Flight Centre chief’s fortune soars as travel outlook improves

The remarkable rise in the wealth of Flight Centre founder and chief executive Graham Turner continued yesterday as the company’s shares hit a 13-month high on news the outlook for the travel sector is improving.

Flight Centre chief financial officer Andrew Flannery addressed an analysts’ conference yesterday, and said conditions in the tourism and travel sector are finally starting to stabalise, particularly in the world-beating Australian market.

That good news helped the Flight Centre stock jump 21 cents to $18.34, the highest level in more than a year.

It’s an extraordinary turnaround from the depths of the downturn, when Flight Centre shares slumped to a low of $3.43 in March.

Back then, the value of Turner’s stake in the company had fallen to just $54.3 million. But thanks to dramatic turnaround in investor confidence, his stake is now worth $290.3 million – a staggering $236 million improvement.

Flight Centre told investors at its annual general meeting last month that first quarter profit was above expectations at $34 million and re-affirmed its full year profit guidance of $125-135 million.

Flannery says conditions continue to improve.

“From what we have seen to date, recovery has been faster in Australia than elsewhere in the world. The combination of a strong Aussie dollar and cheap airfares has delivered great value to travellers and has stimulated demand,” Flannery told analysts.

He said ticket numbers in Australia in the September quarter were actually higher than those in the September quarters of 2007-08 and 2008-09, both of which were record periods.

And while sharp discounting means margins have been compressed, Flannery says “prices appear to have bottomed and the cheapest deals have become harder to secure”.

However, the company’s US and British operations continue to battle difficult economic conditions. Flannery says conditions are particularly challenging in Britain, where corporate travel budgets have been slashed by an average of 40%, although Flight Centre has managed to hold its losses to 15%.

Flannery said one of the key strategies Flight Centre used during the downturn was to keep its marketing spend at pre-crisis levels.

“By adopting this tactic, the company was able to work proactively with its suppliers to highlight the great value offerings that were becoming available as airlines and other suppliers slashed prices.”

“This contributed to customer enquiry – a key performance indicator globally – remaining healthy throughout the year, despite the downturn.”