Flight Centre Travel Group Ltd (ASX: FLT)
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Who is Flight Centre (ASX:FLT)?
Flight Centre is a travel agency, serving both the leisure and corporate sectors, online and through bricks-and-mortar stores. It has several brands beyond its namesake flagship brand and even other business ventures, including forex service Travel Money Oz and a stake in bike retailer 99 Bikes.
Flight Centre remains headquartered Down Under, but well under half of its global TTV (Total Transaction Value) comes from Australia. Its three co-founders still have shares in the business, but only one – Graham Turner – is still involved on a day-to-day basis.
Flight Centre Company History
Flight Centre traces its origins back to the 1970s when Graham Turner and his co-founders ran bus tours around Europe. The company we know today began in 1982 in Sydney, as a seller of discounted airfares.
The company expanded rapidly across Australia and internationally both organically and through acquisitions. It has survived multiple crises including 9/11, the collapse of Ansett, the GFC and the COVID-19 pandemic.
It used the pandemic to become a leaner business, now employing only 12,000 people after having 20,000 pre-pandemic and closing a number of unviable brick and mortar outlets. After losing over $1bn on underlying pre-tax earnings in 2020 and 2021, it made $300m in EBITDA in 2023 and returned to paying dividends, having suspended them during the pandemic.
Future Outlook of Flight Centre
Flight Centre Travel Group's outlook for FY24 appears robust, buoyed by a first half with a 20% year-on-year increase in total transaction volume (TTV), nearing pre-pandemic levels. In the longer term, the International Air Transport Association's projects of a 3.4% compound annual passenger growth globally through 2040. No doubt Flight Centre will reap some benefit as such a big player in the industry. Its $220m acquisition of luxury holiday package seller Scott Dunn will help margins. It is expecting TTV to surpass FY19's $23.7bn for the full FY23.
Is Flight Centre (ASX: FLT) a Good Stock to Buy?
From an investment standpoint, Flight Centre Travel Group presents a mixed bag. Despite facing challenges from the pandemic and global uncertainties, the company has shown resilience, evidenced by its 31.4% gain in share value over the past year. The projected growth in profits and EBITDA for FY24 signals a strong recovery path and potential for substantial financial improvement.
However, investors should approach with caution, considering intense competition in the industry, the slashed commissions by many travel companies (especially airlines) in the aftermath of the pandemic, as well as the company's low 2% margins.
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Frequently Asked Questions
Flight Centre primarily operates as a global travel agency.