Travel back to (almost) normal by 2024

Macquarie Research has brought forward its travel industry recovery profile by 6-9 months due to the rollout of global vaccines in its latest analysis of the Flight Centre business.

“We forecast 85% Total Turnover Value  recovery (of pre COVID-19 levels) in FY24 (FY21: 30% recovery, FY22: 55%, FY23: 75%), with more emphasis expected on domestic & Corporate travel in the near term.

“In line with the company’s expectations, we expect the Corporate business to return to profitability by the end of FY21 (Leisure to return to profit in FY22).”

Analyst Morana McGarrigle says corporate business will be the key driver of growth over the long term.

“Corporate TTV is now over a third of Group TTV (up from a quarter in 2009). We expect the mix shift to Corporate (away from Leisure) to continue, given a heavier domestic travel weighting (vs Leisure) in the short-to-medium term, and with stronger ongoing demand driven by essential services.

“We assume Corporate volumes settle at ~85-90% pre-COVID; while video-conferencing is a good forum for some meetings, it is not an effective substitute for the vast majority of business travel.”

She expects a number of Flight Centre’s corporate travel rivals will fold creating opportunities for further market share gain.

“Many agents that do not enjoy FLT’s balance sheet strength are likely to exit, leaving opportunities for FLT to pick up business as stimulus unwinds.”

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