Flight Centre profits take off - leisure business exceeds pre-pandemic levels

Flight Centre Travel Group reported an A$106 million ($112m) underlying profit before tax for the latest half-year and says the current 12 months will be a “watershed year” for the industry, with airfares falling.

The leisure business’s A$60m underlying profit before tax (PBT) exceeded pre-pandemic levels and was double that of the pre-pandemic year in 2019.

Total transaction value (TTV) increased 15 per cent to A$11.3 billion in the six months to December 31, delivering the group’s second-strongest start to a year (behind only the first half of 2020).

New Zealand figures are not broken out, but the group’s NZ managing director Victoria Courtney said operations in this country had a positive first half, with leisure and corporate travel demand remaining steady, despite household budgets being hit by high living costs and economic uncertainty.

“With the culmination of increased airline capacity, more typical, seasonal demand and thus more competitive airfares – it’s set to be another positive six months ahead,” she said.

Flight Centre is one of the world’s biggest retail travel agents and corporate travel managers, headquartered in Brisbane and with business in 24 countries, spanning Australia, New Zealand, the Americas, Europe, Britain, South Africa, the United Arab Emirates and Asia.

In the latest half-year, the group reported corporate TTV increasing 16.8 per cent on the corresponding period to a record A$5.9b. The increased spending was on volumes only 70 per cent of pre-Covid levels.

Leisure spending increased 18 per cent to A$5.2b.

During the last three months of 2023, average international airfares in Australia fell 13 per cent compared to the previous year, exceeding a 7 per cent drop in fares around the world. Fares have also fallen in this country following a surge in prices as post-pandemic demand exceeded air capacity.

Managing director Graham Turner said at a time when discretionary budgets were tightening, travel remained an outlier and priority spend for many.

“Looking ahead, we are well-placed for the full year as we approach our busiest trading months. We have good momentum and early second-half trading has been strong,” he said.

In its outlook for the full year, the company said after four years of disruption and then gradual recovery, 2024 is set to be a watershed year of travel, with industry bodies including the International Air Transport Association forecasting it will exceed 2019 as the busiest 12 months ever for travel. The association forecasts 4.7 billion people will travel this year.

Flight Centre is forecasts underlying PBT for the full year to be between A$300m to A$340m. Its shares have traded between A$17.30 and $23.50 during the past 12 months and today opened at A$21.73. When the pandemic hit in March 2020, they traded below A$9.

Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.