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Skift Take
These two global agencies’ 2022 fiscal, first-half results signal the importance of winning public sector business in the years ahead.
Government employees and essential service workers rarely stopped traveling during the pandemic, keeping countries functioning during lockdowns. For thousands of critical care nurses, construction workers, cleaners and countless other professions, life had to go on.
Today, government contracts represent a valuable market for the larger corporate travel agencies, who see the upside in their travel resilience during a crisis.
Flight Centre Travel Group and Corporate Travel Management aim to win more public sector contracts in the years ahead, gaining more of the business that helped sustain them through the pandemic.
FCM, Flight Centre’s business travel division, has been focusing on Europe, the Middle East and Africa, plus the Americas, where vaccine roll-outs have accelerated the recovery.
The company said it had won $3.27 billion of new corporate business in its 2022 first half, which covers the six months to Dec. 31, 2021.
“It’s the first time we’ve pivoted to government business outside of Australia,” said Chris Galanty, CEO of corporate, during a conference call last week. “We’ve done very well winning the French government business, but also the UK, with several departments including the Foreign, Commonwealth and Development Office, and the British Council.”
The UK government is now one of the company’s largest clients in the country. Following Brexit, travel may take on even greater importance as the country looks to build new trading relationships.
FCM has also won Singapore government business, and said this now meant it had “greater exposure” to win similar contracts.
There was no breakdown of the proportion of new public sector wins, but government contracts (including the New South Wales government) made up 23 percent of its new customers — the largest proportion — in its 2021 first half.
“There’s a real focus on the government and manufacturing, which are two segments we hadn’t previously focused on,” Galanty said during an investor call in February last year. “As they have a high propensity to travel throughout any circumstance, we’re really focused on them and getting some great wins …. we’ve proven we can win in government, which is going to be a big area in growth for us.”
Overall, Flight Centre posted a loss of $133 million on an EBITDA (earnings before interest, tax, depreciation and amortization) basis. This number was down on its 2021 first-half loss of $113 million, owing to fewer government subsidies over the last six months.
The Australian brand may also be worried that some larger corporate clients will reduce travel in the future, or not recover to pre-pandemic levels, although owing to the nature of their three and five-year contracts, there’s time for bookings to recover.
Brisbane-based CTM, meanwhile, continues to reap the benefits of state business. “The Delta and Omicron variants of Covid-19 delayed the recovery in all regions during the period, however CTM’s strength in essential service and government clients enabled the return to positive underlying EBITDA for the period,” the company said in a statement as it posted its results in February.
At the height of the pandemic, the agency group reported a relatively small annual loss of $6 million in the summer of 2020, thanks to a large market share of government and other essential services clients.
In December 2021, CTM won a $3.63 billion UK public service contract, which is to last five years. In the same month, CTM agreed to buy Helloworld Corporate for $127 million, a deal which is expected to close in the third quarter of this year. “This acquisition will increase the depth of CTM’s existing government business and add a number of high quality corporate clients to the CTM business,” the agency said.
And in Europe, overall revenue grew by 304 percent to $31.4 million for the six months ended 31 Dec. 2021, with a UK government contract to manage inbound quarantine hotels and Covid-19 test kit sales a major contributor.
CTM’s underlying EBITDA was $13.2 million, compared to $11 million in the same period last year.
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