The Flight Centre Travel Group Ltd (ASX: FLT) share price has been the most badly affected in the beaten down travel sector this year.
The travel company’s share price is down by 60% over the year, as the coronavirus pandemic stopped international travel dead in its tracks.
Could the Flight Centre share price pick itself up in 2021 when travel resumes?
First, the losses
In FY20, the company delivered an underlying loss before tax of $510 million, excluding COVID-19-induced expenses of $339 million. On a statutory basis, therefore, Flight Centre delivered a loss of $849 million before tax.
The company said that this loss was incurred entirely since March, as the company reported underlying profit before tax in the order of $150 million before the pandemic hit.
Full border closures along with heavy restrictions and a complete halt on domestic and international travel hit the company’s bottom line hard.
Saving the sinking ship
Management said it acted quickly to stabilise the ship. This was done primarily by cutting costs, which has resulted in a very lean cost base – one that could ensure breakeven at 40% of pre-COVID total transaction volume (TTV) going forward.
The company also quickly secured $1 billion of liquidity, including $700 million injected by shareholders in April and May.
In addition, the company also applied for and received the JobKeeper subsidy for its retained employees in Australia. The net benefit of this program is expected to be between $40 million and $50 million from October 2020 to March 2021.
With the cost base slashed significantly, the company said it should be able weather the storm until conditions improve.
Strategy going forward
In its annual general meeting (AGM) held in November, the company outlined strategies for its post-COVID turnaround.
It said that it will focus on its corporate travel unit, as it believes that segment will recover first, ahead of the leisure unit.
It will also focus on its strategic investments including Ignite (now 100% owned), and its tech businesses TP Connects and WhereTo.
Digital transformation will be the name of the game in 2021 and beyond.
The company said it will accelerate investments in innovative and disruptive technology. This will include investment in state-of-the-art data and reporting, including new COVID dashboards and safety products.
About the Flight Centre share price
The Flight Centre share price has had a volatile year, plummeting by as much as 77% in March, before recovering to current levels.
At the time of writing, the Flight Centre share price is trading at $16.02, down almost 3%.
The company commands a market cap of $3.3 billion.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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