Flight Centre expects its profit margins to improve as the number of "ridiculously" cheap international airfares decreases.
The travel agent's full-year profit slipped six per cent to $230.8 million in the year to June, partly due to an intense airfare price war.
Flight Centre co-founder and chief executive Graham Turner said he now expects a normal trading environment during the 2017/18 financial year, with modest decreases and increases in average fares as opposed to steep declines across the board.
"Domestic yields have come up and internationally they have generally stabilised," Mr Turner said on Thursday.
"There are still some ridiculously cheap fares to the states that come out every now and then, with small seats allocated to them, but overall we are seeing a stabilisation."
The positive outlook pleased investors, who drove shares in the travel agent up by $4.73, or 10.7 per cent, to $49.10.
CMC Markets chief market strategist Michael McCarthy said the outlook was more upbeat than expected and Flight Centre performed well despite a difficult year featuring lower consumer spending and increased competition.
"This is also a heavily shorted stock and it looks like some of those shorts have been forced into the market to buy back given the result," he added.
The company's underlying profit before tax of $329.5 million hit the top end of its guidance released in July, but was at the lower end of its initial target of $320 million to $355 million.
The first half was hit with political uncertainty sparked by the United Kingdom's Brexit vote, and US and Australian elections that resulted in subdued trade.
Mr Turner said the first half also had the steepest fare cuts with the group "advertising some of the cheapest international airfare deals" it has ever offered.
Underlying profit before tax in the second half rose 4.7 per cent, staging a dramatic turnaround from the first half's 22.4 per cent fall.
Mr Turner said the lower airfares did boost ticket volume growth with total transaction value (TTV) growth hitting a record $20.1 billion in 2016/17, up from the prior year's record of $19.3 billion sales.
In Australia and New Zealand, sales increased in both leisure and corporate travel, with the company achieving record ticket volumes and record room nights.
International ticket sales in Australia increased 10.5 per cent, well above Australia's official 4.1 per cent outbound travel growth rate.
The group's Americas business accounted for about 10 per cent of Flight Centre's profit thanks to record profit from the US and Canada's strong turnaround.
FARE DISCOUNTS DENT FLIGHT CENTRE'S PROFIT:
* Profit down 5.6pct to $230.8 million
* Revenue up 1.3pct to $2.7 billion
* Fully franked final dividend up 2 cents to 94 cents
