No-moat Flight Centre’s fiscal 2024 profit before tax, or PBT, of AUD 320 million came in at the middle of management’s guidance range. However, revenue of AUD 2.7 billion missed our estimate by 8%, mostly due to lower-than-forecast revenue margins in the US and Europe segments.
A strong balance sheet allows Flight Centre to take advantage of weakness in the economic cycle via opportunistic acquisitions or increasing market share via investment in marketing initiatives. It also enables the development of new products to more effectively address specific market segments.
Bears
Domestic market success does not guarantee long-lived success of offshore expansion.
Flight Centre Travel is one of the biggest travel agencies in the world. The group generates just over 50% of its total transaction value, or TTV, from the corporate market, just under 50% from the leisure market, and the rest from ancillary travel-related activities. In corporate travel, Flight Centre is a global Top 4 player operating in over 100 countries, with different brands catering to various customer segments (small and midsize businesses to large enterprises). In leisure, Flight Centre operates a network of over 550 shops generating 70% of the leisure TTV, online channels generating just under 20%, and the rest from independent agents. Over half of group TTV is generated in Australia and New Zealand, 20% from Americas, just under 20% from Europe, and the rest from Asia.