Flight Centre Issues Profit Warning, Blaming Polls

May 23, 2016

Australian travel agent Flight Centre blamed a global airfare war and upcoming polls in the United States, Britain and at home as it issued a profit warning.

After telling investors two weeks earlier it expected pre-tax profit to rise by up to 8 percent in the year to end-June, the company said on Monday that pre-tax profit would now likely fall by up to 5 percent from the previous year's AUD$366.3 million.

It said that Britain's vote next month on whether to stay in the European Union, along with upcoming general elections in Australia and the United States had dampened business and consumer confidence, crimping demand for travel.

It also said it had been hit as low-cost carriers drive down fares and as fear of the Zika virus reduced travel to South America.

While people continue to travel in unprecedented numbers, the companies that rely on their business have become more vulnerable than ever to geopolitical pressures.

Australia's two biggest airlines, Qantas and Virgin Australia, have issued similar warnings in recent months, saying election campaigns mean businesses delay non-essential travel until they know the outcome.

"With any election, for whatever silly reason, it seems to dampen consumer confidence," said Flight Centre managing director and 15 percent shareholder Graham Turner.

"It's common knowledge that things just don't fly. If you look at the UK with Brexit, certainly the corporates have come off."

Flight Centre made most of its earnings in Australia in 2015, followed by Britain and then the United Sates, according to its annual report.

(Reuters)