- Flight Centre
Flight Centre Limited (asx|FLT) is
Australia's largest travel agent. It is listed on the Australian Stock Exchangewith a market capitalisation of $1.145 billion as at March 2006. It has 1000 stores in eight different countries with over 8000 staff.
Flight Centre was founded by Graham Turner in 1981. Turner had previously run a successful budget bus trip company in Europe called
Topdeck. Turner retains 18% of Flight Centre. By 1990, Flight Centre had opened stores in New Zealand, the UK and US. The UK and US offices were closed in 1991 in the face of the Gulf War. Expansion began again with a move to South Africa in 1994, Canada in early 1995, and the UK later that year. US operations recommenced in late 1999André Sammartino (2007), 'Retail’, in Dick, H. & Merrett, D. (eds.), "The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation", Edward Elgar: Cheltenham, UK, pp.175-194.] It has been claimed that
"Flight Centre revolutionised the retailing of international air-travel in Australia by shifting to a model where profitability was driven by volumerather than margins. Initially they built a price advantage by bypassingticketing wholesalers, seeking out less well-known airlines, and also byarbitraging price differentials across markets."André Sammartino (2007), 'Retail’, in Dick, H. & Merrett, D. (eds.), "The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation", Edward Elgar: Cheltenham, UK, pp.175-194.]
The company grew rapidly, establishing different brands to cater for different parts of the travel market. It owns FCm Travel Solutions for the corporate market,Student Flights, Overseas Working Holidays for the student market and also runs related businesses in the discount holiday organiser Escape Travel, travelthere.com, quickbeds.com, luxury holiday company Travel Associates, retail cruise specialist Cruiseabout and Campus Travel aimed at the academic and university markets. Its website [http://flightcentre.com flightcentre.com] has been the most popular Australian travel agency website for several years. It has operations in Australia ($4.4 billion 2004/5 sales),
New Zealand($639 million 2004/5 total transactions), South Africa($365 million 2004/5 total transactions), United Kingdom($909 million 2004/5 total transactions), United States($65 million 2004/5 total transactions) and Canada($415 million 2004/5 total transactions).
After decades of rapid and consistent growth in revenues and profits, Flight Centre flew into trouble in 2005 with its first ever decline in annual profit. For the year ending June 30 2005, on a total revenue of $6.9 billion, its net profit was $67.9 million. Profit announcements for the half year ending December 31 2005, showed a continuing fall in net profits to $33.6 million, a decline of 7.7% on the previous year.
It followed Graham Turner's departure from day-to-day operations when he stood aside from being Chief Executive Officer in 2002, allowing a senior manager
Shane Flynnto replace him. He corrected this in July 2005, resuming his previous role as a hands-on manager as Executive Chairman.
The one time darling of the
stock market, normally showing strong profit growth, was punished severely with it being the second worst performing stock in the Australian Stock Exchange's Top 200 companies. Its share price is down 57% from its peak in 2002. This reflected not only concerns about the company's management but also its long-term prospects.
The company faces serious challenges, with
disintermediationoccurring in the travel industry. In 2006, Qantasannounced that it would no longer pay base commissions to travel agents for domestic and New Zealand flights and that it would reduce international commissions from 7% to 5% [http://www.brw.com.au/freearticle.aspx?relId=17047] . An increasing number of customers are following the lead of many of Flight Centre's suppliers and dealing with them directly through their own websites rather than going through travel agents. Some financial analysts are very concerned about this, with one issuing a sell recommendation on the stock in a report titled "Flightless Centre."
November 2006: A company associated with the founders and a private equity firm is offering $17.20 a share (and somewhat less to current "controlling" shareholders) to take Flight Centre back into private hands.
February 2007: The privatisation of Flight Centre failed when investment bank Lazard rejected the deal even though the majority of minority shareholders agreed with the privatisation bid. Flight Centre shares tumbled soon after the trading halt was lifted to around $15. [http://www.news.com.au/sundayheraldsun/story/0,,21309585-664,00.html]
* [http://www.flightcentre.co.uk Flight Centre's United Kingdom Website]
* [http://www.flightcentre.co.nz Flight Centre's New Zealand Website]
* [http://www.flightcentre.com.au Flight Centre's Australian Website]
* [http://www.flightcentre.ca Flight Centre's Canadian Website]
* [http://www.flightcentre.us Flight Centre's US Website]
* [http://www.flightcentre.co.za Flight Centre's South Africa Website]
* [http://www.topdeckdaze.com/ Top Deck Daze] - The story of Top Deck Travel
* [http://www.topdeckreunion.com/ Top Deck Reunion] - Former Top Deck Travel employees tell their stories
* [http://www.smh.com.au/news/business/air-agency-founder-back-in-hot-seat/2005/09/01/1125302685666.html "Sydney Morning Herald" Report on Flight Centre Replacing CEO]
* [http://www.brw.com.au/freearticle.aspx?relId=17047 "Business Review Weekly" on Flight Centre's Troubles]
* [http://afr.com/articles/2006/02/23/1140563908492.html "Australian Financial Review" on Flight Centre's Profit Announcement]
* [http://www.ingentaconnect.com/content/bpl/joms/2002/00000039/00000008/art00002 Academic paper (Palmer & Rumford (2002)) discussing Flight Centre's culture]
* [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1095163 Academic paper (Sammartino (2006)) discussing Flight Centre's international expansion]
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