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Three ASX-listed travel companies with a combined market capitalisation of $2.72 billion have all pulled their profit guidance today as border and flight restrictions block the possibility of meaningful predictions.
The announcements coincided with Flight Centre's (ASX: FLT) decision to close 100 underperforming stores, with plans to transfer transactions and staff to other shops while investing in new models.
Along with other Brisbane-based companies Corporate Travel Management (ASX: CTD) and Apollo Tourism & Leisure (ASX: ATL), Flight Centre saw its shares plummet this morning after providing the market the cold truth that uncertainty has thrown forecasts out the window.
ATL shares fell the hardest in morning trading, plummeting 18.42 per cent to 16 cents each by 11am AEDT. The company is particularly exposed given the USA's ban on flights from Europe, with Europeans making up a significant portion of Apollo's USA guests
"In the wake of the Coronavirus (COVID-19) outbreak we are carefully reviewing operating and capex spend as well as fleet lifecycles across the globe," says Apollo managing director and CEO Luke Trouchet.
But Apollo is a much smaller player in the travel space than FLT and CTD, whose shares were down 8.7 per cent and 4.4 per cent respectively.
Flight Centre had previously forecast an underlying profit before tax (PBT) of between $240-$300 million, while Corporate Travel Management had indicated it was tracking at the lower end of full-year profit guidance of $165-175 million.
Now neither of those results are likely to come to fruition. Total transaction value (TTV) is in line with trends for the half at Flight Centre, but the virus's spread and the subsequent increase in travel restrictions have made it more difficult to predict the full-year impact or a timeframe for recovery.
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Corporate Travel Management has recognised border closures and travel restrictions now mean the impacts will be worse than the board's previous assumptions.
"The material decline in our client's [sic] travel activity, related to client-led travel restrictions and actions from governments to close borders, is of unknown duration," says CTD.
"Whilst the timeframe for a return to normal levels of activity is unknown, we do expect current activity levels to recover in time."
CTM managing director Jamie Pherous will be taking a 20 per cent cut to his fixed remuneration for the rest of the financial year, while non-executive directors will take the same percentage cut to their fees.
Flight Centre announced its executive earnings will decrease given short-term incentives, making up 10 per cent of targeted remuneration, won't be earned. Directors will also forego 30 per cent of their fees for the remainder of FY20 and will review the situation early in FY21.
Flight Centre managing director Graham Turner says his company will draw on its experiences with SARS in 2003 and during the Global Financial Crisis in 2009 by seeking to stimulate demand, while also implementing sensible cost reduction strategies to maintain its balance sheet strength.
"While people are still booking travel in February, our TTV actually increased slightly globally compared to the same month last year we are now seeing significant softening and expect this to continue into April at least," says Turner.
"Within this uncertain environment, our priorities are to reduce costs, while also ensuring that we and our people are ready to capitalise when the steep discounting that is underway across most travel categories starts to gain traction and as the trading cycle rebounds."As we saw with both SARS and the GFC in Australia, the rebound can be relatively fast and strong after a fairly significant downturn in international travel."
Flight Centre's game plan is to win back leisure market share by investing in sales and marketing - at a time when competitors may be forced to cut back - with a particular focus on destinations considered to be low risk like Australia and the South Pacific.
The travel agency will also highlight great value travellers can gain at the moment, and with suppliers it is working to give travellers greater flexibility and additional peace of mind surrounding their future bookings.
"Our corporate travel people are focused on helping their customers, while our large global network of corporate business development managers is focused on winning new accounts to complement the strong retention rates we traditionally achieve and to drive longer term growth," says Turner.
Meanwhile, Corporate Travel Management can take some solace in the fact it continues to retain clients at consistently high levels, and has been winning clients since its 1H20 results, especially in North America.
CTD also notes a high percentage of domestic (intra-country) transactions, including 65 per cent in Australia and New Zealand, 70 per cent in the USA and 70 per cent of European TTV within the UK.
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