Flight Centre won’t buy Helloworld

By Hannah Edensor

Flight Centre is stacking up sales, with reports that it will acquire five separate travel groups both at home and internationally.

Despite the leisure sector sorting through tougher times, news from The Australian quote managing director Graham Skroo Turner saying the acquisitions would cost as much as $50 million, but that he was confident two or three of these purchases would come through for the company in the short term.

“Probably in the next year two or three of these (deals) will come to fruition,” Skroo said, adding they “will contribute to our company.”

Flight Centre’s acquisition spree comes despite a slow in outbound travel growth, per The Australian, which in the past year sagged 2-3%, well down on the 7% produced from 2013/14.

“It’s certainly a bit quieter but it’s still a growth market. We have plenty of opportunity to take market share off other people,” Skroo said.

But despite adding international travel specialist Top Deck to its basket last year, as well as a corporate travel group in Mexico earlier this year, Flight Centre has no plans to nab troubled competitor Helloworld, according to The Australian.

The Qantas-backed company produced a profit of just $6.9 million for the year to 2015, but while this was a solid turnaround against a $1.7 million loss the year before, was not enough to tempt Flight Centre.

“Obviously we heard about it and we thought about looking at Helloworld and decided against it,” Skroo said.

“I don’t think it falls into our portfolio. It would have been a bit of a distraction, but we are looking at others that are smaller and more strategic for us.”

Apart from a slowing outbound market, Flight Centre was also hit by lower leisure travel margins.

The travel agency said it had also heavily invested in new systems and strategies as well as a new wage structure for front-end consultants, at significant cost to the company.

And as a result of stopping short of its ambitious profit targets for 2015, Flight Centre’s senior exec salaries were slashed, including that of Skroo, The Australian reported.

Per Flight Centre’s 2015 annual report, Skroo’s total remuneration was $518,238, down on the $657,073 he earned in 2014.

But as the owner of the global brand, he also raked in more than $23 million in fully franked dividends this year from the 15.244 million shares he owns in the company. Not too shabby.

“It’s not that unusual (to have a low base salary) when you have a significant parcel of shares in the business,” Turner said.

Flight Centre’s chief operating officer, Melanie Waters-Ryan, took home a pay packet of $986,127 in 2015, down from $1.082 million the previous year, while executive general manager Rob Flint received $580,068, down from $795,219.

“The average Flight Centre senior executive earned less during 2015 when bottom-line results did not meet initial expectations,” the company stated in its annual report.

Skroo has long been judged one of Australia’s best value CEOs, and was identified as the second lowest paid CEO in an ASX S&P 100 company for the 2014 fiscal year.

Image: Flight Centre

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Email the Travel Weekly team at traveldesk@travelweekly.com.au

Latest comments

Sydney says:

October 12, 2015 at 1:01 pm

Tara, although you obviously have a personal axe to grind (you ignored a key point in the article – helloworld has had a significant turnaround and is trading profitably), regardless, there is no way FC will consider acquiring it as it needs a strong competitor to keep the ACCC off its back. No other brand in the market has that type of clout. That, Amy, is “relevance”.

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Tara says:

September 25, 2015 at 9:50 am

Since when was helloworld even up for sale? Even if helloworld was selling, I highly doubt it would sell to its competitor.
Way to go Travel Weekly, constantly showing your bias…..

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- Amy says:
  
  September 27, 2015 at 4:03 pm
  
  Tara, actually selling helloworld, is the only thing that will make that company relevant. Unless you have been living under a rock for the last 3 years, you will have noticed helloworld losing millions of dollars year on year. They have had more CEO’S than Australia has had prime minsters in that time, not one of them bringing anything to the company apart from bleeding the company dry with their crazy salaries, like the whole of the executive team. The board, who are mainly Qantas personnel have become a laughing stock in the industry and have made their competitors like Flight Centre, Webjet and Magellan laugh all the way to the bank. I have to ask the question, why on earth would you think helloworld would not sell to it’s competitor ? What a strange thing to say, who do you think whey would sell to, Woolworths or Coles? Dear oh dear.
  
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- Hannah Edensor says:
  
  September 25, 2015 at 10:21 am
  
  Thanks for the comment Tara, but it wasn’t intended to show bias, merely report on the news and facts as they appear. Skroo was asked if he would consider buying Helloworld, to which he gave a detailed answer why it was in fact considered, and why they decided against it. We didn’t make this up. This was a newsworthy angle to run with and an interesting concept to consider.
  
  That’s the way we saw it, so that’s how we wrote it. Sorry if you saw bias in this – but thanks as always for the feedback!
  
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