Travel a ‘necessity’ says Flight Centre boss Graham ‘Skroo’ Turner as retailer storms back to profit

But the travel retailer has disappointed some in the market, who had expected a greater bounce back out of Covid-19 restrictions.

Travel retailer Flight Centre has returned to profit for the first four months of the financial year, with half-year profit forecast between $70m and $90m, it said.

But the result for the period to October 31 – total transaction values rose 246 per cent to $6.8bn compared to last financial year – disappointed some equities analysts who had expected a bigger bounce back out of the pandemic that largely ended travel plans.

The company, in a trading update ahead of its annual meeting on Monday, said revenue rose to $667m for the four month period, with the company recording an underlying profit of $61m. It recorded a $137m loss in the first four months of 2021, as Covid-19 restricted flights.

RBC Capital Markets analyst Wei-Weng Chen said while Flight Centre was “continuing to show a strong recovery in activity post-pandemic, guidance provided for the (first half of the financial year) and implied earnings based on historical skews are likely to lead to a consensus earnings downgrade”.

“The midpoint of guidance is a 23 per cent downgrade,” Mr Chen wrote, adding that the guidance implied an incremental $9m to $29m in earnings across November and December, with the latter seasonally softer for the local travel business.

Speaking at the annual meeting, Flight Centre chief executive Graham Turner said the earnings figures were encouraging, particularly given the recovery was still in its early stages.

“There is considerable pent-up demand that is not yet fully translating to bookings, which means there is also ongoing upside potential,” he said on Monday. “In business travel for example, our recovery is being driven by very high customer retention rates and large volumes of new account wins — rather than by overall client activity returning to pre-Covid levels.”

Leisure travel out of Australia remained well below 2019 levels due to “a lack of competition and capacity leading to a lack of seats to sell and abnormally high airfare prices”, Mr Turner said.

“Our expectations for the 2023 financial year are unchanged – we believe this will be a year of gradual recovery for the industry … ahead of a larger scale recovery during the 2024 financial year.”

Mr Turner noted higher inflation and interest rate hikes were yet to noticeably impact demand, supporting his view that travel was considered more of a “necessity” than a discretionary expense.

He also urged people still holding travel credits to consider their options before they expired, with some suppliers setting a year-end deadline for use. Flight Centre customers had until December next year to use their credits, while Qantas required travellers to book within 12-months of their original travel date.

Flight Centre shares closed down 3.3 per cent, or 56c, ending trade on Monday at $16.45.