Travel Agents

Flight Centre to capitalise on industry consolidation and “the inevitable rebound” after sinking to $662m loss

Huntley Mitchell

Huntley Mitchell

Flight Centre Travel Group (FCTG) has mapped out a few short- and long-term opportunities to help recover from the impact of COVID-19, after revealing the pandemic’s damage to its full-year results.

The travel giant posted a $662.1 million net loss after tax in the 12 months to 30 June 2020, compared to the $264.2 million profit it recorded in FY19.

FCTG’s total revenue plummeted by 37.9 per cent to $1.9 billion, while the group’s total transaction value (TTV) declined by 35.4 per cent to $15.3 billion.

You can check out the breakdown of the results by business segment and region in the below tables:

Commenting on the results, FCTG managing director Graham “Skroo” Turner said: “COVID-19 and, specifically, government responses to it have created the most challenging trading environment that we have experienced in our almost 40 years in business.

“Until the past four or five months, we had not seen – and could not have imagined – a scenario in which virtually all flights and travel plans globally would effectively be grounded for an extended period.

“This extraordinary trading environment has already had a devastating impact on businesses and on people, particularly those in the aviation, travel, tourism and hospitality sectors, with tens of thousands of jobs lost in Australia alone and many businesses struggling to survive.

Turner said FCTG was forced to make some “very tough decisions” as the crisis unfolded, but the group was fortunate to be able to draw on its “strong” balance sheet.

“We also moved quickly to develop a longer cash and liquidity runway and to lower costs in anticipation of a zero or very low-revenue environment for an extended period of time,” he said.

On a positive note, Turner said FCTG’s revenue to date has exceeded initial expectations and has been increasing.

“Travel is starting to gradually recover in locations like North America, Europe and South Africa, where domestic borders are now open, although we are also seeing heightened restrictions in Australia and New Zealand after earlier relaxations,” he said.

“Costs have reached the targeted level and we have capacity to service about 40 per cent of normal TTV with the current cost base, which means we will be able to reach a break-even position without incurring significant additional expenses.

“In the near-term, TTV is likely to be domestic- and corporate travel-weighted, given that heavy restrictions still apply to international travel, although we are seeing some travel ‘bubbles’ or ‘corridors’ open as countries learn to live with the virus.”

In the absence of an effective COVID-19 vaccine, FCTG expects demand for international travel will not fully recover before FY23 or FY24.

The company said it would continue to work towards extending its liquidity runway in the near-term by increasing revenue, as travel restrictions are lifted or relaxed; and via an ongoing, targeted cost focus, particularly in its leisure businesses.

FCTG said this longer runway will allow it to capitalise on industry consolidation, “which is already taking place”, and “the inevitable rebound that will come when restrictions are lifted and consumer confidence recovers”.

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