Flight Centre seeks help as airlines bailed out

The nation’s largest travel agency has initiated talks with the federal government over assistance packages.

Morgans said in a note yesterday that travel companies were now losing money. Picture: AAP

The nation’s largest travel agency has initiated talks with the federal government over assistance packages given the commonwealth’s unprecedented $715m airline bailout, in what is shaping as the biggest crisis the travel industry has ever faced.

Flight Centre yesterday revealed it has been significantly impacted by government-imposed international travel restrictions, coupled with major reductions in airline capacity, leaving it to conduct an urgent business review in response to the coronavirus pandemic.

It has cancelled its 2020 Global Gathering, slated for Brisbane in July, an event it has been running for more than three decades.

“As part of the review, Flight Centre will hold further discussions with stakeholders including landlords, suppliers, vendors, insurers and banks on ways to manage the financial impact of a precipitous drop in travel activity in the near-term,” the travel agency, one of the world’s largest leisure and corporate travel providers, said yesterday.

“The company has also initiated talks with the federal government to discuss broader industry assistance packages, in light of the support being made available to airlines in Australia and, in some cases overseas, to companies that have been significantly impacted,” it said.

Webjet managing director John Guscic would not comment on any federal government assistance packages but said the online travel agency was not planning any redundancies.

“We are planning to reduce the hours people work until there is a recovery,” he said. “Our business prospects are strong … as per our balance sheet we have $150m on hand in cash reserves.”

Meanwhile, Flight Centre managing director Graham Turner said the conditions the industry was facing were unprecedented and had clearly arisen as a result of the coronavirus and the initiatives that were being implemented to slow its spread.

“Management is determined to overcome the significant challenges that it currently faces and, with the support of our stakeholders, is ready to prosper when conditions eventually normalise.”

Morgans said in a note yesterday that travel companies were now losing money.

“Given Flight Centre’s high-cost ‘bricks and mortar’ network, its losses per month are likely the far greatest of our travel industry coverage,” Morgans said.

Flight Centre had a net cash position of $189m at the end of February, and access to additional liquidity plus undrawn debt facilities of around $80m, with its existing debt facilities not maturing until early 2022, Morgans said.

“How well Flight Centre’s balance sheet can withstand the downturn will depend on the severity and duration of COVID-19 on travel demand,” Morgans added.

Nevertheless, Flight Centre said it would seek to preserve as many roles as possible but job losses across the industry and within the company were inevitable.

The federal government has issued indefinite “Do Not Travel” advice for overseas destinations given the highest incidence of COVID-19 cases has been among Australians returning from overseas.

Most major cruise lines have cancelled their voyages until at least April while land operators such as Wendy Wu have cancelled their Chinese itineraries.

Tourism Australia has cancelled the Australian Tourism Exchange conference in Melbourne in May while the US is expected to cancel its IPW, the world’s biggest travel market, which was expected to take place in Las Vegas from May 30.

Meanwhile, Australian Federation of Travel Agents CEO Jayson Westbury has urged travellers not to request refunds or cancellations on trips that are not scheduled until Christmas.