Nothing can stop Aussies from travelling—or so it seems. Even as prices rise, people are ticking destinations off their bucket lists in a post-Covid voyaging spree. And the travel group Flight Centre (ASX: FLT) is the better for it.
In the first half of FY23, its earnings were at $95 million, 19% more than its initial target. It also made up for its losses of $184 million in the first half of FY22, with a turnaround of about $280 million. Flight Centre’s total transaction value shot up 200% to $9.9 billion, almost reaching pre-Covid levels. And finally, its revenue increased by 217% to $1 billion.
Flight Centre CEO Graham Turner feels these results indicate consumers’ pent-up travel demand. He said, “Flight Centre Travel Group has delivered a solid start to FY23 in an improved, but not fully recovered, trading environment. While travel is a discretionary purchase, customers typically view it as essential and prioritise it above other discretionary items, which is one of the reasons why the market typically grows year-on-year and why prolonged downturns in the sector are relatively rare. ”
People made travel plans for business and pleasure worldwide, besides Asia. While corporate travel is set to top $10 billion in FY23, leisure has already covered 44% of the total contribution.
Flight Centre’s global corporate travel business arm recorded transactions worth $5 billion, with its regional segments—Australian-New Zealand (ANZ) and Europe, and Middle East and Africa (EMEA) — also generating record revenue. With regard to leisure, its business recorded $4.4 billion, thanks to a $770 million push from its online businesses and its growing network of leisure brands and companies.
Next on the Company’s bucket list is expanding into the luxury sector. To do so, it has acquired Scott Dunn—a luxury tour operator. This will fast-track the Company’s growth into the luxury sector in the UK, the US and Singapore.
In FY23, it is targeting earnings of $250 million-$280 million. Come FY25; Flight Centre wants to achieve a 2% underlying profit before tax (PBT) margin through cost margin reduction and gradual revenue margin improvement.
Turner added, “While we continue to monitor market conditions. we are not currently seeing evidence that the recovery is slowing, with the leisure business currently trading at post-COVID highs and corporate travel activity escalating after the traditional holiday period. Very high employment rates in our key markets are also a strong macro-economic tailwind.”
While all seems optimistic, the Company is wary of growing airfare prices, people visiting family and not exploring the destination with its partners, and more corporate travel than leisure. These have led to reduced revenue margins.
Flight Centre is hoping that greater airline capacities can mitigate potential losses. For instance, in Australia, it expects international capacity to increase to 85% of pre-COVID levels by June 30 as some key airlines, including Emirates, China Southern and Cathay Pacific, boost services.
Will this booming wanderlust trend continue, or will people finally have to succumb to inflationary pressures and cut their spending?
Alinda is a Business Reporter for The Sentiment
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