Australian spending on leisure-related travel has not recovered since the federal budget was handed down in May, a leading travel agent group says.
Flight Centre says trading conditions in Australia over the first five months of 2014/15 have been challenging, given the lack of uptick in leisure travel spending.
In response, the company has reduced commissions and lowered ticket prices in a bid to stimulate demand.
While Flight Centre’s overseas operations were solid, the company said the growth outlook for its Australian business was “currently unclear”.
“When we set out our full year growth targets in August, we expected the uncertainty surrounding Australia’s Federal Budget would have abated as the first half drew to a close and consumer confidence and spending would have started to rebound,” Flight Centre chief executive Graham Turner said in a statement on Thursday.
“Unfortunately we are yet to see tangible signs of a full recovery and the overall leisure travel market continues to be flat year-on-year.”
Turner noted the total transaction value – an industry term measuring the dollar amount of all travel products sold – of Flight Centre’s Australian leisure business was up about two per cent, compared with compound annual growth rates of 10 per cent the company had achieved in the past five years.
On a more positive note, Turner said the Australian corporate travel market was “relatively stable” amid good growth in the corporate travel sector globally.
In an update to the Australian stock market, Flight Centre lowered its profit expectations for the first half of 2014/15 to an underlying profit before tax of between $360-390 million, down from previous estimates released in October of $395-405 million.
News of the profit downgrade sent Flight Centre shares down nine per cent at $31.87 on Thursday.
Qantas ended the local trading day six cents lower at $2.25, while Virgin flat at 43 cents.
