At a time when the air travel industry is plagued by serious problems, including security issues and soaring fuel costs, Graham Turner is still at the top of his multi-billion dollar game. Turner’s success with Flight Centre has something to do with staffing policies, caution with cash flow, innovative customer service, and everything to do with entrepreneurial vision.
As with many entrepreneurs, the gamble paid off, and then some. Turner is now managing director of Flight Centre Limited, Australia’s largest online and retail travel agent, with representation around the world. At last count, Flight Centre Limited has a presence in 10 countries, 1,300 retail shops, around 2,000 businesses, and includes some 11,000 employees.
Turner admits it’s a long way from the orchard he grew up on in Queensland, but a journey he knew he was going to make, no matter what business he found himself drawn to: “I’ve always been an empire builder.”
As befitting the man behind a travel empire, Turner caught the travel bug a year after graduating, so he packed up and headed for London as a veterinary locum. But six months in, and after seeing a yard of decommissioned buses, he realised there were more opportunities in empire building than as a vet. So he and fellow vet, Geoff Lomas, pooled their meagre funds of $1,300 and launched a tour business, Top Deck Tours, using old double-decker buses to take tourists through London.
Top Deck launched in 1973 with one bus, and by 1979 had nearly 80. In 1980, Turner returned to Australia with his young family, selling Top Deck Tours to Aussie tourists. Although he still had an interest in the company, he decided to focus his energies elsewhere after recognising a gap in the travel industry for discount airfares. The travel industry had just been de-regulated, so for the first time there were opportunities to offer fares at discounted rates (until then it was illegal) and Flight Centre was born in 1981.
Turner is pretty nonchalant about his empire-building skills and the quick growth of the company (that first year netted around $300,000 profit), but admits that even he was a little surprised by how quickly the business grew. “We always planned to grow and we had a pretty aggressive plan for organic growth,” he says, which called for setting high goals. “Our five-year plans were outrageous but, amazingly, we exceeded all plans!”
By 1986 the business was on a steady upward path, so he and his colleagues sold their interest in Top Deck—by way of a management buyout—and focused all attention on Flight Centre.
Fast Tracking Growth
For the next decade, Flight Centre continued on its fast track, growing around 20 to 30 percent each year through acquisition and consolidation of businesses as well as opening new branches. In 1995, the next step in the growth phase involved taking the business public, trading as Flight Centre Limited.
At the time 20 percent of the business was floated, and Turner says the main driver behind the listing was the opportunity to give staff a stake in the company. At the time, shares went on sale to the public for 95 cents, and 85 cents for staff. (As we go to print they are trading over $20).
Turner says many small to medium businesses look to float their business as a means to get a cash injection to grow. “It can be a positive move for SMEs, and it can be negative, it depends on the motivation. We didn’t do it for growth, and as it turned out it was the right move for us,” he says. “I wanted to give staff the chance to own a piece of the brand.”
In 2006 Turner and his team initiated proceedings for privatisation. “The share price fell dramatically and I thought Flight Centre was being under-valued.” After two failed buy-back attempts last year, backed by a private equity partner, a disappointed Turner says he has turned his attention to other roles (he still holds around a 15 percent share in the business). Part of which includes developing new market strategies and expanding international presence. Each market has its own targets, he explains, and growth is driven largely organically. But there will continue to be an involvement in acquisitions, a key driver of early success.
FCL is now made up of the retail travel brand, its corporate FCm Travel Solutions brand, and other brands that include Escape Travel, Travel Associates, Student Flights, quickbeds.com and Overseas Working Holidays.
“We are an international business,” he says simply, and qualifies this by adding that FCL is now represented by wholly owned branches in 10 countries (60 countries under the FCm Solutions brand), and estimates that 50 percent of FCL’s business is now outside Australia.
In terms of market share, Turner estimates that FCL holds a 35 percent share of the leisure travel market and 12 percent of the corporate travel market in Australia. And his plan, as long as the board wants him at the helm, is to continue to strengthen this market share and Flight Centre’s interests in new markets and ventures, including recruitment and other non-travel retail projects.
Day-to-day, Turner says his time is spent liaising with senior management teams across the country—“to make sure things are working across the brand”. He instils a decentralised management structure, so each management head is responsible for the hiring, firing, and decision-making of their own department or team.
Although he doesn’t talk effusively about them, it’s clear that staff are a high priority, and he ensures his senior managers put a lot of effort into benefits to encourage staff not only to stay but also to thrive in the business. “It’s not just about pay, it’s about personal and professional development. While it’s clearly not a democracy, we need to have staff feel like that have input.”
After talking to one of the FCL’s employees, it’s clear that Turner is a “pretty big deal” within the company. Not that you’d know from talking to him. He’s very matter-of-fact about the business, its past and future, ups and downs, as we chat while he walks from one meeting to another. According to staffers, he has created an egalitarian culture where there are no special privileges unless they apply to everyone, there are no individual offices or secretaries, and even the boss himself only has the one phone.
It’s not a culture that works for every business, Turner admits, but it’s certainly one that has been recognised around the world. In March this year, for the sixth year in a row, Flight Centre made The Sunday Times ‘Best 100 Companies to Work for List’, the only company to remain on the list since 2002. As the 51st best company to work for in Britain, Flight Centre also received a Two Star Accreditation, similar to the Michelin Star type of award.
According to Lin Hilditch, head of Flight Centre’s recruitment, the feedback from employees helps to ensure they are continually improving the working environment for staff. Part of this comes from the fact that team leaders, the store managers, get a 10 to 15 percent share of the profits from the store they run, with an option to buy another 20 percent share of the business. “Our employees clearly appreciate this along with our innovative and unique approach that rewards hard work through an uncapped incentive scheme,” Hilditch says.
Another benefit praised by many experts is the access to independent financial management advice (at FCL’s cost), a Healthwise program that offers free health checks to staff, and the fast-track to management training scheme. These innovative schemes drive team members to achieve more within their own store, and in their own personal development.
Innovation is another key driver for success, as with any business. For FCL, technology is a significant part of that, especially with the online presence, but Turner thinks innovation comes down to common sense. “A lot of innovation is moving away from a conventional way of doing things because that’s how it’s always done, to more common sense. And a lot of our innovation comes from the staff at the frontline.”
One example of this was as simple as changing the standard way a refund was paid to a customer. Standard practice was to pass a refund on to the customer only after it was paid from suppliers. It was taking staff more time to follow up on slow-paying suppliers and liaise with and placate increasingly irate customers. After staff suggested it would be better to pay the refund upfront and then chase up the suppliers, the whole refund system was overhauled, resulting in happier clients who are more likely to return.
One of the group’s new offerings, Flight Centre Group (group travel specialists) in NSW will be the evolving model for future groups, including elements such as how the office is run, the contacts, and so on.
And while the internet is crucial for most modern businesses, Turner says FCL’s focus hasn’t been on the online model. “We do offer it but we are not big players. There are complex areas of travel arrangements that can’t be offered online, and we tend to focus on selling more upmarket ‘non-air’ products.”
Despite his successes the last 30-odd years have certainly not been without challenges. One of the biggest, the events of September 11, had a crippling affect on the entire industry. And as companies like Ansett (and its subsidiaries, like Traveland) crumbled, the whole travel industry took a massive hit. FCL survived these ‘blips’, by focusing on value for money. “You have to supply good value service and good value products and you’ll fly through blips like that.”
He also masterminded an “aggressive” marketing campaign to drive interest in travel again, a move widely lauded as the main reason his businesses survived.
In recent times FCL has had to contend with airlines reducing and even cutting the travel agent’s commission fee out of the price of all flights, as Jetstar did when it launched in 2004. While he acknowledges the bitterness of the feud (which included Turner paying for Google searches for Jetstar that directed people to his website) he is largely dismissive of the overall impact.
He is also fairly noncommittal about the importance of relationships formed with various other suppliers: hotels, tour organisers and the rest of the industry. “It’s not unimportant,” he says. “It all depends on their perceived market power.” What is most important, he adds, is that those in the industry realise it’s all about not being able to operate without the other.
Rising fuel costs are a concern, as is the credit crunch, but Turner says FCL remains largely unscathed so far. Even so, such shifts in the industry means that Flight Centre needs to be constantly evolving and building on the brand promise. “We’re going to continue to strengthen the wholesale, retail, and corporate arms of the business,” he says. He is excited about venturing into the recruitment industry and other retail projects that stick to the Flight Centre principles.
The next five years or so for Turner will be committed to growth on an organic basis and development of new industries: “As long as the board is happy with me!”
And like all good entrepreneurs, despite the earlier failed privatisation option, Turner has further succession plans in mind, not that he’s revealing too much at this stage. “I’ve always been really good at forward planning, and I do have some other interests.” There’s the interest in farming and he and his wife own some small resorts, which he says will keep him pretty busy when life at FCL comes to an end.
But until that day comes, with the shareholders to keep happy there’s still plenty to keep him going within the empire. “With sales of $11 billion, growth at 10 or 15 percent a year is challenging!”
1. Be very aware of your cash flow—and be conservative. “Since the early days, even before having to answer to a board, I was very conservative with spending.”
2. You’re only as good as the people working around you. “Give them the latitude to make decisions and make mistakes on their own.”
3. Make sure your staff are rewarded.
Skroo’s guide to planning
Have a brief, broad direction for the business, broad goals and plans to achieve them. It should all fit on one page—so it should be definitive, but brief, and reviewed on an ongoing basis.
Turner’s 2008 resolutions
“After a good year in 2006/07, growth will again be a priority for Flight Centre Limited during 2007/08.
“The company will seek to expand its retail, corporate, and online footprint globally through shop and business openings, while also exploring new product offerings and diversified revenue streams, which may see the company transfer its proven retail model into different businesses.
“Other priorities will include continued development of Flight Centre Limited’s customer and product strategy and fine-tuning of the company’s bricks and mortar friendly web strategy.
“The company will continue to pursue strategic acquisition opportunities in Australia and overseas to fast-track development in some important markets and sectors.
“Generally, I believe that 2008 will deliver some significant benefits to Australian travellers. Positive factors include the buoyant economy, the strong dollar, the arrival of new carriers like Etihad, Air Asia X, Viva Macau, and Tiger and increased capacity from many of the established carriers.”