Flight Centre boss Graham Turner is betting on a recovery in travel backed by border reopenings

Flight Centre has revealed a $317m loss but boss Graham Turner says slashing costs and pent up demand for local travel is keeping it alive.

Flight Centre managing director Graham Turner in Brisbane. Picture: NCA NewsWire / Dan Peled

Travel agent Flight Centre sunk to a $317.3m headline loss for the December half, but is betting on pent up demand for interstate holidays and business flying again when border restrictions are lifted for good.

Flight Centre co-founder and managing director Graham Turner said the travel industry had faced “its greatest challenge” since the COVID-19 pandemic hit early last year but anticipated international travel to resume some time later this year.

But he said Australians were hungry to travel again with domestic leisure sales above previous year levels within two days of Queensland announcing plans on November 23 to reopen its borders to travellers from NSW and Victoria from December 1.

His comments follow a statement from Qantas which earlier on Wednesday pushed back the expected resumption of international travel from July to October.

“Everyone is expecting international travel to start coming back in the second half of this calendar year … we expect it to come back quite strongly over the next two to three years.”

Mr Turner said the travel agent was taking steps to ensure it was well placed for the eventual recovery.

This included slashing costs by 66 per cent and selling property such as its Melbourne headquarters, which kept cash levels high on Flight Centre’s balance sheet.

“We have become a leaner and more efficient business with a long liquidity runway, which has been crucial during this challenging and uncertain period,” Mr Turner said.

Air charter business AVMIN and cycle retailer 99 Bikes have remained profitable and grown significantly through the pandemic.

Indeed, Mr Turner said the charter business was doing “really well” because of the large numbers of Hollywood movies that were being shot in Australia.

Asked how Flight Centre would recover its leisure side given half its bricks and mortar shops had been shut, the company said it was still in seven markets and still held the number one leisure position in Australia, New Zealand and South Africa.

“We intend to grow that. We have the right model to grow; we have just reduced our overweight shop model,” the company said at a presentation on Thursday, adding it would be targeting the northern hemisphere.

Mr Turner said the travel industry was changing with some of the major airlines pushing back on margins and it was obvious that some of the smaller travel suppliers would struggle. He expects some companies to collapse while other travel companies would be the subject of mergers and acquisitions.

Flight Centre’s loss of $317.3m for the six months to December 31, compares to a profit of $38.8m for the same period last year. The underlying pre-tax loss of $247.2m compares to a pre-tax profit of $102.7m previously.

The group’s share price surged on the news, closing up 8.9 per cent at $17.79.

Domestic tickets represented 94 per cent of Flight Centre’s total ticketing volume in Australia during the December half, compared to 57 per cent during the same time last year.

Flight Centre received $177.9m in government subsidies during the half, which included JobKeeper in Australia and similar programs offshore.

No dividend was declared.

Flight Centre is betting on a rapid travel recovery. Picture: Getty Images

Mr Turner noted that the travel sector was in the early stages of recovery — helped along by the vaccine rollout.

“We are starting to see some promising signs,” Mr Turner said.

Revenue for the travel agent reached a COVID-19 period record of $33.5m in December, which is normally one of the company’s quietest trading months

Meanwhile, he expects “significant pent-up demand” for travel, which should ultimately underpin recovery.

“Based on what we have seen so far, travellers have been keen to take off as soon as they have been allowed to do so, which should ultimately lead to a very solid rebound,” Mr Turner said.

“Assuming vaccination programs continue to prove successful against the virus and any

variants, we expect travel restrictions will ease over the next few months given that high-risk and vulnerable people, who are being prioritised in most programs, will be protected”.

“This should allow domestic travel restrictions to be removed permanently and international travel to return in some countries later this year, probably via low risk corridors initially for those who have been vaccinated and have the appropriate health passports, which we believe will be mandatory and is an area that we have proactively expanded into”.

Some of Flight Centre’s far flung businesses are already returning to profit such as its United Arab Emirates corporate group which was profitable during the second quarter.

However, Flight Centre’s Total Transaction Volumes at $1.5bn were just 12 per cent of the corresponding period and were heavily weighted towards the corporate sector.