Americas strength offsets soft home market for Flight Centre

Flight Centre’s offshore operations have produced more profit and gross revenues than its home base for the first time.

Graham Turner, CEO of Flight Centre. Picture: Mark Cranitch.

Flight Centre’s offshore operations produced more profit and gross revenues than its home base for the first time since the travel agency launched in 1982, with the Americas emerging as a $100 million-a-year profit powerhouse, up 44 per cent.

“The best region is North America — it’s making just over $100m profit,” Flight Centre managing director Graham Turner told The Australian yesterday after releasing the group’s results.

“It’s only taken 20 years to get there but this is the way business works. We all expect things to happen overnight but this has been a 20 year journey for us,” said Mr Turner, adding that while the travel agency operated leisure and corporate businesses in the US, profits were significantly eked from corporate operations.

At home, the soft leisure travel market contributed to an 11 per cent drop in underlying profit for the 2019 financial year to $343.1m, which was below initial targets.

Flight Centre will shut 30 retail shops and convert another 30 retail outlets to its Universal Traveller or Travel Associates branding.

“Essentially we have 1000 retail locations in Australia and we don’t know the exact number but we reckon about 30 will need to close, while another 30-40 will be relocated to a more appropriate ­location,” Mr Turner said.

The travel agency will also open another 20-30 shops, particularly in newly built or renovated shopping centres.

However, Mr Turner said the number of shops it operated would remain pretty flat at 1000.

Despite the sluggish Australian results, Flight Centre produced ­record profits not just in the US, but in Canada, Britain, the UAE, South Africa, The Netherlands, New Zealand and China and Hong Kong.

In Australia, Mr Turner said the results were not as good as he would have liked. “It’s a reasonably tough environment in Australia. If it had been higher we would have been much happier,” he said.

Mr Turner said consumer sentiment was not great. “The outbound market is flat and over the last year we have had a few issues with wage costs going up. We did an EBA last year and there’s been a few things that have not helped us.

“We are doing a lot of operational things to sort them out, but it will take some time.

“Over the next six months we will finalise our shop network planning. These things take time as we are on leases of five to seven years. With lease relocations and rebranding it takes a bit of time.”

Flight Centre was getting good growth in leisure online, which produced about $1.3 billion in total transaction volumes this year, Mr Turner said.

“The online and the internet has been a factor for 20 years in travel and it’s not just the online travel agents, it’s also the suppliers,” he said.

Flight Centre shares closed up 7 per cent at $47.14 yesterday.