Flight Centre Travel Group (FLT) has released its first half 2021 fiscal year results, reporting a gradual improvement to the books even as global sales conditions remain volatile.
In a release issued Feb. 24, FLT attributed its improvement to targeted cost base reductions and revenue increases during the period.
Since the COVID-19 crisis took hold in March 2020, FLT said it:
- Lowered its cost base by 66% (representing a $1.9 billion annualised saving) without jeopardizing its investment in growth drivers or its ability to rebound quickly when conditions improve.
- Continued to generate total transaction value and revenue in a pre-vaccination, domestic-only travel world.
- Delivered month-on-month reductions in net operating cash outflow during the 1H.
- Maintained a $1.2billion liquidity runway to help it withstand an extended downturn or capitalize on opportunities during the recovery phase, which could now be fast-tracked with the vaccinations underway.
“The conditions we have encountered since March last year have undoubtedly posed the greatest challenge that our industry and many others have faced,” FLT managing director Graham Turner said. “Rather than enter a holding pattern ahead of future domestic and international border re-openings, we are taking steps to ensure we are well placed for the eventual recovery.”
Investing in tech
Revenue increases were achieved despite airplanes being grounded and heightened travel restrictions and lockdowns due to second and third waves of COVID-19, FLT said.
The company has since deployed new products, including Helio (a leisure platform that consultants can use to search, quote, book and manage travel for clients – full deployment by June 30), Melon (Corporate Traveller brand’s technology offering for SME customers) and SOAR (FLT’s online booking engine, which will soon have new features and content).
“In both the leisure and corporate sectors, we have continued to invest in new and legacy models and have proactively delivered innovative tech-backed-by-people solutions to customers of these legacy businesses, as evidenced by both Helio and Melon,” said Mr. Turner. “While we are in the early stages of recovery, we are starting to see some promising signs.”
Those prmosing signs include:
- Revenue growth: Revenue reached a COVID period record of $33.5million in December, which is normally one of the quietest trading months
- Significant pent-up demand, which should ultimately fast-track recovery: FLT is typically recording strong and immediate rebounds in leisure and corporate demand when restrictions are lifted or eased.
- Various businesses returning to profitability. The United Arab Emirates corporate business was profitable throughout the second quarter, while Ignite in Australia became the first leisure business to return to profitability in January 2021 thanks to solid future domestic sales and 2022 cruise bookings. Air charter business AVMIN and cycle retailer 99 Bikes have remained profitable and grew significantly throughout the pandemic
- A large volume of new corporate accounts secured, implemented and now starting to trade: The FCM business alone has won new accounts with annual pre-COVID spends in the order of $US700million year to date, complementing its high customer retention rates and again underlining its organic growth capacity. High profile wins, including FLT’s largest global account and various government or essential services customers that are likely to transact at closer to normal volumes during the pandemic, have now started to trade which should help fuel a faster 2H recovery particularly within the large Northern Hemisphere businesses; and
- Vaccination programs underway globally and starting to gain momentum in key markets that typically drive group earnings: Examples include the UK, the USA and now Australia, which are all aiming to have at-risk or vulnerable people, plus a high percentage of their overall adult populations, vaccinated by mid-year
Given that the timeframe for recovery is largely dependent on government policies and the vaccination programs’ success, FLT is not able to provide FY21 guidance.
The company, however, said it is seeing a number of positive indicators and is well placed for a recovery.
“Within our businesses globally, we have invested in key growth drivers and controlled the business-critical factors that should pave the way for a return to profitability,” Mr. Turner said. “Based on what we have seen so far, travellers have been keen to take off as soon as they have been allowed to do so, which should ultimately lead to a very solid rebound.”
FLT is targeting a return to breakeven in both leisure and corporate travel during 2021 on the basis that domestic borders are likely to open permanently and some (low risk) international travel may be permitted.
Last October, Flight Centre laid off more than 600 employees in Canada as part of a restructuring effort in direct response to COVID-19's crippling impact on the travel industry.
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