BRISBANE — The Flight Centre Travel Group (FLT) is targeting a return to break-even in both leisure and corporate travel during the 2021 calendar year on the basis that domestic borders are likely to open permanently and some low-risk international travel may be permitted.
Recovery to date has been heavily weighted towards corporate and domestic travel – two sectors that FLT is significantly leveraged to, as the company notes in its latest outlook.
Managing director Graham Turner says FLT continues to respond to the challenges posed by COVID-19 and the unprecedented travel restrictions that are in place to slow its spread.
While global trading conditions remain volatile, results have gradually improved thanks to targeted cost base reductions and revenue increases during the period, he added.
Since the crisis escalated in March 2020, the company has:
- Lowered its cost base by 66% (representing a $1.9billion annualized saving) without jeopardizing either its investment in key growth drivers or its ability to rebound quickly when conditions improve
- Continued to generate total transaction value (TTV) and revenue in a pre-vaccination, domestic-only travel world – December revenue was at its highest point since travel restrictions were introduced globally in March 2020
- Delivered month-on-month reductions in net operating cash outflow during the 1H; and
- Maintained a $1.2 billion liquidity runway to help it withstand an extended downturn, or capitalize on opportunities during the recovery phase, which could now be fast-tracked with the world’s largest ever vaccination program underway
“The conditions we have encountered since March last year have undoubtedly posed the greatest challenge that our industry and many others have faced,” says Turner.
“Rather than enter a holding pattern ahead of future domestic and international border re-openings, we are taking steps to ensure we are well placed for the eventual recovery. We have become a leaner and more efficient business with a long liquidity runway, which has been crucial during this challenging and uncertain period.”
Turner adds that FLT has maintained capital expenditure on key leisure and corporate technology projects at pre-COVID levels and has now started to deploy a number of new products for its customers and team, including:
- Helio, a leisure platform that FLT consultants will use to search, quote, book and manage travel for their customers. Helio replaces six legacy systems and is now live in FLT’s UK, South Africa, New Zealand and Australian shops and will launch in the Americas in March 2021, with full deployment by June 30
- Melon, Corporate Traveller brand’s proprietary technology offering for SME customers. The Melon digital platform uses consumer-grade mobile technology, including robotics and artificial intelligence, to give customers the best experience, says Turner, and is currently being tested in the USA, ahead of its official launch in April
- SOAR, FLT’s proprietary online booking engine, which will soon have new features and content, including enhanced packaging capabilities and personalization
“In both the leisure and corporate sectors, we have continued to invest in new and legacy models and have proactively delivered innovative tech-backed-by-people solutions to customers of these legacy businesses, as evidenced by both Helio and Melon. While we are in the early stages of recovery, we are starting to see some promising signs,” said Turner.
H1 2021 RESULTS
Key points in FLT’s 2021 fiscal year (FY21) first half (1H) accounts include:
- $1.5 billion in TTV, 12% of prior corresponding period (PCP) sales. TTV was weighted towards corporate, given the tighter restrictions that have generally been applied to leisure travellers globally, and domestic, given that international borders have generally remained closed
- 10.4% revenue margin, also in line with expectations as a result of heavier than normal domestic and corporate weightings in FLT’s sales mix
- An underlying $247.2 million loss before tax ($317.3million statutory loss before tax). FLT achieved a $102.7million underlying profit before tax (PBT) during the PCP, before the COVID-19 crisis unfolded.
POSITIVE SIGNS OF GROWTH
Turners notes that while heavy travel restrictions remained in place throughout the 1H, FLT started to see some positive signs as the period progressed, including:
- Revenue growth: Revenue reached a COVID period record of $33.5million in December, which is normally one of the quietest trading months
- Significant pent-up demand, which should ultimately fast-track recovery: FLT is typically recording strong and immediate rebounds in leisure and corporate demand when restrictions are lifted or eased.
- Various businesses returning to profitability. FLT’S UAE corporate business was profitable throughout the second quarter, while Ignite in Australia became the first leisure business to return to profitability in January 2021 thanks to solid future domestic sales and 2022 cruise bookings, says the company. Air charter business AVMIN and cycle retailer 99 Bikes have remained profitable and grew significantly throughout the pandemic
- A large volume of new corporate accounts secured, implemented and now starting to trade: FCM has won new accounts with annual pre-COVID spends in the order of US$700 million year to date.
- Vaccination programs are underway globally and starting to gain momentum in key markets that typically drive group earnings: Examples include the UK, the U.S. and now Australia
“Within our businesses globally, we have invested in key growth drivers and controlled the business critical factors that should pave the way for a return to profitability,” said Turner.
“Based on what we have seen so far, travellers have been keen to take off as soon as they have been allowed to do so, which should ultimately lead to a very solid rebound,” he added.