Flight Centre corporate travel division targets 50 per cent recovery by year end

Flight Centre (ASX: FLT) is expecting a significant rebound for its global corporate travel business FCM as vaccine rollouts get underway globally and international borders begin to reopen.

FCM, which operates in more than 95 countries, is targeting 50 per cent of pre-COVID levels by the end of 2021 as it starts to see returns on investments it has made into its offerings during the pandemic.

At the end of April, Flight Centre's corporate business, of which FCM is the flagship multinational focused division, was trading at 29 per cent of prior year levels globally.

However, FCM has developed a strong organic growth profile, fuelled by a combination of high customer retention rates and record new account wins during the pandemic including large and high-profile accounts such as Procter & Gamble and Atos.

"Based on early signs that vaccines are effective in preventing symptomatic infection, and with healthy vaccine rollout rates in key markets such as the Australia, New Zealand, the US and UK, we expect health risks to reduce," FCM managing director Marcus Eklund said.

"In the absence of disruptions such as new strains, this should lead to an easing of government-imposed restrictions on domestic and international travel, and a partial rebound of the global business travel market by year end.

"Based on our experiences, travel immediately rises by 20-30 per cent when restrictions are relaxed. A healthier rebound will occur if international borders remain open."

Eklund said FCM's diverse customer base was the key to this anticipated rebound, with recent in-house research indicating high levels of pent-up travel demand across several key industries.

"The mining, construction, pharma, energy and resources, FMCG manufacturing industries and their associated supply chains, together with governments and other growth companies, were responsible for most business travel activity during 2020," Eklund said.

"They will also drive early growth in travel activity this year, as their C-suite, customer-facing and sales executives recommence their traditional customer and team engagement.

"It is essential for the corporate travel industry to be highly adaptable to rapid change. It must also offer a greater number of services in health, safety and customer communication, and expedite their delivery, to remain relevant in this environment."

Despite his optimism that the corporate travel world is returning to normal, Eklund acknowledges the pandemic has dramatically changed the way people work.

FCM highlights research from Cisco Webex showing more than half of all employees now work from home several days a month. As a result, Eklund expects some pre-pandemic travel activity will shift to virtual working models.

This will lead to further consolidation in the corporate travel industry - a trend Eklund hopes to jump on.

"Our investment ensures we can boost the confidence of businesses resuming travel, thereby servicing a greater volume of customers and increasing market share.

"In this fast-changing, unpredictable world, health and safety will remain the single biggest priority.

"Our FCM team is monitoring the changing risk and regulatory environments daily and providing solutions within 24 hours. Now helped by our new AI capabilities, we can offer 24/7 travel monitoring, live information updates and instant communication with travel managers and travellers."

Shares in Flight Centre are down 3.22 per cent to $15.62 per share at 10.34am AEST.

Business News Australia