Flight Centre to axe stores in virus scare

VIRUS- BRUISED travel agency Flight Centre will close up to 100 underperforming stores and has scrapped its earnings guidance amid mounting airline service cuts and widening travel bans.

The company said yesterday the stores would close before June 30, and sales staff would transfer to others, as part of moves to cushion the cost of the coronavirus outbreak.

Flight Centre brands include Escape Travel and Student Flights. Managing director Graham Turner said reducing costs was priority in an uncertain environment.

He reported significant softening in bookings, which he expected to continue into April at least.

Management told the share market that while early trends had been in line with expectations, the virus’s spread and travel restrictions made it more difficult to predict the full year impact.

“Given this uncertainty, the company has elected to suspend its revised FY20 guidance,” Flight Centre said.

The guidance on February 27 was full-year profit before tax of $240 million to $300 million, down from the previous range of $310 million to $350 million. As part of cutting costs, Flight Centre directors will forgo 30 per cent of their fees for the remainder of the financial year.

Some stores will reduce trading hours, and staff will be encouraged to take leave.

Recruitment will be suspended, and non-essential projects deferred. Mr Turner said Flight Centre was well-placed to overcome the challenge and had balance sheet strength.

Flight Centre shares were down by 15.35 per cent at $16.60 by 1347 AEDT and have lost about 60 per cent of their value since February 20.

The price recovered to close at $19.15, down 2.35 per cent.

The travel industry is one of those hardest hit by the virus and travels bans.

Yesterday Virgin Australia joined rivals Qantas and Air New Zealand in reducing capacities for international and domestic flights.

Corporate Travel Management announced it too would scrap its already downgraded FY20 guidance.

The company last month cut its full-year underlying earnings guidance to between $125 million and $150 million from a previous target of $165 million to $175 million on account of “unprecedented disruption” from the outbreak.

Yesterday the firm said non-executive directors and managing director Jamie Pherous would take a 20 per cent reduction in their fees.