Weaker dollar won't stop travel rush: Flight Centre

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Weaker dollar won't stop travel rush: Flight Centre

By Matt O'Sullivan

Australians are likely to keep flying overseas for holidays in record numbers despite a sharp fall in the value of the Australia dollar against the US greenback.

That’s the view of Australia’s largest travel agency, Flight Centre, which is eager to tell investors not to fret about the impact of the weaker dollar on travel habits.

Budget carriers such as Scoot have contributed to lower fares.

Budget carriers such as Scoot have contributed to lower fares.

The travel company believes cheap air fares are the main reason Australians are departing en masse.

It cites a halving of fares for flights from Sydney to Singapore between December 2007 and December 2012, and a 36 per cent fall in the ticket price for a flight to Bali during the same period.

The entry of Singapore Airline’s budget airline, Scoot, has been partly responsible for a fall in the cost of tickets to the city-state.

The other routes which are considerably cheaper to fly now than in 2007 include Bangkok (down 30 per cent), Los Angeles (down 25 per cent) and Hong Kong (down 23 per cent).

While a stronger dollar had been ‘‘generally positive’’ for outbound travel, Flight Centre chief financial officer Andrew Flannery believes its influence on Australians’ travel pattern has been overestimated.

He reckons travellers are more likely to respond to currency fluctuations by altering the amount they spend at their holiday destinations.

In the last three weeks, the dollar has fallen about 6 per cent from above parity against the greenback to 96.3 US cents around midday.

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Flight Centre points out that the Australian dollar strengthened significantly against the greenback between 2009 and last year but it did not alter the split between the domestic and international tickets it sold.

Similarly, major fluctuations in the value of the dollar against the greenback between 2001 and 2012 did not materially alter the percentage of Australians who travelled to the US. Last year about 10 per cent of Australians who travelled overseas flew to the US – almost unchanged on 2001.

To support its theory, Flight Centre highlighted a 30 per cent spike in tickets it sold between July 2008 and February 2009, when the dollar fell from 96 US cents to 65 US cents.

It attributed the sharp rise in Australians flying to the US to Virgin and US airline Delta launching trans-Pacific flights during this period.

Deutsche Bank analysts believe energy and mining companies will be among the biggest beneficiaries of a weaker dollar because they gain revenue from the US.

The analysts also estimated that a softer dollar will be a positive for retail companies.

Shares in Flight Centre rose 94 cents, or almost 3 per cent, to $38.28 on Tuesday morning. The stock reached a record high of $41.50 on May 8.

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