Flight Centre Travel Group Limited (FLT) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us today for Flight Centre's half year results presentation. Today, I'm joined by Skroo, our Global MD or CEO; Adam Campbell, our CFO; and the man of the match in Flight Centre's touch game last week; Chris Galanty, our Global Corporate CEO; and Melanie Waters, our Leisure CEO. Skroo will start and finish things off, but in-between, there'll be a sandwich of Adam, Chris and then Mel. I'll now hand over to Skroo.

Thank you, Haydn. Yes, it's been a tough year. We've obviously had the COVID-19 challenge. But I think how we weathered it, we're reasonably happy with so far. We've certainly lowered our cost base substantially, down 70% or so. And we're still generating revenue in -- particularly in the domestic only. But also if you look at December, it was growing from the previous months up to December. It looks like January was down a little bit on December, but that was because of the disruptions we had. And generally, we've achieved month-on-month reductions in our cash outflow. I think it was $30 million outflow in December, which we're reasonably happy with it. It gives us an extended liquidity runway, of course, of about $1.2 billion-plus by December 31. So now for the recovery phase. We're obviously a leaner and a more efficient organization now with a lengthy liquidity runway. As I said, we've tried really hard to maintain and retain our key assets, people and develop that technology during this time. And obviously, we've got a lot of leisure assets and corporate assets. We're a fairly diversified organization as well as our in-destination. So we're pretty confident we can benefit from the travel recovery over the next 12 months. And we're confident also we can grow market share, particularly in leisure but also in corporate. So some of the positive signs are starting to emerge. First of all, we're pretty sure there's really good pent-up demand. We saw this in December when the borders were lifted in Australia and we had some record days there, particularly online. So the demand is there once the borders open. We're certain of that. Even some of our smaller businesses are profitable. I think we've made mention the UAE has been profitable for some months. The My Holiday's brand in Australia is profitable the last 2 months. And obviously, 99 Bikes or the Pedal Group had made significant profits in this last year and Flight Centre owned 48% of that. We think there'll be accelerated second half TTV recovery in corporate. Now this will be particularly important in domestic travel, where there is a big domestic market such as in North America and Australia as long as the borders generally stay open, and we're pretty confident it will. We've seen the vaccination programs working well, particularly in North America again and the U.K., and they're starting to look like they're getting some really good results. And as we know, vaccinations just started in Australia. And the vulnerable people will be fully vaccinated by the looks, by the end of June, which means that not only domestic travel should be able to start again, but we should see international study -- international travel starting soon after that. The next slide, you'll see the vaccination programs, the impact of the vaccination programs. And this is a few days old now, but I think we've heard a fair bit about both the United Kingdom and the States in the success rate there. So these look good. There's still some challenges, of course, with the South African variant, but it looks like the Pfizer vaccine is very effective against all these variants. So some of the other key drivers on the road to recovery is obviously domestic borders opening and staying open, then some selected international routes, which -- initially, it will probably be in the South Pacific and Asia during -- possibly even during the end of this financial year. And then obviously, broader border openings early next financial year, somewhere between July and September, November, we believe. So the road to recovery, it's obviously about the vaccination programs gaining momentum in our part of the world. And that's particularly North America, EMEA, Australia and New Zealand and obviously parts of Asia. The second one -- and that should happen pretty much by end of March this financial year. Certainly, the last quarter in this financial year, the end of June, we'll have every vulnerable Australian vaccinated, and that will help with mortality and hospitalizations if another infection comes into Australia. And obviously, both North America and U.K., Europe will be heavily vaccinated by then as well. And in the second 6 months of this calendar year, we will see a level of herd immunity in most of these major countries that have had this vaccination program or indeed with the U.K. and Europe and North America where they've had a heavy rate of infection, which will help the herd immunity, which means that generally, travel can start, international travel can start returning to normal. So that's basically the story. Adam now will give you some overview of the results. So thank you. Adam?

Yes. Happy to, Skroo. Happy to. So as you said, the reported results for the period that we are putting out are pretty much in line with our expectation and consistent with the market disclosures that we've put out there in August and then again at our AGM in November. The underlying loss was $247 million after adjusting for the sale of the Melbourne head office and the various one-off costs that are incurred in reducing our fixed cost base. Details of all of those adjustments are detailed throughout the PowerPoint and also in the Appendix 4D. So I won't go too much into the them here at the moment. TTV, as Chris said, for the period, continued to grow month-on-month throughout the period, with total TTV of around $1.5 billion, representing around 12% of previous volumes. Our corporate brands on average represented 16% of previous volumes and leisure at 7%. Although TTV was directly impacted by ongoing border closures, we [ continue to ] see immediate rebounds in bookings when those borders reopen. And our TTVs in December was the highest level since the pandemic lockdown commenced in March 2020, which is a good result for us. Our revenue margin, again, as expected, fell to 10.4% overall. And this reflects both the domestic and corporate travel weightings that we're currently seeing. Overall, corporate revenue margins increased slightly over the period, with the majority of the margin decline seen in leisure as a result of the reduction in touring revenue, the traditionally disproportionate domestic volumes that we're seeing and increased online transactions. We do anticipate that leisure margins will stabilize at around 10% over the next 6 months and then increase as international travel returns, ensuring revenue recommences. We have a strong focus at the moment and have had for some time in those items under our control, and that's included the continued discipline over cost control in this low revenue environment. The continued growth in revenue month-on-month combined with this cost discipline has been our operating cash outflows of $97 million in July 2020, reduced to $40 million in September and then further reduced to $30 million in December. Our liquidity has been strengthened during the period by the sale of our Melbourne head office as well as the issuance of $400 million in convertible notes last November. So with $1.7 billion in cash, over $1.2 billion in liquidity and cash outflows of around $30 million a month, we feel that we're in a position to weather even the most pessimistic modeling of macro conditions for an extended period. And if the positive signs that we're now seeing at a macro level eventuate, as expected, we'll be in a good position to use our liquidity to accelerate key investments or capitalize on other opportunities. We've included a normal liquidity position table in the PowerPoint, which most of you should be well familiar with by now, knowing that there's no major changes in either our working capital assets or liabilities since we last reported these at the AGM. We've also continued to invest in our future. In the first half, we invested around $21 million in CapEx, which is pretty much fully incurred on technology enhancements to bring new and differentiated products to market, to make travel safer and easier for our customers and to improve productivity. Mel and Chris will talk to a number of these investments in their sections, including Melon, Helio and SOAR. We've spoken to some elements of the P&L already. So I'll just point out an additional slide that we've included that highlight the underlying movement in our key cost lines. This just highlights the impact of the cost reduction programs that we've implemented over what was a relatively short period of time. And you'll see in there, as an example, that our employee benefits cost line has reduced by around 64% over the period. On the balance sheet, we've had a strong collection -- had strong collections with our receivables. And it's been pleasing to see that we've had no significant write-downs of debtor balances, and our debt -- bad debt expense for the period has remained at our traditionally low levels. We've now finalized documentation for the new bilateral debt facilities that were agreed late last year, which is 3-year facilities with no -- none of the normal covenants coming in until the 31 December 2022 reporting period. And it was really pleasing to see ANZ, Westpac, HSBC, all providing such strong support to us over the period. On our cash flow statement, the operating cash outflows represent our normal monthly operating cash flows for the period, the unwind of our working capital balances over the half, and the one-off costs that we incurred in reducing our fixed cost base. I'll now hand over to Chris to talk through our corporate brands in a bit more detail.

So today, I'm just going to talk a bit about our first half and the strategic objectives that we've achieved and why we're very confident about our ability to capitalize on them, moving into the second half and beyond. The first thing I wanted to reiterate, something I've mentioned before, is that what we are seeing is a very clear pattern. As soon as the customers can travel for business, they do travel. We originally saw this in our Chinese domestic business. That was the first market. We've since seen in other domestic markets, such as Australia, for example. As soon as borders open domestically, people travel. And talking with our customers extensively over the last year, they have made it very clear to us that will apply as international borders open too. So I'm just going to focus on our key priorities. The first one is to win and retain customers to grow market share. The second is to successfully launch our new digital product, Melon, in our Corporate Traveller brand and deploy the brand business model shift in all markets globally. The third is the continued progression of our FCM Truly Global business plan, which includes the deployment of our brand-new FCM digital platform. The fourth is to invest in data science capability to enable more customer-centric decision-making and improve our commercial returns. Fifth is to increase productivity gains through the deployment of robotics and artificial intelligence technology platform. This is really important that as we bring our staff back, we won't be returning to our previous staff numbers. We are in a position to get significant productivity gains throughout the corporate business. And finally, to improve our travel content supply aggregation and pricing to generate customer savings and improve commercial returns. So I've showed this slide before in presentations. This is a customer value proposition. We have a 2-sided model. We address the market uniquely with 2 brands. In the large market space and enterprise space and government space, we use our FCM brand. And in the start-up to medium enterprise space, we use our Corporate Traveller brand. And this approach is unique in the marketplace, and we believe it is a winning approach. And today, I really want to point out how we're winning, where we're winning and why we're winning. And this is a really important part of why we're winning. Each of our brands has a completely tailored solution to their customer segmentation. And for example, in FCM, customers really care about global scale and consistency, very important to them. They're trading in many markets. But they also really appreciate the flexibility that we bring to market. In Corporate Traveller, we use a term called Care Uplifted. And this is really the experience we can give customers through consumer-grade, simple-to-use technology, and very personalized experience using our travel experts. And again, this approach of 2 brands is one of the reasons we do win so much business. Looking at our geographic spread. We are in 100 markets, 23 of which are equity. We have -- we're in 10 of the top 16 global markets, it's full equity. And where we're not -- where we don't have full equity, we have very strong partners. And we, as a business, control the design, solution design for customers, implementation of the program, service level agreements, the data and our partners use their own technology. So it's a very integrated and consistent experience for our customers across the world. And this presence across the world is what enables us to deliver to enterprise customers. And we're one of the very few TMCs that can actually do that. So with our Grow to Win strategy, we very much said we wanted to keep investing in the business. We did make some very tough cuts this year, as Adam highlighted, that we were very keen to keep investing throughout the COVID period. And one of the rationales behind that was we wanted to win more business. Now with our FCM sales update, we talked about FCM because it's our contracted business. Typically, as we sign the customer, it's for 3 or 5 years. However, we always expect at least 2 cycles. So a 5-year customer is actually normally a 10-year customer. And what we're doing here for the first time is not just talking about our wins, but also looking at our sales pipeline. I'll explain that in the moment. And the wins is a very positive story for us. We've won just under USD 700 million of signed business. That's annual signed business so far this year. And although we don't expect the customers to trade at full levels this year, we are, again, signing 3- or 5-year contracts, and we do expect it to get up to those levels during the length of the contract. And there's lots of very well-known names here. The Foreign Commonwealth & Development Office, part of the U.K. government, the current commercial services business that we signed, Ashar, Electronic Arts, the computer games guys, Spotify, KPMG in a couple of key European markets, Bosch, Tupperware, JTI, margins some new markets where we didn't have them, CMA, AXA, JLL, so lots of companies that you would have known. We've also importantly retained lots of customers. I think our retention rate is close to 99% in FCM this year, which we get as a new high. And we have secured 3 of our top 5 customers were out for bid this year. We signed all 3, and that includes the New South Wales government. Looking at the sales pipeline. The reason we can keep winning businesses -- this is not just a one-off exercise. We really work on these leads for many years. It shows the strength in marketing and our sales capability. So at the top of the funnel, we have a lead generation where we work with potential customers years as long as they're RFP. And today, we have USD 25 billion of contact with customers where we're talking to them about FCM. We're explaining our customer value proposition, why they should consider us the RFP. The RFP proposal stage itself, we have over $1 billion, $800 million shortlisted, and in final negotiations where we're down to the last 2, sometimes down to the last one, awaiting Board approval. We've got over $500 million of sales. So that's why we keep winning, it's a very strong pipeline. You can see the new wins year-to-date evenly spread around the world, but a big focus on both EMEA and Americas, which is good news for us because they appear to be the regions where the vaccines are progressing fastest. And you can see on the right side on the pie chart, we've actually got a bit of a change in approach here, a real focus on government this year in manufacturing, which are 2 segments we haven't been that heavily focused on previously. So as they have a high propensity to travel throughout any circumstance, we've really refocused on them and are actually getting some great wins, not just the U.K. government, but also a lot of business in the French government as well. So we've proven that we can win in government, which is going to be a big area of growth for us moving forward. So some of the product we bring to market. We're very excited this year about Melon. Melon is a new digital platform which brings consumer-grade mobile technology using robotic artificial intelligence to give the best experience to customers, very simple to implement and implemented, in hours rather than weeks and is on -- in use with customers today in the U.S. It's going to a full market launch in April in the U.S. and then to rest of the world throughout '21, so something we're very excited about there. And certainly in FCM, our FCM platform, which is going live globally in 2021 as well across all of our markets. So what we're doing in both of these brands, we're bringing 2 brand-new products to market. And again, that's a testament to the investment we've made throughout this year. It's working closely with customers to understand their new needs in the post-COVID world and making sure our products are market-ready and in fact ahead of the market in both brands. So we're very excited about this. Our customers are very excited about this. And you'll hear a lot more about that as this year goes on. So this final slide from my section, I really just want to give a one-page summary of our business and our investments and how we're winning. So at the top, you can see our 2 corporate brands. We have only 2 brands globally. And they focus on different segments of the market, 2 very differentiated brands, both of which are going through a relaunch in the next couple of months. We -- each of those brands have their dedicated product, so Melon for Corporate Traveller, and the FCM platform for FCM, so unique, bespoke, proprietary technology that gives the best-in-class experience for those customer types. Both very different in terms of the user experience, implementation times that's perfectly suited for those customer types. We then have our sales and marketing machine behind those products, and again, dedicated sales and marketing for Corporate Traveller and FCM but very much shared capability with our global marketing team who service both brands from a technical perspective, such as digital marketing. And then below that, we -- is where all of us shared [ work in FCM ], and often, in many cases, shared with our leisure business as well. I mean we work very closely between corporate and leisure to make sure that capability is shared, content is shared and best practice is shared. And Mel will touch on some of that in her section. But our intelligence layer here is where all the magic happens. So this is really the robotics, the data side, the artificial intelligence, the pricing analytics, where we use lots of proprietary skills and technology to make sure we get the right content and the right price to the right customers. And this is a big change for us. Again, a big investment this year, but it means for the first time, we're moving from just having transactional and financial data to behavioral data as well, which really enhances our ability to give a better experience, better savings and better commercial returns for us. And this is very common with many modern platforms around the world. The Amazons and the Spotifys, et cetera. But it is the first time we're using this level of analytics and data, and we expect it to be a game changer for our business. Below that, we then have content and supply. And again, we've made some significant investments in this area with leisure to make sure we can get the best content and the most appropriate content into our customers' hands, into our consultants' hands when our customers are booking offline. Our strategic investment in TPConnects has meant that we can bring all their content, so all private net content that we've negotiated with carriers, customer private content that we've negotiated for our customers on their behalf, published fares, NDC content. And I think we're leading the world with NDC, certainly according to many airlines at the moment in the business world. And this means that we can bring as NDC grows and is growing across the world. We can bring private and public NDC content and low-cost carrier content all through the one API into our Melon and FCM platforms. And this really is a huge advance from where we've been before but also where we see any of the industry at the moment. And TPConnects will be powering Melon and the FCM platform this year. And also I've already mentioned it has exactly the same functionality but for land hotels. Again, all the different hotel content available aggregated and brought into our products. And then finally, we remain a people business. Yes, we have the best technology and our customers tell us that. That's one of the reasons we win. But they also tell us -- now I talk to customers every week, the -- are really that our people, our culture, our approach to doing business, that's what they love about both Corporate Traveller and FCM. And that culture remains incredibly important, and we've spent a lot of time throughout the pandemic, keeping as many of our people on board as we can, certainly keeping our A team on board and making sure they're empowered, they're motivated. And importantly, they're kept up-to-date with all the investments we're making and they remain in contact with our customers. So that's the summary from me. I'll hand over to Mel on leisure.

So good morning, everyone. Thanks, Chris. I've just put a recent Instagram post from Flight Centre. It's the first slide in my section, which I think sums up how a lot of us and our customers are feeling. And that is that we all want to travel. I think everyone I speak to at the moment is desperate to get on a plane and go somewhere. So just -- I'll just spend a few minutes talking from a group leisure perspective and give you a brief strategic overview and progress on the key initiatives and investments that we are making that we believe position us to recover and win in leisure travel as we come out of the pandemic, regardless of how long and what that path to recovery is. And I think there is no doubt that leisure travel will recover. We know that connecting with family, friends, places, et cetera, is the core expectations of humans, particularly in the markets that we operate in. There is no doubt, however, that there is limited revenue generation as restrictions have been put in place over the last year. And as you -- I think Adam mentioned in the leisure segment result, we have less than 10% of pre-COVID volumes partly for the first half. We have, however, been able to accelerate our transformational plan, which I think you would all remember we've had ongoing for some years. We now have a greatly reduced and sustainable cost base while maintaining key assets. We still have a very good shop network with a reach. 95% of our Australian Flight Centre customers, even after our reduction in the network, still live within a 5-kilometer access of a shop. We also are very much focused on our investment in future growth drivers and global capability to power our key brands in leisure as the same, as Chris has outlined with corporate. Early signs also support that we have made the right choices with our plans and strategies are, in fact, gaining momentum. We are holding or, in fact, increasing market share whenever the travel did rebound after restrictions were lifted. And we saw that particularly in markets like South Africa and Australia, a bit hard to tell in New Zealand because it's such a restricted domestic market there. But domestic sales in Australia exceeded the prior year levels within 2 days of the Queensland announcing its borders opening back in November. That was quickly reversed in December when they shut them again. But you can see as soon as, Chris mentioned, customers can travel, they do travel. Also, some of our newer models that we had made acquisitions for in the last years and we're continuing to invest in, particularly in our online supply and call centers, are also showing more solid growth than our traditional business as the market opens up. In fact, our Ignite call center in Australia, which we only completed that transaction, I think, late 2019 is, in fact, one of the first leisure businesses globally to return to profit in January of this year, driven by domestic and cruise sales and looks like February, in fact, will be even better. On the next slide. I actually think that this is an important to note and now answer the question that I probably get asked the most about in our leisure business. And that is how will we recover our volumes with half our previous shop network now in place. And the answer is we have maintained our leisure reach and global footprint whilst reducing brands and shops and increasing and, in fact, rebalancing our channels. As I mentioned, this was a strategy we had commenced pre-COVID to address both changing consumer needs and preferences as well as clearly the cost issue that we had in our leisure business pre-COVID. However, we are still in 7 markets. We were in 7 markets pre-COVID. We still hold the #1 market share position in Australia, New Zealand and South Africa, and we intend to grow that, and we still have a targeted specialized offering in the Northern Hemisphere. We believe we have the right footprint to grow from. We've just managed to reduce our overweight shop model over the period of 2020, which was going to take something like 3 to 5 years. I just thought I'd reiterate quickly our global leisure strategy. This is not a new slide -- you've seen it before, and how we are addressing that leisure market. Essentially, we've very much narrowed it to 3 major pathways built around some shared core global capabilities. But as I've said, we're taking this downturn period to accelerate the development of and is where we still continue to make prudent investments, I might add, not earth-shattering one, but we're spending wisely. So our 3 core leisure strategies revolve around the mass markets with Flight Centre and really rejuvenating that brand to be a multichannel, mass traveler retailer with irresistible deals and savvy personal service. And that is very much our #1 strategy. Our second strategy has been in the premium and luxury space. We're using our brands of travel associates and Laurier Du Vallon in Canada. We intend to become the most distinctive premium luxury boutique travel brand in-market with superior service and expertise. And then our third core strategy is to become the home of the travel entrepreneur or #HOTTE as it's known internally. So we want to be the leading network and product proposition for member and mobile travel professionals, essentially the independent contractor and affiliate marketplace. We also have, I call it, a bit on the side, a very small suite of complementary yet independent brands. But again, that has been severely rationalized over the last year. Like Chris, I've got a similar slide here and I won't go through all the layers, but you can see that a core leisure backbone is really what's powering those core brands of Flight Centre and Travel Associates and, in fact, our B2B aspirations as well. And I'll just take a moment. You can see the bottom 3 layers are very much the same as corporate. And Chris mentioned that we work together globally to ensure that our people and culture, which is now 40 years old for Flight Centre, in fact, this year. Skroo, I think we turned 40 this month. And with top deck obviously goes up to something like 50 years, but really ensuring that we are still a people and cultural brand for a business with a distinctive entrepreneurial performance-based approach. Our content and suppliers, also, we have a long history of great supplier relationships, which is now very much enhanced with digital capability across 2 core aggregating platforms. We share the same platform with air, with corporate, the TPConnects, one that Chris has gone through, and we have a platform in leisure called Helio, which we've accelerated the rollout of and, in fact, we'll complete the global rollout by May of this year. Supported with an intelligence layer. And again, Chris mentioned, this is hugely important because no longer are we using the individual, the consultant and their expertise to help work out what products we should put in front of what customers when and how, but we're using data, robotics, artificial intelligence and real analytical strength to improve that. On the top of our kind of platform is our models, which we've now centered on 4 core models. Our shop model, which most of you are well aware of, which operates with both Flight Centre and Travel Associates, our new call center model, our independent contractor and affiliate model and, of course, e-commerce. We also, with our products and marketing have really transformed and industrialized our product design and merchandising, ensuring that we leverage that collective travel brain, that data and analytical capability on behalf of our customers. And therefore, with our key brands of Flight Centre and Travel Associates deliver a superior customer experience for our famous and well-positioned brands to win in the marketplace. Over the history of leisure, a lot of this kind of work was actually done discretely within brand and country. Over 2020, as we said, we've taken the opportunity to transform this, industrializing it, digitizing it, automated it -- automating it and ensuring that it's shared across all of our regions instead of being replicated in many. I'm just going to spend a few minutes just going through some of our core strategies very quickly. As I mentioned, our first core strategy is Flight Centre. It is our iconic brand, and it is where most of our energy is going into -- in 2 key pathways of rejuvenating the brand, externally from the customer's perspective and internally from our operating models. And again, good progress is well underway. We will win with Flight Centre by combining what Flight Centre has become famous for, great value travel deals with great people. What we've been working along is making it multichannel. And as I said, are very pleased with the progress. So we've been working on a rejuvenated and modernized brand, and you'll see us launch a new, refreshed brand in about April and May of this year depending on when borders mean that it's worthwhile to spend the money. It's become very customer-driven through those data and analytics with a customer center now ensuring that we really drive the customer metrics through everything we do. We've created the product design house, which was that industrializing of the products we take to market again, on the Helio platform, which we've accelerated and got out over the last year. And the other thing is really winning in the under 40s where we were, in fact, doing fairly poorly prior to COVID. Funnily enough, necessity is the mother of invention. And because of our lower marketing spend, we've been very strong in digital, social channels over the last year, hence the Instagram post I had earlier, which, of course, is the domain of the under 40s, and it's really helping us move along in gaining market in that space as well. In fact, Flight Centre has a TikTok now, has a TikTok presence. So there you go, if you're interested in sort of Flight Centred answers. On an operating model, we've also gone to those 4 models. As I said, everyone all knows about our world-class shop network, which is now of the right side. We also have a sales center, which we've just kicked off on the Gold Coast for Australia, leading in terms of being very deal-driven and with specialized consultants on a very strict call center operating model, really focused on new customer acquisition. Our independent contractor is also available in the marketplace in all Flight Centre brand jurisdictions apart from the U.K. and of course, our self-service or e-commerce model. So again, much progress in the last few months. I've got a slide there specifically on our online strategy. I won't go through it, but suffice to say, we are really expanding and investing in our proprietary store parts platform, which I think Adam mentioned, and really bringing together the deals, our people and that technology across connected channels. One thing that will be a first is our new Helio platform allows open source access. So a customer will be able to book online, and our consultants will be able to also work within that booking for the packages when they become available to book at a few months' time. There are some examples there of our new online website, our mobile app and our searches. We actually upgraded our DIY hotel capability, where we've been very soft in the marketplace. Next is our premium, including moving to a more luxury strategy. And again, that's well underway with our brands of Travel Associates and Laurier Du Vallon. And again, these brands were delivering good metrics prior to COVID. It's just the growth was somewhat suppressed. We've now moved to differentiate them more away from the mass brand of Flight Centre throughout most of the world and Liberty in the Americas. Although we're leveraging group technology and travel content as well as people, we're really working to give them product and customer distinctiveness with leading customer value propositions. Again, I won't go through it but one of the first things we've done with differentiating the product in our premium space is we've partnered up with Virtuoso. We're, as we speak, launching that partnership across our entire Travel Associates network in Australia and New Zealand, which gives our premium and luxury customers access to unique products that they would -- and amenities that they would not get elsewhere. Again, we're moving forward with different models, and we've launched the @Home with Travel Associates, which is the independent contractor in our premium space. Our next major strategy with the B2B, which, again, I mentioned, we're already gaining much traction somewhat in part to the lack of confidence in some markets with their current household consortia. In some instances, we've seen some collapse. There was a collapse in South Africa of a major competitor. But also due to our leading content, technology and brand strengths that we're able to offer independents and affiliates. And what's nice is our entrepreneurial culture really dovetails into being that we can become the home of the travel entrepreneur. Our intent is to become a leading independent operator in Australia, New Zealand and South Africa, again with some very targeted offerings in the Northern Hemisphere. I think you can see there also some of our offers that we've got in marketplace, where again, our different brands. One of the things we are doing that's different in this space is allowing our Flight Centre and Travel Associates brands to also offer a referral model, which means we'll be able to generate and give leads to our independent agents as well as allow us the flexibility in peak periods of having an overflow to those guys. And finally, in leisure, we have, as I said, a very small suite of complementary and independent brands which are getting very little investment, but because of the accelerated nature of how they were going pre-COVID and are showing early signs of recovery particularly with StudentUniverse and the My Brands portfolio within Ignite, are proving to offer some good opportunities for recovery. Studentuniverse was doing solid levels of pre-COVID TTV and with [ the exhibitor ] of STA in this space, we have strong aspirations to become the #1 student end-use business in travel in the world. As I said, My Brands is also doing very well because they were able to pivot to a domestic and cruise offering and, in fact, are already profitable in the early part of '21. BYO and Travel Money are essentially in hibernation, but again, we'll be looking to bring those businesses back as the market recovers. In summary, we believe our reduced physical portfolio, diversifying our models, our investments in technology and product powered by our great culture and more importantly -- or most importantly, our famous brands, strongly position us to recover and win in leisure travel. So thanks. Back to Skroo.

Thanks, Mel. I'm actually feeling a bit exhausted after that. I can't believe everything is going on. Look, I just mentioned some of our other businesses that haven't been talked about, the in-destination, we call the Travel group. The first one is Discova Destination Management. It's DMC. It's going great guns, our hotels, mainly in Southeast Asia, and obviously, our tour operations, which is Topdeck and Back-Roads, which currently in hibernation. We're planning to run a small program late 2021, mainly with customers from the U.K., Europe, but hopefully also some from Australia and New Zealand. One of the businesses that most of you know -- Flight Centre has a -- I think it's a 48% share of is -- is the Pedal Group, which is 99 Bikes. And mainly because of the pandemic, it's gone pretty well. For example, I think it made under $18.5 million in the financial year ending June 2020, but it's expecting probably a $45 million profit before tax this year, which is pretty good. We're looking at ongoing expansion. There's more shops. I think we've got about 55 shops in Australia and 5 in New Zealand, but we are looking at London at the moment to grow that. And so that's a really good story, and it is very -- it's quite closely associated Flight Centre. A lot of the use of the Flight Centre systems and the way we do things here. So that's one of the positive stories out of the pandemic. AVMIN as well. It's our charter operation. We have a 50% -- is it 50%? Or 50% of ownership of that, and it's been going very well. It's quite profitable. A lot of it's because of the movies being done out here in Australia, and we're getting charters out mainly from the States. And Travel Junction is our B2B hotel operation, which we're selling our contracts into other people who buy this sort of thing. So that's -- it's a small operation but being quite successful during this pandemic period. Just moving on to guidance and expectations. Look, we've got a stable cost base now. We're reasonably happy. We don't have to grow that until we get more revenue coming back. So -- but we still have retained most of our IP, most of our people that are very important, ongoing as things come back. We can't provide guidance for '21, but you will see from the first half, it's going to take a little bit of time to get back to where we'd like to be breakeven and then profit. We're expecting domestic recovery in places like Australia and the U.S., Canada a little bit later. And the same with Europe and U.K., a little bit later in this half of the year. But that will be domestic. And I think you've heard, those of you in Australia that the premiers and the health offices are basically saying they don't want to shut down the borders anymore. We'll see if that's true or not. And we're reasonably confident that there will be international travel. You heard Boris this morning -- on Tuesday morning, it was, saying that he expects international travel to return out of the U.K. in May. And we're looking at probably a similar timetable in North America. Asia is a bit harder to predict. But certainly in Australia, we would expect it after all the vulnerable people have been vaccinated by the end of June that international -- some international travel will start to resume. So we're certainly looking forward in the second half of this calendar year. Some of the trends in the second half of in FY '21. January ended up in line with expectations given the fact that there was a lot of lockdowns and -- not only in Australia, of course, but in places like the U.K., although vaccinations, it started in earnest. There was still a fair bit of uncertainty in a lot of places. So it wasn't a great month. People are tending to book closer to departure now for obvious reasons. I think one of the things that we're very good at is our relations with suppliers. We put a lot of effort not only in Australia but around the world in our relationships with our suppliers to make sure that as things come out of this pandemic, we've got a long-term, secure relationships with the people, the airlines, the tour operators, the hotels, the hotel chains that we can really work well with. There's no doubt there's going to be some market consolidation, not that we wish this on anyone, but inevitably, there's going to be a lot of small businesses not going to survive this almost regardless of what governments do. There will be some M&A opportunities. There will be business closures, and we're obviously in a good position to take any advantage of this. Obviously, the vaccination is a big thing, widespread rollouts in our markets, particularly in North America, in U.K., and to a less extent in Europe and now starting in Australia and New Zealand and obviously parts of Asia. So that's quite important. And this is going to be -- someone said it's not a silver bullet. But assuming the vaccinations work, it should be a silver bullet. There are still some issues, of course, with variants and that, but we don't know the exact answers of this. So post-pandemic travel would be anything but normal. But do you want to say any more about this Haydn?

I might hand over to Chris as the expert on some of this stuff.

So look, as Mel and I both said, in leisure and corporate, when people can travel, they will travel. That's the evidence we're seeing. However, it seems pretty clear to us that travel will be different in a post-COVID world. And we use this, we saw this after September 11 where the whole industry had to adapt globally. And we've been working very closely with both governments and industry bodies, such as IATA, to make sure that we are getting protocols in place that enable international travel to start again. And as what's been very common in the pandemic across all sectors is that technology is going to play a very important role in this. So some of the trends we've been seeing is the duty of care, which really say travelers' safety in leisure, but due to COVID in corporate is a major factor now in determining travel. In fact, 42% of our customers now say that it's their top priority, which is massively up from pre-COVID and is more important than things like price than user experience, et cetera. So this is -- this really means that travelers get the right -- the appropriate information at the right moment in their -- throughout their travel journey. And again, technology is very used there. Enhanced testing. Some governments are really looking at enhanced testing as part of the getting international travel happening again pre and post travel. And then health passports, which we're hearing a lot about at the moment, which is really about digitizing information so customers can travel. So these trends are developing around the world with different protocols, but there is slowly now emerging 2 major protocols here. And I think we're very confident governments moved from dealing with the health crises to now focusing much more on opening up economies and critically how they get travel happening again. This next slide really shows what some of the stuff we're doing, both in corporate and leisure. I think these are corporate examples in this case. On the top here, you can see our app. So this is Singapore example. But really, what it's showing is that Digital Health Wallet in FCM, which is -- has been developed in Singapore with Temasek, Singaporean Sovereign Wealth Funds, also a customer of ours. And here, really, what it's showing is a technology solution. So Singapore Airlines require a negative test to travel. The app the traveler has will direct the traveler to a clinic. They get a negative test from that clinic. And that is sort of the QR code as part of their boarding pass. That's a really seamless experience using technology to make sure that international travel can happen. And then below, where there are different protocols and different countries and different airlines, we can actually upload whatever the protocol, whatever the health certificate is into a Sam app so customers can use it. So this is really a good example how health partners are using technology to make sure that vaccinated and tested travelers can get on board and travel simply and easily. And we see significant progress being made here. And in both leisure and corporate, we're bringing these technologies into play with our customers. You can see, we have recently agreed with Helius in Australia, some testing stations for both our leisure and corporate customers. There are lots of progress here. We're at the forefront of it. And we're very optimistic that these protocols will become standard and will enable international travel to happen again.

I think we probably may have seen earlier this week. We've also made a similar announcement that we're working with a company called Helius in Australia, which will deliver very similar sort of services, the one Chris is talking about. Keep an eye after that and some other developments in this space because it's certainly evolving pretty quickly. That's the end of the presentation. So we're now ready to go to Q&A.

[Operator Instructions] The first question we have is from Grant Saligari from Crédit Suisse.

My first question is in regard to the impact of government subsidies as they wind down. You received $178 million of gross government subsidies during the half. Most of those went to employees that have stood down or furloughed. So what I'm wondering is, can you run us through the timing of the different subsidies as they cease? And then what will actually happen either to your employee retention or your cash as those subsidies with cease? Could you run us through that, please?

Yes. Grant, it's Adam here. The majority of the subsidies, obviously, in Australia, with JobKeeper. And from January to March, the net impact here to us as it currently stands is about $5 million a month retained. Within the company with, obviously, the -- our stood-down employees having to flow through directly to them. And as you know, currently, that's slated to end at the end of March. In Canada, the other 2 bigger areas that we're receiving these sort of subsidies are in Canada and the U.K. and they've pretty much been pushed out until the end of June. So we've got an extended period there for those to flow through, which we think will give us a bit more visibility in those markets by the time we get to the middle of the year in terms of the impact of macro conditions coming through. So big one really is JobKeeper here in Australia. And Skroo, I don't know if you want to talk to the impact of that when that starts to wind down toward the end of March.

Yes. Look, obviously, we've been -- and the rest of the industry has been in touch with various government ministers in terms of ongoing support. There's certainly the JobKeeper is going to finish, but there's a general indication that these badly affected of industries in travel and tourism, airlines and airports will get some ongoing support from the government, probably not in form of wage support but in other areas which we just don't know. We'll know that in the next couple of weeks. But I think we're reasonably comfortable that we have the liquidity regardless of what happens. Unfortunately, there's going to be a lot of small operators, particularly in the tourism and tour operating business that again really struggle when Job Keeper finishes. So I guess we're just waiting to see, Grant, in the next couple of weeks.

So can you keep your employees stood down for a more extended period? Or at some point, would you need to actually offer redundancies or sort of make it formal? Just trying to understand how the business sort of goes over the next 6 months.

That's a good point, and that's unclear at the moment. We're reasonably confident that we can keep people stood down. The main problem is that a lot of people are starting to go and get other jobs, obviously. And also, there may well -- if JobKeeper does finish like that, there may well be some -- almost certainly will be some redundancies. But the actual position on stood-down people is not clear, although obviously, we are -- quite a few people are leaving on their own accord to get other jobs. So obviously, because of it's -- for a lot of them, this is going to last another number of months.

If I could ask a second question just on the Slide 15, which you very helpfully provided the underlying cost base. If I look at the employee benefits expense line, which is running at an underlying, excluding sort of the subsidies that are flowing through to people stood down, it's running at $294 million compared with $822 million in first half '20. If your TTV gets back to somewhere in the vicinity of the first half '20 levels -- so the $12 billion you do in first half '20. Can you give us some indication as to what that $294 million would need to go to? So we're trying to understand the sustainable cost saves in the business. Would it go to $700 million? Would it go to $600 million? Just some broad indication of the sort of savings that are embedded in the business, I think, would help us understand the leverage as you come out of this.

Yes, Bryan, it's -- unfortunately, I'm not going to give you -- be able to give you a specific answer to that one, as I'm sure you can probably imagine. But there's a lot of factors there. But what I will say is that the -- we will be -- overall cost base, including our employee cost base, will be lower than it has historically been. And the efficiencies that we're bringing in and the streamlined changes that we've made to the business will mean that the cost base across most categories, but employee costs being our biggest cost, certainly, the driver behind it, will be lower than they've previously been. As I say, there's a lot of different factors to that. There's the changes that we've made. There will be stronger discipline to really make sure that we're only bringing back those costs as we truly need it, and there'll be a bit of tension there, positive tension there in terms of how we bring those costs back. But also, as you heard from both Mel and Chris, there's a lot of focus on productivity and the investments we're making at the moment to make productivity gains within both the corporate and leisure business. So that will also have an impact as well the mix. So if you look in the leisure business, there's likely to be a higher percentage of transactions going online than there were in the first half of last year, which obviously will mean that the employee costs will be a little bit less as well. So there's a number of factors there. I think the overarching principle I can give you is it will certainly be leaner than we were previously.

The next question we have is from Michael Simotas from Jefferies.

Can I follow on from Grant's question, please? I know you guys tend to think about your business in a very long-term way, which is great. Do you think when the world does recover, allowing for the productivity benefits that you have extracted, the potential for industry consolidation somewhat offset by mix -- and maybe there's a comment needed on likely support from agents. But do you think you can make more money than you may pre-COVID? So in calendar '19, the business earned, I think it was about $305 million PBT. Should we be thinking about that as a base that you should eventually be able to surpass?

Look, I'll start with that. I'm sure Skroo has got a view on it as well. Certainly, I think as -- Michael, as I said to Grant, I think the reality is that our cost base will be lower, will be leaner than it was previously. As you say, there's a bit of movement in terms of mix of channels, et cetera, that will, no doubt, have a bit of an impact as well. But broadly speaking, we'll certainly be looking to improve the PBT margins that we previously operated under. And you'll recall that we had set a target of a 2% of return to a 2% PBT margin, a number about 3 years ago that we were working towards. My view, and we haven't -- certainly shouldn't be taking this as guidance by any stretch, and we haven't really firmed a number. But when we restate those sort of targets, my expectation certainly would be that we would be and should be looking for a higher PBT target, margin target than we had previously. But Skroo, any thoughts on it?

Yes. Michael, look, yes, the main thing is, and it covers off on Grant's question a bit, is that we're very focused as we bring revenue back that a significant part of that revenue doesn't go in costs. So for every $10 million, for example, our revenue comes back, we want a substantial lesser amount in costs. And that's achieved by several ways that Adam did detail before. As to the $300-plus million, we certainly would hope that we will back there within the next few years. There's -- we've obviously got this year and next year to get through -- I'm talking about financial years, before it's going to come back to anything like pre-COVID levels. But we expect in both leisure and corporate to have greater market share and we're quite comfortable the margins will be quite good. So -- but other than that, it's pretty hard to predict. But if we weren't back within less than 18 months to 2 years to something similar to what we were before, we'd be disappointed. But as you know, there's a lot of water to flow under the bridge, just domestically keeping the borders open. But it is -- both in the U.K., U.S.A. and probably Canada, places like India, the domestic market is starting to come back. It's really now up to when -- due to vaccinations, the international market comes back. But I think you said we saw what's as the airport said, I think what Qantas said. Everyone's expecting international travel to come back in the second half of this calendar year. Just exactly which month is not clear yet. That will depend on the vaccination rollout and the effectiveness against some of the variants, which generally look positive. So we certainly would expect it to exceed it over the longer term significantly because we've still got the basis of our -- of our operation, our IP. All our major businesses are intact. And so we certainly would expect it come back quite strongly over the next 2 or 3 years.

Yes. Okay. That's helpful. And look, the timing is clearly very difficult, and I wouldn't expect you to have a strong view on that. But I guess what you've got much better visibility over than what we've got is things like mix and commission rates and support from suppliers, et cetera. And you had some pressures on revenue margin in the lead up to COVID. So just to make sure I'm understanding things correctly, it sounds like you think that they will be more than offset by the productivity benefits when we ultimately do recover. And whether that's 3 years' time or 4 years' time, that remains to be seen but that's okay, but I just want to understand what the end state is.

Yes. Look, as I think I said it in the presentation, we do make a lot of effort to have a good relationship with our suppliers. And obviously, some of the smaller ones will struggle, particularly if government support finishes. But so far, we've been very active both in keeping in touch with them, keeping up-to-date with both them and us, where we see things going. And we've signed up a lot of our suppliers not just in Australia but globally. And most of them have been very flexible, and we're quite happy with the arrangements going forward on a margin point of view. Some of the airlines -- some of the major airlines will be pushing back a bit on margin, but a lot of others -- and you know with the Middle Eastern carriers and some of the Asian carriers, it's probably the opposite. So we're pretty confident that at worst, the airlines will come out at least the same as before. And a lot of the other operators or land operators and cruise operators, obviously, that's one of the areas that we think will be -- will come out quite well, Michael. So we're not -- of all the things we need to be worried about, that's one thing that we're not.

Actually, Michael, I'll comment too. You mentioned -- yes, the answer is yes. Even if there is, we've built in plenty of scenarios with what will -- could happen with margin versus the cost margin. But just so you know, particularly, Chris and I have been doing sessions with all the top suppliers a month now, going through our strategies, going through theirs. And if anything, I think -- I've been in this space for many years, they like the diversity and reach we bring with both corporate and leisure in the one group, the on and off-line, even things like our premium strategy in leisure. So we've been -- we've gone through, I think, Skroo, about top 10, 20 airlines, and we're doing others as well, both with hoteliers, et cetera. So we're hearing a very positive message. I mean, I think there's a bit of a camaraderie in some instances, that we're all in this together and we need to get the industry back on its feet. There will be the odd individual gripes and challenges, but those dances haven't been happening for decades. So no, we're fairly comfortable, as Skroo mentioned, on that space. Plus -- also, a lot of our cost control has been in delayering. So our efficiency is not just when you look at the front end, but in delayering throughout the business and doing a lot of automation. So I'm very comfortable particularly in leisure that we can, to your point, get back to pre-profit levels because we've really attacked where we had a lot of the inefficiency.

The next question we have is from Mark Wade from CLSA.

Just a follow-up on Michael, too. I mean, just to be clear, your arrangements you had with Qantas was due for renewal and they've only been extended 12 months. Can you confirm that that's been getting rolled out on a longer-term basis?

Look, what I can confirm is that we have reached an arrangement with Qantas. So over the longer term, so -- which we're not unhappy about. We'd always like to do better, but Mark, we're reasonably comfortable with where we are with Qantas.

Okay. That's great. And just turning to the culture of the organization. I mean it's been through a massive upheaval and it is really a service people business. And what gives you the confidence that you can bring that back with any -- no long-lasting damage?

Mark, I'll say something and maybe Skroo can as well. We've done, I think, a really good job of socially still engaging and caring for our people, whether they're with us or, to be honest, stood down or even exited. We have all sorts of contacts through our social platforms with our [ past app ]. And in fact, we've got a lot of our people going, "I know it's tough, but in a year or 2, I'll come back." So we feel very confident. We've also tried to -- and this will sound a little bit, though -- maintain some of our rituals in terms of recognition and communication. We didn't have our global ball last year, but we did it digitally, and it went really well, sort of remembering from the past. If anything, I think it's our culture that managed to get the change so quickly in terms of getting our costs down. Everyone was just on board. So I think our culture is actually going to emerge even stronger coming out of this. It doesn't mean there hasn't been a lot of -- some of the worst days in terms of potentially having to ask people to go, et cetera. But Skroo, I don't know what you feel, but I talk to a lot of people at the moment and I think the culture is stronger than ever.

Yes. Look, it's not easy. And in the end, it's the frontline people mainly, not only frontline but a lot of the support people that suffered throughout this. But we've generally had very good feeling that people will come back when they can. Obviously, our overall industry will be smaller. There will be a lot of well-qualified people looking for roles in this. And travel is of those games that when people are in travel, they love it and they want to come back into it even -- but a lot of people will have gone to other jobs. And I know just with the Pedal Group, for example 99 Bikes, they've taken on quite a few of our people because our cultures are fairly similar and it is a sales culture. But even those people eventually would -- most of them seem to want to get back into travel. And I think we had a survey that 75% of people, even when they've been stood down or made redundant, said that they would come back at a later date. But it's a matter of priority, getting things back to some level of normality is our first priority, and that's one of the things, I think, we're reasonably confident of.

And Mark, just even -- I know in the leisure space, where we offered the independent model fairly quickly, we had good take up. And a lot of our people are actually thankful that we were trying to do things flexibly so that they could still remain part of the group, put it that way. So I think, again, that's a real positive for us. But we have certainly done everything possible. You saw from both Chris and I on those slides, our people and culture underpins everything we do. So yes, I mean, it's been certainly challenging, but yes, I think our culture will be, as I said, stronger as a result.

[Operator Instructions] The next question we have is from Bryan Raymond from Citi.

My first one is just on the composition of TTV that you guys expect once we do head back towards normal. So you closed 1 party store base in Australia and a large portion overseas as well. Prior to COVID, you had about 9% of leisure online in FY '19. So I just wanted to understand sort of how you see that channel mix evolving as you get back towards normal from an industry perspective with -- of course, online fortunately will be higher, but also some of the stores that are still open will trade well relative to where they were before, given the consolidation. And then if you can just comment on how you see the margin structure of that online channel. It's obviously been a bit lower margin historically.

Okay. Bryan, yes, as I said and I addressed that with my slide, we certainly do have a much reduced shop network, which we knew we had a bloated one previously, put it that way. But we've been very, very pointed about keeping the reach. So we've removed density, high density. We haven't removed geographical spread, if that makes sense, particularly in Australia, New Zealand and South Africa. So where we had 5 or 6 shops within a 2- or 3-kilometer location is where we certainly made the cuts. So we still feel our reach is there. The other thing is the shops that are there are often the bigger, more productive shops previously. So even though, let's say, it might be 40% or 50% of them, they were probably doing 60% or 70% of the TTV previously. So we're very comfortable. The other thing is using that independent model where we can have more hub-and-spoke mentality with our shops because it wasn't, remember, necessarily just going into a shop that's having access to people. So our access to people via the independent and also the call center will also be just as available to our customers. But back to your point on the online as well. Yes, I think we're already getting somewhere, and I think it's in the slide somewhere. Over 20-odd percent now is our volume coming through online, which, by the way, we're quite happy with because that was certainly where we wanted it to head. And a lot of that is our margin commoditized product, a lot of point-to-point domestic, low-cost carriers, et cetera, which is much more efficient for both the customer and for us, to be honest, to go through online. You did comment though on the margin spread. There is no doubt online, because it's a largely domestic and it's online, it's a lower margin. We know that. That's built into our scenarios. But again, that margin will be improved once -- and I think I even saw it with Webjet. It wants to get some international point-to-point where the margins are a lot better but also add diversification into our packages and hotel. And again, it won't be -- it will still be mainly flights sold online, but even a small shift into that fundamentally helps to improve the margin. And the other one is ancillaries, starting to be able to sell meals, seats, bags, blah, blah, blah, where the airlines are much more favorable in terms of the margins they'll offer. So yes, we're comfortable that you will see definitely a higher proportion online. You will see a lower margin of that online proportion, but we know we can grow that back to something reasonable. But again, the cost base is much lower. So it should wash out. And if you look to corporate, that's been happening over 10 years, as there's been more OVT penetration where their gross margin has certainly been impacted, particularly if you looked at the Australian market, but their profit margin has, in fact, improved because of the better cost base.

Right. So just to confirm then, if industry TTV gets back to FY '19 levels, do you think you guys will -- given your store closure program, will get back to FY '19 levels of TTV? Or a bit lower because the closures are a bit better because of consolidation in the industry? How do you view your relative positioning?

Okay. I think it will be at least the same if not better for a couple of reasons. One, you mentioned the consolidation. Also, our multichannel capability will be vastly expanded. And we already knew we had customers who wanted to book online that were kind of almost forced into a shop in some instances. So some consolidation. But the other thing is the same as the brand, and I can't reiterate that enough. We had done some further brand consolidation during 2020. And we literally, in the last day or 2, got the latest brand's sort of reviews. And 1 in 5 Australians are rating Flight Centre as their first choice to book travel. So we can already see we're gaining awareness and, more importantly, consideration. I mean pretty hard in Australia. People don't know Flight Centre but more and now actively saying they will choose Flight Centre for their travel. And the same in South Africa. New Zealand is a bit harder to tell with the whole place being relatively shut down. But yes, I think the fame of the brand will also -- and the security of that it is a trusted and a brand that got through, I think, will really help us. So consolidation, multichannel and the brand, I believe, will actually end up with more of the market.

And Bryan, from a corporate perspective, if the industry gets back to 2019 levels, we'd expect serious growth because we're adding customers every week. So we're not anticipating it gets back to 2019 levels certainly not a next year or so. But if it did, we'd expect significant growth on 2019 numbers.

Okay. That's interesting. Just one of the things you guys called out I've found really helpful at the FY '20 results was when you talked about your breakeven levels of TTV as a percentage of pre-COVID. From memory, it's about 30% to 35% in corporate and 45% in leisure. Have those numbers changed at all over the past 6 months with any other cost programs you guys have done? Or should we take that as the same sort of Slide 1?

Yes. Bryan, there's been -- overall, there's been really no change. So for the group, we think around that 40% mark still is where we need to get to for prior volumes to start getting back to profit. There has been a shift with leisure and corporate though. You might recall at the AGM, we spoke about a cost-out -- further cost-out program we're undertaking within the leisure business. And that identified approximately $9 million a month of additional cost-out from the leisure business. We then reinvested back into the leisure business a further $4 million. So the leisure business cost base on a net basis has actually come down by around $4 million or $5 million a month. And that means it's a leisure breakeven, comes back to just under 40%. Between 35% and 40% now is what we need in terms of those sort of volumes because of those cost-outs that we saw. Conversely, we have taken $3 million of the costs we identified in leisure, and we've reinvested them back into the corporate brands, particularly as we're starting to see some of the momentum that we expect to see coming forward. So that means that the corporate brands now would be around about 45% and they'll be -- they should be looking to get back into profit. And again, the relative size of that, the corporate cost base was around $23 million a month. So adding another $3 million increase is not a lot in dollar terms but does increase the cost base by 15%, which is why that breakeven number inches up a little bit. So overall, it still is a number though.

So Australian corporate had 43% in January, should have been broadly breakeven then.

So Australia corporate is an interesting one. We've got a lot of -- some key essential services clients there that operate at a low margin, particularly with a lot of the work that -- a lot of the bookings are there in hotels at the moment, which are very low margin. If you take them out, they represent about half of that volume. So if you take them out and look at the core, if you like, of the normal corporate volumes in Australia, we're at about 20% of typical volumes. So that means that we've still got a little way to go in terms of getting to breakeven in Australia.

Right. Okay. And then my final part of this, my final question, just around the override. So you talk about supplier relationships going really well. I'm just -- I just find it hard to believe given our lines of pretty capital-intensive and have been under a lot of pressure globally through this that overrides are going to come back pretty quickly or -- or even if they come back to linearly with TTV, I would expect that at best, it would be with a bit of a lag as they rebuild their cash flows and balance sheets. So can you just help us understand how important overrides are to that breakeven analysis and whether they should be back in line with TTV or whether that's going to take a while?

Look, it's Skroo here. Look, every airline is a bit different. And we've -- as Mel said, we've had a good chat to most of the CEOs of our major trading partners in airlines, and it does vary a lot. But the one thing all of them really want, particularly the international guys, particularly Middle Eastern, Asian and also the American guys, they desperately need volume. And they accept that we've got to be a viable business just as I have to be. So it's really about the overall package now until volumes return. So -- and that generally will include an allowance for what we would have earned in overrides as well in 1 margin. So in the end, they need the volume and if we can give it to them, and that's a key thing for us that we can give these airlines volume, it's really important for them. Some of our clients it's not quite as important because they're a very big domestic carrier. And so the international is -- will come later for that. But most of the Asian and Middle East in particular, they're all international. So they are desperate to get volume. And we're one of the players that can provide them volume, not just out of Australia and New Zealand but also out of Europe and North America and Asia.