Leader Interview | Flight Centre Travel Group

Transcript

Oriel Morrison:I'm very, very lucky to be sitting beside Graham Turner. I'm sure all of you know who Skroo is, but let me ask, does anybody here know why Graham is called Skroo?

Graham Turner:No.

Oriel Morrison:No, he's not screwy. Well, maybe he is at home, but— anybody? Nobody? One person here. It's a bit real. It could be embarrassing. Okay, can you tell me and then I will— It's got to do with Skroo's surname Turner, which is the brand of a screwdriver, and I believe that's how he got his nickname. Okay, so the answer has got to do with Skroo's surname Turner, which is the brand of a screwdriver. Is that— welcome, by the way. Is that correct?

Graham Turner:Yes, unfortunately it's not. When I was at uni, I tried to live up to the name, but it didn't work very well. We even had to start a bus company to try to—

Oriel Morrison:And it still was unsuccessful? Yeah, pretty much.

Audience:Well done.

Oriel Morrison:Just before we kick off, what I did want to mention is that We are going to be opening for questions. Skroo has very kindly agreed to take questions from the floor. So I'm going to hog a little bit of the time myself, but then we will ask questions. As Marco just mentioned, there is a Slido app, so if you're feeling a bit shy and you don't want to put your hand up and actually verbally ask Skroo the question, feel free to type it. We do have a moderator though going through the questions, so you can't be rude. And we will ask Skroo those questions as we move through, so just bear that in mind as as we start talking. So it's been a riot, I'd have to say, over the last 3 to 4 years for anyone in the travel industry. And if you look at Flight Centre, if we look at Flight Centre just for a moment, share price at $60 prior to COVID, down to $9, on the way back up. How does it feel to have made it through? I mean, now you can sit here and go, we actually, we actually made it through that time.

Graham Turner:Oh well, how many hours have you got?

Oriel Morrison:About 20 minutes.

Graham Turner:I'm sure, you know, a lot of other people in the room have been through this. We, I think it was March the 12th, 2020, when the borders were shut here in Australia and, you know, the transatlantic border was shut. We, we had at that stage 21,000 people doing about $24 billion in sales, and we immediately set up a war room, and, you know, for the next 3 or 4 months hardly left it, just to try to get the company to survive. And, you know, obviously as an executive team, some of us, and probably I didn't have to do this, but letting a lot of people go, a lot of their friends, was, you know, was really tough for them in particular. But probably took us 3 months to really get to the stage. We had to get our costs down from $230 million a month down to under $70, $60, $65. So huge. And, you know, those of you who remember through this, Some of the nonsensical actions of governments made it all the worse, because you knew what they were doing was just plain stupid. So you had to put up with that as well. But, you know, now it's 3 and a half years later. I don't think we've learnt the lessons yet. The government, some of the governments, you know, obviously the Chinese government led the charge, but a lot of other governments, including Australia and New Zealand, followed it. Unfortunately, but hopefully we will have a proper inquiry and it won't happen again.

Oriel Morrison:What are the lessons from your perspective, from the view of the travel industry, that should be learnt?

Graham Turner:The basic lesson is not to panic, which our government did and most governments did. You know, the ridiculous idea of locking down basically 100% of the population when COVID is a virus affects a very small percentage of people in a very adverse way. It's just that makes no— it doesn't pass the pub test. It is just plain stupid. And it's a risk-benefit analysis. And obviously, I remember Jane Hurdlicker at the beginning said, yeah, some people are going to die. But to lock everyone down is just verging— it's insanity. It was insanity. What about the airlines? And I think just that we can get proper science and that it's not just about the medical things. And sure, people who are in old people's homes, they're at serious risk. So if you want to keep them safe, well, they should be locked down and not visited, for example.

Chris Chamberlin:Mm-hmm.

Graham Turner:Anyway, that's what made it really tough, I think, that we knew it was stupid. Anyone with any decent background in epidemiology knew it was total overreach, and it put through, you know, a lot of people a lot of pain, and some of them probably in this room that, you know, we had to let go during that time.

Oriel Morrison:So when you look back at the decisions you made and the decisions your executive made, is there anything today that you would do differently?

Graham Turner:Oh, again, how long? No, look, we, we, we were in survival mode for months and months. We had to raise a lot of money, we had to dilute shareholders dramatically. We've still got quite a lot of debt. Over those 3.5 to 4 years, our company as a business, in terms of lost profits and losses, lost $3.2 billion. So very significant. But Yeah, we're coming out of it reasonably well now. We're, um, we've just announced a profit last month of about $100 million, um, back to, you know, where hopefully where we were pre-COVID in the next couple of years.

Oriel Morrison:Congratulations on that. Now, while things are seem to, and a fabulous, um, presentation just before by Simon, so wherever you are, thank you for that. That was a great wrap. Up of the industry. We are starting— we are coming out of where we were during COVID as you've just discussed too, but it's still a very tumultuous time, certainly in Australia, in the airline industry. There's a lot happening. So I know you're always very honest, Skroo, and I'm gonna ask you to give us your honest opinion to the people in this room. But what do you make of the accusations that have been levelled against Qantas?

Graham Turner:How many Qantas people in the room? I look, I think, um, possibly none. If there's one person I feel very sorry for, it's Alan Joyce. I think over the last 15 years he's done a lot of great things, you know, for Qantas and the industry. And we have— I can absolutely assure you haven't always agreed on some of the things either, but I probably feel a bit sorrier for Vanessa Hudson, who's got to take on the challenges now. Look, and I've said this before, but if a government shuts the country down, shuts— basically shuts the airline down for a couple of years, airlines just don't start get up and running with no operational issues, you know, in 5 minutes. It takes time. And I think, um, you know, Qantas has borne the brunt of that. Probably a bit unfairly, maybe they probably should have done things better. They've got the ACCC issue with cancelled flights. Personally, I suspect that it's more about operational competence than deliberate trying to get commercial gain, but, you know, I guess we'll see that. So I, I, I've— although I've not always agreed with what's happened in our Qantas relationship, You know, you've probably heard about commission, which is almost non-existent in some areas now. But, but I do think they've, they've had a— yeah, it's been a tough job for them. A tough job. And it's going to be a tough job getting back to where that Qantas brand is, was, if you like, revered, you know, in the past. But I'll be surprised if they don't get back there within the next 6 or 12 or 18 months.

Oriel Morrison:So you don't think it will have a huge impact on the airline industry as a whole? Um, almost a rebalancing of sorts?

Graham Turner:Look, some of the airlines have probably done better. Um, you know, have you heard about Qatar?

Oriel Morrison:I have heard about Qatar, yes I have.

Graham Turner:Well, you know, they particularly to Australia and just generally, you know, they were the biggest international carrier during COVID and they kept going, they kept flying and doing a lot of freight and that, and You know, we believe, and we were told anyway, operationally generally washing their face during that period by continuing flying. And, and that was pretty brave of them. And so they came back pretty quickly, whereas I think some of the other airlines, and Qantas is a, is not a bad example, you know, it's just been tougher because they were basically offline for longer.

Oriel Morrison:Well, let's talk about Qatar, shall we? Obviously, there's a, there's an inquiry now, Senate inquiry, the Bridget McKenzie inquiry into that. You've made your views very public on how you feel about the government's decision. What do you think the inquiry is going to find?

Graham Turner:Look, I've got no idea. It depends a bit on what the exact, the criteria the inquiry is going to do, but I think it's a positive thing because, you know, the reality is we just haven't had any decent answers about this from the government. There is absolutely no doubt that decision on Qatar has, uh, will lead and keep higher airfares. I don't think anyone denies that. But for the government to say that's in the national interest, I just can't see it. If it is in the national interest—

Audience:It is.

Graham Turner:Well, let's hear what national interests are we talking about? Because, you know, and I've said before, a lot of the Labor constituents, you know, the people who would support Labor, will often be lower income people, and they're the ones that are really suffering, particularly people who can't afford to visit friends and relatives and other loved ones, you know, in Asia or Europe or wherever they are. So, It is a mystery. And hopefully the inquiry will give some answers. I don't know.

Oriel Morrison:Where do you see airline prices going from here?

Graham Turner:Well, you know, Simon talked about price of fuel, and that may well be a factor. I'd— we think though, as capacity comes on board, they will start coming down. Bear in mind, you know, there is inflation. You could argue inflation one way or another is probably, since 2009, is probably around the 12 to 15%. But bearing that in mind, we think they'll probably come back to much better value by the middle of next year. We've heard, and I'm talking mainly international here, domestic's a bit harder. It'll depend on when the Virgin float is and other things like that, I think. And, you know, there tends to be more competition then. But in Australia, we do need more capacity. And we think the middle of next year, it'll be— you'll see a real decrease in fares. But it's probably '24, '25, probably mid to late '25 before they'll be back to what you could say is reasonably normal competitiveness on the international front.

Oriel Morrison:Skroo, you just mentioned the Virgin float, the IPO that's coming up. What do you make of that? How do you think that's going to turn out?

Graham Turner:Look, I have no idea. But yeah, there is a bit of consensus in the market that they feel they might have missed their slot to do it. So I don't know. No one— we do actually occupy the same building, but Jane doesn't tell me anything about that.

Oriel Morrison:You're going to be buying some Virgin shares?

Graham Turner:I don't know. I won't. I don't know.

Oriel Morrison:I'd love to push you on that. But I'll be kind. So let's talk a little bit about Flight Centre. You talked about your earnings that you've just released. They obviously tell the story of your recovery, and congratulations again on that. We've seen, and Simon mentioned this as well in his presentation, but this almost sort of a shift between business and leisure travel. Do you see that rebalancing as airfares start to come down?

Graham Turner:Yeah, I mean, yeah, we just need cheaper airfares for better value for our customers as much as anything. And so people will travel more for sure, and people— it'll even out the bumps, I think, a lot more. Um, well, what was the question?

Oriel Morrison:The rebalancing between corporate and leisure.

Graham Turner:Oh yeah, I just had a Biden moment.

Oriel Morrison:Where were you going on your Biden moment?

Graham Turner:Yeah, um, look, over the last 3 and a half years, our model's changed a bit. We do more online in leisure. We've won a lot of business in corporate. Thank you, guys. And in leisure, we shut a lot of shops, you know, because shops are quite an expensive overhead. We went from something like 1,300 shops globally to Somewhere under 500 now. So it, you know, there was a lot of readjustment. A lot of the corporate accounts we won were large, relatively low margin accounts. For example, a global Shell, $500 million of business, and there's quite a few of them. In terms of seat numbers, we're back to pre-COVID levels in corporate, in terms of, uh, TDV or sales were at about 110-115%. And as Simon said, corporate travel's probably around that 75-80% back in terms of seat numbers at the moment. So we've obviously taken market share there. And last year, even in 2022-23, we ended up with about $11 billion in sales in corporate. Leisure ended at about $10 billion.

Oriel Morrison:Mm-hmm.

Graham Turner:You know, we've still got a bit of a way to go in leisure. Pre-COVID was probably around $12 billion. So, but, you know, we want a mix of not only just volume, but we want a mix of profit as well. So, and our models have changed a bit.

Oriel Morrison:This team over here that you were pointing to when you were saying thank you to corporate, you've obviously got a number of brands under Flight Centre. Which brand is this one?

Graham Turner:Well, I think you see the FCM FCM brand, but basically in corporate we have 2 major brands, FCM, FCM Travel, and Corporate Traveller. And Corporate Traveller is SME, and FCM is the large market. A lot of them are multinational accounts we have.

Oriel Morrison:So I promised your head of marketing I would get you to say the brand name. So Sam, I hope you're out there listening right now. I got that done. All right, Skroo, let me ask you about— you were talking about your shift in terms of the way that you're doing business and your strategy going forward. You've actually got a much bigger focus on luxury travel than you have had previously. Tell us about that.

Graham Turner:Yeah, well, this is one of the models that probably moved a little bit during COVID but we were already doing it beforehand through initially through the Travel Associates brand, but We also purchased about a year ago, I think, or 8 months ago, Scott Dunn brand in the UK. And it's in the UK, US, and Singapore. So in leisure travel, we have the mass brand, which is obviously Flight Centre. We have independents as well. And then the luxury division, which we see, particularly for face-to-face, person-to-person travel, that the more upmarket, more luxury is going to be an important part of it. of part of that sort of travel. But, you know, we still, you know, Flight Centre, the Flight Centre brand still is by far our largest, and it's more in that mass market, as well as in small SMEs as well. We do quite a lot of business travel there as well.

Oriel Morrison:Okay, so you've got a lot of your brands out in that one too. Well done. All right, we've got around about 10 minutes to go. Do we have any questions in the room? Anybody got a question for Skroo? Over here, we've got some microphones coming over, so bear with us.

Audience:So I've got a question that's more, how do you see interest in travel to Australia rather than from Australia? Because obviously you've got the global brands. And thinking about the international airlines and growth, it's not just Australian travellers travelling overseas, it's also inbound. Where do you see Australia now in terms of that sort of level of interest, and particularly around leisure, thinking about how much of the growth of the middle class there is in the Asia-Pacific area coming up?

Graham Turner:Yeah, no, good question. This is one of the reasons that Australia desperately needs more capacity. Particularly coming in from Europe, the Indian subcontinent, and the UK. And that's obviously one of the areas that Qatar would have helped a lot with. Because Australia is quite an expensive destination for most tourists, we need every bit of help we can get. And you add that expensive, relatively expensive destination along with high airfares, and it really does negatively affect you know, local tourism operators and tourists coming in, in particular. So we, we need to do everything we can to get more capacity into Australia, particularly from those areas. North America is, is probably recovering a bit. Obviously, we heard about China coming in. China will— would be one of the, the bigger players in, in the Australian market, the tourism market. So So that's good news, but we've still got a long way to go.

Oriel Morrison:Any other questions? There's one over here, one at the back, one at the back.

Chris Chamberlin:Good morning. Chris Chamberlin from Point Hacks. I wanted to ask you a bit more about China in particular and international airfares. Obviously with the Qatar decision, we're hearing about higher oil prices remaining high on long haul. Do you expect that the return Do you think the return of China Eastern and China Southern to Australia will make any material difference to European airfares given, I guess it's fair to say, the hassle of transiting in China even with the visa-free transit process?

Graham Turner:Yeah, I think it will make a difference, particularly for lead-in, particularly for people wanting, you know, relatively low fares to North America and Europe. The, you know, they do set the prices to To some extent. So it will help, but as you say, it's not the most popular way to transit on your way to Europe or North America. By the same token, if you look at the low season early next year, you know, for example, out of Brisbane to New York, there are fares now available on Air Canada, I believe, for about $1,600.

Audience:Wow.

Graham Turner:And to LA on Air Canada, about $1,100. So, you know, there are some specials, but you're going to have to book— there's probably not a lot of seats, and you're going to have to book a long way ahead. To Europe, I know Malaysian has about a $1,600 airfare— or they did. It might have gone since then, so don't rely too much on my— but $1,600 through Malaysia to Europe in February, March next year.

Audience:Wow.

Graham Turner:They are around, but the Chinese carriers will certainly help those people who are on a strict budget and who are prepared to go transit through China.

Oriel Morrison:Question at the front here, please. Hello, it's Robyn Ironside from The Australian. Skroo, I was wondering, what would your advice to Vanessa Hudson be at this point? How would you suggest that she turns things around for Qantas?

Graham Turner:I reckon I'd take a sabbatical for about a year, I reckon. No, I, um, no, I'll, I'll, we'll probably get together some days and, um, I'll have a think about that, Robyn.

Oriel Morrison:Good question though. Any other questions on the floor? We do have some coming through on Slido here. How is the New Zealand market performing?

Graham Turner:Well, you'll probably hear from Greg Foran later on.

Oriel Morrison:We will, yes.

Graham Turner:Look, it's not bad. It's fairly similar to Australia, probably a little bit slower. I think that's just, you know, Kiwis are traditionally a little bit slower.

Oriel Morrison:Any Kiwis in the room? Want to refute that fact?

Graham Turner:Yeah, no, it's, it's from our point of view, and I think Greg will say the same, generally things are coming back reasonably well. Probably a little bit behind where we are, and we're obviously behind the rest of the world, except for Asia. So New Zealand will be— New Zealand's, you know, we work pretty closely together and most of the things are pretty similar, the trends and that.

Oriel Morrison:We've got another question here on Qatar. The question is, isn't it in the nation's interest when by not increasing Qatar frequency preserves Australian jobs, especially considering Furb restrictions imposed on Qantas limiting foreign investment that its competitors enjoy?

Graham Turner:Yeah, I can't see the logic here. And, you know, Virgin do have a codeshare with Qatar, so the people that— Virgin is largely a domestic carrier now, and they desperately need more capacity, particularly from Qatar, particularly from Europe and the UK. So if anyone's going to really lose out on that decision, It's going to be Virgin and the jobs and that, that they would have otherwise. So it's a real blow for Virgin and Virgin's people, I think. So that's why I think it would definitely be in the national interest to allow those extra 21 flights.

Oriel Morrison:Any other questions? So I have another question for you. I was hoping we'd have enough time for this. You started off earlier on in our conversation when we started talking about your name, talking about your bus company in the, in the UK, in London, when you very first started out. Now you've been with this company for many years. You were a co-founder of Flight Centre way back when, which started, correct me if I'm wrong, as this particular bus company. Can you tell us the story?

Graham Turner:Oh, um, look, um, yeah, we started Top Deck in 1973. As a matter of fact, our 50-year departure of our first trip is being celebrated in London on the 5th of November this year. So you'll see a lot of old people, those, those of us who are still alive anyway, turn up in London and try to keep up with each other drinking red wine or sangria or something.

Oriel Morrison:We—

Graham Turner:I used to be a vet, so I was working as a vet in Yorkshire, and they had this old World War II airfield full of double-decker buses. So I had a student vet with me, so I said, oh, why don't we go and have a bit of a look at this? You know, it was lunchtime or something, and we— and there was a bus a double-decker bus there that was already fitted out. And so then I went to the Beer Fest.

Oriel Morrison:As you do.

Graham Turner:With a group of friends and met one of my other vet mates, Geoff Lomas, there. He was called Spy. And I convinced him after about 3 steins of beer that we should— I'll go back to London and I'll buy this bus, we'll get it fixed up and run a trip. And he then went on travelling and that's exactly what we did. And on about November 5th, 1973, we set off on a 6-week Spain, Portugal, Moroccan trip with no— we had no road tax, none of us had bus licences. We had, I think we had 18 passengers. And it was the middle of winter, as you would say. And, you know, there's sad news about Morocco at the moment, but we nearly had some sad news because crossing the High Atlas, we didn't have any chains either. So I remember we got right to the top of one of the passes, Tizi n'Tichna, I think it is called. And I was driving and the bus started sliding towards the edge of the road and I realised we were on ice. Oh, my God. With no chains. Anyway, lucky it was a sunny day. We waited for about 5 or 6 hours. The ice melted and the bus stopped, obviously, before it got to the edge of the cliff, if you like. It came onto some gravel and luckily we had all the passengers off by then, so I was the only one in the firing line. But we managed to survive that. The next trip we actually took chains with us.

Oriel Morrison:Good. Good plan.

Graham Turner:So anyway, that's how we started. And we started Top Deck Flight Centre then in 1982, basically started in Brisbane. So now we, we, we bought Top Deck back in 2015. So we're the proud owners back of Top Deck. And it's, it's been— it's, it's back into profitability this, this year for the first time for a few years as well. So generally, it's great.

Oriel Morrison:That is a very good news story. Thank you so much for sharing it with us as well. Now just before we go, I know I'm over time, I'm going to get in trouble, but we do have a very important question that's come through. Who's going to win the Rugby World Cup?

Graham Turner:Well, I don't think— oh, I suspect it's not Australia. But no, I think it's going to be one of the most interesting of all times. And for my sins and having to be in London on November the 5th, I'm actually going to the final on the 28th of October, so I'll let you know then.

Oriel Morrison:Okay, all right, hold you to that. Ladies and gentlemen, please put your hands together for Skroo Turner.

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