Source : THE AGE NEWS
Monday’s earnings downgrade by Flight Centre suggests it’s the canary in the coal mine – or the airline cabin.
It’s an early sign of how US President Donald Trump’s trade war is impacting global consumer confidence. Additionally, it provides evidence that American immigration officials’ “enhanced vetting” is spooking travellers to the United States.
This little bird hasn’t fallen from its perch, but it is squawking a bit.
Flight Centre downgraded its profit guidance on Monday morning.Credit: Dan Peled
The travel company’s update revealed that “recent US developments” had led to lower-than-expected total transactional value growth in core brands, which was impacting overall profit margins.
Social media and increasingly mainstream media have been documenting hairy tales of visitors being detained at US airports, having their electronic devices searched and some being disallowed entry.
A long line of countries has issued updated advisories about the risks of visiting the US.
And then there is the cohort of travellers who are refusing to holiday in the US as a protest against the current regime – while Canadians are chief among them, Australians are in the mix.
But larger than even these issues is an increasing lack of consumer confidence that is washing over many economies as the trade war fuels concerns of slower economic growth, inflation or a recession.
Australian companies that operate on a global stage, such as Flight Centre, will be more prone to infection from the global trade malaise.
Another is pallet giant Brambles, which is generally a good barometer for the economy. But its quarterly update released weaker than anticipated sales growth resulting from “macroeconomic uncertainty on consumer demand”.
Pallet giant Brambles is generally a good barometer for the economy.Credit: Luis Ascui
However, as we move towards full-year results, there will be other Australian companies with international operations that may issue warnings about the effect Donald Trump’s trade grenade could have on their profit.
In the US, this has already begun. Over the past few weeks, three of the country’s largest airlines, Delta, American Airlines and Southwest, have withdrawn their earnings guidance for 2025 because of their inability to predict how profit will fare amid a drop-off in bookings that took root in February.
Flight Centre says it is taking action to address short-term results volatility brought about by uncertain trading conditions “including recent changes to United States trade and entry policies”. This will include cutting staff in some areas and reining in capital expenditure.
Official statistics from the US International Trade Administration reveal the number of visitors from Australia in March 2025 was down by 7 per cent on March last year and down 10 per cent in overall international visitors by air.
Virgin is “very brave” to stick with a June timetable for listing on the ASX.Credit: Ryan Fletcher
Curiously, there is no indication yet from Qantas that it is seeing any meaningful drop in forward bookings to the US.
But the situation is certainly being watched by Qantas, whose bookings to the US may have been supported by customers availing themselves of its loyalty scheme.
And while Virgin Australia has no meaningful international business, any upheaval in the aviation business and sharemarkets couldn’t come at a worse time for a business that’s trying for the third time to list on the stock exchange.
Markets have been in chaos since Trump went postal on his trade war.
Virgin’s recent profit performance, its appointment of a new chief executive and a deal to have Qatar as a new shareholder, rendered the timing ripe for an IPO.
But undertaking an IPO under the current market conditions feels like the equivalent of constructing a building in the middle of a cyclone.
To stick with the June timetable feels very brave.
International markets appear to have calmed a little over the past week. But as recent history has shown, it only takes another errant social media post from Trump to plunge us back into chaos.
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