Good morning, everyone. Thanks for joining us today for Flight Centre's half year result presentation. Today, I'm joined by Skroo , our Global MD or CEO, Adam Campbell, our CFO, and the man of the match in the Flight Centre touch game last week. Chris Galanty, our Global Corporate CEO, and Melanie Waters is our Leisure CEO. Skroo will start and finish things off, and 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. 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. We're still generating revenue, particularly in the domestic only, but also if you looked 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. Generally, we've achieved month-on-month reductions in our cash outflow. I think it was AUD 30 million outflow in December, which we're reasonably happy with. It gives us an extended liquidity runway, of course, of about AUD 1.2 billion plus by December 31st. 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 to retain our key assets, people, and develop our technology during this time. Obviously, we've got a lot of leisure assets and corporate assets. We're a fairly diversified organization as well as our destination. We're pretty confident we can benefit from the travel recovery over the next 12 months. We're confident also we can grow market share, particularly in leisure, but also in corporate. 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. 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 brand in Australia is profitable the last two months, and obviously, 99 Bikes or the Pedal Group has made significant profits in this last year, and Flight Centre own 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 they 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.
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 travel starting soon after that. The next slide, you'll see the vaccination programs, the impact of the vaccination programs. This is a few days old now, but I think we've heard a fair bit about both the United Kingdom and the U.S. in the success rate there. 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. Some of the other key drivers on the road to recovery is obviously domestic borders opening and staying open.
Some selected international routes, which initially it'll probably be in the South Pacific and Asia, possibly even during the end of this financial year. Obviously broader border openings early next financial year, somewhere between July and September, November, we believe. The road to recovery, it's obviously about the vaccination programs gaining momentum in our part of the world. That's particularly North America, EMEA, Australia, New Zealand, and obviously parts of Asia. The second one, that should happen pretty much by end of March this financial year. Certainly, the last quarter in this financial year, end of June, we'll have every vulnerable Australian vaccinated, and that will help with mortality and hospitalizations if another infection comes into Australia. Obviously both North America and U.K., Europe will be heavily vaccinated by then as well.
In the second six 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. 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 international travel can start returning to normal. That's basically the story. Adam now will give you some overview of the results. Thank you, Adam.
Yeah. Happy to, Skroo. Happy to. So , you said the reported results for the period that we are putting out are pretty much in line with our expectations 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 AUD 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. I won't go too much into them here at the moment. TTV, as Skroo said, for the period, continued to grow month-on-month throughout the period with total TTV of around AUD 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 did see immediate rebounds in bookings when those borders reopened. Our TTV for December was the highest level since the pandemic lockdown commenced in March 2020, which was a good result for us. Our revenue margin, again, as expected, fell to 10.4% overall. This reflects both the domestic and corporate travel weighting that we're currently seeing. Overall, corporate revenue margins increased slightly over the period, with the majority of the margin declines 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 six months, and then increase as international travel returns and touring revenue recommences.
With a strong focus at the moment, and have had for some time on 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 seen our operating cash outflows of AUD 97 million in July 2020, reduced to AUD 40 million in September, and then further reduced to AUD 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 AUD 400 million in convertible notes last November. With AUD 1.7 billion in cash, over AUD 1.2 billion in liquidity, and cash outflows of around AUD 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.
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 our normal liquidity position table in the PowerPoint, which most of you should be well familiar with by now, knowing there's been 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 AUD 21 million in CapEx, which was 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, 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 program that we've implemented over what was a relatively short period of time. 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 strong collections with our receivables, and i t's been pleasing to see that we've had no significant write-downs of debtor balances. Our 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 are three-year facilities with none of the normal covenants coming in until December 31, 2022, reporting period.
It was really pleasing to see ANZ, Westpac, HSBC and NAB 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.
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. Beyond. The first thing I want to reiterate, something I've mentioned before, is that what we are seeing is a very clear pattern. As soon as our 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 it in other domestic markets, such as Australia, for example. As soon as borders open domestically, people travel. 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. I'm just going to focus on our key priorities.
The first one was 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 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 the position to get significant productivity gains throughout the corporate business. Finally, to improve our travel content supply aggregation and pricing to generate customer savings and improve commercial returns. I've showed this slide before in presentations. This is our customer value proposition. We have a two-sided model. We address the market uniquely with two brands.
In a large market space, an enterprise space and government space, we use our FCM brand. In the startup to medium enterprise space, we use our Corporate Traveller brand. This approach is unique in the marketplace, and we believe it is a winning approach. 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. For example, in FCM, customers really care about global scale and consistency. Very important to them as they're trading in many markets, but they also really appreciate the flexibility that we bring to market.
In Corporate Travel, 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. Again, this approach of two 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 are in 10 of the top 16 global markets with full equity. Where we do not have full equity, we have very strong partners, and we, as a business, control the solution design for customers, the implementation, the program service level agreements, the data, and our partners use our own technology. It is a very integrated and consistent experience for our customers across the world. This presence across the world is what enables us to deliver to enterprise customers.
We're one of the very few TMCs that can actually do that. 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 Graham highlighted, but we were very keen to keep investing throughout the COVID period. One of the rationale behind that was we wanted to win more business. Now with our FCM sales update, we talk about FCM because it's our contracted business. Typically, as we sign a customer, it's for three or five years. However, we always expect at least two cycles, so a five-year customer is actually normally a 10-year customer. 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 a moment.
The wins is a very positive story for us. We've won just under $700 million U.S. dollars of signed business. That's annual signed business so far this year. Although we don't expect the customers to trade at full levels this year, we are again signing three or five-year contracts, we do expect them to get up to those levels during the length of the contract. There's lots of very well-known names here. The Foreign, Commonwealth and Development Office, part of the U.K. government, the Crown Commercial Service business that we signed, ASOS, Electronic Arts, the computer games guys, Spotify, KPMG in a couple of key European markets, Bosch, Tupperware, JTI, Mars in some new markets where we didn't have them, CMA, AXA, JLL. 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 again is a new high. We've secured three of our top five customers were out for bid this year. We've signed all three, and that includes the New South Wales Government. Looking at the sales pipeline, the reason we can keep winning business is this is not just a one-off exercise. We really work on these leads for many years. It shows the strength of our marketing and our sales capability. At the top of the funnel, we have our lead generation, where we work with potential customers years advanced their RFP. Today we have $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 in the RFP.
The RFP proposal stage itself, we have over AUD 1 billion, AUD 800 million shortlisted. In final negotiations, where we're down to the last two, sometimes down to the last one, they're waiting board approval, we've got over AUD 500 million of sales. That's why we keep winning is 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. 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 and manufacturing, which are two segments we hadn't been that heavily focused on previously.
As they have a high propensity to travel throughout any circumstance, we've really refocused on them and actually getting some great wins, not just the U.K. government, but also a lot of business in the French government as well. We've proven that we can win in government, which is going to be a big area of growth for us moving forward. Some of the product we bring to market, we're very excited this year about Melon. Melon is our new digital platform, which brings consumer-grade mobile technology using robotics, artificial intelligence, to give the best experience to customers. Very simple to implement. Can be implemented in hours rather than weeks, and is in use with customers today in the U.S., and is going through a full market launch in April in the U.S. and then to the rest of the world throughout 2021.
Something we're very excited about there. Similarly, in FCM, our FCM platform, which is going live globally in 2021 as well across all of our markets. What we're doing in both of these brands is bringing two brand-new products to market. Again, that is testament to the investment we've made throughout this year, is working closely with customers to understand their new needs in this post-COVID-19 world and making sure our products are market ready and, in fact, ahead of the market in both brands. 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. This final slide for my section, I really just want to give a one-page summary of our business and our investments and how we're winning.
At the top, you can see our two corporate brands. We have only two brands globally, and they focus on different segments of the market. Two very differentiated brands, both of which are going through a relaunch in the next couple of months. Each of those brands have their dedicated products, Melon for Corporate Traveller and the FCM platform for FCM. Unique, bespoke, proprietary technology that gives a best-in-class experience for those` customer types. Both [uncertain] in terms of user experience, implementation times, but 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.
Below that is where all of our shared working is, and often in many cases, shared with our leisure business as well. 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. Our intelligence layer here is where all the magic happens. This is really the robotics, the data science, 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.
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. This is very common with many modern platforms around the world, the Amazons and the Spotifys, et cetera. 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, 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. I think we're leading the world with NDC, certainly according to many airlines at the moment in the business world. This means that we can bring, as NDC grows, and it 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. This really is a huge advance from where we've been before, but also where we see any of the industry at the moment. TPConnects will be powering Melon and the FCM platform this year.
Also, we mentioned that's exactly the same functionality, but for land, for hotels. Again, all the different hotel content available aggregated and brought into our products. 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. They also tell us, and I talk to customers every week, that really it's our people, our culture, our approach to doing business. That's what they love about both Corporate Traveller and FCM. 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.
That's the summary from me. I'll hand over to Mel and leisure.
Good morning, everyone. Thanks, Chris. I've just put a recent Instagram post from Flight Centre as 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. 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're 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. I think there is no doubt that Leisure Travel will recover.
We know that connecting with family, friends, places, et cetera, is a core expectation 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. As you, I think Adam mentioned in the l eisure segment result, we have less than 10% of pre-COVID volumes currently for the first half. We have, however, been able to accelerate our transformational plans, 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 Reach. 95% of our Australian Flight Centre customers, even after our reduction in the network, still live within a 5 km access of a shop.
We also have very much focused 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, and they're in fact gaining momentum. We are holding or in fact increasing market share whenever the travel did rebound after restrictions were lifted. 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. Domestic sales in Australia exceeded the prior year levels within two days of the Queensland announcing its borders opening back in November. That was quickly reversed in December when they shut them again. 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 that 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 important to note and now answer the question that I probably get asked the most about in our leisure business. That is how will we recover our volumes with half our previous shop network now in place?
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 seven markets. We were in seven markets pre-COVID. We still hold the number one market share position in Australia, New Zealand, and South Africa, and we intend to grow that. 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 three to five years.
I just thought I'd reiterate quickly our global leisure strategy. This is not a new slide. You've seen it before. How we are addressing that leisure market. Essentially, we very much narrowed to three major pathways built around some shared core global capabilities. 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 ones, but we're spending wisely. Our three core leisure strategies revolve around the mass market with Flight Centre and really rejuvenating that brand to be a multi-channel mass traveler retailer with irresistible deals and savvy personal service. That is very much our number one 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. Our third core strategy is to become the home of the travel entrepreneur or #HOTTE as it's known internally. 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 the bit on the side, a very small suite of complementary yet independent brands. 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. I'll just take a moment.
You can see the bottom three layers are very much the same as corporate. 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 turn 40 this month. With Topdeck obviously goes up to something like 50 years. 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 two 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. 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. We're using data, robotics, artificial intelligence, and real analytical strength to improve that. At the top of our platform is our models, which we've now centered on four 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, of course, e-commerce. We also, with our product 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. 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 discreetly within brand and country. Over 2020, as we said, we've taken the opportunity to transform this, industrializing it, digitizing 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 two key pathways of rejuvenating the brand, externally from the customer's perspective and internally from our operating models. 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 multi-channel. As I said, very pleased with the progress. We've been working on a rejuvenated and modernized brand, and you'll see us launch a new refreshed brand in about April or 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 a customer metric through everything we do. We've created the product design house, which was that industrializing of the product we take to market. Again, on the Helio platform, which we've accelerated and got out over the last year. The other thing is really winning in the under 40s, where we were, in fact, doing fairly poorly prior to COVID-19. 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 is 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. There you go, if you're interested in Flight Centre dances. On an operating model, we've also gone to those four models. As I said, everyone knows about our world-class shop network, which is now of the right size. We also have a sales center which we've just ticked 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. Of course, our self-service or e-commerce model. 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 SOAR platform, which I think Adam mentioned. 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. 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's some examples there of our new online website, our mobile app, and our searches. We actually upgraded our DIY hotel capability, but we've been very soft in the marketplace. Next is our premium, including moving to a more luxury strategy. Again, that's well underway with our brands of Travel Associates and Laurier Du Vallon.
These brands were delivering good metrics prior to COVID-19. 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. 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. I won't go through it, 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 and amenities that they would not get elsewhere.
We're moving forward with different models, and we've launched the At Home with Travel Associates, which is the independent contractor in our premium space. Our next major strategy was the B2B, which I mentioned we're already gaining much traction, somewhat in part to the lack of confidence in some markets with their current host or consortia. In some instances, we've seen some collapse. There was a collapse in South Africa of a major competitor. Also due to our leading content technology and brand strengths that we're able to offer independents and affiliates. 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 are also some offers that we've got in Marketplace against 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. Finally, in leisure, we have, as I said, a very small suite of complementary and independent brands, which are getting very little investment.
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 is doing solid levels of pre-COVID TTV. With the exit of STA in this space, we have strong aspirations to become the number one student and youth business in travel in the world. As I said, My Brands 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 2021. 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. Thanks. Back to the group.
Oh, thanks. I'm actually feeling a bit exhausted after that. Can't believe everything that's going on. I'll just mention some of our other businesses that haven't been talked about. The in-destination, we call it the Travel Group. The first one is Discova Destination Management. It's a DMC. It's going great guns. Our hotels, mainly in Southeast Asia, and obviously our tour operations, which is Topdeck and Back-Roads Touring, 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, I think it's a 48% share of, is the Pedal Group, which is 99 Bikes. Mainly because of the pandemic, it's gone pretty well.
I think it made under AUD 18.5 million in the financial year ending June 2020, it's expecting probably a AUD 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 five in New Zealand. We are looking at London at the moment to grow that. That's a really good story, and it is quite closely associated to Flight Centre. A lot of the use of the Flight Centre systems and the way we do things here. That's one of the positive stories out of the pandemic. AVMIN as well. It's our charter operation. We have a 50% 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, we're getting charters out mainly from the U.S. The Travel Junction is our B2B hotel operation, which we're selling our contracts into other people who buy this sort of thing. It's a small operation but been 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. We still have retained most of our IP, most of our people that are very important of ongoing as things come back. We can't provide guidance for 2021. You'll see from the first half that it's going to take a little bit of time to get back to where we'd like to be, breakeven and in 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. That'll be domestic, and I think you've heard, those of you in Australia, that the premiers and the health officers are basically saying they don't want to shut down the borders anymore. We'll see if that's true or not. We're reasonably confident that there will be international travel. You heard Boris this morning or Tuesday morning it was, saying that he expects international travel to return out of the U.K. in May. We're looking at probably a similar timetable in North America. Asia is a bit harder to predict.
Certainly, in Australia, we would expect it after all the vulnerable people have been vaccinated by the end of June, that some international travel will start to resume. We're certainly looking for it as the second half of this calendar year. In the second half of FY 2021, 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. a lot of vaccinations had started in earnest. There was still a fair bit of uncertainty in a lot of places. 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've 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, where we've got 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'll be business closures. We're obviously in a good position to take any advantage of this. Obviously, the vaccination's a big thing.
Widespread rollouts in our markets, particularly in North America, in U.K., and to a lesser extent in Europe, are now starting in Australia and New Zealand, and obviously parts of Asia. That's quite important. Someone said it's not a silver bullet, assuming the vaccinations work, it should be a silver bullet. There's still some issues, of course, with variants and that we don't know the exact answers of this. Post-pandemic travel will be anything but normal. Do you want to say any more about this, Haydn?
I might hand over to Chris, the expert on some of this stuff.
So, look, as Melanie and I both said, in leisure and corporate, when people can travel, they will travel. That's the evidence we're seeing. It seems pretty clear to us that travel will be different in a post-COVID-19 world. We used this, we saw this after September 11th, where the whole industry had to adapt globally. 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. What's been very common in the pandemic across all sectors is that technology is going to play a very important role in this.
Some of the trends we've been seeing is the duty of care, which really traveler safety in leisure, but duty of care as we call it 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, the user experience, et cetera. This really means that travelers get the appropriate information at the right moments throughout their travel journey. Again, technology is very useful. Enhanced testing. Some governments are really looking at enhanced testing as part of the getting international travel happening again pre and post travel. Health passports, which we're hearing a lot about at the moment, which is really about digitizing information so customers can travel. These trends are developing around the world with different protocols.
There are slowly now emerging two major protocols here, and I think we're very confident as governments move from dealing with the health crisis, they're now focusing much more on opening up economies and critically how they get travel happening again. This next slide really shows 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. This is a Singapore example. Really what it's showing is our digital health wallet in FCM, which has been developed in Singapore with Temasek, the Singaporean sovereign wealth fund, who are also a customer of ours. Here, really what it's showing is a technology solution. 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. That stores the QR code as part of their boarding pass. It's a really seamless experience using technology to make sure that international travel can happen. 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 our SAM app so customers can use it. This is really a good example, health passports, of using technology to make sure that vaccinated and tested travelers can get on board and travel simply and easily. We see significant progress being made here. In both leisure and corporate, we're bringing these technologies into play with our customers. You can see we recently agreed with Healius in Australia some testing solutions for both our leisure and corporate customers. 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.
As you can see, we probably may have seen earlier this week, we've also made a similar announcement that we're working with a company called Healius i n Australia, which will deliver very similar sort of services to the one Chris was talking about. Keep an eye out for that and some other developments in this space because it's certainly evolving pretty quickly. That's the end of the presentation. We're now ready to go to Q&A.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star and then one on your telephone now, and wait for your name to be announce. If you wish to cancel your request, please press star and then two. If you're on a speaker phone, please pick up the handset to ask your question. The first question we have is from Grant Saligari from Credit Suisse. Please go ahead.
Good morning and thank you. My first question is in regard to the impact of government subsidies as they wind down. You received AUD 178 million of gross government subsidies during the half. Most of those went to employees that are stood down or furloughed. What I'm wondering is, can you run us through the timing of the different subsidies as they cease? What will actually happen either to your employee retention or your cash as those subsidies cease? Could you run us through that, please?
Yeah, Grant, it's Adam here. The majority of the subsidies, obviously in Australia with JobKeeper. From January to March, the net impact here to us, as it currently stands, is about AUD 5 million a month retained within the company with obviously our stood down employees having to flow through directly to them. As you know, currently that's slated to end at the end of March. In Canada, the other two bigger areas that we're receiving these sort of subsidies are in Canada and the U.K. They've pretty much been pushed out until the end of June. 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.
The big one really is JobKeeper here in Australia. Skroo, I don't know if you want to talk to the impact of that when that starts to wind down towards the end of March.
Look, obviously, we've been, and the rest of the industry's been in touch with various government ministers in terms of ongoing support. Certainly, the JobKeeper is going to finish, there's a general indication that these badly affected 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. 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 are going to really struggle when JobKeeper finishes. I guess we're just waiting to see, Grant, in the next couple of weeks.
Can you keep your employees stood down for a more extended period, or at some point would you need to actually offer redundancies or make it formal? Just trying to understand how the business goes through the next six months.
That's a good point. 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. Also, if JobKeeper does finish like that, there may well be some, almost certainly will be some redundancies. The actual position on stood down people is not clear, although obviously quite a few people are leaving on their own accord to get other jobs. Obviously because 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 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 AUD 294 million compared with AUD 822 in first half 2020. If your TTV gets back to somewhere in the vicinity of the first half 2020 levels, so the AUD 12 billion you did in first half 2020, can you give us some indication as to what that AUD 294 million would need to go to? We're trying to understand the sustainable cost savings in the business. Would it go to AUD 700 million? Would it go to AUD 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.
Yeah, Grant, unfortunately, I'm not going to be able to give you a specific answer to that one, as I'm sure you can probably imagine. There's a lot of factors there. What I will say is that our overall cost base, including our employee cost base, will be lower than it has historically been. The efficiencies that we're bringing and the streamlined changes that we've made to the business will mean that the cost base across most categories, but employee cost 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. 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. That will also have an impact, as will the mix. 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 cost will be a little bit less as well. 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.
All right. Thank you very much.
Thank you. The next question we have is from Michael Simotas from Jefferies. Please go ahead.
Good morning, everyone. 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 made pre-COVID? In calendar 2019, the business earned, I think it was about AUD 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, and I'm sure Skroo has got a view on it as well. Certainly, I think, 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. Broadly speaking, we'll certainly be looking to improve the PBT margins that we previously operated under. You'll recall that we had set a target of a return to a 2% PBT margin, a number about three years ago that we were working towards.
My view, and you 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 margin target than we had previously. Skroo, you have any thoughts on that?
Michael. 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. If for every AUD 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 AUD 300 million+ , we certainly would hope that we were back there within the next few years. 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. We expect in both leisure and corporate to have greater market share, and we're quite comfortable the margins will be quite good. Other than that, it's pretty hard to predict.
If we weren't back within less than 18 months to two years to something similar to what we were before, we'd be disappointed. As you know, there's a lot of water to flow under the bridge, just domestically keeping the borders open. It is both in the U.K., U.S.A. and probably Canada, places like India, the domestic market starting to come back. It's really now up to when, due to vaccinations, the international market comes back. I think you said, and we saw what Sydney 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'll depend on the vaccination rollout and the effectiveness against some of the variants, which generally looks positive.
We certainly would expect it to exceed it over the longer term, significantly, because we've still got the basis of our operation, our IP. All our major businesses are intact. We certainly would expect it to come back quite strongly over the next two or three years.
Yeah. Okay. That's helpful. Look, the timing's clearly very difficult, and I wouldn't expect you to have a strong view on that. 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. You had some pressures on revenue margin in the lead up to COVID. Just to make sure I'm understanding things correctly, it sounds like you think that they'll be more than offset by the productivity benefits when we ultimately do recover. Whether that's three years' time or four years' time, that remains to be seen, but that's okay. I just want to understand what the end state is.
Look, I think I said it in the presentation. We do make a lot of effort to have a good relationship with our suppliers. Obviously, some of the smaller ones will struggle, particularly if government support finishes. 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. We've signed up a lot of our suppliers, not just in Australia, but globally. 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 major airlines will be pushing back a bit on margin. A lot of others, the Middle Eastern carriers and some of the Asian carriers, it's probably the opposite.
We're pretty confident that at worst, the airlines will come out at least the same as before. A lot of the other operators, the land operators and cruise operators, obviously, that's one of the areas that we think will come out quite well, Michael. 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 plenty of scenarios with what could happen with margin versus the cost margin. Just so you know, particularly Chris and I have been doing sessions with all the top suppliers for months now, going through our strategies, going through theirs. If anything, I think, and 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 offline. Even things like our premium strategy and leisure. We've gone through, I think, Skroo about top 10, 20 airlines, and we're doing others as well, both with hoteliers, et cetera. We're hearing a very positive message.
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 have been happening for decades. No, we're fairly comfortable, as Skroo mentioned, on that space. Also, a lot of our cost control has been in delayering. Our efficiency is not just when you look at the front end, but in delayering throughout the business and doing a lot of automation. 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.
All right. That's really helpful. Thank you, guys.
Thanks, Michael.
Thanks, Mel. Bye.
Thank you. The next question we have is from Mark Wade from CLSA.
Good morning, guys. Just to follow up on Michael's too. Just to be clear, your arrangements you had with Qantas was due for renewal. It had 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 over the longer term. Which we're not unhappy about. We'd always like to do better. Mark, we're reasonably comfortable with where we are with Qantas.
Okay. That's great. Just turning to the culture of the organization. It's been through a massive upheaval, and it is really a service people business. What gives you the confidence that you can bring that back with 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 staff. In fact, we've got a lot of our people going, "I know it's tough, but in a year or two I'll come back." We feel very confident. We've also tried to, and this will sound a little bizarre, 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. I think our culture is actually going to emerge even stronger coming out of this. It doesn't mean there hasn't been some of the worst days in terms of potentially with having to ask people to go, etc. 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.
Yeah, look, it's not easy. In the end it's the frontline people mainly. Not only frontline, but a lot of the support people and that suffer through this. 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. Travel is one of those games that when people are in travel, they love it, and they want to come back into it even. A lot of people will have got other jobs. 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. Even those people eventually, most of them seem to want to get back into travel.
I think we had a survey, and 75% of people, even when they've been stood down or made redundant, said that they would come back at a later date. 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. Yeah.
Mark, just even I know in the leisure space where we offer the independent model fairly quickly, we had good take-up. A lot of our people were actually thankful that we were trying to do things flexibly so that they could still remain part of the group, put it that way. I think, again, that's a real positive for us. We have certainly done everything possible. You saw from both Chris and I on those slides, our people and culture underpins everything we do. It's been certainly challenging, I think our culture will be, as I said, stronger as a result.
Okay. I appreciate those reflections. Thanks, guys.
Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. The next question we have is from Bryan Raymond from Citi.
Morning, guys. My first one's just on the composition of TTV that you guys expect once we do head back towards normal. You've closed more than half your store base in Australia and a large portion overseas as well. Prior to COVID, you had about 9% of leisure online in FY 2019. Just wanting to understand how you see that channel mix evolving as you get back towards normal from an industry perspective. I assume that online portion 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. If you could just comment on how you see the margin structure of that online channel. It's obviously been a bit lower margin historically. Thanks.
Okay, Bryan. Yeah, 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 pointed about keeping the reach. We've removed high density. We haven't removed geographical spread, if that makes sense, particularly in Australia, New Zealand, and South Africa. Where we had five or six shops within a 2 km or 3 km location is where we certainly made the cuts. We still feel our reach is there. The other thing is the shops that are there are often the bigger, more productive shops previously. Even though, let's say it might be 40% or 50% of them, they were probably doing 60% or 70% of the TTV previously. 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, it's having access to people. Our access to people via the independent and also the call center will also be just as available to our customers. Back to your point on the online as well. Yes, I think we're already getting somewhere in, I think it's in the slide somewhere, over 20%-odd 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. A lot of that is low 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 largely domestic and it's online, is a lower margin. We know that. That's built into our scenarios. Again, that margin will be improved once, and I think I even saw it with Webjet's, once you get some international point to point where the margin's a lot better, but also our diversification into our packages and hotel. Again, it'll still be mainly flights sold online, but even a small shift into that fundamentally helps to improve the margin. The other one is ancillaries. Starting to be able to sell meals, seats, bags, blah, blah, where the airlines are much more favorable in terms of the margins they'll offer. Yeah, we're comfortable that you will see definitely a higher proportion online.
You will see a lower margin of that online proportion, we know we can grow that back to something reasonable. Again, the cost base is much lower, it should wash out. If you look to corporate, that's been happening over 10 years as there's been more OBT penetration where their gross margin has certainly been impacted, particularly if you looked at the Australian market. Their profit margin has in fact improved because of the better cost base.
Just to confirm then, if industry TTV gets back to FY 2019 levels, do you think you guys will, given your store closure program, will get back to FY 2019 levels of TTV or a bit lower because of the closures or a bit better because of consolidation in the industry? How do you view your relative positioning at that point?
I think it will be at least the same, if not better, for a couple of reasons. You mentioned the consolidation. Our multi-channel capability will be vastly expanded, we already knew we had customers who wanted to book online that were almost forced into a shop in some instances. Some consolidation. The other thing is the fame of the brand, I can't reiterate that enough. We have done some further brand consolidation during 2020, we literally in the last day or two got the latest brand reviews, one in five Australians are rating Flight Centre as their first choice to book travel. We can already see we're gaining awareness and more importantly, consideration. Pretty hard in Australia people don't know Flight Centre, more are now actively saying they will choose Flight Centre for their travel.
The same in South Africa. New Zealand's a bit harder to tell with the whole place being relatively shut down. Yeah, I think the fame of the brand will also, and the security that it is a trusted brand that got through, I think will really help us. Consolidation, multi-channel, and the brand, I believe we'll actually end up with more of the market.
Okay.
Bryan, from a corporate perspective, if the industry gets back to 2019 levels, we'd expect s erious growth because we're adding customers every week. We're not anticipating it gets back to 2019 levels, certainly in the next year or so. If it did, we'd expect significant growth on 2019 numbers.
Okay. That's interesting. Just one of the things you guys pulled out that I found really helpful, I guess, by 2020 results was where you talked about your break-even levels of TTV as a percentage of pre-COVID. From memory, it was about 30%-35% in corporate and 45% in leisure. Have those numbers changed at all over the past six months with any other cost programs you guys have done? Should we take that as the same sort of guideline?
Bryan, overall there's been really no change. 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 further cost out program we're undertaking within the leisure business. That identified approximately AUD 9 million a month of additional cost out from the leisure business. We reinvested back into the leisure business a further AUD 4 million. The leisure business cost base on a net basis has actually come down by around AUD 4 million or AUD 5 million a month.
That means that the leisure break-even 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 AUD 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. That means that the corporate brands now would be around about 45%, and they should be looking to get back into profit. Again, the relative size of that, the corporate cost base was around AUD 23 million a month. Adding another AUD 3 million increase is not a lot in dollar terms, but does increase the cost base by 15%, which is why that break-even number inches up a little bit.
So overall [crosstalk].
Right
Still is a number, though.
Australian corporate at 43% in January should have been broadly break-even then?
Australian corporate is an interesting one. We've got some key essential services clients there that operate at a low margin, particularly with a lot of the bookings there are in hotels at the moment, which are very low margin. If you take them out, they represent about half of that volume. 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. That means that we've still got a little way to go in terms of getting to break-even in Australia.
Right. Okay. For my final question, just around the overrides. You talked about supplier relationships going really well. I just find it hard to believe, given airlines are pretty capital intensive and have been under a lot of pressure globally through this, that overrides are going to come back pretty quickly. Even if they come back linearly with TTV, I would expect that at best there would be a bit of a lag as they rebuild their cash flows and balance sheets. Can you just help understand how important overrides are to that break-even analysis and whether they should be back in line with TTV or whether that's going to take a while?
Yeah, it's Skroo here. Every airline is a bit different. 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. The one thing all of them really want, particularly the international players, particularly Middle Eastern, Asian, and also the American guys they desperately need volume. They accept that we've got to be a viable business just as they have to be. It's really about the overall package now until volumes return. That generally will include an allowance for what we would have earned in overrides as well in one margin. 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.
Someone like Qantas is not quite as important because they're a very big domestic carrier, and so the international will come later for them. Most of the Asian and Middle Eastern in particular, they're all international, so they are desperate to get volume. 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.
Bryan, I'll add to that, too. One of the things that we did with suppliers, and again, particularly airlines, is we give them a higher yielding revenue passenger than say, a lot of the mass OTAs. Which is the one thing they'll be desperate for coming out of this. Again, we've really, when we've done these strategic sessions, looked at that. But we were doing it previously. This is both corporate and leisure, and particularly with corporate, with our SME focus and our leisure businesses. Again, I think you might see them making some rationalization for distribution, to your point, because they're trying to also reduce their cost base. They're certainly very keen to keep as much reach as they can and spread to attract that higher revenue and yielding customer. Again, we give them everything under one roof.
I think that will benefit us, and certainly is what they're keen to talk to us about.
Bryan, Haydn, just to paraphrase what Skroo said in pretty simple terms. What the airlines are doing at the moment and what we're sort of seeking from the airlines too, is more of a guaranteed margin. A bit like [crosstalk].
Yeah.
Coming out of that GFC [crosstalk].
GFC.
Sort of period. There's not really override discussions at the moment or super override discussions. It's more about, okay, this is what the previous contract you were earning, this is the level that we're going to be paying out at for the foreseeable future, and then we'll revisit volume-based incentives at a later point when things get back to more normal.
Okay. Excellent. That's really helpful. Thanks, guys.
Thank you. The next question we have is from Morana McGarrigle from Macquarie.
Good morning, everyone. Two questions from me. The first is the ambition still that TTV recovers to pre-COVID levels in FY 2024 for leisure and with corporate ahead of where it was? On that, I've noticed there's a slight change in the commentary on outlook versus what it was at the AGM. I can see that the expectation is now for both leisure and corporate to break even in calendar year 2021. Previously, I think it was corporate returning to profit in late FY 2021 and leisure in late FY 2022. I guess the question is the read-through that corporate will take an extra six or so months to return to profitability, whereas leisure appears to have been brought forward by about six months?
Yeah, good question. I can't remember exactly what our predictions were then, and probably I'm more interested in the overall break even. Yeah, look, it does depend a lot on borders reopening, domestic borders staying open, not just in Australia, and also the international travel. We're looking at overall as a company either late this calendar year or early next calendar year, without being too specific. I think Adam just explained it a bit with the last business. We have quite a lot of very low-margin hotel business. Usually, we look after some of the quarantine hotels for some of the states, and that's really affected our corporate margins. That's probably been the main impact on corporate going somewhat later than we originally thought. Also, we thought borders, particularly in Australia, would stay open. They didn't. They opened and shut every five minutes.
That pushed corporate back as well. There's still a fair bit of water to flow under the bridge. With the vaccination program, every month it would appear to become a little bit more predictable about when we move into profit.
Thanks. Just going back to that first one, I guess the broader ambition for TTV recovery is still FY 2024 with corporate a little bit higher?
That's a fair way. We've had a good look at this, and we're reasonably happy with that we'll get back to that in about that 2024 year.
That's fair.
Around that period. We expect corporate to get back a bit earlier and/or be a bit higher by then than pre-COVID. Not because the market's going to be bigger, it'll probably be smaller, but because we are winning market share, particularly in the Northern Hemisphere.
Thanks. Just one more question from me. There was a comment earlier on smaller players not being able to survive. Could you please just provide some more color on what you're seeing in that competitive landscape? Have they started to exit the market, and does opportunity for consolidation differ between corporate and leisure?
Look, the people with the big problems, if government doesn't support the travel and tourism industry, will be the small players, particularly in the tourist field, the tourism field, and certainly some in the travel agency. They'll be the people that will struggle without some government support, and I think the government's very much aware of that. We hope that the government does continue support because I think just as an industry, it's important that we have a good structure that survives rather than us having a competitive advantage in that area. Also, obviously, the people who are operating tourism facilities, whether it's in Australia or overseas, and tours and other, it's really important we have their product to sell. We certainly hope they survive. There will be a fair element.
You will know a lot of the smaller tour operators that are global operators are headquartered in Australia. The Australian approach to this is going to be quite important, as well as some of the overseas areas like the U.K. and Europe in particular. Obviously, the cruise lines that are based, a lot of them are based in places like Miami and that. There's a number of, t hey're obviously big players, so are probably less likely to be affected negatively. There was another part of the question.
Oh, I was just going to say, Chris, did you want to give any flavor specifically from a corporate landscape?
Yeah, sure. In terms of consolidation, I think consolidation was happening pre-COVID in the industry anyway, so it's certainly going to continue and probably speed up. I think that the way to look at the market is that companies, as they start traveling, are going to need new requirements in a post-COVID world, particularly around duty of care, but also around access to content. What we are seeing in the market is even those companies who are managing to survive in different parts of the world, often through government subsidies, don't appear to be investing in new product. That's what we're hearing from customers, and that's why we're winning business, is we are very much committed to not just surviving in corporate but bringing new product to market and products relevant. We're not seeing much of that happening.
The other interesting thing we are seeing a bit of an exit is a lot of the disruptors and VC money was going into business travel up to 2019 in the preceding years. We're seeing a bit of that money exiting, some people pivoting out of business travel into other sectors. That's quite an interesting trend we've seen in the last few months. Obviously, that bodes well for players like us who are bringing new technology to market as an incumbent.
Thank you. That's very helpful.
Thank you. The next question we have is from Weiheng Chen from JP Morgan.
Hi, guys. Thanks for the call and taking the questions. First one, maybe we'll stick with Chris on corporate. Just based on what you're seeing and hearing from customers, what's your view on how much the corporate market shrinks as a result of the pandemic and Zoom, et cetera?
Yeah, it's a good question. We've spent a lot of time talking to them about this. I think there definitely will be some shrinkage. What we're hearing is things like internal business meetings, which may have been done face-to-face. Some customers have got used to doing those over Zoom, over Teams, and some of that won't come back. However, what we are seeing as well is markets which are opening up. We've actually been quite surprised, in some cases, at how much has come back. China, which I've referenced before, we're seeing that domestic China's back to over 80%. Some months we got back to 100% of pre-COVID-19 levels. It's partly because we put some new business in, but it's also partly because people who can travel are traveling again. I also think we're seeing an interesting trend now.
The longer this pandemic has gone on, we are hearing from customers that there is huge pent-up demand to get traveling again. I anticipate in the next couple of years, we don't have the exact percentages, but I think what I'm confident to say is that we can win new customers, enough new customers, and get them trading to replace the down-trading in our existing customer base up to 2019. We're very confident we can get back to growth sooner rather than later once the world opens up, simply by winning enough new customers to make up for the customers who won't go back to 100%, certainly for the next couple of years.
Yeah. All right. Thanks. Understood. Next couple of questions just on leisure. The first one was on the reduced bricks-and-mortar network. Sort of historically, that's been justified in part through advertising benefits associated with the network. That network's now 60% smaller. Does marketing spend sort of post-pandemic need to increase as a percentage of sales?
Hi, Weiheng. Well, yes, in summary, our expectations and scenarios have built in an escalating marketing spend. However, during the pandemic, we've got very creative about using owned channels as opposed to paid channels. One would expect we can get greater advantage out of SEO, et cetera. Social platforms, as I mentioned, are proving very fertile ground. Yeah, we do intend to spend more on marketing as an overall percentage. That's in the Flight Centre brand. If you move to, say, the TA brand, it's the advisors themselves who are the marketers, so you won't see it as much there. Yes, that would be part of our forward plans. Remember one thing I did say, though, is what we've reduced is high density, not necessarily geographical reach. We're certainly making sure the brand billboard impact is still there in terms of traffic flows, et cetera.
Yeah. Great. Thanks. Just the next one on the leisure business. In first half 2020, pre-pandemic, the leisure business was loss-making at a PBT level. Appreciate there's sort of seasonality in the business, just wanted to see if that was normal or if just first half 2020 was just a tough period.
There's a couple of things in there, Weiheng. Yeah, you're right. Seasonality is there. If you look at the U.S. in particular.
Yeah
They operate in a loss-making position for the first half of the year. What we also had in that first half of the year here in Australia was we were going through some of the heavy lifting in terms of transformation project and program that Mel was undertaking. Typically, we would expect to see that we would be overall in a profit position, albeit that the North American leisure business would typically trade at a loss and drag that profit down.
Weiheng, most of the other leisure businesses also are seasonal. The ones Adam's talking about are massively seasonal, but also Australia and New Zealand has a second half skew as well.
Yeah. Thanks. Just last one on just M&A. Vaccines are here and real-world experience is showing their effectiveness. Feels like this is probably the last chance to make a move from an M&A perspective. Just wondering if you guys had any thoughts on that. Are you guys looking at anything?
What have you got, mate? I think Skroo said before, look, there are and will be opportunities through consolidation of both the leisure and corporate businesses. I think the reality is that, like anyone else, we'd certainly be having one eye open to what we believe is the best outcome for us. I will say historically, and certainly in the leisure business and definitely in the corporate business, our growth has come from organic growth, and we've never relied on acquisition to materially change that growth profile for us. We wouldn't do it just for growth. Certainly, if there was an opportunity that fit really snugly within our strategic objectives in both the leisure and/or the corporate business, then we'd certainly be looking at it.
Okay, thanks. That's all from me. Thank you.
Thank you. The next question we have is from Aryan Norozi from UBS.
Hi, guys. Hope you're well. Just the first one from me. To what extent does the leisure business subsidize your profits in the corporate business? Mainly in terms of, when I say subsidize, in terms of buying power.
Yeah, Aryan. There's no doubt we leverage the combined volume of both businesses. Not just from a supply chain perspective. Remember, I did mention the diversity that we give the supply chain by coming into the group through one doorway. If you go back to those how we win sort of layered diagrams that both Chris and I had, the investments in terms of, and I'll give one, in terms of TPConnects that we've been investing in over the last year to improve our NDC capability. We're jointly doing that together, so the cost is shared, and it makes it a lot more palatable, gives us more options in that space. Yeah, we're very committed to working together as a group. The supply chain generally like that.
Mind you, we also work with the supply chain as well if they want to approach more regionally. We certainly have some contracts that are either just corporate or leisure, not necessarily in air. Yeah, no, we think it's a benefit and certainly the interactions we've had with the big suppliers, as I said, we've been really proactive in that space over the last six months particularly, is resonating with them as well. Chris, do you want to add any comment on that?
Yeah. Well, Mel does buy me dinner occasionally. I'm not sure if that counts as subsidizing, but maybe it does. No, I agree with Mel. I don't think there's any subsidies, but there's definitely a benefit in supply chain having them both. I think that's what we leverage more than anything else.
Actually, just on for clarity there. In terms of the overall cost base, we allocate our costs to both leisure and corporate largely on a usage basis. Any cost that we can't specifically allocate to either leisure or corporate do end up in that big other bucket in the segment note. From a pure cost perspective, there's no subsidization of leisure to corporate or corporate to leisure. One of the benefits we've seen in the cost out program that we've had to undertake over the last 12 months is the benefit of having both leisure and corporate and starting to work together for a lot of the support businesses, to get greater efficiency across all of our brands collectively, rather than just specifically on individual ones.
That's perfect. Second one, just in terms of the revenue margin, I think at the start you mentioned around 10% in leisure for shorter term is the way we should be thinking about it. If the mix between your leisure business does recover between international and domestic, how do we think about revenue margins then?
Yeah, look, certainly I think the point I was trying to make there is for the next six months, we're not expecting a significant shift in those domestic-international channels for leisure. The current revenue margin is probably a good approximation of what we'll see over the second half. As we start to see international come back, certainly we start to see the revenue margin increase. I think as Mel mentioned earlier, overall, we'd expect to be able to get the revenue margin up relatively close to where it was in pre-COVID times for leisure. That would also have a reduced cost base that means we wouldn't have to bring back the additional cost there as well. Net-net, we'd expect it to get back fairly similar to pre-COVID levels once we get back to international travel, and once our touring operations start up again as well.
Remember the international travel, it’s not just the nature of the higher TTV, but you get chunkier margin products like coach touring, insurance, et cetera. That’s just not available really on a domestic basis where it’s largely flight and hotel.
Your comments are assuming overrides come back. You guys already mentioned in negotiations for at least the next sort of 12 month-ish, you've just got 60%. The comments you're making around it returning to pre-COVID levels, that's assuming overrides kick in again. Is that right?
Yeah. Margins remain at a steady sort of level.
Yeah. Whereas we're just looking at the collective margin we earned over an average over the last period. Like Haydn said, we did exactly the same as we came out of GFC, trying to have that retained average margin. Once there's some sort of level of numbers as we get a base for volume tiers as well. I think that's sort of half and half.
Yeah. It doesn't really matter where it comes from.
Yeah.
It's what you earn and. Whether it's paid at source or whether there's some back-end component, but generally, it's being paid at source.
There's no doubt any conversations I've been in with any of the supply chain, they have been totally fine to work on that sort of basis.
That's perfect. Thanks, guys.
Thank you, Aryan.
Thank you. The final question we have is from Belinda Moore from Morgans.
Good morning, everyone. I just wanted to check, maybe Adam, a question for you, please. I think your cash burn was supposed to reduce by a further AUD 4 million from January, just following those cost savings. Is that still correct? I know in December it was AUD 30. Just how we should think about that. Secondly, just thinking about your overall second half 2021 loss, I suppose, versus the first half, just given you expect TTV to accelerate.
Yeah, Belinda. I'm just pulling up the page from the AGM that you're referring to, yeah, we certainly expected to have net savings come through by the time we got to January. We are seeing them coming through into the numbers. As I said, we've reinvested some of the overall savings. The net you'll see in the OpEx should come back into line with what we were talking about at the AGM, which was around about that AUD 71 million a month. There's also some elements of that were coming off in CapEx, because we weighted some of our CapEx over the final quarter of last calendar year. We are absolutely seeing the benefits that we expected to see in the savings program, net of the reinvestments that we'd highlighted at the AGM. Sorry, Belinda, what was the second part of your question?
Just how we should think about the second half result, I suppose, versus the quantum of the first half loss. In the second half, hopefully TTV is going to improve?
Look, I guess the reason we're not giving guidance that we don't know is probably the short of it. We can control things like our cost base. There are a lot of things out of our control, and that's largely at the revenue line, and that largely feeds into things like the stability of domestic borders, whether any channels internationally with people like New Zealand can open up over that period, et cetera. Unfortunately, I can't really answer that one for you at the moment, Belinda. It's just not known to us. There's too much ambiguity.
Understandable. Thank you.
Thanks.
Guys, we're going to have to run now to other events, but if anyone has any further emails or any questions, shoot them through to me later today and we'll come back to you as quickly as we can. Thank you. Thanks, everyone.