Flight Centre buys luxury brand Scott Dunn

Flight Centre is expanding further into the global luxury travel market buying one of Britain’s top prestige brands.

Flight Centre’s Graham Turner says airfares are stabilising. Picture: Tara Croser

Flight Centre is further expanding into the global luxury travel market buying one of Britain’s top prestige brands with plans to further expand within the UK, North America and in time, Australia.

Flight Centre managing director Graham Turner, has paid $211m for Scott Dunn, a luxury travel brand charging high margins to time poor professionals and multi generational families booking all their travel from hotels and tours right down to restaurants.

“Luxury is a segment of the market we really want to expand into, we really like Scott Dunn’s management team, I have met with them a couple of times in the past few weeks,” Mr Turner said on Tuesday.

Given Flight Centre is a mass brand its average booking cost is $5,000 to $6000 for a 2-3 week travel itinerary. In the luxury end travel itinerary charges can grow to $13,000 to $14,000.

But Mr Turner says Scott Dunn typically charges well-heeled families $40,000 per itinerary given its trips are multi-destination and multi-generational.

Flight Centre funded the acquisition via a fully underwritten $180m institutional placement and $40m cash with eligible shareholders offered the ability to participate in a non underwritten share purchase plan to raise up to a further $40m.

Following the completion of the acquisition Flight Centre will concentrate on further expanding Scott Dunn into America’s north eastern cities including New York, Boston and Massachusetts where it can help given its existing businesses.

“They don’t have bricks and mortar shops. They are a call centre operation. They are also in Singapore and are growing in the UK. We will help them expand,” Mr Turner said.

“It’s a really well known brand in the UK, we will almost certainly bring it here within a few years. (But) Obviously we will grow Travel Associates here, this will be our first priority.”

RBC Capital Markets said Flight Centre’s Scott Dunn acquisition provided them with an entry point into the UK and US luxury market which complements their existing global leisure offering.

Meanwhile, Flight Centre outperformed initial guidance producing earnings before interest, tax, depreciation and amortisation (EBITDA) of $95m for the half year. But Mr Turner said there are still challenges given some areas are still not up to expectations with low margins particularly in the corporate sector.

“We still have challenges with margins in some areas but we are up to expectations with how profitability is returning. We are slightly ahead of the market in leisure in the southern hemisphere,” he said.

“A lot of the business we have won in multi-national corporations is lower margin, we have grown on line (but) those margins are lower but the international capacity is not back yet as things come back margins will come back.”

On the airfare front Mr Turner said prices are already coming down.

“For May and June they have come down a reasonable amount. You can get return economy fares for $1500 to $2000 to Europe or $8000 or $95000 on business class on good carriers.” he said.

“We are now at about 70 per cent capacity without taking into account the growth in capacity from the Chinese carriers. Airfares will still be a bit higher but it’s much more competitive.”