CHEAP AIRFARES STALL FLIGHT CENTRE PROFIT

CHEAP AIRFARES STALL FLIGHT CENTRE PROFIT

FLIGHT Centre (ASX: FLT) has warned that cheap international airfares will impact profit and revenue growth in FY17.

While the Brisbane-based company is expecting record sales volumes for the year, and expects to exceed $20 billion in total transaction value (TTV) for the first time, that will not translate into strong profit growth.

Underlying profit before tax (PBT) is expected to be between $320-350 million, compared to $352.4 in FY16.

In addition to low fares, Flight Centre's results are being subdued by currency movements, the US election and UK Brexit vote, and the zika virus.

In response to the news, the company's shares are trading down 7.25 per cent this afternoon at $30.560.

Managing director Graham Turner says it will be disappointing if the company does not grow underlying PBT and surpass the $20 billion TTV barrier for the first time this financial year.

"That remains the case, although the internal and external factors that are currently impacting top and bottom-line results mean that we will not be tracking at those levels by the end of the first half, despite a relatively strong sales performance," says Turner.

"Qantas this week reported similar trends in relation to airfare discounting and its impacts on revenue, while Virgin outlined subdued trading conditions during the first quarter in its recent market announcement."

The Top Deck and Back Roads touring businesses have also experienced a slow peak season.

However, Flight Centre expects ticket prices to recover in the second half of the year, and improvements in the European business as people come to terms with Brexit.

In more positive news, ticket volume growth at Flight Centre is outpacing the industry as a whole and appears to be accelerating.

"International and domestic ticket sales were particularly strong last month, with average ticket numbers per day growing at the fastest rate we have recorded since 2014. Tickets to the USA alone increased by almost 40% in the month and are up about 15% so far this year," he says.

"Travellers have, of course, been the big winners in this low-fare environment and have been snapping up some of the cheapest fares we have ever advertised."

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