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Markets love Flight Centre vision of calmer times ahead

August 25, 2017 Headline News No Comments Email Email

Flight Centre shares shot up almost 11% yesterday after chief executive Graham ‘Skroo” Turner forecast modest fare fluctuations rather than steep discounting across the board and unveiled a transformation program designed to speed revenue growth and slash costs.

“In terms of airfare pricing, Flight Centre currently expects a more normal trading environment during FY18 in Australia, with modest decreases or increases in average fares, rather than steep declines across the board,” Turner said.

Flight Centre is aiming at 7% average total transaction value (TTV) growth each year for the next three years. Turner said the group would be “disappointed if we don’t grow sales and profits globally during financial year 2018 as we work towards achieving the high level, medium-term goals that we are targeting”.

Fairfax media quoted Turner reaffirming that bricks-and-mortar leisure retail business remained the most important part of Flight Centre’s mix. He said the strategy was to return net profit margin to 2%, lifting it from 1.6% in 2017.

Flight Centre in Queen Street Brisbane

Flight Centre net profit dropped by 6% to AUD 230.8 million during the latest year and underlying earnings fell to AUD 329.5 million – still close to the top of the company’s revised guidance of AUD 300 million to AUD 330 million.

The first half of the 2017 financial year saw some astonishing airfare bargains following heavy discounting.

Trading was soft globally in the first half, as the world pondered Britain’s Brexit vote, the triumph of Donald Trump in the US and the slim majority of the Australian government after elections in July 2016. Airfares steadied in the second half and earnings improved.

Turner conceded that “a little bit of tweaking and rationalisation” would be necessary in a few areas to improve Flight Centre’s bottom line.

In Australia and New Zealand, Flight Centre’s leisure and corporate travel sales grew healthily, with the company achieving record ticket volumes and record room nights. International ticket sales climbed 10.5% in Australia as outbound travel from the country overall rose by 4.1%.

Written by Peter Needham

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