Flight Centre reports $602m loss, but sees profitability on the horizon

Flight Centre reports $602m loss, but sees profitability on the horizon

Flight Centre Travel Group (ASX: FLT) has painted a promising picture of recovery in its global operations, including early signs of profitability in the US, after reporting a $601.7 million group loss for FY21.

An easing of restrictions and rising vaccination rates in some of its key markets saw travel demand surge in the fourth quarter.

The recovery was led by the US where Flight Centre’s leisure and wholesale business returned to profit towards the latter end of FY21. The company’s TTV (total transaction value) in the US corporate market had also bounced back to be 40 per cent of pre-pandemic levels.

Overall volumes in the US were close to 70 per cent of pre-COVID levels at the end of July. The picture was even more buoyant in China, France and Germany with volumes at 80 per cent or more.

The full extent of how much a year of global travel restrictions has impacted the Travel Centre business is revealed in the company's latest results.

TTV in FY21 is 74.2 per cent lower than a year earlier at $3.94 billion, while group revenue has fallen 79.1 per cent to $395.9 million.

The company’s underlying pre-tax loss of $507.1 million is in line with forecasts. The $601.7 million statutory loss compares with a loss of $848.6 million in FY20.

The phasing out of the JobKeeper subsidy provided a $41 million hit to the company’s bottom line, along with a $42 million increase in underlying costs.

CEO Graham Turner says despite another challenging year, conditions have broadly begun to improve.

“When lockdowns have lifted and borders have re-opened – as they have just started to do in a more meaningful way outside of Australia and New Zealand – we have typically seen immediate and strong travel recovery, which is what we have now started to see in key locations like the US, Canada and Europe,” Turner says.

“The near-term outlook has also improved in the UK, another large and important market for our company, with most restrictions now lifted and people learning to live with the virus.”

Flight Centre has responded by taking a less defensive approach to emerging opportunities.

 “As an organisation, we too have learnt a lot during the past 18 months, particularly about being resilient, consistent and as optimistic as possible during tough times,” says Turner.

“Our priorities have evolved from emergency cost cutting at the beginning of the crisis to maintaining those significantly reduced expenses, while still developing and implementing our technology, improving productivity and finetuning our recovery strategies to drive stronger future returns.

“Looking ahead, we believe our position as a diversified global business with compelling customer offerings across three main travel divisions – leisure, corporate and supply – will be of enormous value and a great advantage to us and to our major suppliers.”

Flight Centre is now taking a monthly view of profitability to gauge the recovery. Turner says Flight centre will return to monthly in late FY22 while TTV are expected to reach pre-COVID levels by June 2024.

“Travel will inevitably be more complex in the post-COVID world and customers will require more assistance as they navigate new requirements and try to understand any restrictions that may still apply,” Turner says.

“In this type of environment, our people’s knowledge and our enhanced systems will prove invaluable at every step of the customer journey.”

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