As one of the hardest hit stocks by COVID-19 with its shares still trading at less than half their pre-pandemic price, Flight Centre (ASX: FLT) is supremely confident in international travel resuming soon, expanding their FCM Travel business to Japan via a joint venture with NSF Engagement Corporation.
FCM Travel is one of the Corporate travel management businesses operated by Flight Centre which noted that its corporate travel business was tracking at 40% of its pre-COVID levels, aided by various border openings around the world everywhere other than Australia.
Transatlantic travel soared in July 2021 after the UK reopened its border to the US on July 24 as part of their plans to just live with the virus.
Hoping the trend continues, Flight Centre sees major opportunities to extend their corporate travel footprint in Asia with Japan being the world’s 4th largest market for corporate travel.
“Japan is a key corporate market because of its size and importance within the global economy as a business hub for multi-national companies,” said Flight Centre Managing Director, Graham Turner.
“By securing an equity position in this crucial market, we will enhance our ability to win new local, regional and multi-national accounts, while also gaining greater control over and enhancing the service we provide to our existing customers with operations in Japan.
“We believe this will become a very significant business and a valuable addition to our Asian network, which also includes businesses in China including SAR Hong Kong, India Singapore and Malaysia.”
The joining venture into Japan’s market comes at an interesting time with many global organisations questioning the value of international travel having maintained its operations through the height of the pandemic without it.
A recent survey conducted by Bloomberg of 45 large businesses in the US, Europe and Asia showed that 84% plan to spend less on travel post-pandemic. This has been aided by major tech improvements in video conferences, virtual reality headsets and sustainability initiatives to reduce carbon footprints.
Nonetheless, with corporate travel being the most lucrative market for travel companies due to the higher margins on premium services, Flight Centre has been using the subdued travel period to upgrade their technology. This included the rollout of their FCM platform in China last month which will be followed by Japan under the joint venture which will launch in January 2022 and be headed by Kenichi Shiraishi, currently the leader of NSF Engagement’s corporate travel business.
In their FY21 results, Flight Centre reported a 79% decline in revenue to $395.9 million for a net loss after tax of $364 million. Subsequently, FLT shares are still yet to recover from their pre-pandemic price when trading around $40 per share to have last closed at $16.90.
Immediately following the reporting period however, Flight Centre saw rising travel activity as Europe commenced its broader re-openings while hopeful other regions follow suit as vaccination rates steadily climbed globally.
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