The Flight Centre Travel Group Ltd (ASX: FLT) share price is in focus today after the release of yesterday’s FY21 third quarter trading update. Shares fell, so now it’s cheaper.
What happened in the FY21 third quarter?
Flight Centre told the market that things are getting much better.
March 2021 was the best month by far since the COVID-19 pandemic started impacting the world.
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. Thats good news for long suffering shareholders.
Australia corporate and leisure businesses, as well as US leisure, is contributing strongly to the recent improvement.
However, 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. This can be offset as long as those state borders stay open.
Flight Centre said that it’s achieving its cost targets. The fixed costs are continuing to track at around $70 million per month.
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 of FY21 because of the loss of jobkeeper, which is expected to be positively offset by the stronger demand for travel.
What to make of this for the Flight Centre share price?
A return of volume is clearly a good thing. The more activity there is, the more Flight Centre can utilise its scale to help customers.
Flight Centre said that the corporate business was tracking at 29% of historic TTV at the end of the third quarter and it’s poised for market share growth. This recovery is being driven by essential services clients – government, mining and health. But most companies are starting to travel when they can.
The travel business also said that it has a strong pipeline of account wins globally.
In the corporate segment it’s likely to return to profit ahead of the leisure business. It’s targeting 50% of pre-COVID TTV by 31 December 2021, assuming vaccines continue to be effective and borders stay open.
Global leisure TTV is tracking at 14% of historic levels at the end of the third quarter. This division has a higher cost base and is weighted towards international travel historically. But there’s “significant” recovery opportunities as travel corridors open and restrictions ease for vaccinated travellers.
The Flight Centre share price has fallen materially over the last month or so. It could be a longer-term opportunity if vaccinations continue to improve the situation, particularly if updated vaccinations are more effective against the troublesome variants.
