The Flight Centre Travel Group Ltd (ASX: FLT) share price has soared higher by more than 9% after investors learned of the government’s plans to support the travel sector.
What’s going on?
Flight Centre is benefiting from news that the federal government plans to subsidise the cost of around 800,000 flight tickets to regional places like Cairns, Alice Springs, Broome and Launceston.
The two major airlines will get retention payments for international travel employees between April and October when international travel is expected to restart. However, in order for the airlines to get these payments, they must keep a total of 8,600 internationally-focused airline staff on the books.
There hasn’t been any confirmed financial numbers of this support, but the Flight Centre CEO Graham Turner said, according to the AFR: “There is nothing in it for us. I don’t think it will help tourism either. We are a large organisation. We can survive until the borders reopen but there is going to be a lot of small businesses suffer through this, unfortunately. It is a very small, very meagre package at the best.”
But investors do seem to think it’s a big deal for Flight Centre considering the share price is up by around 9%. The more people that are travelling, the more volume of activity that Flight Centre’s network of travel agents are likely to see.
Flight Centre is looking forward to a recovery considering the travel sector is still suffering from COVID-19 effects. The company’s FY21 half year result showed that its cost base has lowered materially – down 66% – to “sustainable levels” with continued revenue generation. December was a record month when looking at the COVID-19-affected period.
Are there good signs for Flight Centre?
Flight Centre has been steadily reducing its monthly net operating cash outflow during the first half of FY21, but it still had more than $1.2 billion at the end of the first half.
The company believes that there’s significant pent up demand for customers to travel when they can, which could drive a rapid rebound in sales. Flight Centre has won a few key accounts in the corporate space, which are large, high profile and starting to trade.
Flight Centre is looking forward to international travel reopening later in 2021 as more of the population groups are vaccinated against COVID-19. Indeed, vaccination programs are going on around the world.
