Travel Agents

Flight Centre reveals three-pronged plan to tackle COVID-19

Flight Centre Travel Group (FCTG) has outlined its immediate plan to overcome the ongoing challenges posed by the coronavirus.

To deal with the rapidly changing trading environment, FCTG has developed a three-pronged plan to immediately and significantly reduce costs globally, preserve cash where possible, and access additional liquidity in the short-term.

Travel Weekly has carefully dissected the plan below so you can easily make sense of it all:

Staff and shops

Due to governments banning travel and normal business functions being significantly disrupted, FCTG said a high percentage of the work which its employees normally perform has stopped, and maintaining staff and shop numbers at pre-virus levels has become unsustainable.

As a result, FCTG has made the decision to temporarily reduce its 20,000-person global workforce to better reflect the prevailing trading climate and to preserve future jobs.

About 6,000 support and sales roles will either be stood down temporarily or, in some instances, will become redundant, meaning FCTG will initially retain up to 70 per cent of its global workforce.

The company said it is assessing the timing and nature of further reductions.

In Australia, where international travel bans and domestic border controls are in place, about 3,800 people in sales and support roles will be temporarily stood down in the near-term.

FCTG said it will maintain close connections with its people during the stand-down period, which will be reviewed weekly, and will aim to bring them back to work as soon as the current travel bans and trading restrictions are lifted.

In addition, the company has proactively engaged with a large pool of other potential employers to secure immediate access to more than 10,000 sales and call centre vacancies for stood-down employees in Australia.

These people will have the opportunity to return to FCTG when conditions improve, the company noted.

Furthermore, FCTG has sought additional government support, including “rapid access” to benefits and support schemes for any stood-down workers who exhaust their accrued leave entitlements and are unable to find short-term roles.

FCTG has also developed resources outlining financial and emotional assistance packages, work opportunities and ongoing access to company benefits.

The travel giant previously flagged plans to bring forward the closure of some underperforming leisure shops in Australia, and has also downsized its leisure networks in the US as part of ‘business as usual’ processes during recent years.

With the likelihood of a prolonged downturn in demand, FCTG has accelerated and extended its leisure shop closure plans globally and could now close about 30 per cent of its leisure outlets across multiple brands in Australia, and in the order of 35 per cent of its leisure shops globally over the next few months.

The company noted that changes to these plans are likely if market conditions deteriorate further, if restrictions are in place for an extended period, or if demand rebounds more rapidly than currently expected.

Executive and board remuneration

FCTG has initiated immediate 50 per cent pay reductions for senior executives and board members at least until the end of the 2020 financial year.

The company’s executives will also forgo all short-term incentive payments for the year.

Liquidity

FCTG said it is undertaking steps to ensure it retains a robust balance sheet and liquidity position to enable it to manage through the current crisis.

The company said it is “well-progressed” in pursuing relevant initiatives and will update the market in due course, at which time it also expects to end the voluntary ASX suspension that is currently in place.

Landlords

FCTG said it has moved to significantly reduce occupancy costs by renegotiating rental agreements with landlords.

Discussions to date have been “positive” as the company has pursued potential cost savings including rent-free periods and more flexible trading hours.

Other cash prevention measures

FCTG has paused a number of other major expense items, including its $15 million-per-month sales and marketing spend to preserve cash while travellers are effectively unable to take off either domestically or internationally. The company said this spend will be re-activated when demand increases.

Various non-essential projects have also been paused, which FCTG said will result in reduced capital expenditure in the coming months.

Government support

FCTG has welcomed stimulus packages that governments throughout the world are delivering to help businesses retain as many workers as possible and overcome the extraordinary trading conditions they are facing.

In Australia, the company said it has proactively engaged with state and federal governments to discuss various support mechanisms that would help it preserve more jobs for the future.

Customers

While new bookings have decreased significantly this month, FCTG noted the “tireless” efforts of its staff in helping customers adjust future travel plans or fly home ahead of the enforced border closures.

The company said it continues to liaise with government bodies, including Australia’s Department of Foreign Affairs and Trade, to help repatriate thousands of travellers who are now stranded overseas.

FCTG said it has a team in place to consider all options, including charter flights, for customers and other travellers globally that no longer have access to commercial flights.

Major areas of concern, given the loss of or reduction in scheduled services, currently include South America, South Africa and the United Kingdom.

Flight Centre forced to make “extremely tough decisions”, says Skroo

Commenting on the new plan, FCTG managing director Graham “Skroo” Turner said: “We are dealing with unprecedented restrictions and extraordinary circumstances that are having a significant impact on our customers, people, suppliers and all other stakeholders.

“People are effectively unable to travel in the near-term, either domestically or internationally, and some are actually unable to be repatriated to their home countries, which is affecting thousands of people and is a problem that we’re working to help solve.

“Within this climate, our people have been working tirelessly to help our customers amend their plans, but unfortunately the vast proportion of the work that they would normally undertake has now been stopped.

“As a result, we have been forced to make extremely difficult decisions, including temporarily standing down some of our people and cancelling our interim dividend, with a view to preserving more jobs for the future.

“These people that we are temporarily standing down are a valuable part of our company and, where possible, we aim to bring them back to work as soon as restrictions are lifted and as demand starts to increase.

“We are also making other changes to reduce costs, preserve cash and help the company overcome the current challenges that our industry and almost all businesses now face.

“In making any changes, we will be extremely conscious of the impact on all stakeholders and will seek solutions that minimise the effects on any one group.

“We will also be conscious of the need to make changes that allow us to successfully overcome this short-term challenge, but do not harm our culture or prevent us from thriving into the future.

“We and our people remain committed to looking after our customers – both during this difficult period and beyond – and will continue to be available through our leisure shops and corporate offices (where permitted), our websites, via social media, and through our mobile capabilities during this time of social distancing.”

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