IF THERE were still any doubting Thomases questioning the vitality of the travel sector, they were promptly washed away in a sea of rebounding profits and optimistic financial forecasts last month. While most private businesses don’t open their books for the public to see, the listed companies certainly painted enough of an optimistic picture to convince most observers that the industry may have finally put that dreaded “p” word behind them once and for all. For the big players, a succession of losses during the shutdown were replaced with a shiny profits, and for those not quite there yet, the trends show the golden hill is not too far away.
Starting with the agency groups, both Helloworld and Flight Centre enjoyed healthy half-year results for the six months to 31 December 2022. For Flight Centre, the extent of the recovery even surprised their own optimistic projections, with its EBIDTA result 19% ahead of forecasts put in place a year earlier ($80 million), raking in $95 million during the gangbuster period. The result marked a $280 million turnaround from the $184 million underlying EBITDA loss recorded during the previous corresponding period. Both Flight Centre’s corporate and leisure divisions returned to profitability, with the former trading ahead of industry growth rates and delivering a record Total Transaction Value (TTV) of $5 billion, a figure which is tipped to exceed $10 billion during this full fiscal year. Sales also recovered strongly in the first half, with TTV up 203% to $9.9 billion, already tracking at around 80% of its record result in 1H 2020. Tantalising for Flight Centre is the fact that its CEO Graham Turner believes the business can still do much better, characterising the pleasing numbers as “solid” in what is only a partly-recovered environment.
“In both leisure and corporate, we are achieving our strategic objectives and laying foundations for more meaningful profit recovery in the future,” Turner said.
Meanwhile, over the fence at major competitor Helloworld, the picture also looks very encouraging, with the company posting significant gains in TTV across all major segments. The company delivered a 209% jump in overall TTV of $1.2 billion for the first half of FY23, up from just $390.5 million in the same period last year, with Australian operations alone seeing an eye-watering 194% increase to $1.02 billion. Helloworld’s underlying EBITDA also swung around in the right direction from an $7.7 million loss in the previous year to a $13.5 million profit, while a statutory profit after tax of $1.6 million was also recorded, representing a sharp $16.8 million bounce-back to the black.
In making the announcement, Helloworld largely attributed the rosy financials to a combination of pent-up travel demand, and, perhaps most importantly, an even stronger traveller appetite for travel advisor services. So fast had the need for travel agents spiked in the back end of 2022, that Helloworld admitted the demand so far exceeds travel agent availability, signalling a possible scaling up of its human capital in the coming 12 months. While the picture wasn’t wholly positive, most notably a declining revenue margin and supply chain issues curtailing greater profitability, a bigger investment in digital efficiency and a swathe of opportunities relating to the re-opening of China to travel are expected to make the next reporting phase even cheerier in the full-year reporting season.
Another agency brand taking full advantage of the return of travel was Corporate Travel Management, which managed to double its TTV for the first half of the 2023 financial year when compared to the previous corresponding period. The business recorded a TTV of $4.19 billion for the first six months, a significant jump on the $2.08 billion posted in the first half of the 2022, while Underlying EBITDA rose by 182% to $51.3 million, and revenue also grew from $163 million to $291.9 million. MD Jamie Pherous was upbeat about the latest figures, labelling the numbers “pleasing” and confirming the business continues to see strong momentum into 2H23 through significant new clients transacting and activity recovery.
Looking further up (literally) in aviation and the flow of recovery looked pretty similar, with Qantas Group recording a massive $1.43 billion Underlying Profit Before Tax for the six months to 31 December 2022, representing a staggering rebound from the $1.27 billion loss posted during the previous period. Domestic operations were shown to have returned the fastest, posting a 222% increase in revenue to $3.63 billion, while international flights weren’t too far behind, rebounding by 189% to $3.8 billion. Qantas’ budget Jetstar business also performed well, improving revenue by 432% from $394 million to $2.09 billion during the six-month period, while the group’s loyalty division also surged ahead, posting a 112% increase in revenue to $1.027 billion from $485 million. While pleasing for Qantas, the news wasn’t cause for universal elation, with many in the sector believing Qantas, and the aviation industry more broadly, was disproportionately assisted by government aid programs, while other segments of travel had to do it much tougher. For many, reading about the swelling coffers at Qantas left a bitter taste in the mouth – especially agents who feel the airline has looked to cut them out of the sales cycle by taking an axe to commissions. Perhaps more philosophically however, a strong national carrier is reflective of a stronger travel ecosystem and hopefully it ultimately means that everyone benefits in the long run through the trickledown effect. Along with the news of surging profits, Qantas revealed a good portion of the funds will be used to boost its fleet numbers so it can scale more sharply for global growth.
The picture was slightly less clear at the headquarters of bitter rival Rex Airlines however, which failed to get out of the red by 31 December 2022. The airline’s parent company Regional Express posted an after-tax loss of $16.5 million for the period, narrowing its loss by 55% on the same half-yearly period in 2021. The result was negatively impacted by regional operations, which Rex conceded had been a “drag on the group’s performance”, along with a $23 million slug resulting from mark-to-market valuation of the Convertible Note and Warrant facility entered into with PAG in 2020. Despite this, it remains clear that Rex is on track to touch down in the black again soon though, with the cash in the bank almost doubling in a 12-month timespan and its domestic jet services returning to profitability from September 2022 onwards.
The last month also saw the industry provided with a rare glimpse into the financials of one the sector’s biggest touring players, with Intrepid voluntarily opening up its books as part of a commitment to being more transparent. Despite a 10-fold surge in client revenue last year, the report showed the tour operator operated at a $25.9 million loss for the 12 months to 31 December 2022. But far from crying into their beers, Intrepid’s vitals still look very healthy, with the result representing a vast improvement on the previous corresponding period, which delivered a $60.6 million loss. Encouragingly, Intrepid returned to a positive cash flow position, with the business also surpassing $370 million in bookings for 2022, noting a particularly strong performance in the final quarter of the last financial year. Looking ahead, Intrepid said it is forecasting record departure revenue and profits by the end of this year, in addition to further investment from
shareholders, and plans to sink more capital into its vertically-integrated platform and Northern Hemisphere operations.
An honourable mention should also go to Amadeus, which also returned to an annual profit for the 12 months to 31 December 2022, enabling the company to once again resume paying dividends. Factors listed in its return to the black included global air traffic’s recovery last year, coupled with solid commercial activity, which ultimately contributed to stronger revenue (€4.49 billion), EBITDA (€1.64 billion), and adjusted profit (€742 million) compared to 2021. Australia-headquartered airport transfer company Jayride also saw its revenue from net commissions and fees booked rise by 170% and raise $4.39 million from new share issues, however, the company, for now at least, still reported a loss of $2.7 million for the six months to 31 December 2022.
