Flight Centre disappoints investors with dour outlook

Flight Centre has flagged a bigger than expected $500 million blow to its books for the full year and temporarily taken dividends off the table, as it works its way through the fallout of the pandemic on global travel.

“Nothing is certain in this market except… we will not be paying a dividend in 2022,” Flight Centre managing director Graham Turner told the Macquarie Australia Conference on Tuesday.

“We feel we’re in a reasonable space considering the difficulty of the travel and tourism market… but it’s going to be a reasonably long road back.”

Graham Turner said Flight Centre should return to profit in the second half of next year as international travel comes back online.
Graham Turner said Flight Centre should return to profit in the second half of next year as international travel comes back online. Credit:Paul Harris

The $3.3 billion global travel group – which had to raise more than $1 billion in fresh debt and equity to survive the pandemic-enforced travel shutdown – told investors it expected to return to profit in the second half of next year.

However, the implied guidance for an underlying full-year loss of around $500 million was worse than the analyst consensus forecast of $355 million, according to Bloomberg, and Flight Centre’s share price fell sharply on the update, closing the session at $16.14 – the lowest they have traded since February 22. The company’s shares started 2020 at $35.54 and hit a pandemic-low of $8.92 last March.

Bookings were recovering every month on the back of travel resuming within Australia and North America, Mr Turner said. But the group would still run at an underlying loss of around $250 million this half – in line with its first-half result – after its higher revenue was offset by the end of the JobKeeper wage subsidy.

Flight Centre CFO Adam Campbell said that while the group’s own outlook had not shifted significantly since February, the market may have anticipated that Australian state borders would have remained more reliably open and that more international “travel corridors” would have opened in the half.

“Fundamentally for us, this is broadly in line with where we would have thought,” Mr Campbell said.

In March the group’s global corporate bookings were at 29 per cent of pre-COVID levels, while leisure bookings were at 14 per cent.

Advertisement

Mr Turner said travel becoming possible between the US, Europe and UK for anyone who has been fully vaccinated over the coming months would make a significant difference to bookings, while he now assumed Australian state borders will remain open.

Flight Centre has closed around half its retail shopfronts globally since the pandemic hit, and around 40 per cent locally. Mr Turner told the conference he expect Flight Centre could still return to pre-COVID levels of bookings given its remaining stores accounted for two-thirds of its business pre-COVID.

“They were are best locations that we kept and our best people… and we certainly are considering some online growth,” he said.

Business Briefing

Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up here.

Most Viewed in Business

Source: Thanks smh.com