Profits lift off for 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".