Flight Centre Travel Group has released its 2022 financial results, reporting a $183.1million full-year loss, which is a 46 per cent improvement on the $337.8million result from last year, and below the company’s previous prediction of between a $180million-$190million loss.
FCTG is starting the new fiscal year with solid momentum after a strong finish to last year’s results, with total transaction turnover (TTV) recovery accelerating during the fourth quarter and leading to the travel behemoth recording a $35million underlying profit for the last period of the year.
The company said the recovery was driven by rapid sales growth globally after governments relaxed or removed international and domestic travel restrictions.
However, overall revenue margin for the financial year was down slightly at 9.7% (FY21: 10%), with the changes driven predominantly by higher airfare prices and a lack of capacity and planned and unplanned business mix changes, which FCTG said led to heavier than normal weightings of lower margin products.
In positive news, all of FCTG’s geographic regions and business segments, apart from Asia, returned to profit during the last quarter of the financial year, with the global corporate and Europe, Middle East and Africa businesses profitable for the year.
FCTG also reported that its corporate business has continued to out-perform, with key sales metrics all outpacing the broader business travel sector’s recovery, pointing to further market-share growth.
The Omnichannel journey continues
Meanwhile, the company’s leisure online businesses generated almost $750million in TTV, including a record full-year contribution from flightcentre.com.au, with the website capturing almost 20% of Flight Centre brand’s gross turnover in Australia over the year.
The company’s global shop network now includes 469 stores, with an additional 43 (38 Flight Centre shops and five Travel Money outlets) set to re-open by the end of 2022.
Work is also continuing on Flight Centre brand’s evolution from a multi-channel travel agent to a modern omnichannel retailer with connected offerings that allow customers to move seamlessly between in-store, online, app and phone channels.
What have airlines’ reduced commissions changed?
FCTG says it is fostering ‘best-in-market supply partnerships’ and working closely with those airlines in Australia and New Zealand that are reducing front-end commission payments to deliver new revenue streams.
With airlines investing heavily in NDC and now starting to look for returns by shifting volume to these new channels, FCTG said it is well placed to capitalise on this shift, given its ownership of TP Connects, a Dubai-based specialist aggregator that works with both airlines and agencies to provide access and distribution solutions.
What’s the outlook for 2023?
FCTG says that profit will be a challenge to forecast in the short-term and is expected to be heavily weighted towards the second half of the financial year, reflecting both seasonality (with peak booking months in the January- June period) and the anticipated capacity and pricing stabilisation as the year progresses.
- The travel industry rebound is in its infancy and normal travel patterns (local v long haul, holidaymakers v VFR) are yet to resume
- Various parts of the world, including China, are yet to reopen, which is adversely impacting capacity as well as leisure and corporate passenger flows; and
- Airline capacity and pricing – the key drivers of supply and demand – and revenue margin are yet to stabilise and normalise
The company said that while supply constraints and macroeconomic changes are being monitored, they are not currently noticeably impacting demand, underlining travel’s resilience and its unique position as a discretionary item that customers view as a ‘necessity.’
As such, FLT says it has started the 2023 financial year with strong momentum and is well-placed to capitalise on opportunities that will arise given that it is:
- Re-emerging from the pandemic with a solid balance sheet and with its key assets retained and, in some instances, enhanced
- Investing in technology to enhance productivity and the customer experience
- Continuing to prioritise TTV and market-share growth, revenue and cost control; and
- Preparing for growth by expanding its leisure and corporate workforces
Commenting on the results, CEO Graham “Skroo” Turner said, “After two years of unprecedented disruption to normal global travel patterns and other everyday activities, we are pleased to start FY23 with a considerably brighter outlook.”
“It is, of course, early days in the recovery, and there is still considerable upside potential.”
“While the cost of living is generally increasing, very low unemployment globally and travel’s proven resilience are significant offsetting factors for our business, with customers having both the means and the desire to make the most of their limited vacation time after being denied that opportunity for some two years.
“Corporates also continue to re-engage face-to-face to re-establish old business relationships or to create new ones.
“We will, of course, continue to monitor COVID-19 and the possible incidences and impacts of future strains. While we believe further lockdowns are highly unlikely, there is little visibility around government’s future strategies or intentions.”
For the full-year results, head to www2.asx.com.au/announcements.flt
