State of the industry in March
Flight Centre cuts brands
Flight Centre last month announced a major restructure of its Australian retail operations around three new “super networks”. The move will see the demise of the Escape Travel and Cruiseabout brands, with existing stores to be rebranded as either Flight Centre or Travel Associates. The company revealed the chops alongside its first half results, which included record TTV of $10.16 billion for the six months to 31 December, an increase of almost 9% on the previous corresponding period. Underlying pre-tax profit was $139.4 million, up a healthy 23%, with the group upgrading full year guidance to be “within reach” of its previous record $376.5 million result in 2014.
The “Rebrand and Grow” plan foreshadowed a strong push to grow Flight Centre’s market share in Australia, shifting the company’s focus locally after turning around loss-making businesses overseas. The three new networks will respectively aim at the mass market (Flight Centre and BYOjet/Aunt Betty), premium travel (Travel Associates and Travel Partners) and youth (Student Flights/StudentUniverse). A Flight Centre spokesperson confirmed that the majority of the company’s existing Escape Travel franchisee members would become part of the Travel Associates network, although there are also affiliate opportunities under the Travel Partners offering if they prefer. See this month’s cover story for more.
QF-AA warn of DFW cut
Qantas and American Airlines are hoping the new political climate in the USA will allow them to get their expanded cooperation alliance over the line, last month formally lodging a new application with the US transportation regulator. They claimed the proposed partnership, which was previously knocked back in 2016 under the Obama administration, would “significantly improve service, stimulate demand and unlock more than US$300 million annually in consumer benefits that are not achievable through any other form of cooperation”.
If the pact is knocked back again, a sting in the tail was a threat to down-gauge or even cancel QF’s daily A380 service between Sydney and Dallas/Fort Worth, as well as AA’s flights from Los Angeles to Sydney and Auckland. “If the joint business is not approved, American and Qantas will have no choice but to further reduce codesharing on their networks…this will jeopardise the number of services and routes each carrier flies between the US and Australia and NZ,” they said. On the flip side, the proposed arrangement would potentially allow AA and QF to introduce additional routes on the Pacific, including “new city pairings,” they said. The application remains under consideration by US authorities.
Helloworld tech buy
Helloworld’s rampant appetite for acquisitions continued unabated last month with the announcement the company was purchasing Flight Systems Pty Ltd, the parent of online travel agency skiddoo.com.au. Skiddoo was established about five years ago by 33-year-old Mirza Juddani and has operations in Australia and Singapore. While Helloworld said the deal would boost its overall TTV by more than $80 million, a key driver of the acquisition is software, with HLO CEO Andrew Burnes saying it gives the company a “low risk and low cost entry to some sophisticated distribution technologies to incorporate into the rapidly developing ResWorld agency platform” which is set to roll out this year.
Burnes said the tech move would empower Helloworld Travel members to offer 24/7 bookability via their own branded websites, making it easier for customers to book and interact with the company. It’s certainly a “back to the future” deal for Helloworld, with the benefits sounding surprisingly close to those touted by the company’s now defunct technology agreement with Orbitz which previously powered the helloworld.com.au website. Ironically, after founding Skiddoo, Juddani was also quoted as saying he was specifically targeting customers of Helloworld’s former Best Flights operation, the OTA business which was closed down by former CEO Rob Gurney in 2014.
Travel Partners growth
Travel Partners managing director Jeff Hakim last month revealed expectations that the company could double in size over the next twelve months, after last year’s acquisition by Flight Centre which has presented multiple avenues for expansion. He spoke to travelBulletin at the 2018 Travel Partners conference in Sydney, hailing the wide array of product now available. “[Flight Centre’s] Infinity product is fantastic, and everyone is earning more,” he enthused.
There’s also strong potential to boost numbers through the major restructure of Flight Centre’s brands, with the closure of Escape Travel and Cruiseabout likely to see more consultants and franchisees shift to Travel Partners. Hakim confirmed that 15 Flight Centre consultants had already switched to the Travel Partners mobile model, with significantly more likely to join the pipeline. The Travel Partners conference also included a presentation by Infinity, which is restructuring its offering around Flight Centre’s new mass market, premium and youth networks, with dedicated consultants for each division. Infinity business leader Richard “Sticky” Glew confirmed the imminent launch of a new Infinity Rewards loyalty scheme for agents, estimating a typical consultant could earn about $1,000 worth of points each year.
VA to boost Hong Kong
Virgin Australia is continuing its focus on growth into Asia, confirming the launch later this year of non-stop flights between Sydney and Hong Kong. Fine details of the new service haven’t been revealed at this stage, but it’s understood VA has managed to secure flight slots at HKG which also provide convenient connections to onwards services into China — as well as through to London with sister brand Virgin Atlantic which withdrew online service from the Australian market some years ago. VS plans to return to the local market via a codeshare with the new Virgin Australia operation. The new route announcement coincided with the release of VA’s results for the six months to 31 December which for the first time in many years saw the carrier in the black, with a $4.4 million after tax profit.
Virgin Australia chairman Elizabeth Bryan also dampened speculation that the company planned to delist from the ASX, saying that after discussion with major shareholders it had been decided not to privatise the group. She noted that the company had more than 21,000 shareholders with small stakes worth less than $500 and announced an “unmarketable parcel buy-back facility” offering 30c per share. The minnow shareholders — many of them believed to be current or former Virgin Australia employees who bought in at then discounted prices (believed to be significantly more than the 30c on offer) — will have their shares acquired at the Buy-Back Price unless they choose to opt out of the facility by 13 April 2018.
HLO takes aim at Viking
Helloworld executive director Cinzia Burnes flexed her considerable corporate muscle last month when she launched a broadside at Viking Cruises, urging travel agent members of the group to stop selling the popular line. The move was sparked by the termination of a wholesale contract with HLO’s The Cruise Team, which Burnes claimed had been cancelled with “no cause and with very little notice”. She noted that Viking was not a preferred supplier to Helloworld’s retail network, “nor will it become one” meaning agents wanting to sell the product will end up going direct to the cruise line. The HLO executive director described the Viking move as “unilateral cherry picking” and accused the cruise line of unfairly targeting the Helloworld Travel Group in Australia. “Bullies need to be dealt with…let’s ‘sink’ Viking and stop selling it,” she said.
Viking responded, saying The Cruise Team contract was a legacy agreement established in 2009, when the line had no call centre or sales representation in Australia. “Our strategy moving forward is to move away from wholesale agreements as this no longer reflects our business needs,” said Viking’s local GM Michelle Black. She confirmed all wholesale-only agreements had been terminated. “We have made significant changes to our business over the past 12 months which agents would have benefited from, and as the only cruise line with no non-commissionable fees we firmly have the financial success of our agent partners in mind,” Black said, promising that Viking would continue to maintain significant investment in consumer marketing to drive customers into agents’ stores “regardless of the name above the door”.