Flight Centre (ASX:FLT) share price falls following Q1 update

Here’s how Flight Centre is performing…

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The Flight Centre Travel Group Ltd (ASX: FLT) share price is falling on Wednesday.

In morning trade, the travel agent giant’s shares are down over 1% to $22.44.

Why is the Flight Centre share price falling?

Investors have been selling down the Flight Centre share price today following the release of a trading update at its annual general meeting.

According to the release, during the month of September, Flight Centre’s sales reached 27% of pre-COVID levels globally.

As per previous updates, the corporate side of the business is improving at a much quicker rate. Its sales were at 41% of pre-COVID levels during the month, with leisure sales tracking at 14% of pre-COVID levels.

However, this wasn’t enough to make the company cash flow positive during the month. Flight Centre needs to achieve 50% and 40%, respectively, to reach breakeven within each of these divisions. In light of this, Flight Centre recorded a net operating cash outflow of $41 million for the period.

Management commented: “Cash outflows impacted by decreased revenue during ANZ lockdowns, seasonality (extended Northern Hemisphere summer holidays), removal of government subsidies & significant investment ramp-up ahead of anticipated surge in demand when borders reopen.”

In respect to quarterly sales, the company generated almost $1.6 billion in gross total transaction value (TTV) during the first quarter. This represents an 8% increase on its fourth quarter result, despite the quarter traditionally being a softer trading period.

Current trading

Not even management’s positive commentary on current trading conditions in Australia has been able to stop the Flight Centre share price from falling.

It advised that there are positive early signs in the domestic market, with a surge in enquiries and bookings growth in October.

In addition, the company advised that international leisure bookings have now surpassed domestic bookings in Australia for the first time since the start of the pandemic. They almost tripled between July and September. This is a big positive as its Australian leisure business is very heavily weighted towards international travel. In fact, international travel represented more than 80% of its pre-COVID total transaction value.

Overall, booking numbers this month have already surpassed the September total with more than a third of the month still to come.

But as promising as this is, it hasn’t been enough to keep the Flight Centre share price from dropping into the red 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 Bruce Jackson.

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