The Flight Centre Travel Group Ltd (ASX: FLT) share price is in focus after the company gave an update to investors and outlined how it expects the corporate travel market to perform.
Flight Centre is more than just the leisure segment of its business. In-fact, in the first half of FY22, its corporate segment produced more total transaction value (TTV) and revenue ($2 billion and $192 million, respectively) than the leisure segment ($950 million and $112 million).
Flight Centre noted that the corporate segment experienced a continued strong sales recovery, with almost 150% TTV growth year on year.
The corporate business generated about 60% of Flight Centre's total TTV, this is up from 40% in pre-COVID times.
The corporate travel underlying earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $30 million was better than the leisure's half-year EBITDA loss of $155 million.
Flight Centre corporate travel operational update
The ASX travel share just gave a corporate travel update. Flight Centre said that there had been a "strong rebound" from February. The corporate travel segment is targeting a return to monthly profitability in March or April 2022. It was close to breakeven in February 2022.
Management said that the company is maintaining cost discipline while continuing to invest in key drivers. Large customers are reinstating travel programs as COVID-19 concerns subside.
Flight Centre continues to monitor the effects of the Russian invasion of Ukraine, but it reported no noticeable impact on the corporate or leisure sector recovery to date.
The ASX travel share said that it's increasing its market share organically, fed by a multi-billion dollar pipeline of new account wins, and that it's maintaining a high retention rate.
Its wins are expected to drive TTV growth globally, but especially in the Americas and EMEA (Europe, Middle East and Africa) where around 70% of new business captured during the pandemic is set to trade.
Flight Centre now has greater exposure to government accounts after major wins in France, Singapore and the UK.
Corporate travel outlook
The ASX travel share said that there is pent-up demand for face-to-face meetings. It noted that government restrictions are easing, with the UK and Europe leading the way.
Flight Centre said that 'external travel' continues, while 'internal travel', meetings and events have picked up in the past six months.
Flight Centre expects a return to 60% to 75% of pre-COVID corporate travel in FY23.
It also said that customer needs are changing. There is increased demand for services, with a shift from supplier direct channels to managed travel. The ASX travel share also said there is less 'leakage', with safety and compliance driving higher adoption of travel programs.
In terms of the competitive landscape, Flight Centre said that large corporations have less choice and are seeking an alternative. Legacy travel management companies are reportedly struggling to adapt to new needs.
The ASX travel share also claimed that small and medium enterprise (SME) customers see limitations in technology-only companies.
Is the Flight Centre share price a buy?
Morgans is not convinced yet. It has a 'hold' rating on the business, with a price target of $19.56 after the FY22 half-year loss was worse than expected. The broker noted the improving situation in February. According to Morgans, Flight Centre may start generating a net profit again in the 2023 financial year.
