Flight Centre upgrades profit guidance on back of strong corporate and leisure demand

A mix of new corporate clients and strong leisure travel demand has put Flight Centre on track for a $483m turnaround.

Flight Centre managing director Graham Turner says demand for leisure travel and a large volume of new corporate clients has set the company up for an even stronger profit in the 2023 financial year. Picture: Tara Croser.

A flood of new corporate clients and strong leisure travel demand has put Flight Centre on track for a $483m turnaround in the 2023 financial year.

Revised profit guidance reported to the ASX on Thursday showed the travel agency was now expecting earnings before interest and tax of between $295m and $305m.

It noted that the midpoint of $300m represented a 7 per cent increase in the company’s previously targeted range of between $270m and $290m, and a $483m turnaround from last year’s $183m loss.

Total transaction value was expected to be in the order of $22bn, in what would be the company’s second-strongest full year result, behind $23.7bn in 2019.

Revenue from corporate travel bookings was now exceeding that of leisure at $11bn to $10bn, which was attributed to a multi-billion dollar pipeline of new accounts.

Flight Centre managing director Graham Turner said the volume of new business was offsetting the impact on total transaction value flowing from lower-than-normal client spend, with most businesses only back to 70 to 80 per cent of pre-Covid travel.

“Overall we are pleased with our continued recovery as demand has generally rebounded solidly across both our leisure and corporate travel businesses,” Mr Turner said.

“In corporate we have delivered record total transaction value while investing significantly for the future by securing large volumes of new accounts, expanding our sales force and introducing innovative new platforms and products for our customers which should lead to stronger returns in the years ahead.”

Flight Centre Corporate managing director for Australia and New Zealand Melissa Elf said internal data showed that business travel domestically had soared by over 35 per cent in the period from January 1 to June 30, 2023, compared to the same time last year.

International bookings were also more than double, she said.

“The ‘golden triangle’ has continued to be the main artery for corporates in Australia, with travel taking off exponentially,” said Ms Elf.

“Internationally the normal stalwarts of London, Singapore and Auckland remain favourites, with government and not-for-profit, mining/oil/gas and construction the leading industries.”

Singapore’s Marina Bay is one of the top three destinations for Australian corporate travellers according to Flight Centre. Picture: Getty Images

While a “sugar rush” was expected when borders reopened, Ms Elf said it appeared absence really did make the heart grow fonder, even in the business world.

“We’re seeing no let up in corporates wanting to see their teams face-to-face, and for most businesses, travel is a necessity rather than a discretionary spend,” she said.

“There has also been a real jump in terms of business people returning to meetings, events and conferences.”

At the same time, leisure travel had seen a “strong and consistent recovery” during the financial year’s second half.

Mr Turner said they expected leisure travellers would continue to prioritise holidays and experiences over other areas of discretionary spending, “as evidenced by the consistent year-on-year growth in outbound travel in large and important markets like Australia”.

“In leisure we are emerging from the pandemic as a more productive, more efficient and more diverse business with a strong brand stable, enhanced capability and efficient and productive models that are now starting to achieve scale benefits,” he said.

Capacity remained an issue for the international travel sector, and Mr Turner expressed his concern at the federal government’s refusal of Qatar Airway’s request for more bilateral air rights.

“It seems fairly irrational,” he said of the decision.

Citi analyst Samuel Seow rated Flight Centre stock as “buy” in the current economic climate, and noted that corporate revenue was now eclipsing that from leisure travel.

“Looking forward, we see this as optimistic, as we see mix as the key driving factor in achieving a 2 per cent profit before tax margin,” said Mr Seow.

Flight Centre shares jumped 4 per cent to $21.65 in morning trade off the back of the revised profit guidance.

Since July 10, shares in the company have soared 15 per cent, but remain a long way from their pre-Covid-19 high of $59.22.