Flight Centre bracing for full-year loss after coronavirus hits travel

Its business hit by coronavirus, Flight Centre expects to dive to a full-year loss of up to $525m, although there are signs of recovery.

A closed Flight Centre store in Melbourne. Picture: Getty Images

Flight Centre expects to report an overall COVID-19-driven loss of up to $875m for the year to June 30 after releasing its preliminary results.

Reporting its first loss, Australia’s largest travel agency revealed it had at least 22 months of liquidity but its earnings guidance was weaker than analysts such as Morgans had expected.

Flight Centre produced a $53m net outflow in July, below the $65m target, and netted $17m in revenue, helped along by the JobKeeper wage subsidies that afforded it $10m in net benefits.

Flight Centre secured about $200m in extra funds in July and more than $1bn since April.

Flight Centre’s total transaction values exceeded $200m.

The company reduced occupancy costs through rent reductions and shop rationalisation and retained about half of its shops, including almost 520 in Australia.

Flight Centre managing director and co-founder Graham Turner said there was light at the end of the tunnel but it depended on how long government restrictions were retained.

“We have done some pretty conservative planning. It will be tough for this financial year but we presume we will get back into profit in the 2021/22 financial year,” he told The Australian.

Mr Turner said revenues from corporate travel were down 90 per cent, but this part of the business had lower costs than leisure travel.

He said extra cost-cutting measures would depend on what the government did, how long he could make cash reserves last and whether a vaccine was developed.

Flight Centre is still looking at opportunities to purchase but Mr Turner said they “do not have the cash reserves to look at too much”.

“If we think they are strategic and important then we are looking,” he said, adding that the company had recently bought a digital platform. “It was an opportunity that came up due to the virus. We will be looking for anything that adds to us strategically without costing us too much.”

On the vexed question of whether companies should pay dividends if they are receiving the federal government’s JobKeeper stimulus, Mr Turner said the question was a “tough one”.

“Maybe the government should have changed the policy once some of the restrictions dropped in June … but what do they do — give money back?”

“From our point of view, with the Turner family-owned Spicers Retreats, when JobKeeper came in March, April and May occupancies and revenues were down 95 per cent.

“But it came back dramatically in the second half of June and July and you could argue they should not be getting JobKeeper any more.

“But with a company like Flight Centre we are still down 90 per cent.”

Mr Turner said Flight Centre would probably not be paying dividends until at least 2022-23 or 2023-24.

Its shares closed up 5.1 per cent at $12.28.