TURBULENCE IN FLIGHT CENTRE'S 'GOLDEN ERA'

TURBULENCE IN FLIGHT CENTRE'S 'GOLDEN ERA'

THE YOUTH, Baby Boomers and corporates - three markets that Flight Centre Travel Group (ASX: FLT) is putting its money on as carrying the company through an overall declining period of leisure travel.

FLT CEO and managing director Graham Turner (pictured) remained firm today that we are "entering a golden era of travel" - as stated by the company last year following a record 2013/14 profit - despite a profit slump in the half year to December 2014. Cheaper fares are expected to stimulate demand going forward.

The company's underlying NPAT declined 6.8 per cent from the previous corresponding period to $97.6 million, from a revenue that saw a growth of 4.6 per cent to reach $1.1 billion. This included costs and profits from the Top Deck acquisition settled in August 2014.

While it may not look like a golden period on the books, this result was met with a share price surge of 8.5 per cent to $38.25 in early trading today.

The company, with diversified offerings across 29 brands, is of the view that decline has stabilised in the Australian market - which endured a decline in the last half year to offset record sales in overseas markets.

Striking gold offshore

That being said, almost half of FLT's global network (47 per cent) is now located outside of Australia, with Flight Centre USA being the second largest company operation to generate more than AUD$1 billion in TTV in the six months to December 31 last year.

FLT's America to Europe route has 30 per cent more traffic than the entire Australian outbound market.

"Four businesses - the United Kingdom, South Africa (local currency), Singapore and Greater China - delivered record first half EBIT, while the USA achieved its best first half result since we acquired the Liberty and GOGO businesses in 2008," says Turner.

"In sales terms, each of our 10 operations [worldwide] achieved record results.

"We are pretty confident in the corporate market in Australia - corporate TTV topped $1.1 billion for the period - but the bottom line leisure results were lower than we would like, and lower margins and costs haven't gone away.

"Leisure is pulling us backwards but we think it will be profitable in the second half - the challenge is to enhance productivity in our leisure businesses, as we are successfully doing in corporate."

Costs pulling the fleet down

A downturn in consumer confidence corresponded with increased investment in terms of new shop designs, marketing strategies such as SEM that incurred higher costs and wage increases.

Wages grew nine per cent over the period, the major drivers being a $5 to $6 million investment in Australian novices, a seven per cent increase in headcount and store numbers increased four per cent to 2759.

Where the money is















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