Webjet itching to capture pent-up travel demand as loss widens

Online travel group Webjet (ASX: WEB) has widened its full-year loss to $156.6 million, although the company says it is itching to take advantage of the pent-up demand for travel once restrictions are eased.

The loss is exacerbated by the shortened financial year which now ends on March 31. The latest nine-month deficit compares with a 12-month net loss of $143.6 million in FY20.

Underlying earnings as measured by EBITDA showed an even sharper decline with a loss of $125.3 million, blowing out from $90.1 million in FY20.

Webjet has shifted its financial year to bring it into line with its northern hemisphere travel peers.

The company remains optimistic as it continues to scale back costs in readiness for a resumption of international travel amid the push for global vaccinations.

"We see a world of opportunity," says CEO John Guscic.

"We know people cannot wait to travel to reunite with families and loved ones, to embark on adventures and to explore the world.

"While we wait for markets to open, we have not stood still. We have taken the opportunity to transform our business to be ready for the recovery."

Webjet has some way to go for a return to normal. Revenue in FY21 was $38.5 million, down from $266.1 million in FY20.

However, expenses have more than halved to $163.8 million from $356.2 million as the company continues to focus on managing its cash burn.

The current setback hasn't dampened Webjet's appetite for growth, as the company looks to grab more market share at a time of subdued activity.

"We have created a global platform that will reduce costs at scale by at least 20 per cent and provide the structural support to focus on those markets that will rebuild fastest, where competitors are weakest, and we can target the number one position," says Guscic.

The profitability of Webjet OTA (online travel agency) continues to improve with market share increasing and EBITDA margin rising above 30 per cent in the latest half year.

The division's Australian domestic bookings in April were 95 per cent of those in April 2019. WebBeds USA's total transaction value was at 83 per cent of April 2019 levels and booking for Online Republic, the car and motorhome rental division, were at 48 per cent.

Booking for Webjet OTA and Online Republic lifted in the second half, buoyed by more normalised conditions in the Australian market.

"The Australian and New Zealand domestic borders remaining opened also meant we saw Online Republic return to profitability in April and believe there is considerable scope for that business as global leisure markets reopen," says Guscic.

"While WebBeds continues to be impacted in most regions, we know that once borders do open, our businesses rebound.

"We're already seeing that in North America. The US is among the first to reopen and WebBeds is already at 83 per cent of pre-COVID total transaction value in that market.

"WebBeds is committed to emerging from Covid as the number one global B2B provider and we are confident our transformation initiatives will materially reduce costs across the business."