Further cuts and losses for travel firms
Travel firms HelloWorld Travel and Flight Centre Travel Group have both announced changes to its business models in light of the updated travel restrictions on international and interstate travel.
The borders have been closed for international travel while domestic travel should be cancelled unless it is essential.
Since the start of 2020 to 20 March, Flight Centre shares have fallen 77% and HelloWorld has fallen by 82%.
In an announcement to the Australian Securities Exchange (ASX), it said Flight Centre senior leadership will give up 50% of their salaries, cancelled a $40.1 million interim dividend payment and warned of job losses as a result of the closure of 100 stores.
“We have made another difficult decision by cancelling the $40.1 million interim dividend payment that was due to be paid to shareholders next month, a strategy that various other companies have also adopted to maintain liquidity and protect long-term shareholder value.
“Last week, we announced we would hold further discussions with landlords, suppliers, vendors and investors and banks on the ways to manage the financial impact of a precipitous drop in travel activity in the near term.
“We have also engaged with the Federal Government to discuss broader assistance packages, in light of support being made available to airlines in Australia and, in some cases overseas, to companies and employees that have been significantly impacted.”
Meanwhile, HelloWorld announced 275 redundancies at an estimated cost to the business of $1.4 million and the ‘stand down’ of a further 1,300 staff (65% of the workforce) across multiple countries for 10 weeks. The remaining staff would be offered reduced working hours.
“Given the rapid de-escalation of international and domestic travel, demand for our services has declined and is very unlikely to show any signs of recovery in the next four to six months. We do anticipate this changing until the rate of infection is declining in our region and elsewhere and a vaccine is either available on its way with some degree of certainty.”
The chief executive and executive director would take no salary until 30 June, 2020, direct reports to the CEO would have a 40% reduction in pay, all discretionary expenditure had ceased, marketing and advertising activity had ceased until further notice and projects had been put on hold.
HelloWorld said it expected the expenditure cuts would reduce monthly outlays by 80%.
Share price performance of Flight Centre and HelloWorld versus ASX 200 since 1 January, 2020 to 20 March, 2020
AUTHOR
Laura Dew
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