Flight Centre’s first-half profit has plunged 74 per cent as the retailer feels the effect of the collapse of travel operators Thomas Cook and Cox & Kings – and warns the worst of the fallout from the coronavirus is yet to come.
The flight retailer’s after-tax profit for the six months, announced on Thursday, was $22.1 million – down from $85 million a year ago.
The fall came as Flight Centre said it was yet to feel the full impact of the widening global outbreak of coronavirus.
“It is impossible to predict the virus’s impact at this time, but Flight Centre expects it will lead to subdued activity through to the end of FY20,” the company said.
Releasing its half-year results on Thursday, the company signalled its full-year results would be hit by the deadly infection, which has rocked the whole travel sector. It said it now expected its full-year profit before tax to be $240 million-$300 million, down from its previous forecast range of $310 million-$350 million.
Flight Centre will continue to monitor the effect of the virus outbreak on its corporate and leisure businesses in coming months – which are traditionally the year’s peak booking periods.
It is the latest travel-related company to reveal it has been hit by the fallout from COVID-19. Earlier this month, Flight Centre rival Webjet also posted a first-half profit after writing off $44 million following the collapse of British travel group Thomas Cook in September.
On Wednesday, Virgin Australia said it would slash flights and axe some domestic and international routes as the escalating effects continued to hit its bottom line.
Qantas said last week it would cut capacity by 7 per cent, including slashing flights to Asia. Chief executive Alan Joyce urged staff to used some of their “considerable” leave balances to help the company through its difficult period.
Also on Thursday, Air New Zealand joined its Australian counterparts, announcing it would slash capacity to Asia.
The Kiwi airline, which posted a 33 per cent net drop in profit for the six months to December 31, 2019, said it would cut its Asian capacity by 17 per cent until June.
On Thursday, Flight Centre said its Chinese and Singapore corporate business – which together generate about 2.5 per cent of its total transaction value – had been significantly affected by the shutdown of travel to and from China.
Its other corporate businesses had also been significantly affected, particularly in the past three weeks, as companies worldwide amended travel policies to prevent employees from travelling to China and other major business travel hubs.
Flight Centre said leisure travel patterns were also being increasingly affected. Some customers were reviewing short-term holiday plans and monitoring the virus’s possible spread outside China and other parts of Asia.
“It is impossible to predict the virus’s impact at this time, but Flight Centre expects it will lead to subdued activity through to the end of FY20,” the firm said.