could be absolute bargains, but I do think they’re a speculative buy.

More reading

• The one sector that could experience a V-shape COVID-19 recovery
• Where to invest $5,000 in ASX growth shares today
• 5 things to watch on the ASX 200 on Tuesday
• CSL shares have underperformed the ASX 200 over the past month. What’s going on?
• These are the latest ASX shares to be upgraded by brokers to buy

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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 Is $1,000 in Scentre shares a good investment? appeared first on Motley Fool Australia.

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