Flight Centre on right path but pandemic turbulence not over

Flight Centre has warned investors of a higher-than-expected loss in the 2022 financial year due to slow uptake of leisure travel but says corporate bookings have bounced back to almost pre-COVID levels.

The company said it was forecasting a loss of between $195 million and $225 million for the 2022 financial year but expects to be profitable in the five months to June 30. Its share price tumbled more than 6 per cent on the news.

Speaking at the 2022 Macquarie Australia Conference in Sydney on Wednesday, the company’s chief financial officer Adam Campbell said that rates of leisure travel had returned to only about 47 per cent of what they were before COVID-19.

“Leisure is probably the part of our business that has gone through the heaviest transformation process over the last two years,” Campbell said.

This was partly due to fewer airlines returning to the Australian market and therefore reducing the number of options available to customers. “Airline capacity … is a restriction for us at the moment. We expect over the next quarter that airline capacity internationally will significantly ramp up.”

He also said most people travelling internationally were visiting family and friends and not booking tours or hotels, which is a significant part of Flight Centre’s business.

“You don’t get a lot of tours, you don’t get a lot of hotels… So your margins are typically a bit lower than you’d expect.”

However, despite a sluggish return to leisure travel, Flight Centre is set for a small profit for the first time since the pandemic began, thanks to its corporate travel division returning to the green. The company said business travel was at 75 per cent of its pre-pandemic levels.

As COVID-19 hit Australia in March 2020, major travel agencies such as Flight Centre and HelloWorld were forced to close stores and reduce overhead costs. But Campbell said customers were returning to stores to deal with the complexity of online travel bookings.