Flight Centre records strong half-year financial result as customers 'revenge travel' Travel agency's revenue from leisure arm now exceeding pre-pandemic levels as head predicts 'watershed' year after four years of disruptions

Travel agency Flight Centre has recorded one of its strongest ever starts to a financial year as more customers take off, and set sail, even if it means drawing down on savings buffers. The Brisbane-headquartered company recorded a more than five-fold increase in pre-tax profit to $106.2m over a six-month period, with revenue from its leisure travel arm now exceeding pre-pandemic levels. Its corporate travel business also lifted significantly. Flight Centre managing director Graham Turner said 2024 was set to be a "watershed" year for travel after four years of pandemic disruptions. "At a time when discretionary budgets are typically tightening, travel remains an outlier and a priority spend for many," Turner said. "Ongoing solid travel demand has been aided by continued low unemployment in key markets and a desire among regular travellers to make up for lost time after lockdowns - revenge travel." Flight centre data shows that Australian air fares fell by 13% in the first six months of the financial year, while international fares dropped by 7%.

The falling prices, and increased airline capacity, is expected to boost travel demand, especially for families buying multiple tickets. While fast-rising living costs are eating into household budgets, cuts in non-essential spending are not uniform, with many Australians still willing to spend on experiences such as travel and entertainment. The two categories are the only non-essential items to record above-inflation growth, according to a report from Commonwealth Bank and data firm Quantium Group, with Australians aged over 65 leading the charge. The report does note that some of the exuberance of early 2023, when people were booking pandemic-delayed trips, has started to subside. Flight Centre's results represent the second strongest first-half financials in its more than four-decade history, backed by widening profit margins from hotels and tours and strong demand for leisure and corporate travel. The company's strongest first half occurred in 2019-20, shortly before the pandemic began. Cruise lines are also now reporting record numbers of passengers, with short two-to-five day trips popular among more budget-conscious travellers. Flight Centre will pay an interim dividend of 10 cents a share, its first since the pandemic upended travel. The results are a stark turnaround to the early pandemic years, when the travel agency cut large staff numbers and closed hundreds of stores as flight bans and closed borders threatened its entire business model. Flight Centre has also had to grapple with increasing numbers of online competitors and the impact of airlines and other travel businesses selling direct to consumers. The company said on Wednesday it was successfully using artificial intelligence to scan inquiries, with emails that indicate urgent travel needs and "potential revenue opportunities" helping its consultants prioritise.

Jonathan Barrett Wed 28 Feb 2024 This article is retrieved from the link https://www.theguardian.com/australia-news/2024/feb/28/flight-centre-half-yearly-financial-results-profits-earnings-share-price

Question 1: Summary of the article (200 - 250) -Can you tell a story from the article? (e.g., what is the key issue? How did it happen? Why did it happen? What are the suggested solutions?) -3 to 4 key points per news article (60 words/key point)

Question 2: Application of theory (400 - 450) - Introduce the Theory first. What is the "Reactions of Capital Markets to Financial Reporting?"

-Start with a brief discussion of relevant theory?

-Apply the relevant theory using relevant detail drawn from the article? -Link the case study to the Theory.

You can choose the relevant theory as following and suggest

a. Relationship between share price and expected earnings b. Total earnings versus unexpected earnings c. Relationship between changes in share price and returns to investors d. The Capital Asset Pricing Model (CAPM)