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Cheap fares dent Flight Centre's profit

AAP logoAAP 4/11/2016

Flight Centre shares have nosedived after the travel agent warned its annual underlying profit could fall because airlines are offering so many discount international airfares.

The travel group said it is selling more tickets but that those tickets are cheaper because many airlines are offering substantial discounts, particularly in its key markets of Australia, the US and India.

Average international fares sold by Flight Centre in Australia are down seven per cent on the same time a year ago, it said.

The company said its underlying profit before tax for the first half of this financial year is set to fall by up to 28 per cent from a year ago, as revenue growth has slowed because of lower airfares.

Flight Centre said its annual underlying profit before tax is expected to be between $320 million and $355 million in 2016/17, compared to the previous year's $352 million.

Its shares dropped eight per cent, losing $2.65 to $30.30.

The pound's sharp drop since Britain's vote to leave the European Union will also hurt Flight Centre, devaluing its overseas profits, and it said trading in the UK has been subdued so far this financial year due to the vote.

Uncertainty about the US presidential election, and concerns about the Zika virus, have also hit trading in the US, Flight Centre said.

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