The Flight Centre Travel Group Ltd (ASX: FLT) share price is trading higher this morning as the company looks to strengthen its technology roadmap with an investment in a business that enhances airline-travel agent connectivity.
This morning, Flight Centre announced an investment in Dubai-based TPConnects Technologies LLC. The travel agent has secured a 22.47% stake in the business, which has a next-generation travel technology platform.
TPConnects boasts a New Distribution Capability (NDC), a technology developed by the International Air Transport Association to streamline the airline distribution process. NDC not only communicates fares and schedules, but also provides information on ancillaries and seat selection, and will eventually allow for dynamic pricing and personalised offers.
TPConnects also has a Global Distribution System (GDS), which enables transactions between travel industry agencies and hotels, airlines, and car rental providers using real-time inventory. Flight Centre has also entered into a Software-as-a-Service (SaaS) agreement with TPConnects under which it can use TPConnects’ platform, which aggregates NDC and GDS data.
Executive General Manager of Flight Centre Greg Parker said, “this investment ensures we are at the forefront of developments in an exciting new era of distribution and connectivity and that our company and customers have access to the widest choice of airfares and content, including offers that sometimes sit outside the traditional channels. Within our business, this investment will help deliver innovative, next-generation solutions and drive consistency in the end-to-end agency process.”
Flight Centre outlook
Flight Centre shares are currently sitting near three-year lows having slid from a high of over $40 in February to just $31.97 currently. Panic over the spread of coronavirus has seen Flight Centre shares sold off despite the company reporting a record first half last week with total transaction value of $12.4 billion.
Flight Centre advised that it is expecting coronavirus to have a significant second-half earnings impact and reduced its profit before tax guidance to $240 million – $300 million from $310 million – $350 million previously. Nonetheless, Flight Centre says based on the SARS experience there is a possibility of a rapid FY21 rebound.
While this new investment will not change the current outlook, in the longer term it will help drive additional retailing capabilities. The new technology should allow Flight Centre to provide corporate and retail customers with a personalised one-stop shop for trip planning, shopping, and booking.
Flight Centre is investing in its technological capabilities in order to future-proof its offering. While the short term outlook is clouded by coronavirus fears, longer term prospects look more positive.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.