Travel Agents

“Soft” and “disappointing”: Flight Centre laments struggling Aussie leisure business

Huntley Mitchell

Huntley Mitchell

Flight Centre Travel Group’s Australian leisure business is on struggle street, but the company insists the challenges “are largely within our control” and is working to address them.

The Australian and New Zealand segment of Flight Centre saw its underlying profit fall 30 per cent to $179 million in the 12 months to 30 June 2019, with external revenue down two per cent to $1.6 billion.

Total transaction value (TTV) for the ANZ segment experienced a slight rise, up two per cent to a record $12.5 billion.

Leisure and online accounted for 76 per cent of this amount, compared to 24 per cent by corporate, while Australia accounted for 89 per cent of the region’s overall TTV.

Australia’s earnings before interest and taxes fell 29.7 per cent to $173.1 million in FY19, with the number of business dropping 4.1 per cent to 1,443.

Flight Centre noted that increased international and corporate travel earnings partly offset its subdued Australian leisure results, which were linked to softer than normal TTV growth, lower revenue margin and costs.

The company said the subdued results partly reflected a challenging trading cycle, but also disruption from changes that have taken place during the past two years, including the deployment of a new sales system, a new front-end wage model, brand consolidation, and an ongoing leisure network and sales force review.

Flight Centre said the review is close to being finalised and has identified “rationalisation and rebranding opportunities, along with growth opportunities in some areas that continue to perform well”.

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Managing director Graham “Skroo” Turner acknowledged there were challenges to overcome within the Australian leisure business, “which remains very important to us despite the emergence of other businesses that are capable of driving overall growth”.

“Aside from market conditions, we believe these challenges are largely within our control and we are working to address the issues,” he said.

One of the ways Flight Centre is looking to boost its Aussie leisure business is through a targeted brand improvement program called “FC 2.0”, which is currently underway.

The program will deliver a new membership model focused on omni-channel benefits and personalisation; product and pricing initiatives to improve the use of big data across the business; self-service capabilities to make it easier for customers to engage with the business; sales technology to better handle, score and direct business leads; and modern strategies to automate, personalise and optimise marketing.

In better news, Flight Centre chief financial officer Adam Campbell said its specialist divisions in Australia achieved solid growth and together generated about $430 million in TTV.

These divisions focus on small corporate accounts (Flight Centre Business Travel), group travel, round-the-world airfares, cruise, and first- and business class- flights.

Overall, Flight Centre’s net profit after tax was down 0.2 per cent on FY18 to $264.2 million, and its underlying profit before tax was down 10.8 per cent to $343.1 million.

Total revenue was up 4.5 per cent to $3.1 billion, and Flight Centre’s group TTV hit a record $23.7 billion (up 8.8 per cent).

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