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Australia's Flight Centre blames airfare war for 36 pct profit drop
February 22, 2017 / 11:00 PM / 10 months ago

Australia's Flight Centre blames airfare war for 36 pct profit drop

SYDNEY, Feb 23 (Reuters) - Australia’s biggest listed travel agent, Flight Centre Travel Group Ltd, cut guidance and reduced its dividend after unprecedented airfare discounting pushed it to a 36 percent half-year profit drop.

While the airfare price war has also hit earnings at Air New Zealand and Qantas, the result from the bricks-and-mortar travel agent contrasts with online-only agency Webjet Ltd, which reported a record half-year profit after the market closed on Wednesday.

Flight Centre, which mostly relies on selling flights and holiday packages to customers in its stores in Australia, but also operates subsidiaries in the United States, Britain, Europe and Asia reported underlying pre-tax profits of A$113.2 million ($87.2 million) for the six months to Dec. 31.

The after-tax figure of A$74.4 million is down 36.2 percent on a year earlier and tracks well behind market expectations for the company’s full-year profit.

Flight Centre’s managing director Graham Turner said that heavily discounted fares on routes to the United States, New Zealand, Singapore and India had boosted sales, but not earnings since the second half of last financial year.

“This discounting, which was driven in Australia by rapid airline capacity growth during the 2016 calendar year, has delivered unprecedented airfare bargains to our customers, but has affected total transaction value and revenue,” he said.

Flight Centre also said it was hit by adverse foreign exchange movements, and reported falling earnings in Asia, the Middle East and the United Kingdom.

Flight Centre announced an interim dividend of 45 cents, lower than the 60c it paid a year ago. Its revised guidance forecasts an underlying pre-tax profit between A$300 million and A$330 million, below last year’s figure of A$352.4 million. In August, the company said it hoped to grow underlying profit in fiscal 2017.

Travel agent disruptor Webjet reported an 86.9 percent profit leap to A$20 million late on Wednesday after stripping out one-off gains from an asset sale, beating its own guidance and market expectations while also upgrading its outlook. ($1 = 1.2989 Australian dollars) (Reporting by Tom Westbrook; Editing by James Dalgleish)

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