Airline ills no barrier to growth

By SIMON HENDERY

Travel chain Flight Centre is soaring above aviation industry woes and the threat of increased internet bookings, announcing plans to open 20 more retail outlets across New Zealand in the next six months.

New Zealand managing director Graeme Moore said the company's annual rent bill would top $4 million this year as it increased the retail space it leases by 1000sq m. It now leases about 7000sq m.

"Our market research has shown that our street signage is one of our greatest marketing tools, so the positioning of each store is one of our biggest priorities."

Moore said a push by airlines to encourage on-line bookings was not a threat.

"People book with us not just because we offer good value but because we are handy."

Last November Flight Centre took the unusual step of opening an outlet at Auckland's Middlemore Hospital, which Moore said had been trading well.

It also has a store at Auckland International Airport and has three shops within Warehouse stores.

Moore said the company was also close to launching a booking engine on its website. But while more travel would be booked over the internet, New Zealanders' travel plans tended to be complex enough to warrant personal dealings with an agent, he added.

"We're still basing a good 95 per cent of our growth strategy on the convenience of a shop location."

Flight Centre, which also owns the Great Holiday Escape and Corporate Traveller brands, has more than 120 shops and business units in New Zealand and employs more than 700 staff. Last year it bought the Sir George Seymour Travel and Tourism College.

The Australian-listed company reported a A$62 million ($67.15 million) profit on revenue of A$3.6 billion last year. The New Zealand operation turned over A$364 million.

Moore said the company's profitability depended on it achieving volume targets with airlines and accommodation providers.

"The more volume we can produce the better price we can get. It's very much a volume market ... It's almost like a supermarket - the margins are wafer-thin so you have to have a very low operational cost."

In his latest weekly tip-sheet, Auckland investment adviser David McEwen said Flight Centre had impressed analysts with its ability to overcome the many disasters that have plagued the industry since 2001, including the collapse of Ansett and the September 11 terror attacks.

Because it focused on the "value-for-money" sector of the market, it was less susceptible to economic down-turns, when travellers were more budget-conscious, McEwen said.

Moore said most of the new Flight Centre would be in Auckland, Wellington and Christchurch.