Flight Centre: Weak Aussie dollar won’t affect travellers

According to Flight Centre (ASX: FLT), Australians will not stop travelling overseas at record numbers even though the dollar may drop further.

In the past month alone, the Aussie dollar has dropped over 6% against its US counterpart, but Flight Centre Chief financial officer Andrew Flannery has played down its effect on outbound travel. He says the high dollar had been “generally positive” but says the biggest incentive for travellers in recent times is the cost of the airfares.

The Aussie dollar took flight back in 2009, however Flight Centre says it did not alter the split between the dometic and international tickets sold. In 2001, a similar result occurred when our local currency experienced major fluctuations.

Some of Australia’s most sought after international destinations like Bali, Los Angeles, Hong Kong, Bangkok and Singapore have all dropped well over 20% in terms of airfare prices since 2007. The massive reductions have come as a result of increased competition from airlines such as Qantas (ASX: QAN) and Virgin Australia (ASX: VAH).

Both companies have recently formed agreements with competitors to offer cheaper deals. Yesterday, Tiger Airways and Virgin were given the nod from the Foreign Investment Review Board (FIRB) for the latter’s 60% acquisition of the flying tiger.

Similarly, earlier in the year Qantas formed an alliance with Emirates for international and domestic destinations. It seems a common occurance for airlines to have a finger dipped in each other’s pie. Air New Zealand (ASX: AIZ) also has a 19.99% stake in Virgin as well as a codeshare arrangement.

Foolish takeaway

Flight Centre’s share price has skyrocketed in recent times and perhaps the comments are just a pitch to alleviate any worried shareholders. However, the company’s share price has gone up over 114% in the past 12 months alone and if it cannot bolster its recent profits, the underlying value of the company will be affected, taking its share price down with it. Similarly, shareholders in any of the airlines or companies like Webjet (ASX: WEB) may also encounter some turbulance in years to come.

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Motley Fool contributor Owen Raszkiewicz owns shares in Air New Zealand.

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