Flight to Recovery > Adam Campbell, CFO Flight Centre

When the travel industry was brutally brought to its knees during the pandemic, Flight Centre Travel Group’s CFO Adam Campbell couldn’t have predicted the dark COVID clouds would bring a silver lining.

“Of course, it’s a silver lining nobody wanted to have at the time, but if I look at how we’ve completely reshaped the business as we’ve rebounded, that’s the silver lining we got from it,” says Campbell, a 17-year veteran of the group.

Indeed, the reshaping of the business since copping heavy losses when the pandemic hit in 2020 has been so significant, he says it’s becoming irrelevant to compare the Flight Centre of today with its pre-COVID state. 

“If you look at our business now, it’s fundamentally different to what we had pre-COVID,” he says of the Brisbane-headquartered global retail and corporate travel business.

“We now have a leaner cost base, we’ve streamlined systems and have an even more diverse stable of brands, businesses and channels.”

“We’re not quite back where we were pre-COVID…But as we head into the next financial year, FY25 is when we really expect things to pick up and overtake where we were.”

Adam Campbell, CFO | Flight Centre Travel Group

Shape shifting salve

Among the biggest shifts have been a halving of the group’s network of shops and heavy investment in new distribution and sales channels; the acquisition of a UK-based luxury travel business to open up new markets; a rethink of its independent agent model; a bigger push into corporate travel; and the centralisation of its business model over operations which span 24 countries.

“So, while COVID threw up some of the biggest challenges we’ve ever faced, rather than just sitting and waiting for things to reopen, to the credit of the team we took the opportunity to completely reshape the way we came out of it.”

And those hard yards are beginning to bear fruit.  

A combination of the strategic reset along with a steep pick-up in travel over the past 18 months, have contributed to the group posting a circa $485 million year-on-year turnaround in its underlying earnings during the 2023 financial year, recording almost $302 million in underlying earnings compared to the previous year’s $183.1 million underlying loss.

“We’re not quite back where we were pre-COVID,” Campbell says. “But as we head into the next financial year, FY25 is when we really expect things to pick up and overtake where we were.”

Revenge travel leads rebound

While the demand for travel has surged since borders reopened, Campbell says there are pockets in both the leisure and corporate travel segments that still have plenty of upside.

“In leisure, we’ve definitely seen that rush of ‘revenge travel’, where people have just wanted to get back out there and see the world again,” he says. “Where we think there is still quite a bit to go is family travel, and one of the reasons is that airfares are so high at the moment. We’re starting to see those prices come off a bit now as airline competition returns, which is great.”

Corporate travel has also rebounded, which he says has been interesting to watch given predictions that it wouldn’t come back to more than 30 percent of pre-COVID levels given the hasty universal embrace of video meeting technologies.  

“But people in business have missed being in front of their customers, their suppliers and their teammates. The corporate travel market has recovered to about 70 percent of pre-COVID volumes and will continue to increase, but we don’t think it will get to 100 percent for at least another few years. That’s meant we’ve had to look for greater share of the market, and that’s what we’ve done. Corporate business is now a bigger part of our mix proportionally than what it was.”

Getting through tough times

Looking back on the challenges of managing through the pandemic, some of Campbell’s toughest moments have been the ones he looks back on with pride.

“We had to let 15,000 people go and for me that was one of the toughest parts because, although we’re a fairly large organisation, we’re all tight knit, so that was really tough,” he recalls.

But when borders reopened and Flight Centre went on a huge recruitment drive to refill roles, he says more than half of the people taken on were those who’d been stood down. “For them to come back made me really proud because it meant we’d handled it in a pretty good way, with compassion and respect. Of course you can always improve, but that was a powerful message for the broader team.” 

Campbell had the daunting task of cutting two-thirds of the group’s cost base which – beyond letting staff go – entailed exiting supplier agreements and renegotiating or ending contracts with the landlords of about 1100 Flight Centre shops. 

“Our costs pre-COVID were around $230 million a month and we had to get that down under $65 million, all within a couple of months,” he says.

The group also needed to quickly raise capital, securing $700 million in April 2020, around 40 days after the pandemic was declared. “There were some rigorous conversations with the banks – we were saying, not only do we recognise that we have debt to you, we want to increase that, and we’re in an industry that’s on its knees. So, we’re really asking you to double down and back us.”  

When Campbell later asked one of the banks why they took the risk, he recalls that although the funders had no idea when travel would resume, their decision was based on trust in the leadership team given “everything they’ve done and the way that they’ve worked through things”. “That, to me, was a really proud moment,” he says.

Future focus

Looking to the future, Campbell says Flight Centre’s “North Star” is to achieve a 2 per cent underlying PBT margin – or profit before tax as a percentage of total transaction value – a level at which he says the company should be operating but hasn’t for about ten years (it was 0.5 percent in FY23).

To get there, among the priorities are to bed down the group’s strategic reset, win more market share particularly in corporate travel management, and modernise and simplify the group’s “spaghetti map” of legacy technology systems. The company is also in the early phases of leveraging artificial intelligence, having set up a ‘GenAI’ team last year, but is taking a cautious approach, ensuring it’s applied in ways that help (not replace) consultants to sell travel to customers.

Does Campbell worry about another ‘black swan’ event like COVID?

“Absolutely,” he says. “Now that we’ve been through something like COVID it makes it more real. If we had another virus outbreak, I suspect governments would react a little bit differently, but it would certainly have a major impact on us, without a doubt.

“You can’t really plan for ‘black swan’ events, but I take comfort in the fact that we’ve still got 95 per cent of the team that got us through COVID, so that team will get us through whatever gets thrown our way.”

Lessons learnt

Among the many lessons learned through the COVID crisis, here are 3 of Campbell’s most important:

1. Even in the urgency of a crisis, optionality is vital. “When we were trying to raise capital in a hurry, we had a few options on the go and that meant that we could pick the best one. Don’t have just one path ahead of you, even if that path looks like being the most important, obvious or hasty. Having optionality is really important.” 

• The right playbook is not as important as the right people. “In times of crisis, the playbook often goes out the window, so it’s more important to have the right people sitting around the table. We had the people willing to just roll their sleeves up, who were emotionally tied to the company and passionate, and that’s how we got through.”

• Creating a North Star can replace a burning bridge. “COVID was a burning bridge for us to make the changes we needed. I’ve reflected since on how to create a burning bridge to push difficult changes through without actually being burned, and I’ve realised you can’t, because if you know you can put the fire out any time you don’t take the same risks, with the same urgency. But what you can do is to create your own North Star – a vision of where you want to get to and drive the company towards it.”