Flight Centre's Cruise Growth Story Runs Into A Middle East Setback

Fund managers weigh withdrawn earnings guidance against strong corporate travel share gains and a fast-growing cruise business

22 Jun 2026 · 6 min read

Middle East conflict disruption forced Flight Centre Travel Group to abandon its own earnings guidance in mid-2026. Pendal Group reported in June 2026 that the company's trading update removed any reference to its prior underlying profit before tax guidance of $315 million to $350 million, with performance through May continuing to be affected by the conflict, and said that while the stock screens as inexpensive at under 10 times earnings, it wanted more evidence of a turnaround before turning more positive. A separate Pendal update the same month detailed an earnings downgrade of roughly 11 per cent against prior guidance, driven by a $50 million to $60 million hit to fourth-quarter leisure earnings from cancellations, rerouting and weaker forward bookings, alongside modest currency headwinds, though it noted corporate travel continued to outperform on contract wins and competitor disruption, and that the stock found support from a surprise $200 million incremental buyback.

This was largely expected, whilst the stock screens as inexpensive at <10x PE, we would like to see more evidence of a turnaround before becoming more positive.

— Pendal Group, Newsletter, June 2026

A cruise acquisition built the case for a re-rating

The setback follows a period of genuine momentum built around a December 2025 acquisition. Wilson Asset Management reported Flight Centre agreed to acquire Iglu, the UK's leading online cruise agency, for up to £127 million, with around £100 million paid upfront, a business holding more than 15 per cent of the UK cruise market and over 75 per cent of online bookings in that category. Selector Funds Management said the deal was expected to push Flight Centre's cruise total transaction value above A$2 billion during FY26, roughly two years ahead of the company's own plan, with management setting a new A$3 billion cruise TTV stretch target for 2028. The acquisition came with a guidance upgrade, with FY26 underlying profit before tax guidance lifted to $315 million to $350 million.

Ten Cap, which had been building its position through the back half of 2025, said in a February 2026 presentation that a very strong result had management pointing to a rosy outlook over the following six to twelve months, driven by strength in leisure travel alongside an expectation that Flight Centre would win meaningful market share from rival Corporate Travel Management, which was dealing with its own reputational issues. The manager said the combination of double-digit growth potential and a very cheap trading multiple gave it confidence in the position.

We continued to build our position in FLT as we built conviction on strengthening fundamentals. With Asia returning to profitability and the likeliness of material market share gains in the corporate travel market, we think that at 12x PE & significant EPS growth, FLT is a compelling investment opportunity.

— Ten Cap, Monthly Report, December 2025

A contrarian case built well before the cruise deal

That optimism had earlier roots in a straightforward valuation argument. 1851 Capital described Flight Centre in a November 2025 article as a standout opportunity, trading near its COVID-19 lows from 2020 even as the Small Ordinaries index had more than doubled over the same period, on 12 times earnings, virtually debt-free, yet the seventh most shorted stock on the ASX. The manager pointed to a robust corporate travel business that had grown quietly in the background through years of leisure-side disruption, arguing that new contract wins combined with easing macro headwinds for leisure could drive earnings across the group from a base of very low market expectations.

Selector Funds Management's detailed August 2025 quarterly report showed the operational discipline behind that thesis, noting headcount had fallen from 20,092 in FY19 to 12,411 as the company targeted a return to a 2 per cent-plus profit-before-tax-to-TTV margin last achieved in FY15. Despite a record $24.5 billion in total transaction value for FY25, underlying profit before tax fell to $289 million on Middle East tensions, softer US bookings and Asia underperformance, though the manager noted the corporate segment's Net Promoter Score had jumped from 31 to 54 as new technology platforms rolled out, while the balance sheet remained flexible enough to repay $100 million of debt and buy back $200 million of convertible notes.

What managers are watching next

With the Middle East conflict now the dominant swing factor in the near-term outlook and Flight Centre's own guidance withdrawn as of June 2026, the questions for managers are how quickly leisure travel demand recovers once the conflict eases, whether the Iglu-driven cruise growth and continued corporate travel market share gains from Corporate Travel Management's struggles are enough to offset the leisure earnings hit, and whether the newly announced $200 million incremental buyback signals management's own confidence in a turnaround.