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Flight Centre outlines priorities and outlook at AGM

October 31, 2014 Corporate, Headline News No Comments Email Email

egtmedia59A weaker Australian dollar has failed to slow growth in outbound travel, according to Flight Centre. Even so, current growth in leisure travel is sedate rather than soaring.

Speaking at the company’s annual meeting in Brisbane yesterday, Flight Centre managing director Graham Turner reiterated his conviction that the value of the Australian dollar is not a major driver in outbound travel.

Turner also sounded a cautionary note, advising that reaching the 5% to 8% growth targets for this financial year would not be a given, as first-half growth was likely to be “subdued”.

Turner told shareholders that Flight Centre expected a gradual recovery in demand and a pickup in consumer confidence as the financial year progressed, which would “hopefully lead to accelerated second-half growth”.

He added, however, that the group could not guarantee that such a recovery would eventuate “and, while sales are growing modestly in both leisure and corporate travel, we are yet to see significant improvement”.

Shares in Flight Centre, Australia’s biggest travel retailer, slipped almost 2% yesterday yesterday morning to AUD 42.67. The Sydney Morning Herald pointed out that the stock is down almost 23% since attaining an all-time high of of AUD 55.57 in March this year.

While the future can’t be foretold, Flight Centre is still on track to achieve its forecast for an underlying profit before tax of between AUD 395 million and AUD 405 million this financial year, a 5% to 8% rise on 2013-14.

Turner said Flight Centre continued to expand its US leisure business, and would open Philadelphia and Los Angeles hyperstores in the next couple of months. Those would be Flight Centre’s third and fourth US hyperstores. There are nine hyperstores in the UK, where the concept has became a key part of Flight Centre’s overall growth strategy.

In Australia, Flight Centre saw opportunities to have flagship stores in major cities, Turner said. Hyperstores had already opened in Perth and Brisbane, with another to open shortly in Darwin.

More generally in Australia, Flight Centre sought to open “megastores” – larger than normal shops but smaller than hyperstores.

Current Flight Centre priorities include ensuring that corporate, wholesale and retail spaces reflect the fact that Flight Centre’s people are “retailers first and foremost, not office workers”. Under the heading “Experts, not Agents” a Flight Centre document stresses the importance of “ensuring each brand’s people are experts in understanding the brand’s speciality and that they in turn are backed by ‘travel gurus’, who are readily available if additional expertise is required”.

On other points, Turner said Flight Centre expected to expand its global sales force by 5-7% this year.

The price of fares had hardly changed in 30 years, Turner reminded his audience. “We believe we are in a golden era of travel.”

And a reassuring note on Ebola: “At this stage, we don’t think Ebola is having a meaningful impact on travel given that the major areas of concern – parts of West Africa – are not mainstream tourist destinations.”

Turner contrasted that to the situation with SARS over a decade agao, when parts of Asia and Canada were affected and it was feared the disease would spread quickly to other regions and countries.

“This wasn’t the case and tourism recovered relatively quickly.”

Written by : Peter Needham

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