Flight Centre Limited announces Liberty Travel acquisition and $100 million capi

The $US135million acquisition of privately-held Liberty Travel willtransform North America into FLT's largest international market outside ofAustralia by sales and will:

    -  Deliver a profitable business with a track record of total transaction       value (TTV) growth    -  Provide immediate scale in the key North American market, with the       addition of 193 leisure travel shops along the East Coast, Florida and       Chicago, plus 40 wholesale locations in 22 states    -  Bolster the company's existing leisure operations, which are       predominantly located on the US West Coast and in Canada, and provide       a footprint for further leisure, wholesale and SME corporate travel       growth    -  Strengthen FLT's global product offering and relationships with key       suppliers.    Total transaction value from Liberty and FLT's existing leisure, corporateand wholesale travel businesses in the United States will exceed $US2billionper year, making the combined FLT and Liberty business the USA's:    -  10th largest travel group overall;    -  Second largest bricks and mortar leisure agency behind the AAA Travel       group and;    -  Largest wholly-owned retail and wholesale leisure travel business    

The acquisition is expected to be earnings per share accretive in FY2009on a pro-forma basis. The acquisition is subject to usual closing conditionsand to key regulatory approvals and consents being obtained. It is expected tocomplete in January 2008.

In connection with the Liberty acquisition, FLT will raise $A100millionthrough a Share Placement to be conducted via an institutional bookbuild. Theplacement will be launched November 12th and will be led by ABN AMRO Morgans.

In conjunction with the institutional placement and in line with theirstated intention to reduce their overall holdings in FLT without surrenderingcontrol, FLT's founders have elected to sell up to 2.6million FLT shares inthe same institutional bookbuild.

At the completion of the placement and selldown, FLT retail investorswill be given the opportunity to subscribe for up to $5,000 of FLT shares viaa Share Purchase Plan.

The company also intends to undertake a review of its capital structuregoing forward with a view to enabling the introduction of greater levels ofdebt to fund future acquisitions and optimise the company's capital structure.

Liberty Travel

Liberty Travel, credited with the invention of the packaged vacation, wasfounded by Fred Kassner and Gilbert Haroche in 1951. The Kassner and Harochefamilies have to date maintained their leadership and ownership roles in thecompany.

Liberty serves more than 2million customers annually through its retailshop network and an additional 18,000 travel agencies via its wholesalebusiness, GOGO Worldwide Vacations.

Acquisition Rationale

FLT managing director Graham Turner said the acquisition came afterextensive due diligence and would produce significant benefits for FlightCentre Limited and its shareholders.

"We are excited to work with Liberty's management to seize theopportunities created in the large and dynamic North American travel market,"Mr Turner said.

"With the addition of Liberty, FLT will gain a strong network of brancheswith an affluent client base, access to niche product offerings and anexperienced management team.

"The acquisition is directly aligned with Flight Centre's strategic goalsfor growth and fast-tracks the business's evolution in this key market, as itwould have taken years of organic growth and major financial investment toachieve Liberty Travel's results, size and market penetration.

"From an overall company perspective, the addition of Liberty is verysignificant.

"Firstly, access to GOGO's wholesale product range, particularly its coreCaribbean and Americas offerings, will strengthen FLT's global productplatform, which is a key strategic objective for the company.

"Secondly, FLT will now have an iconic and profitable leisure travelbusiness in the USA to complement its successful and rapidly expanding FCmTravel Solutions corporate travel business.

"Thirdly, the acquisition significantly strengthens FLT's overseasoperations and reaffirms the company's position as one of the world's largesttravel businesses. Based on Liberty's expected results moving forward, morethan half of FLT's annual total transaction value will now come fromoff-shore."

    Growth opportunities in the short-term include:    -  Expanding the GOGO Worldwide Vacations wholesale business and product       range    -  Improving retail shop performance by building on Liberty's traditional       strengths and introducing some key elements of the FLT business model,       particularly in the contracting and marketing areas, to capitalize on       ongoing TTV growth    -  Securing a larger share of the middle market as growth in the online       sector slows    

Leadership Team

Following the acquisition, Liberty Travel will be managed as part ofFLT's North American business, which is headed by Greg Dixon, and will bejointly led by Sue Rennick and Cathy Pelaez during the integration period. MsRennick has worked for Flight Centre for 19 years in a variety of seniorpositions, including leader of Flight Centre brand in Australia and presidentof the company's West Canada operations. Ms Pelaez, Liberty Travel's currentchief operating officer, will take on the role of president Liberty Travel. MsPelaez is a 27-year veteran of the organisation and has held various executivepositions throughout her career. In addition, other key Liberty executiveswill continue with the business.

USA Leisure Travel Market Conditions

While online agencies are currently the largest operators in the USleisure travel market, FLT believes there are reasonable growth opportunitieswithin the offline sector for a business of its size post Liberty'sacquisition.

Mr Turner said while economic factors such as the sub prime housingcrisis and the relative weakness in the US dollar had affected the overallleisure travel market, some positive signs were emerging in the$180billion-a-year leisure sector.

"Travel agency revenue is increasing - albeit slowly - and indicationsare that spending will increase in upcoming years as America's Baby Boomerstake off to explore the world and Generations X and Y enter their peak earningyears," he said.

"This creates opportunities for larger service-focused agencies, as thesepeople are generally time-poor, have relatively high disposable incomes andhave a desire to venture further afield.

"Recent changes to passport regulations, which mean more Americans nowhave passports, are also likely to increase international leisure traveltraffic in the medium and longer terms."

Recap on Expected FLT Performance

News of the Liberty acquisition follows upgraded profit guidance from FLTfor 2007/08.

Following a strong start to the year, the company has announced that itexpects to report 40% growth in net profit before tax for the first half, incomparison to a relatively weak previous corresponding period.

Excluding any acquisition-related benefits attributable to Liberty, FLTexpects a minimum of 15% pre tax profit growth (excluding the abnormal gainrecorded during 2006/07) for the full year.

The company is currently tracking at the top end of its guidance of10-15% TTV growth.

Mr Turner said a number of factors had fuelled the healthy TTV growthglobally including:

    -  More consistent approach to mark ups in retail and corporate offices    -  Improved gross margin through smarter approach and better performance       to major contracts    -  More productive selling environment for staff via the international       roll out of the Shop of the Future design    -  Development of fresh marketing campaigns - "Unbeatable" and "Perfect       Holiday Promise"    -  Improved incentive structures for sales staff    -  Strong discipline on cost of seat business model    -  Improved higher margin land sales    -  Corporate travel growth, particularly SME segment    

    ----------------------    (1) EBITDA as calculated by FLT. Liberty's financial year ends    December 31.

For further information

Enquiries to: Haydn Long, Flight CentreLimited, +61 418 750454
Allison Eaton (North America), CommunicationsManager, (604) 202-0872