The Flight Centre Travel Group Ltd (ASX: FLT) share price is having a strong start to the week.

In morning trade, the travel agent’s shares are up over 5% to $18.05.

Why is the Flight Centre share price charging higher?

Investors have been bidding the Flight Centre share price higher this morning after the company upgraded its guidance for FY 2022.

Following a solid rebound in travel demand globally late in the financial year, the company expects to record an underlying EBITDA loss of between $180 million and $190 million in FY 2022.

This represents an 11.9% improvement on the mid-point of the company’s initial FY 2022 guidance for an underlying loss of between $195 million and $225 million. It will also be a material improvement on Flight Centre’s FY 2021 underlying EBITDA loss of $337.9 million.

Based on this, the company is expecting to breakeven on an underlying EBITDA basis for the six months to June 30. Management notes that this is a major turnaround considering the significant losses it was making through to February.

On the top line, management expects to report total transaction value (TTV) of over $10 billion, which is more than two-and-a-half times the $3.95 billion achieved in FY 2021.

Pleasingly, on a monthly basis, the company’s TTV was tracking near or above pre-COVID levels in a number of businesses by year-end. This has been fuelled by both an uplift in demand and higher than normal ticket prices linked to a lack of airline capacity, particularly on international routes.

Management commentary

Flight Centre’s managing director, Graham Turner, was pleased with the company’s turnaround. He said:

After an incredibly challenging period, we were pleased to achieve our goal of returning to monthly underlying EBITDA profitability in both the corporate and leisure sectors late in the year. The scale of our recovery exceeded our initial expectations and meant that we should now exceed our preliminary FY22 result target, with early trading results pointing to a breakeven second half result and a healthy fourth quarter profit (underlying EBITDA).

Turner acknowledges that COVID isn’t going anywhere any time and the industry will continue to face challenges from new strains. Nevertheless, he believes the company is well-placed to overcome these challenges. The managing director explained:

There will inevitably be ongoing challenges for the industry over the next six to twelve months as new strains of the virus emerge, airline capacity returns and as we rebuild staff numbers to required levels, but we feel that we are well placed to overcome these concerns given our corporate business’s continued rise and our leisure business’s ongoing strength.

In the corporate sector, we are gaining market-share globally through high customer retention rates and a multi-billion-dollar pipeline of new accounts won across our Corporate Traveller and FCM brands during the pandemic.

In the leisure sector, our success is built on having strong brands and sales channels that are resonating with customers in what is now a more complex travel environment.

The post Flight Centre share price storms 5% higher on guidance upgrade appeared first on The Motley Fool Australia.

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More reading

• Why are Flight Centre, Webjet, and other ASX travel shares sinking today?
• Is the Flight Centre share price on a runway to growth in FY23?
• Flight Centre share price leaps as ‘revenge travel’ takes off
• These are the 10 most shorted ASX shares
• Clipped wings: Why ASX 200 travel shares are having trouble getting off the ground today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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