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13 August, 2020

Corporate travel helping keep Flight Centre alive, as company warns of huge FY20 loss

Melbourne, Australia: April 12, 2018: Street view of a Flight Centre shop window. Flight Centre is Australia’s largest travel agency selling international flights, holidays and tours. A man walks past.

Flight Centre Travel Group (FCTG) is leaning heavily on its corporate offerings for revenue as the company navigates its way through the COVID-19 pandemic.

To date, FCTG revealed in an ASX update earlier today that its corporate travel businesses have predominantly fuelled the company’s revenue generation during the COVID-19 lockdowns, “given that essential services have generally been permitted to travel”.

The corporate businesses, which FCTG said were on track to deliver more than $10 billion in annual total transaction value before restrictions were imposed, traded profitably (underlying) during FY20 and have established a solid platform for future growth by winning a record amount of new business during the year.

The FCM business alone secured new accounts, with an annualised spend of $US1.3 billion ($1.8 billion) during FY20, with the majority of these wins coming during the second half.

In contrast, FCTG said revenue generation within the leisure sector has generally been more subdued due to heavier restrictions that “have typically been applied to discretionary leisure travel and given relatively low consumer confidence”.

FCTG will release audited FY20 accounts on 27 August, and currently expects to report an underlying loss before tax of $475 million to $525 million, subject to the finalisation of impairment reviews.

The estimated profit warning is a big change will be a big swing away from the $343.1 underlying profit before tax it achieved during FY19.

The company received or secured access to about $200 million in additional funds during July and more than $1 billion since April to protect it from a prolonged virus-related downturn.

Today, FCTG confirmed it had also surpassed its key target of a monthly net operating cash outflow of $65 million by 31 July.

In addition to significantly slowing its cash outflow, FCTG recently bolstered its liquidity position by selling its Melbourne head office, securing a government-backed UK loan and through its ongoing eligibility for the JobKeeper subsidy, which has now been extended for six months.

FCTG supremo Graham “Skroo” Turner said: “Despite ongoing restrictions, revenue has now started to increase, particularly in Europe, and we have surpassed our initial cash flow target, thereby extending our liquidity runway.

“We have also continued to win a record amount of new corporate accounts, while generating an underlying corporate profit during FY20.

“This highlights both our corporate business’s resilience and its strong future growth prospects in this large, global travel sector which was estimated to be worth $US1.5 trillion ($2.1 trillion) per year pre-COVID-19.

“There are, of course, further challenges to overcome, plus ongoing uncertainty around government COVID-19 objectives and the strategies they will adopt in the near-term to counter the virus’ effects.”

Turner said it was critical that businesses across all sectors know the objectives and data lines for COVID- 19 control and the lifting of restrictions, “whether the end goal is community immunity, suppression, eradication or learning to live with this virus”.

“Learning to live with the virus involves protecting the vulnerable, particularly the elderly, while ramping up testing, contact tracing and ultimately isolation so we don’t overwhelm intensive care units,” he said.

“Adopting this approach, while continuing to take sensible health precautions, flattening the curve and getting society and business back to a reasonable level of normality, must be priorities to reduce the already dire economic outcomes being experienced.

“Within the travel and tourism sectors, we need to know what COVID-19 conditions need to be present in each state, territory and at a national and international level for governments to ease restrictions, stop lockdowns and open borders.

“This will allow businesses to plan for the future, to prepare to restart their operations and to bring back thousands of our people who are currently on stand-down.”

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Email the Travel Weekly team at traveldesk@travelweekly.com.au

Latest comments

rajtamang says:
August 13, 2020 at 8:49 pm
Good article.
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