Flight Centre blames Federal Budget for 16 per cent profit plunge

FLIGHT Centre has blamed a 16 per cent plunge in net profit on the Federal Budget’s impact on households’ travel spending.

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FLIGHT Centre is banking on Australians’ “itchy feet” syndrome to reverse a slowdown in travel bookings since the Federal Budget.

The travel agency yesterday posted a record underlying pre-tax profit of $376.5 million for the year to June 30, but a 16 per cent fall in net profit to $206.9 million.

Managing director Graham Turner said the company had traded solidly in 2013-14 and achieved new sales and underlying profit milestones.

The holiday market has been affected since Treasurer Joe Hockey released the Federal Budget in May, Flight Centre says. Picture: Kym Smith

But he said gains in the leisure market had been eroded following the Federal Budget’s release in May, and the resulting tightening of household purse strings.

“A bit of finality about the budget would help consumers generally,” Mr Turner said.

He remained optimistic a turnaround was ahead because of the “golden era of travel” characterised by cheaper airfares, more choice of product, greater luxury and comfort and less flying time.

FLIGHT CENTRE: Australia’s ‘golden age’ of travel

“While we cannot predict a time frame for full recovery, our experience shows us that short term downturns are often followed by healthy uplifts in demand as Australian leisure travellers get itchy feet and take off to ensure they make the most of their holiday time,” he said.

“The cheap airfares we are seeing create exciting opportunities for our customers and we will continue to proactively promote the best deals.”

Flight Centre also announced it would invest in youth venture Topdeck Travel, of which Mr Turner was a founding member in 1973.

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Bell Potter analyst John O’Shea said the final quarter of the financial year had been tough for Flight Centre and gave an “indication of the impact of the budget on the household environment”.

“The key driver of outbound travel is household expenditure and the fact of the matter was the budget came out, and households got cautious,” Mr O’Shea said.

“We would expect any sort of slowing in outbound travel to be fairly transitory.”

The financial pain may not be so fleeting for Qantas, which will deliver its full year results today.

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Mr O’Shea said a “fairly terrible result” was expected with predictions ranging from a loss of between $750 million and $1 billion due to write downs and redundancy costs.

“The market will be focused on anything that gives them an indication of green shoots — the stabilisation of airfares and a continued pull back in capacity,” he said.

“It does give you some indication of how competitive the (aviation) environment is and how low airfares are.”

Another carefully watched announcement will be Malaysia Airlines’ 2014 second quarter results due late today.

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The embattled carrier is believed to be losing as much as $2 million a day as it struggles to sell seats in the wake of the twin tragedies of MH370 and MH17.

Virgin Australia will release its full year results on Friday.

Originally published as Flight Centre blames Federal Budget for 16 per cent profit plunge