Airfares are so cheap they are cutting into Flight Centre profits

The Qantas lounge in Perth. Image: Supplied.

Cheap airfares are partly to blame for a 4.7% drop in profit to $244.6 million at travel agency Flight Centre.

Flight Centre says the cheap flights dragged on growth in Asia and in Australia.

International capacity during 2016 grew faster than the number of passengers, leading to empty seats. In Australia, average international airfare prices fell 4% during the second half.

However, the result was still the company’s third best profit in a challenging trading climate. Revenue was up 11.2% to $2.7 billion on Total Transaction Values (TTV) of $19.3 billion.

Managing director and co-founder Graham Turner says he will be disappointed if 2017’s results didn’t improve on 2016.

“While the soft trading conditions experienced during the FY16 fourth quarter continued into July, we have started to see some recovery this month, led by the Australian business,” he says. “This year in Australia, we aim to increase overall market-share in both corporate and leisure travel, as well as growing within key market segments.”

The company declared a fully franked dividend of 60 cents a share.

The 2016 results in detail:

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