The year 2020 was absolutely miserable for travel stocks and many of these companies saw losses on an unprecedented scale. This was reflected in the markets. Indeed, last year, the worst performer in the FTSE 100 was the British Airways owner IAG. But with travel starting to reopen, and the lockdown finally over in the UK, there’s now reason to be slightly more optimistic. These are the two travel stocks that I’d buy now.
Budget airline
Like IAG, easyJet (LSE: EZJ) saw its share price plunging in 2020. As such, it’s currently still 45% off its pre-pandemic price. Things haven’t been that pretty in 2021 either. In the company’s recent third-quarter trading update, it reported losses of £318m. Flights were also only 17% of 2019 levels.
But there have been some signs that easyJet’s fortunes are starting to change, especially now that the government has waived quarantine for fully-vaccinated passengers returning from Europe. In fact, easyJet now expects its flying schedule to be 60% of 2019 levels, significantly higher than the 17% last quarter. In anticipation of this increased demand, the company has increased the size of its fleet at Gatwick, from 66 in 2019 to 71. This demonstrates great optimism in the future of the company.
And while I expect that a number of headwinds will remain, I am also optimistic. The airline has managed to cut costs throughout the pandemic, and capital expenditures have been significantly reduced to £34m per week. This gives me hope that easyJet will emerge from the pandemic in a strong position and be able to take market share in the future. This is the reason why I’m tempted to add this travel stock to my portfolio.
This travel stock has also posted large losses
Before the pandemic, National Express (LSE: NEX) was performing excellently. Indeed, in both January and February last year, revenues were up 17% year-on-year. But of course, the rest of the year was dreadful, and it ended up posting an operating loss of £380m. This compares to a £240m profit the previous year.
Due to a lack of reliance on international travel, National Express has performed slightly better than easyJet in 2021. In fact, in its half-year trading update, losses were significantly smaller than the previous year, at just £26m. There’s hope that the firm will also see a “robust improvement” in the second half of the year.
During the year, the company has also been able to win contracts in both the UK and the US, which should boost long-term revenues. This was accompanied by the acquisition of the Spanish bus firm Transportes Rober last month for around £11m. It’s hoped that this will help consolidate the firm’s position in Spain.
Accordingly, I am optimistic about the long-term future of National Express. Its strong financial position has enabled it to survive the pandemic, and it’s now in the position to gain market share through acquisitions and winning contracts. This is the reason I initially bought this travel stock, and I’m not planning on selling anytime soon.
