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Flight Centre Travel Group (ASX: FLT) has cut its full-year profit guidance by as much as $50 million, warning that the Middle East conflict's disruption to international leisure travel, particularly bookings to the UK and Europe via Gulf transit hubs, will drag fourth-quarter earnings well below expectations.
The travel giant, which also announced a $200 million share buyback in the wake of a weaker share price, now expects underlying profit before tax (UPBT) of $275 million to $295 million for FY26, down from an adjusted target of $310 million to $345 million.
At the midpoint, the revised range is broadly flat against an adjusted FY25 result of $286 million, effectively wiping out the growth trajectory the company had been building across the first nine months of the financial year.
Flight Centre delivered UPBT of $226.4 million over the first three quarters, representing 9.7 per cent growth on the prior corresponding period and accelerating to about 20 per cent in the third quarter alone.
Total transaction value hit $19.5 billion for the nine months, up 7.6 per cent.
The company says the fourth-quarter leisure shortfall is expected to come in at $50 million against prior expectations, compounded by about $5 million in touring cancellations linked to the conflict and a $5 million to $10 million headwind from adverse foreign exchange translation as the Australian dollar strengthens.
“The change in our short-term expectations reflects a temporary, conflict-driven headwind layered over what was shaping as a very solid year,” says Flight Centre managing director Graham Turner.
“It has been driven by an external shock - the Middle East conflict disrupting peak leisure travel - not by a deterioration in our underlying business."
Flight Centre's corporate travel division has proved more resilient, with the company's nine-month numbers underpinned by continued strength in its FCM and Corporate Traveller brands.
Turner notes a peace deal reached between the US and Iran this week provides a "clearer runway into FY27" but he concedes it had come too late to rescue the current financial year's leisure earnings.
“Looking ahead, we have strong foundations and growth prospects in both the leisure and corporate sectors," he says.
"This is reflected in the board’s decision to launch a new up-to-$200 million buyback - which clearly signals that we see our shares as undervalued at current levels."
The $200 million share buyback is the second in succession for Flight Centre after the company completed a $200 million program in May this year that retired 16.2 million shares, equivalent to 7.3 per cent of issued capital.
Shares in Flight Centre were trading 4.5 per cent higher at $12.34 at 12.53pm (AEST).
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