Following last month’s announcement that 100 stores were closing due to the COVID-19 global pandemic, the popular travel agency Flight Centre have announced that they will be permanently closing 428 of 944 stores. 40 percent of the underperforming Australian stores are now expected to close their doors by the end of July.
The difficult decision came after sales from last month were down by up to thirty percent, with a predicted decline in the coming months as travel restrictions in Australia become more strict.
While people are still booking flights for the future, Flight Centre are looking to prepare for the worst. The permanent store closures are predicted to save the company annual costs of up to $1.9 billion.
Like many other struggling travel companies right now, 6,000 out of 20,000 support and sales staff have either been made to stand down without leave or become entirely redundant. This includes staff a part of the store network including the Universal Traveller brand.
The permanent store closures are not the only changes within the company, either. It is possible that the central Melbourne office for Flight Centre will also be closed, leaving leftover staff and stores without the extra crucial support and resources required for ongoing business survival.
“It is, without question, the most challenging period we have encountered in over thirty years of business and it is inevitable that some businesses across our industry will fail, given the significant loss of revenue that they will be experiencing now and for at least the next few months,” Graham Turner, Flight Centre CEO, stated to the ASX.
“Within this uncertain environment, our priorities are to reduce costs, while also ensuring that we and our people are ready to capitalise when the steep discounting that is underway across most travel categories starts to gain fraction and as the trading cycle rebounds,” Turner continued. “As we saw with SARS and the GFC in Australia, the rebound can be relatively fast and strong after a fairly significant downturn in international travel.”
The trusted company have also been able to secure an estimated loan of up to $900 million. $200 million is said to have been borrowed from existing investors and the remaining $700 million from capital raising. This was made possible after the company issued 97 million new shares, which would make for a significant 27 percent discount. Despite the new funds that this created, the increased shares will have significantly decreased the overall value of the company.
The circumstances surrounding travel companies like Flight Centre are changing as rapidly as COVID-19 cases are, and therefore it is difficult to predict how long the industry will suffer. The best course of action is to prepare as much as possible, which makes the closure of stores a necessary move.