Mideast deal gives travel firm an ‘earnings tailwind’
An Australia-based global travel leader is hoping to cash in on the peace deal between the US and Iran as we head into the new year, as the country’s travel advice for the Middle East comes into focus.
The developments appear to be a positive sign for Flight Center Travel Group, which on Wednesday cut its earnings for the current financial year due to conflicts in the Middle East.
The company, which operates in Australia, New Zealand, South Africa, Canada and the UK, now expects pre-tax underlying profits of between $275 million and $295 million for 2025/26.
It had previously projected an underlying result of $310 million to $345 million, compared to the previous year’s result of $286 million.
“This was not due to a deterioration in our core business, but rather the external shock of the conflict in the Middle East disrupting peak holiday travel,” managing director Graham Turner said in a stock exchange statement.
Following the start of the war in late February, when the US began attacking Iran, the Australian government issued a ‘do not travel’ warning to the region.
The advice has reduced demand for travel from Australia to the Middle East and regional hubs that normally serve as transit points for some international carriers to destinations in Europe.
However, on Wednesday, the government brought forward the recommendation to ‘reconsider your travel needs’ for Bahrain, Israel, Kuwait, Qatar and the United Arab Emirates as the possibility of a peace agreement decreased.
“Reconsidering your travel needs also means ‘reconsidering your transit needs,'” the government said.
“If you must transit through these places, stay for as short a time as possible and eliminate unnecessary activities.”
Flight Center said the conflict mostly affected its leisure travel market in the fourth quarter, with earnings expected to fall by about $50 million.
Situations such as cancellations and reservation postponements, the weakening of long-distance reservations and the transition to low-margin routes were pointed out.
“Even after recovering from the disruption in Q4 the group still expects an underlying profit broadly in line with FY25,” Mr Turner said.
Flight Center said the new peace deal between the US and Iran would provide a clearer path to 2026/27 and a “significant gain”.
Flight Center also announced market share buybacks worth up to $200 million after the last one is completed in May.
Mr. Turner said the buyback reflected the company’s view that it believed its shares, which closed at $11.81 on Tuesday, were undervalued.
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