China's recovery is key for the corporate travel agency in many ways, but it all depends on how many businesses are ready to head back there.
FCM Travel, Flight Centre’s principal corporate-focused agency, is gaining from the business travel pick-up in every part of the world — apart from Asia. As a whole, the Australian group only managed to break even in the region, according to its 2023 first-half results, when taking into account business and leisure sales.
Profitability is also trailing revenue, compared to how the group’s business division, which also includes Corporate Traveller, operated in 2019 because of investments it’s made to win business off its larger rivals.
FCM Travel now brands itself as “the alternative to the traditional mega travel management companies,” which include American Express Global Business Travel, CWT and BCD Travel.
While FCM Travel’s volumes reached 95 percent of pre-Covid levels globally during the six months to Dec. 31, 2022, it was adversely impacted by slower volume recovery in Asia following extended closures
“Asia was the last region to open up for us, and even up until December it was really suppressed,” said Chris Galanty, global CEO, Flight Centre Corporate, during an earnings call on Tuesday.
The division’s results were also impacted by its strategy to win new clients, and invest in preparing for that extra buisness. “We’ve also concentrated on our people, prioritizing recruitment, training, and development so we’re fully equipped to help clients navigate and minimize frictions in a more complex travel environment,” the company said in a statement.
When quizzed by analysts over trailing profits, Galanty said the two brands made the decision to not maximize short-term profitability. “We’ve invested a lot of money bringing back the business, to make sure we grow. We’ve made sure we invest to grow, to take market share. We have borne the cost of that this year,” he said.
The company will be focusing on recruitment, training and development to service increasing demand in a more complex travel environment. Rival agency Corporate Travel Management also heavily invested in building back up its teams, and the Brisbane-based agency reported an almost $6 million one-off expense for “excess staff capacity.”
New business wins were therefore not appearing in its results. “In the second half, we expect to benefit from further stability in global airline capacity and fares, coupled with strengthening of our regional performance, particularly in Asia where travel has recently resumed in markets like China,” it added.
Flight Centre’s corporate division recorded $3.41 billion in total transaction value in the six months to Dec. 31, 2022. It posted $54.6 million in underlying earnings before interest, taxes, depreciation, and amortization (or EBITDA).
First-half revenue recovered to 88 percent of pre-Covid levels, with transactions back to 90 percent and total transaction volume reaching 103 percent. It predicts total transaction volume for its corporate business will amount to $6.83 billion during the full year.
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Photo credit: FCM Travel's volumes reached 95 percent of pre-Covid levels globally during the six months to Dec. 31, 2022. Danilo / Bueno Pixabay