AN OVERSEAS holiday is no longer considered a luxury but part of the annual family ritual, according to Australia's largest travel agency, Flight Centre.
In stark contrast to the crisis gripping retailers, Flight Centre said it was not experiencing the soft consumer demand that had led to a slump in retail stocks.
Announcing a small profit upgrade yesterday, Flight Centre managing director Graham Turner said consumers did not really consider a holiday once or twice a year as discretionary spending but an "annual ritual" during a long working year.
"Leisure customers are finding compelling reasons to take off overseas, with international air fares remaining highly affordable and the strong dollar delivering a secondary benefit," he said.
Two days after department store retailer David Jones issued a shock profit warning, Flight Centre is now forecasting a pre-tax profit of between $243 million and $247 million for the full year a rise of as much as 24.5 per cent on 2009-10.
It has benefited from a strong Australian dollar and cheap international air fares encouraging people to travel.
The guidance is slightly above the top end of its previous forecast of $220 million to $240 million.
Shares in Flight Centre closed up 18? at $21.40 in a weak market, taking the stock's gains over the past year to about 22 per cent. Other travel-related stocks did not fare so well yesterday, with Wotif.com and Webjet both falling 2?, to $4.73 and $1.95 respectively.
Moelis analyst Todd Guyot said the key drivers of Flight Centre's growth cheap international fares and the strong Australian dollar were likely to continue.
"The fact that they have been able to come up with a result just above the top end of their [previous] guidance is a pretty good outcome this year it has been a challenging year," he said.
Flight Centre emphasised that its full-year profit target would be achieved despite the adverse effect on travel demand of the Queensland floods and cyclone, earthquakes in New Zealand and Japan and a recent ash cloud from a Chilean volcano.
The company said it would be profitable for the first time in each of the 10 countries where it operates wholly owned businesses, including the US, which has been an under-performer for more than a decade.
Mr Turner said the corporate and leisure travel sectors had "generally improved".
Frequently Asked Questions about this Article…
What profit guidance did Flight Centre announce and how big is the upgrade?
Flight Centre upgraded its full‑year pre‑tax profit guidance to between $243 million and $247 million, slightly above its prior forecast of $220 million to $240 million. The company said this result represents up to around a 24.5% increase on 2009–10.
Why are Flight Centre profits rising — what’s driving the travel demand?
Flight Centre cited two main drivers: cheap international airfares and a strong Australian dollar, which together have encouraged more overseas travel. Management also noted consumers increasingly treat overseas holidays as an annual ritual rather than discretionary spending, and both corporate and leisure sectors have generally improved.
How did Flight Centre shares react to the profit upgrade?
After the upgrade Flight Centre shares closed higher at $21.40, taking the stock's gains over the past year to about 22% despite a weak overall market.
How did other travel stocks perform around the same time?
Not all travel stocks shared Flight Centre’s uplift — Wotif.com and Webjet both fell about 2%, trading near $4.73 and $1.95 respectively.
Has Flight Centre been affected by recent natural disasters and travel disruptions?
Flight Centre said it would still meet its full‑year profit target despite adverse effects from the Queensland floods and cyclone, earthquakes in New Zealand and Japan, and an ash cloud from a Chilean volcano.
Is Flight Centre profitable across its international operations?
Yes — the company reported it would be profitable for the first time in each of the 10 countries where it operates wholly owned businesses, including the United States, which had been an under‑performer for more than a decade.
What should everyday investors watch in Flight Centre’s outlook?
Investors should monitor the strength of the Australian dollar, trends in international airfares, ongoing corporate and leisure travel demand, and any regional disruptions (natural disasters or ash clouds) that could hit travel volumes. Also watch future company guidance updates for signs of sustained momentum.
What did analysts say about Flight Centre’s prospects after the announcement?
Moelis analyst Todd Guyot noted that the key growth drivers — cheap international fares and a strong Australian dollar — were likely to continue, and that coming in just above the top end of prior guidance was a favourable outcome in a challenging year.
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