Flight Centre to shut 428 Australian stores as it faces the most challenging period in its 30-year history

Photo: Scott Barbour/ Getty Images.
  • Flight Centre will permanently close 428 stores across Australia.
  • The travel group announced on Monday it has raised $900 million in equity and debt.
  • Flight Centre managing director Graham Turner called it the “most challenging period” in the company’s 30-year history.
  • Visit Business Insider Australia’s homepage for more stories.

Embattled travel group Flight Centre will permanently shut 428 Australian stores by the end of July in an attempt to radically slash costs while raising $900 million in fresh equity and debt to last it through the coronavirus pandemic.

The ASX-listed travel group on Monday announced a $700 million capital raising, consisting of a $282 million placement to institutional investors and a $419 million 1-for-1.75 entitlement offer for existing shareholders, both at $7.20 a share.

The group said it had also negotiated $200 million in debt from its existing lenders, who had also agreed to waive covenant testing for its existing facilities.

Flight Centre’s shares, which have been in a trading halt for almost three weeks, last traded at $9.91. Macquarie and UBS are lead managers and are underwriting the offer.

The pandemic has caused the virtual shutdown of the global travel industry, and Flight Centre said on Monday that its transaction volumes fell to 20 to 30 per cent of its normal level in March, and was implementing initiatives that would cut its annual cost base by $1.9 billion.

It will shut half its leisure brand shopfronts worldwide, including 40 per cent in Australia, or about 428 of its 944 local stores by the end of July. The company’s store network also include the Universal Traveller brand. It will shut 371 of the 593 stores it has outside of Australia.

Flight Centre had previously announced it would close up to 100 underperforming local stores, and has temporarily stood down 3800 Australian sales and support staff.

Flight Centre said it was trying to renegotiate rent on its existing stores and was looking to sell its Melbourne head office building.

“It is – without question – the most challenging period we have encountered in over 30 years in business and it is inevitable that some businesses across our industry will fail,” Flight Centre managing director Graham Turner said.

“With this funding in place and additional liquidity, we are in a much stronger position and are well placed to weather a prolonged downturn, which currently seems the likely scenario, and to then take advantage of the significant opportunities that will arise once conditions normalise”.

Flight Centre said the raising and cost-cutting plan would give it $2.3 billion of liquidity and a monthly cost base of around $65 million, less one-off implementation costs of around $210 million.

This story originally appeared on the Sydney Morning Herald. To view the original, click here.

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