Flight Centre Travel Group Ltd (ASX: FLT) has provided the market with a detailed business update today regarding how the company will deal with the fallout from the coronavirus pandemic.
The travel company went into a trading halt a week ago on March 19. Following this on March 23, Flight Centre suspended shares and cancelled its interim dividend.
The recent impact of travel restrictions both locally and internationally, as well as social distancing rules and trading restrictions of non-essential services, has hit Flight Centre particularly hard.
Flight Centre noted that it has seen its total transaction value (TTV) tracking at only 20-30% of normal levels during March, and it expects to see further declines in coming weeks.
Major reductions in cost base
The travel company is now implementing a strategy which will see an immediate and sharp reduction in costs.
Flight Centre has temporarily paused its monthly sales and marketing spend of $15 million and is also halting non-essential projects to reduce capital expenditure over the next few months.
The travel company is also attempting to renegotiate rental agreements and has noted positive progress so far including rent-free periods and more flexible trading hours.
Flight Centre added that it is progressing well with accessing additional liquidity. It will update the market about this in due course and at that time, it intends to start trading again on the ASX.
30% of Flight Centre's workforce to be stood down globally
Flight Centre has made the difficult decision to reduce its global 20,000-person workforce by 6,000 staff, with a range of support and sales roles either being stood down temporarily or in some cases, being made redundant.
Within its Australian operations, 3,800 staff in either sales or support roles will be stood down temporarily over the short term.
Flight Centre will keep in close contact with all stood-down staff over the duration of the crisis, with the aim of bringing them back to work as soon as current restrictions are lifted.
Flight Centre has also engaged with various employers to secure access to more than 10,000 sales and call centre vacancies for its impacted Australian staff.
Store closures and executive pay cuts
Flight Centre has made the decision to accelerate and extend its plans for leisure shop closures in Australia and North America. The company flagged that around 30% of its leisure outlets in Australia and around 35% globally could now close over the next few months.
All senior executives and board members will see an immediate 50% pay cut until at least the end of June and executives will forego all of their short-term pay incentives for the year.
