Low prices have stimulated demand but slowed short-term TTV and revenue growth.
Flight Centre has just released its figures for the six months to 31 December 2016, with record sales as TTV topped $5 billion for the first time.
The company said profit before tax was $109.2 million, including a one-off $4.1 million loss on the sale of its Employment Office business.
Managing director Graham Turner said the prevailing market conditions and their impacts on the first half results had masked some of the company’s key achievements during the period. As well as low ticket prices, overseas results had been impacted by adverse foreign exchange movements and there were also reduced earnings from Flight Centre’s Asia, Middle East and UK-based tour operating businesses which recorded a $12.5 million drop in first half profits.
However the key factor was widespread airfare discounting, particularly on Australian outbound routes and in the USA, New Zealand, Singapore and India.
“This discounting, which was driven in Australia by rapid airline capacity growth during the 2016 calendar year, has delivered unprecedented airfare bargains to our customers, but has affected TTV and revenue comparisons, given that fares were higher during the FY16 first half,” Turner said.
He said productivity was improving and “our record ticket sales again underline the strength, relevance and diversity of our offerings and of our omni-channel network”.
Turner added that online sales were growing for the company, both in leisure and corporate travel.
The company lowered its expectations for the full 2017 financial year, now forecasting underlying pre-tax profit of between $300 million and $330 million (previously $320 million-$355 million).
More details in today’s issue of Travel Daily.