Flight Centre shared an update saying that it was performing "marginally above" the same quarter last year for total transaction value and profit margin.
👉 Background: While Flight Centre has been around since 1984, it had an existential crisis during COVID when it was forced close down its stores, let go of staff, and made a pre-tax loss of over $330 million in FY21. But it bounced back post-COVID, and its share price has more than doubled since.
👉 What happened: Last week Flight Centre shared an update saying that it was performing "marginally above" the same quarter last year for total transaction value and profit margin, but there is "some inconsistency month-to-month".
👉 What else: It couldn’t give guidance for the upcoming year because it was ”currently too early to draw conclusions”. Investors saw this as a red flag and next minute: Flight Centre’s share price dropped more than 17%.
💡When airfare prices start to deflate, the entire travel industry braces for turbulence.
💡Airfare prices are a key driver of revenue for travel agencies like Flight Centre. So when the company warns of an airfare deflation, investors take note.
💡Lower airfare prices mean less revenue per transaction for both the airline and the travel agent, and companies may need to sell more tickets to maintain the same revenue levels. So Flight Centre not being able to commit to a guidance has got investors seriously worried.
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