The Flight Centre Travel Group (FCTG) has reported it is seeing strong recovery in the market with its corporate brands outpacing the broader industry recovery and its leisure business currently trading at post-COVID highs.

The group today released its financial results for the six month to December 31, 2022, which show higher than expected earnings of $95 million for the six-month period across corporate and leisure brands. Travel sales recovered strongly with the total transaction value (TTV) increasing 203% to $9.9bn and revenue increasing 217% to $1bn.

Short-term profitability was adversely impacted by important, longer-term investments such as recruitment, technology and sustainability. Abnormally high airfares and lower margins on air-only sales further also led to short-term revenue margin reductions. However, airline capacity is gradually recovering, which is expected to deliver cheaper fares and higher volumes, in addition to positively impacting supply margins in a more competitive environment.

The Flight Centre corporate travel business, including FCM and Corporate Traveller, led the recovery for the six-month period to December 2022 with a record TTV of $5bn, reinforcing its position as one of the world’s leading travel management companies (TMCs). The business outpaced broader industry recovery with revenue recovering to 88% of pre-COVID levels, transactions back to 90% and TTV reaching 103%.

FCM’s wins typically came from competing TMCs, while Corporate Traveller won large volumes of business from competitors, disruptors and accounts that were previously unmanaged. In upcoming periods, the company expects an uplift in corporate profit driven by investment in new platforms, products and people as well as better returns on client contracts.

The recovery of the group’s global leisure business was largely driven by its online business. However, the traditional Flight Centre shop network remained the major contributor to the group leisure TTV.

While travel is gradually becoming more seamless, following the disruption experienced during the pandemic, some complexity remains. This complexity plays to Flight Centre’s strengths and is contributing to strong demand for person-to-person services that underpin the company’s leisure and corporate offerings.

Commenting on the results, FCTG CEO Graham Turner said: “Flight Centre Travel Group has delivered a solid start to FY23 in an improved, but not fully recovered trading environment. In both leisure and corporate, we are achieving our strategic objectives and laying foundations for more meaningful profit recovery in the future.”

Looking ahead, Turner expects further recovery and says the group targets underlying EBITDA between $250 million and $280 million for the full year.

“While we continue to monitor market conditions, we are not currently seeing evidence that the recovery is slowing with the leisure business currently trading at post-COVID highs and corporate travel activity escalating after the traditional holiday period.”

“This underlines both the significant pent-up demand that still exists for travel in this early recovery phase and the sector’s proven resilience. While travel is a discretionary purchase, customers typically view it as essential and prioritise it above other discretionary items, which is one of the reasons why the market typically grows year-on-year and why prolonged downturns in the sector are relatively rare.”

“Very high employment rates in our key markets are also a strong macro-economic tailwind,” Turner concludes.