Flight Centre sees more upside next year

Flight Centre has been experiencing a solid start to the new fiscal year - but not quite as strong as analysts were expecting.

The travel company said on Monday it expected to deliver first-half underlying EBITDA earnings of between $70 million to $90m, well below consensus estimates of $104m. At the same period last year it suffered a $184m EBITDA loss.

Executives told its annual general meeting in Brisbane that it expects "rapid improvement" in the second half of 2022/23, where it typically earns 60 to 70 per cent of its profit, but it was hard to predict exactly how much.

"While we are encouraged by our achievements to date, our industry is in the very early stages of recovery, some large and important markets are yet to fully reopen and there are likely to be ongoing concerns in the months ahead," chairman Gary Smith said, according to a copy of his speech released to the ASX.

International capacity is returning to Australia and is likely to be back to around 70 per cent of pre-COVID levels by December, managing director Graham "Skroo" Turner said.

International capacity should approach 90 per cent by mid-2023, assuming Chinese carriers return, he said. 

These airlines are important from lead-in pricing perspective, and Flight Centre expects some to return early next year. 

In the meantime other airlines such as United and Qatar have been working to increase capacity in Australia, "which will ultimately lead to cheaper fares," Mr Turner said.

So far higher inflation and the interest rate hikes haven't impacted demand for travel, he said.

Flight Centre said it was upstaffing and reopening hibernated shops, with 42 stores in Australia and the UK coming back on deck by December 31.

The company has also reopened its Travel Money foreign exchange shops, which fully "hibernated" during the pandemic, and has plans to operate a 65-shop network in Australia.

The group has also added another 300 to 400 staff in Australia recently.

Mr Smith said Flight Centre had almost $1.3 billion in cash and investments at year-end, with $350m in bank debt after repaying a £115m ($A202m) short-term loan from a British government COVID relief program in March.

The company hasn't paid a dividend since 2019, and is starting to consider optimal capital structures including shareholder returns, although Mr Smith didn't dwell on that point. He said the company would also consider merger and acquisition opportunities.

At 11.41am AEDT, Flight Centre shares were down 4.6 per cent to $16.23.