Global travel aids Flight Centre recovery

Flight Centre’s comeback is gaining momentum as global markets reopen, but Covid curbs continue to hit business in Australia and NZ.

Flight Centre is fighting back after the pandemic destroyed international travel. Picture: Andrew Henshaw

Flight Centre’s recovery is gaining momentum as global markets open up, but the travel agency’s performance in Australia and New Zealand is being hampered by ongoing lockdowns and state border closures.

The international travel company produced a $507m underlying loss for the 2021 financial year, in line with market expectations with Morgans analysts adding that given Flight Centre’s exposure to international leisure travel and higher cost bricks and mortar business model, it is likely to be the last of its peers to reach pre-Covid-19 levels of profitability.

However, Flight Centre chief executive Graham Turner believes “signs of sanity are coming into Australian politics” and we could start returning to international travel from early November striking deals with countries such as Singapore and the UK when we have achieved similarly high rates of vaccinations.

He said pre-Covid Flight Centre’s profitability was growing faster offshore than it was onshore and he expected this scenario to continue.

More than half of Flight Centre’s before tax underlying profit was generated in the Americas, Europe, Middle East and Africa.

“We will be growing faster in the Northern Hemisphere despite Covid. We have been growing our business a lot over there, we are getting good traction, we want to stay an Australian company but we want to have a big presence in the Northern Hemisphere,” Mr Turner said.

Flight Centre boss Graham Turner. Picture: Dan Peled

Releasing its results on Thursday Flight Centre said before tax statutory losses improved to $602m in the 2021 year, from a loss of $848.6m a year earlier.

Flight Centre said its sales revenue, led by corporate travel, jumped 48 per cent or $76m for the second half compared to the first half of the 2021 financial year.

However this improvement was deeply offset by a reduction in JobKeeper government subsidies and an 8 per cent cost increase.

Corporate travel sales were generally heavier than normal domestic travel, with sales volumes at 80 per cent of pre Covid-19 levels in China, France and Germany. “The global corporate businesses … have generally led the recovery in most countries to date,” Flight Centre said.

On the leisure travel front, while ongoing lockdowns throughout Australia are heavily impacting near-term bookings, trading conditions and the travel outlook are generally improving, with vaccination programs gaining momentum worldwide and restrictions being removed or relaxed in several key markets.

Mr Turner said when lockdowns lift and borders reopen, a strong recovery is expected, as had been seen already in key locations like the US, Canada and Europe.

“Although we can’t predict the future, given the current government-enforced restrictions, we are targeting a return to monthly profitability later in the 2022 financial year and a return to pre-Covid total transaction volumes by June 2024, but with significantly reduced ongoing operating costs.”