Travel Agents

Flight Centre boasts “strong” Aussie online leisure sales, but expects $7m hit from Tempo/Bentours collapse

Flight Centre Travel Group has recorded strong growth in online leisure sales in Australia during the first quarter of the 2020 fiscal year.

In a presentation at the Morgans Queensland conference, Flight Centre managing director Graham “Skroo” Turner revealed that online leisure sales in the country had doubled during the three months to 30 September 2019, despite a relatively challenging trading climate.

Turner said the Jetmax OTAs, BYOjet and Aunt Betty, and flightcentre.com.au had together generated more than $250 million in total transaction value (TTV) during Q1 in Australia.

“The Aunt Betty and BYOjet businesses are trading strongly and together recorded 140 per cent TTV growth in Australia during the quarter,” he said.

“Flightcentre.com.au has also continued its trajectory since online booking fees were removed late in FY19 and delivered 65 per cent Q1 TTV growth.”

Turner said this growth is predominantly coming from domestic travellers who are new to the Flight Centre brand, rather than from existing customers who are moving between sales channels.

“While online sales represent a relatively small percentage of our leisure TTV, the growth we are recording is a positive sign, particularly when Australian trading conditions begin to recover, as demand for bigger ticket and more complex items that are typically booked in-store starts to improve and as our leisure network improvement strategies gain traction,” he said.

Turner highlighted the home-based agent/independent contractor sector, the ready-made holiday package market and specialist Flight Centre brand businesses as other emerging leisure travel opportunities for the group.

Last month, Flight Centre increased its presence in the ready-made sector by taking 100 per cent ownership of Gold Coast-based Ignite Travel Group and has announced plans to export the Ignite model to other Flight Centre geographies.

In the corporate travel sector, where Flight Centre has grown rapidly in recent years, Turner said the company had continued to perform well in early FY20 trading.

He said Europe was emerging as a key future growth driver for the corporate business, given the company’s expanding footprint on the continent.

“Europe is home to some of the world’s largest corporate travel markets, and we now have company-owned businesses in key countries like France, Germany, Switzerland, the Netherlands, Sweden, Finland, Norway, and Denmark,” he said.

FY20 outlook

Flight centre

The Flight Centre boss also outlined the company’s likely trading patterns for the year in light of the volatility experienced during FY19 and ahead of releasing more detailed FY20 profit guidance at its annual general meeting on 7 November.

Turner said that while TTV was again increasing solidly early in the year, underlying profit would be below the prior corresponding period during the first half of FY20, and was likely to be heavily weighted towards the second half.

He said stabilisation is expected during Q2 after a challenging Q1.

Contributing factors to this forecast include comparatively strong results during the first four months of FY19, and unrest and uncertainty in geographies such as the UK (due to Brexit) and the US (due to safety concerns in the Dominican Republic), according to Flight Centre.

Increased costs early in FY20, lower than expected profits from the emerging in-destination businesses, and lower interest earnings (reflecting lower yields in Australia) and higher interest repayments (given that Flight Centre has used debt to fund recent acquisitions) were also noted as contributing factors in the overall forecast.

Thomas Cook’s monumental collapse in the UK had a minimal impact on Flight Centre and its customers, but the company said it expects to incur approximately $7 million in costs “associated with its decision to ensure its customers were re-accommodated and not adversely affected by the collapse of Bentours and Tempo Holidays in Australia”.

Flight Centre currently expects to separate these costs from its underlying FY20 results.

Turner said that while TTV was increasing in Australia, the company had not yet seen tangible benefits flowing from recent interest rate cuts and tax refunds, and that any benefits were more likely to be seen later in FY20, assuming consumer confidence improved ahead of the year’s peak booking periods for longer-haul holidays.

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