Bounce in US travel keeps Flight Centre looking up
Australians’ prioritization of short-haul travel has hit Flight Center’s profits, but optimism remains that interest in Asia and the US will rebound.
The 2024/25 financial year may have disappointed, with the online travel agency reporting a lower-than-expected pre-tax profit of $289.1 million, but early results have left executives and analysts confident there will be greener grass ahead.
Chief executive and company founder Graham Turner told the company’s annual general meeting on Wednesday: “Our fundamentals are strong – arguably stronger than ever – and we expect to return to profit growth this year.”
With the largest share of business occurring between March and June each year, fears of a return to US borders and rising tensions in the Middle East in the first half of 2025 have had a major impact on Flight Centre’s success.
Australians in particular have begun looking for shorter international flights, with Japan overtaking the US and UK to become the second most popular overseas destination behind New Zealand.
But analysts are seeing signs that travelers are returning to the US, with outbound travel from Australia to the US in October rising for the first time since the March quarter.
“We expect today’s update to be received positively as the stock has underperformed relative to its travel peers,” RBC Capital Markets analyst Wei-Weng Chen said.
Corporate customers are increasingly important to Flight Center, and losses in Asia were a major reason for the lackluster profits seen in 2024-25.
In the first quarter of the current financial year, Mr Turner said Asia delivered “modest profitability”, with the total transaction value of corporate business rising by seven per cent.
A sunnier outlook has led to a pre-tax profit target of between $305 million and $340 million in its next earnings report, up as much as 17 percent.
Adopting artificial intelligence is a step that the travel company approaches cautiously; It highlights both the potential to streamline customer service and the threat posed by AI-powered competitors in online travel planning.
Corporate Traveler, a subsidiary of Flight Centre, introduced an AI assistant called “Mel” to “deliver a smarter, more personalized experience while keeping human service at the center.”
When asked by a shareholder what the adoption of AI would mean for the future of Flight Center’s 12,400 full-time employees, the company’s chief financial officer said AI was not intended to replace staff.
“We are very much a people-focused company,” Adam Campbell said.
“We will always be a people-first organization, but we will use AI as an enabler of our strategies.”
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