Flight Centre eyes travel demand rebound

Flight Centre eyes travel demand rebound
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Flight Centre is counting on a rebound in demand for travel to help it achieve a return to monthly profitability within the current financial year, but has stopped short of providing a specific guidance.

The travel agency, which was among the worst-affected companies as domestic and international travel collapsed amid the coronavirus pandemic, says the sector is poised to take off again in Australia based on the surge in inquiries and bookings in recent weeks.

“International leisure bookings have now surpassed domestic bookings in Australia for the first time since the start of the pandemic and almost tripled between July and September,” managing director Graham Turner told shareholders in a speech on Wednesday.

“Booking numbers this month have already surpassed the September total with more than a third of the month still to come.”

The stand-out leisure international destinations were the UK, USA and Fiji, he said.

The company slumped to an underlying net loss of $364 million for the 2020/21 financial year as lockdowns and travel restrictions smashed its business. But it is seeing improved momentum this year.

It is now targeting a return to “monthly profitability” in both corporate and leisure travel sectors later this financial year, helped by a much leaner cost base and a more efficient operating model.

During the first three months of this financial year, Flight Centre says it has doubled its total transaction value (TTV) from a year ago to nearly $1.6 billion and 8 per cent improvement on the June quarter, even though the September quarter is traditionally a softer trading period.

Mr Turner said activity increased late in September and escalated in October after positive border reopening announcements in multiple countries including Australia, US and Singapore.

Still, the company’s quarterly TTV was just 27 per cent of pre-COVID levels in FY19, and accounting losses have been slightly higher because of customer refunds processed, as well as non-cash depreciation and amortisation costs.

The company declined to provide a profit guidance for FY22 given the uncertainty.

“The exact timing of our return to profitability is uncertain and remains largely in government hands, given that revenue generation opportunities are intrinsically linked to borders re-opening and staying open; and international travel resuming in a more meaningful way globally,” Mr Turner said at the company’s annual general meeting.

The US will welcome fully vaccinated international tourists from November 8. Locally, NSW has been the first state to announce it will open up to international travel from November 1.

Flight Centre has previously flagged that it could mount a legal challenge against domestic border closures if Queensland, Tasmania and Western Australia do not reveal reasonable plans to restart travel soon.

Mr Turner backed Queensland’s roadmap this week to open borders by Christmas, but he again criticised WA.

“At least Queensland has a plan, with Western Australia I don’t think the reality has hit home they are just trying to bury their head in the sand,” he said.

The closed borders have continued to weigh heavily on investor sentiment in Flight Centre. Shares in the company were down 5.6 per cent to $21.46 by 1530 AEST.

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