Flight Centre heralds travel as an ‘outlier’ of the spending crunch as profit rebounds

Flight Centre Travel Group (ASX: FLT) founder and CEO Graham Turner has good reason to describe travel as an ‘outlier’ of discretionary spending in a challenging consumer market after the company posted a massive turnaround in fortunes over the past year.

The Brisbane-based company posted an $86.6 million profit for the first half of FY24, up from a $20.02 million loss a year earlier, as leisure travel took flight during the period to beat pre-COVID highs.

“At a time when discretionary budgets are typically tightening, travel remains an outlier and a priority spend for many,” says Turner.

“We are seeing ongoing solid demand for leisure and corporate travel, leading to our second-strongest start to a year in TTV (total transaction value) terms and accelerated activity in January and February, ahead of our busiest trading months.”

Turner says Flight Centre’s key strategies are ‘gaining traction and driving margin improvements’, which has led to stronger profits and shareholder return.

“Our corporate business, which has been heavily growth focussed since the start of the pandemic, has continued to grow rapidly – well above the industry’s recovery rate – while also targeting efficiency gains.

“In leisure, profits and margins are now comfortably above comparative pre-COVID levels, with the prospect of further productivity-driven improvement.”

Flight Centre posted a 28.5 per cent increase in revenue to $1.2 billion for the six months to the end of December, driven by a 14.6 per cent increase in TTV to $11.32 billion.

Corporate TTV increased 16.8 per cent to a record $5.9 billion while leisure TTV increased 18 per cent to $5.2 billion.

Flight Centre delivered underlying profit before tax (PBT) of $106 million, up 565 per cent, with statutory PBT of $120 million up 756 per cent from a year earlier.

The leisure business’s $60 million underlying PBT exceeded pre-pandemic levels and was double the FY19 first half and almost 10 times greater that the equivalent period in FY20.

Profit before tax for corporate travel rose 53 per cent, aided by an improved underlying profit margin of 1.6 per cent, compared with 1.2 per cent a year earlier.

Leisure revenue growth of 33 per cent significantly outpaced Flight Centre’s 18 per cent TTV growth, with the company attributing this partly to the recovery of international travel, which typically offers higher margins.

“Looking ahead, we are well placed for the full year as we approach our busiest trading months,” says Turner.

“We have good momentum and early 2H trading has been strong. Positive lead indicators have also emerged, with international capacity expected to be almost back to pre-pandemic levels in Australia by the end of FY24 and airfare prices decreasing – by an average of 13 per cent in Australia recently and about 7 per cent globally over the 1H.”

Flight Centre has revealed that preliminary results for the current half-year are in line with expectations putting the company on track to beat the record $23.7 billion in TTV achieved in FY19.

The result is being buoyed by leisure customers prioritising travel, along with new account wins by the company's corporate business.

Flight Centre shares were trading at $20.09, down $1.64 or 7.5 per cent, at 11.54am (AEDT).