Steve Jones’ Say

I was as shocked as anyone when Helloworld announced it was buying Magellan Travel Group. Well, not quite. I’m sure I wasn’t half as surprised as Magellan’s rank and file members. They, like the rest of us, had no idea what their board was up to. Their shock must have been almost palpable, particularly those who had left Helloworld to join Magellan.

What didn’t surprise me was the fall out that followed and the ensuing scramble from rival groups to exploit the inevitable unrest.

I suspect Magellan’s board also fully anticipated the adverse reaction from some members. If they were surprised, they shouldn’t have been.

I have a lot of time for Magellan, its founding members and its philosophy of transparency. Its growth and approach have been admirable and it is rightly regarded as one of the industry’s success stories.

Yet the manner of the deal with Helloworld made a mockery of this policy of openness. When members needed to be consulted the most, they were kept in the dark. That was wrong. Understandably it has left Magellan retailers more than a little agitated. Some reportedly learned of the transaction through Travel Daily.

It’s hard to believe this was such a hastily conceived agreement that no opportunity for consultation was possible. Notwithstanding ASX regulations which complicate the disclosure of information, there would have been ample opportunity for the Magellan board to at least share their strategic thinking with members. Little wonder Express Travel Group in particular has sought to stir the pot and offer disaffected Magellan members a new home.

So when the dust has settled — and that might take a while — what will this mean for Magellan?

Access to better technology has been cited as the key driver for the deal, and we all know how critical technology is. So that is clearly a plus.

As for the structure, Magellan will “continue to operate in its current form”, according to Helloworld. But to what extent remains to be seen and tough questions will inevitably follow over whether, under new masters, it can truly deliver on its existing proposition.

Currently, members are told they control their own destiny with decisions taken solely for their benefit.

In addition, agents see “every dollar spent and every dollar due to them” and are kept “fully informed of all commercial dealings”.

And then, of course, is the pledge that members retain all profits and earn “best-in-market commission…undiluted by administrative overheads or shareholder dividends”.

Can all this really be preserved under Helloworld which, like any public company, has a duty to shareholders?

Under Andrew Burnes, Helloworld has certainly attempted to put agents at the forefront of the business. It is no longer the “horrible beast it once was”, as one senior agent told me. And Burnes is astute enough to know not to meddle in a network that has enjoyed such success. If it ain’t broke, don’t fix it.

Nevertheless, as a subsidiary of Helloworld, it’s hard to see how Magellan can operate in the future with quite as much flexibility and transparency.