Flight Centre shares have sunk to their lowest level since mid-2012 as the company scrapped its guidance for the June 30 financial year amid the continuing market panic over the COVID-19 virus’ impact on travel and the global economy.
The company said it was abandoning the guidance given in late February when it told the market that the virus would have a significant impact on FY20 second-half earnings.
Flight Centre then lowered its full-year guidance to an underlying profit before tax to between $240 million and $300 million (previously $310 million-$350 million) when it released its first-half results on February 27.
Flight Centre said on Friday that “while the early 2H total transaction trends it had seen had generally been in line with expectations, the virus’s spread and the subsequent increase in travel restrictions had made it more difficult to predict the virus’s likely full-year impact or a timeframe for recovery.”
“Given this uncertainty, the company has elected to suspend its revised FY20 guidance,” the company told the ASX.
That saw the shares tank 15.5% to $15.46 by 1 pm Friday
“The coronavirus’s spread and increased travel restrictions mean demand is softening significantly and the timeframe for recovery is unclear,”company told the ASX.
Already, FLT has implemented strategies to protect and grow market share, while reducing costs and maintaining its solid balance sheet, in a challenging trading cycle. Other initiatives will also be implemented in the upcoming months.
The company said that in order to reduce costs, it intends to shut up to 100 underperforming stores in Australia with the staff to transfer total transactional value and sales staff to other stores.
Flight Centre says it currently has about 1,040 sales teams within its established leisure brands at some 855 sites throughout Australia.
It also announced that executive team earnings will d fall, including the abolishment of short-term incentive payments for FY20. Management will receive substantially lower returns on other programs that are tied to profit, including the company’s Business Ownership Scheme. Directors of the company directors will also forgo 30% of their fees for the remainder of FY20 and will review the situation early in FY21.
Flight Centre said it had “a $189 million positive net debt position at February 29, 2020, which included $403.2 million in general cash and investments (part of a broader $1.3 billion global cash and investment portfolio).
At the same date it had $213.9 million in debt and “currently has access to additional liquidity, plus undrawn debt facilities in the order of $80 million. Existing debt facilities run to February 2022.
Meanwhile, Virgin Australia has joined Qantas and Air New Zealand in slashing more flights in response to falling demand for travel due to the spread of coronavirus.
Virgin said on Friday it would cut overall capacity by 7.7% over the rest of the year, with international flights hit the hardest.
From May the Sydney-Los Angeles service will fly five times a week instead of daily, while trans-Tasman flights will be cut by 6%.
Domestic flights within Australia will be cut by 5%, with cancellations mostly confined to routes with high frequencies such as Sydney-Melbourne.
Flights from Auckland to Tonga and Auckland to the Cook Islands will cease on May 1 and July 21 respectively.
CEO, Chief executive Paul Scurrah said the airline was “less exposed” to the global COVID-19 crisis because 88%of passengers traveled on domestic routes.
