The rising cost of living has failed to dampen Australian consumers' enthusiasm for travel, with strong ongoing demand lifting sales at Flight Centre.
The travel retailer on Wednesday announced a 15 per cent jump in total transaction value - the price of travel services and products plus revenue - for the first half of the 2023/24 financial year to $11.3 billion, even as discretionary spending drops across the economy.
While profits still trailed pre-pandemic highs, the company's recovery was impressive given the backdrop of economic and geopolitical uncertainty, interest rate increases and conflict in Ukraine and the Middle East, managing director Graham Turner said.
"The level of recovery strongly underlines the travel sector's resilience," he told analysts.
"Travel we believe is non-discretionary and this is the case in many customers' eyes.
"It's been referred to as the emergence of a travelling class, which is different obviously to business and economy, with the means and propensity to travel."
Solid ongoing demand across leisure and corporate bookings and margin improvements were leading to stronger profits and shareholder value compared to pre-COVID, Mr Turner said.
The group's profit margin before tax of 0.94 per cent was the best first-half result in five years, helping propel underlying profit before tax to $106 million after recording a narrow loss in the prior corresponding period.
Mr Turner affirmed the group remains on course to lift profit margins to two per cent by the end of financial year 2025.
Its net bottom line result was a profit of $86.6 million, versus a loss of $19.8 million in the previous corresponding period.
Shareholders were treated to a 10c interim dividend, as part of a $425 million investment in capital management initiatives.
Leisure travel sales increased 18 per cent to $5.2 billion, driven in part by further recovery in higher margin international travel bookings and increasing economies of scale.
Flight Centre sees potential upside in corporate travel with capacity still lagging pre-pandemic levels at 70 per cent and more room to grow as the market recovers.
"According to the Global Business Travel Association, international business travel spending will reach $1.5 trillion in 2024, which is up from the pre-pandemic peak of $1.4 trillion," said Flight Centre Corporate managing director Melissa Elf.
Total transaction value for the corporate arm grew 16.8 per cent to $5.9 billion in the first half, outpacing recovery in the broader sector.
Flight Centre enjoyed a strong start to the second half, with total transaction value for the year on track to exceed the company's record $23.7 billion result in 2018/19, Mr Turner said.
"Positive lead indicators have also emerged, with international capacity expected to be back to almost pre-pandemic levels in Australia by the end of financial year 2024 and airfare prices decreasing - by an average of 13 per cent in Australia recently and about seven per cent globally over the first half," he said.
RBC Capital Markets analyst Wei-Weng Chen estimated the group's profit result was six to seven per cent short of consensus estimates, after adjusting for amortisation costs.
The company also incurred a one-off $7.3 million loss because of the closure of loss-making US wholesaler GoGo.
"Despite the miss, Flight Centre is guiding to unchanged trading expectations but lifted guidance by $30 million to reflect the removal of convertible amortisation from underlying results," Mr Chen said.
Flight Centre shares dived 5.9 per cent to $20.44 in morning trading.
