DOWNTURN HITS FLIGHT CENTRE PROFIT

Written on the 26 June 2015

DOWNTURN HITS FLIGHT CENTRE PROFIT SAVVY holidaymakers turning to online competitors have slugged Flight Centre (ASX:FLT) with the travel retailer downgrading its profit guidance.

Underlying profit before tax is forecast to be between $355 million and $365 million in FY15, down from its earlier target of $360 million to $390 million.

Earnings are also expected to fall short compared to the previous period, despite reporting a record total transaction value across Flight Centre's 10 global businesses.

Consultant discounting in the first half to stimulate demand and compete with bargain market pricing has contributed to the decline.

The company has also faced higher costs as a result of increased wages, network expansion, repositioned marketing strategy and sluggish sales growth in the industry overall.

Flight Centre managing director Graham Turner says the growth in the retailer's international division won't be enough to offset the domestic decline.

"Corporate travel results have generally been reasonable, although the downturn in the resources sector has again affected performance in Western Australia and the Australian corporate travel market as a whole," Turner says.

"While our mainstream leisure growth has been subdued this year, the investments we are making in the marketing and customer intelligence areas will help us generate stronger returns on our marketing spend and increase our market-share in the future."

Leisure sales in Australia slowed in the lead up to the Federal Budget in May last year, with the market stabilising in the second half of FY15.

Turner says the company hasn't kept pace with the recovery, as demonstrated by modest growth during the traditional "uplift" months of May and June.

"On a positive note for the longer term, airline competition remains healthy in Australia, with international capacity up again this year and about 50 airlines servicing outbound routes," he says.

"This competition looks set to continue, with Airbus recently predicting in its Global Market Forecast that the passenger aircraft fleet serving the Australia South Pacific region will almost double by 2033.

"This supports our belief that the next 20 years will represent a Golden Era of Travel, as customers will have more choice, better in-flight experiences and continued access to highly affordable fares."

Earnings in the US are set to increase by 50 per cent this year, while the UK is on track to reach GBP$1 billion in transactions.

Flight Centre will continue to revitalise the brand in Australia, including the roll out of enhanced stores for Escape Travel and Travel Money.

Latest News

APOLLO REVS UP ITS RESULTS

APOLLO Tourism & Leisure (ASX: ATL) has hit its profit forecast in its maiden result as a publicly traded company...

JASMINE YARBROUGH AND TAMIE INGHAM TAKE MARA & MINE TO HOLLYWOOD

MARA & MINE entrepreneurs Jasmine Yarbrough and Tamie Ingham (pictured left and right respectively) slipped in...

HUGE PROFIT SPIKE FOR HELLOWORLD HEALS MERGER WOUNDS

HELLOWORLD (ASX: HLO) gripped the share market this morning after its announcement of a whopping 880 per cent increas...

PROFIT DROP AT SERVCORP

SERVICED office company Servcorp has seen its profit fall, citing New York City, Singapore and Saudi Arabia as the pr...

Related News

WHY EMPLOYEE-OWNED COMPANIES ARE BEATING ASX200 SHARE PRICES

EMPLOYEE-owned companies command a higher share price than their publicly listed peers, reaping a 17 per cent prem...

RISE OF THE MACHINES HAS WORKERS SWEATING

UP TO 3.8 million Australian workers are fearful their job may soon be terminated by a robot, a new survey has shown....

LESS TALK, MORE SMALL BUSINESS ACTION IN 2017

THE future growth and prosperity of Australian SMEs could be undermined if governments lose sight of the sector...

TEST DRIVE A POST GRAD AT BOND

THERE'S only one way to really move your career into the fast lane, says Bond University, and 'test driving...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter