State of the industry: December

Qatar buys into Cathay

Qatar Airways has moved on from its failed bid to take a stake in American Airlines, having announced a purchase of almost 10% of Cathay Pacific.

The transaction was completed last month and involved Qatar taking 378 million shares in the Hong-Kong based airline. The acquisition represents 9.61% of Cathay shares and cost close to HK$5 billion (about A$840 million). “Qatar Airways is very pleased to complete its financial investment in Cathay Pacific,” said the airline’s CEO Akbar Al Baker. “Cathay Pacific is a fellow oneworld member and is one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future,” he said.

Cathay becomes the fourth oneworld airline in which Qatar has an investment. The Middle Eastern carrier already has a 20% stake in International Airlines Group (IAG) — the parent company of British Airways and Iberia — and 10% of LATAM Airlines Group. Qatar also holds 49% of unaligned Italian carrier Meridiana. But its bid to take an investment in oneworld founder American Airlines was thwarted in August and withdrawn in response to US hostility towards the move.

ACCC pricks Red Balloon

Online activity provider Red Balloon has become the first major casualty of the Federal Government’s new credit card surcharge rules, copping a $43,200 fine for four excessive charges. The Australian Competition and Consumer Commission (ACCC) said Red Balloon had overcharged four consumers between March and June. New rules introduced earlier this year mean businesses can only pass on to consumers the actual cost of accepting a payment via credit card, including merchant fees and other charges. In the case of travel agents using the AFTA Insurance Chargeback Service (AICS), there are also provisions to charge an allowance for “forward delivery risk” to cover supplier failure. “I think this is a real reminder to all in the travel industry that the ACCC and the Government are serious about these new laws,” said AFTA chief executive Jayson Westbury.

Meanwhile, AirAsia has been hit with a $500,000 bill after being caught out over-charging travellers on its flights between Darwin and Denpasar. The carrier has been forced to repay almost 10,000 customers after concerns raised by the ACCC over the incorrect application of the Australian Passenger Movement Charge (PMC) on children’s fares, affecting flyers aged 2-12 between December 2010 and September this year.

Helloworld tips new records

Helloworld Travel is on track to achieve earnings of $63-67 million this financial year, surging beyond the record pre-tax earnings of $55.2 million posted during 2016/17. At the group’s annual general meeting last month, CEO Andrew Burnes reaffirmed previous earnings guidance and said the company was continuing to focus on lifting revenue and margins. His upbeat message has been reflected on the stock exchange, where Helloworld Travel shares made a surge during November to hit a high of $5. Shares had risen more than 40% during the previous six months.

“It’s cool to have a travel agent again, to assist people to have much richer travel experiences,” Burnes told the AGM. He said the company was working to “future proof” its agents and the business through investment in technology, training and new product development, while at the same time increasing brand profile. “Unrealised synergies” in the business offer potential for further cost reductions, Burnes said, while expansion prospects are likely to come from organic growth and new acquisitions. Helloworld membership has grown to 2,015, an increase of 349 from 30 June last year, although an update in January put the overall figure at 2,049.

Seven network enters travel arena

The Seven network will attempt to secure a foothold in travel retailing through its new 7Travel online venture, launched last month on the Sunrise morning television program. With the backing of several founding partners including Carnival Cruise Line and Voyages Indigenous Tourism Australia, the broadcaster has created a website it claims will become the “go-to” platform for Australians wanting to plan and book their travel. Seven says the new website “closes the loop” between the network’s advertisers and audiences.

“Seven West Media has the largest combined audience across TV, digital, social and print across Australia,” said Seven’s chief revenue officer Kurt Burnette. “With our research and insights highlighting that we hold a high proportion of travel intenders, we will use this enormous scale and influence to inspire through advertising, editorial, integration and influencers using theunmatched power of travel storytelling and content to enable every part of the travel industry.” Other founding ‘marketing partners’ in the initiative include Tourism and Events Queensland, Destination Gold Coast, New Caledonia Tourism and the Tourism Authority of Thailand.

Aussies turn to China

It appears that Aussie tourists have turned their travel attention to the Chinese market with recently released Australian Bureau of Statistics (ABS) figures suggesting the number of people making the trip to China increased in Sep 2017 by 17.4% on the same period last year. Noteworthy travel trends between Australia and China were reflected going the other way too, with more than 97,300 Chinese tourists entering Australia in Sep, a 12.74% increase from the 86,300 travellers who made the trip down under in the same period last year.

Other major travel trends emerging from the latest round of reporting showed a slight increase in the number of visitors coming into Australia overall, with 647,000 entering in September, constituting a 2.55% lift on September 2016. Inbound travellers from New Zealand also dropped in the same period to 123,800, down from 133,600 last year. Although this represented less Kiwis than the corresponding month last year, the figures were still a rise on the preceding month of Aug which came in at 115,800.

Webjet raises the bar

Listed online travel agency Webjet has flagged a whopping 50% increase in total transaction value to $3 billion for FY2018, underpinned by its recent acquisition of UK-based accommodation aggregator JacTravel. CEO John Gucsic also declared his intentions for the business to significantly outperform both the general B2B and B2C markets.

A presentation to analysts confirmed the carrier was seeing exceptionally strong growth in air bookings, which have surged 20.7% — six times the increase in short-term resident departures, according to the ABS.

Webjet’s performance has also been underpinned by increases in higher margin products such as packages, deals and ancillary products. Packages TTV is up 40%, while the tour-focused Exclusives contracted range is up 42%. Travel insurance sales have jumped 25% and car hire bookings are up 60%, Gucsic revealed.

Interestingly, Webjet has also changed tack on B2C accommodation, with hotel only sales down 19% after a strategic decision to no longer actively promote the company’s standalone hotel offering.

Singapore Airlines splurges on refurb

Singapore Airlines has splashed out on its A380 fleet, spending more than $1.1b on a major upgrade of its cabins across all travel classes. The airline says the makeover will “redefine premium air travel”, providing a raft of new features.

The flagship Suites first class product is stunning, with a comfortable armchair and a completely separate bed. The A380 will feature just six suites — half the number of the current configuration with the same overall footprint, meaning the individual studios are enormous.

SQ’s new business class seats have moved away from the ‘flip over’ design which debuted with the A380, while there are also new premium economy and economy class seats reflecting all the latest technology.

Singapore Airlines’ KrisWorld inflight entertainment also takes a leap forward, with travellers able to link to their individual loyalty program profile — meaning when they catch their next flight the system knows what they were watching and allows them to resume viewing, even on a different aircraft.

SQ CEO Goh Choon Phong said the refit demonstrated the airline’s “confidence in the future of premium full-service air travel”.

Flight Centre contraction

FLIGHT Centre is biting the bullet with the rollout of its new Sabre reservations system, with CEO Graham Turner confirming that during the training period staff numbers are expected to decline as departing employees are not replaced.

Speaking at the Flight Centre annual general meeting last month, Turner also flagged the closure of underperforming stores in Australia but said after the first half distraction of the Sabre implementation “improvement is expected” once the new systems are fully deployed.

While some shops will close, overall staff numbers are expected to remain flat as other channels expand, mainly large flagship stores and specialist sectors.

Turner flagged negotiations with landlords to improve shop locations, and confirmed changes in FLT’s international operations including the closure of leisure businesses in Singapore, Canada, the UAE and the USA.

Flight Centre’s investment in Travel Partners will also help reduce costs, with the independent contractor model having lower expenses than traditional shops, Turner said.

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