State of the industry: September

Helloworld profit surge

Helloworld Travel Limited is clearly reaping the benefits of the strong leadership of Andrew and Cinzia Burnes, with the company last month recording a hefty increase in reported earnings to $55.2 million — an increase of almost $30 million on the prior year. Net profit after tax increased tenfold to $21.5 million, with the performance achieved alongside the ongoing integration of the Helloworld and AOT Group businesses.

The company cited improved economies of scale and productivity efficiencies, along with the stabilisation of network numbers and the addition of MTA Travel in Australia and New Zealand’s World Travellers Group. Although all divisions improved their profitability, the “Rest of World” segment was impacted by strong competition for the Insider Journeys business which saw a drop in revenue as it refocused away from direct business back to its traditional wholesale market.

Going forward Helloworld expects further improvement, forecasting full year pre-tax earnings for 2017/18 of $63-67 million.

Reed Holidays goes under

AFTA raised some eyebrows last month when it advised travel agents and consumers affected by the collapse of Melbourne-based operator Reed Holidays to contact police. AFTA ceo Jayson Westbury announced the immediate revocation of the ATAS accreditation of the various Reed brands which include Young at Heart Travel, Australian Air Holidays and Seniors Coach Tours. He urged agents to invoke a chargeback if payments were made by credit card, and “to contact the local police to commence criminal charges against the principals where payments and deposits had been paid for future travel and that travel will now not be able to be taken”.

Details of the collapse remain sketchy, but the administrators from insolvency advisory firm Cor Cordis confirmed they had been appointed as liquidators and were working to analyse the financial situation of the business. Four trips under way in the Northern Territory and Queensland were affected, while a further 72 passengers scheduled to depart the following week were contacted to advise their trips were off.

Cor Cordis said the future of the companies may involve a sale of existing assets “including the itineraries already booked”.

Another record for CTM

Corporate Travel Management continued it strong performance, with the company’s full year profits described by managing director Jamie Pherous as “another great result despite challenges in the global economy”. CTM’s underlying earnings result of $98.6 million was up 43% on the prior year, with global TTV jumping 16% to just over $4.1b.

Pherous said each region in the CTM network grew “significantly above market,” with organic growth complementing expansion through acquisitions such as Tasmania’s Andrew Jones Travel, Redfern Travel in the UK and other agencies in the USA. “With the global network largely complete, CTM has won significant global clients which has been primarily due to the company’s global network and its award winning SMART technology suite,” Pherous enthused. He forecast futher growth in 2017/18, with full year underlying earnings of $120-$125m representing an increase of up to 27.5%.

Interestingly investors did not join the celebrations, selling down the company’s shares which experienced a decline of almost 10% in the wake of the announcement.

Flight Centre transforming

Flight Centre also recorded a strong profit figure of $329.5 million — almost $1 million per day over the last year — but the result was down almost 5% on the previous 12 months. The company unveiled details of its ongoing transformation plan, led by chief operating officer Melanie Waters-Ryan, which has already seen a number of senior redundancies in Australia.

“Within three years the company aims for every brand in every country to be materially profitable, with all underperforming business models to pivot or be divested or closed,” the company said. Further significant changes in Australia are not expected, given high profitability levels, however, “a small number of shops with sub-standard profit and sales histories are also being filtered to ensure they meet key performance metrics, with a view to either improving results or closure”.

Another interesting feature of the Flight Centre results announcement was the revelation of losses at Top Deck Back-Roads Touring, which combined lost $1 million, versus a $9 million profit contribution in 2016.

QF transformation achieved

The Qantas Transformation Program embarked upon by CEO Alan Joyce three years ago to turnaround the airline after record losses has delivered again, with the Australian flag-carrier announcing a FY17 statutory profit before tax of $1.18 billion, but down 17% on last year’s result.

Joyce said the now complete strategy had seen the airline tackle “some difficult structural issues”, which included wage freezes on high ranking executives and reducing its workforce by 5,000 full-time equivalent staff group-wide.

He said the transformation plan had delivered $3.5 billion in cumulative underlying profit, record customer satisfaction and the opportunity for Qantas to grow.

The FY17 result was slightly above Qantas Group’s guidance range flagged in May, primarily driven by the strengthening domestic business of Qantas and Jetstar, which combined achieved a record $865 million Underlying EBIT.

Despite facing high level of capacity growth, Qantas International saw conditions improve in the 2H, with an Underlying EBIT of $327 million, while Qantas Loyalty achieved a record $369 million, up four percent in revenue.

Net passenger revenue fell 1%, with the Group citing “significant international competitor capacity”, reduced domestic volume and a dip in demand for the resources sector.

Non-executive employees will share in a $55 million bonus, which equates to $2,500 for full-time staff and $2,000 for part-timers.

Qantas revealed the airline’s 12 Airbus A380s would be overhauled beginning in Q2 of 2019. Skybeds in Business class will be retrofitted with Business Suites and the Premium Economy cabin would be increased in size, featuring a like-for-like product as will be offered on the Qantas 787-9 Dreamliner. Economy and First class will also be refurbished.

The Business and Qantas Club lounges at Melbourne Domestic will also be renovated to provide more space, comfort & dining options.

Joyce also challenged Boeing and Airbus to develop next-gen aircraft capable of flying non-stop from Sydney to London and Melbourne to New York with full passenger loads that would be “revolutionary for air travel in Australia”.

Virgin Australia “improving”

Virgin Australia continued to lose money over the last financial year, with the company’s annual results announcement indicating a group loss of $185.8 million. The company worked hard to find the bright spots in its figures, saying the result was “an improvement of $38.9 million” on the previous year and pointing out improvements in several key metrics such as free cash flow, total cash balances and financial leverage.CEO John Borghetti said the statutory result was impacted by restructuring charges relating to the airline’s Better Business Program which would deliver “significant long term cash flow savings”.

Domestic performance was impacted by subdued trading conditions including reduce demand for regional and corporate travel. Virgin Australia International was profitable for the 2017 financial year, while Tigerair Australia’s domestic operations were also profitable as the business delivered passenger and unit revenue growth.

However the overall Tigerair Australia result was impacted by the launch and subsequent withdrawal of operations to Bali. Borghetti said recent improvements in trading conditions were expected to continue, improving the business’ overall performance.

Avis revamps scholarship

AVIS’ longstanding commitment to the Australian travel sector is continuing this year, with the car rental giant last month confirming details of the 2017 Avis Travel Agent Scholarship which is evolving to reflect a new focus on innovation. Kaye Ceille, Avis Budget Group managing director Pacific Region, said with today’s travel agents operating in a hyper-competitive retail environment “to stand apart consultants must constantly be looking for clever and creative ways to deliver a genuinely memorable service”.

The scholarship prize package is also evolving, with this year’s winner to receive return Qantas flights, accommodation and car hire with the option of travelling to the USA, Europe or Asia to attend a Phocuswright industry conference. Also on offer is 12 months’ individual membership of Cruise Lines International Australasia, a Polonious Resources Personal Profile, and two tickets; to the 2018 AFTA National Tavel Industry Awards gala dinner including flights and overnight accommodation.

Applications are due by 9 October, with the final judging and awards announcement taking place in Sydney on 13 November – for entry details see www.avisscholarship.com.

Express expansion

The Express Travel Group has seen some significant wins in the last month, with two large groups of travel agents joining the company’s Independent Travel Group network. The first addition to be announced was Western Australia’s RAC Travel, which becomes part of Express on 1 October when all seven of its locations will move across.

RAC WA executive manager of travel and tourism, Mike Leary, said “we see Express Travel Group as the partner that best aligns with our vision for growth in the future”.

A week after the Western Australian announcement, Express confirmed the further addition of South Australia’s RAA Travel, the travel services division of the Royal Automobile Association of South Australia. RAA currently operates 22 shops across SA and far western NSW including eight in the Adelaide CBD, 13 in country South Australia and one in Broken Hill. Nine of them feature international travel consultants.

ETG general manager of sales, Jonathan Nelson, was enthusiastic about the addition, saying “our customised partnership model…continues to attract the highest quality agencies in Australia, which benefits all of our 700-plus members in the long term”.

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