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Flight Centre (ASX:FLT) share price under scrutiny on FY21 Q3

The Flight Centre Travel Group Ltd (ASX: FLT) share price could be a mover today with a trading update.

What did Flight Centre say in its trading update?

Flight Centre revealed that it has seen record COVID-period sales revenue in March after a subdued January and February.

March turnover was more than $100 million higher than February – up 32.7% month on month. It took gross quarterly total transaction value (TTV) back above $1 billion for the first time since COVID-19.

Flight Centre is currently expecting further growth in April 2021.

What’s driving this performance?

Australia corporate and leisure businesses, as well as US leisure, is contributing strongly to the recent improvement. The Liberty leisure business (USA) was profitable in March and April with strong demand for core Mexico and Carribean products.

The US corporate business is also recovering strongly in April. Schools are now operating in-person, with clients returning to offices.

The recovery is continuing despite heavy restrictions in key markets. UK travel corridors are closed (effective 18 January 2021 but subject to an upcoming review), with ongoing domestic border uncertainty in Australia.

What’s happening with government support?

Flight Centre said that it has now lost the $5 million to $7 million per month jobkeeper wage subsidy in Australia during the fourth quarter. Overseas government programs have generally been extended. However, the jobkeeper loss is likely to be recouped if state governments keep borders open.

Costs

Flight Centre said that it’s achieving its cost targets. The fixed costs are continuing to track at around $70 million per month.

Variable costs are increasing slightly in line with expectations, with increased incentive payments to staff due to sales growth.

The company continues to invest in products and projects that will drive productivity gains, the customer experience and future returns.

Balance sheet

Flight Centre had around $1.1 billion of total liquidity at the end of the third quarter. That puts it in a strong position to get through to the other side of COVID.

Summary thoughts on the Flight Centre share price

Flight Centre is targeting a return of profitability (in profit before tax terms) in FY22 on a month to month basis.

It’s currently expecting FY21 second half losses to be the same as the first half because of the loss of jobkeeper.

However, Flight Centre believes there’s pent-up demand which will help in various markets when restrictions are lifted.

Flight Centre could be a long term opportunity if global travel returns to normal in the medium term. But that requires the world to keep on top of COVID as well as the variants. It’s not a clear bet yet.

There are also other ASX growth shares that could do well over the next few years.

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Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

Note: the report is 100% free.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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