Flight Centre share price down 4% despite making significant progress with its cost cutting

The Flight Centre Travel Group Ltd (ASX:FLT) share price is dropping lower on Monday despite the release of a positive update…

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The Flight Centre Travel Group Ltd (ASX: FLT) share price has dropped lower on Monday after release of an update.

The travel company's shares were down as much as 4.5% to $9.60 at one stage. They have rebounded a touch, but are still down 2% to $9.85 at the time of writing.

What was in Flight Centre's update?

This morning Flight Centre revealed that it continues to progress towards the cost reduction strategies and financial targets it announced last month.

According to the release, the company is making significant progress in reducing its global cost base towards the $65 million per month target by the end of July 2020.

Another positive is that it now expects that these cost reductions will be implemented with less than the $210 million in one-off costs that it originally anticipated.

Not everything in the update was positive, though. Management revealed that heavy travel restrictions are weighing on its total transaction value (TTV). During April its TTV was tracking at approximately 5-10% of normal levels.

Managing director, Graham Turner, commented: "There has been some ongoing activity in most countries and we are seeing a slight uptick in bookings in countries like China as travel and trading restrictions ease."

"Importantly for the future, we continue to win and implement new corporate accounts that will help drive TTV growth when conditions recover and normalise," he added.

When will the travel market recover?

Mr Turner appears optimistic that activity will increase once interstate borders reopen in Australia, though he warned that the timeframe for this recovery remains unclear.

He said: "The timeframe for this recovery remains unclear, but we anticipate an increase in activity in countries like Australia as soon as interstate borders reopen, which we expect will happen in the coming months."

"Given that domestic travel represents roughly half of the leisure tickets that we normally issue in Australia and the overwhelming majority of our corporate volume, we are well placed to play a positive role in the recovery and are keen to work closely with local tourism bodies, airlines and other suppliers in the coming months," the managing director explained.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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