State of the industry Feb 2017

CLIA shuffles the deck

NEWLY appointed Cruise Lines International Association (CLIA) Australasia managing director Joel Katz has wasted no time in putting his stamp on the organisation, last month announcing a new structure which has resulted in the departure of long-time CLIA commercial director Brett Jardine. Jardine, who has been part of the organisation since 2007 and guided it through its metamorphosis from the former International Cruise Council into its current form, leaves at the end of February, with chairman Steve Odell saying Jardine had “played an important role in the organisation’s transition during a decade of extraordinary growth for the Australian cruise industry”.

He said with the expansion of CLIA over recent years Jardine’s responsibilities would be spread across several roles, including the appointment of Vera Huntink as Marketing Manager and a new Advocacy Director in the form of Dimity McCredie who joins CLIA from her former role as general counsel with Carnival Australia. CLIA head of training & development, Peter Kollar, will take on additional global responsibilities and become CLIA Head of Training & Development — International. Another new role has also been established to focus on membership engagement, events and CLIA’s Executive Partner program.

HLO says goodbye to GSAs

Helloworld confirmed long-time industry speculation just before Christmas when it announced an agreement to sell its airline representation businesses, World Aviation Systems and Global Aviation Services, after more than 40 years as a General Sales Agent (GSA). Once a flourishing part of the company’s portfolio, the GSA operations had languished more recently as more airlines shifted to self-handling or to other organisations such as the Walshe Group. The businesses had also suffered from several leadership changes in the last year, including the abrupt departure of former GM James Vaile. Helloworld ceo Andrew Burnes said the decision to sell was “in accordance with strategy going forward to focus on the core businesses of Helloworld Limited”.

The people behind the purchaser — a newly formed company called World Aviation Holdings Pty Ltd — turn out to be none other than Spiros and Irene Alysandratos, the owners of Consolidated Travel and a range of other travel industry interests, including a 20% stake in Helloworld Limited itself. It’s expected the airlines under the WAS/GAS umbrella will become part of Consolidated’s Airline Marketing Australia division which currently represents Aeroflot, Air Astana, Air Madagascar, Air Mauritius, Avianca, Bangkok Airways, CSA Czech Airlines, Finnair and SriLankan Airlines. The WAS/GAS portfolio includes Kenya Airways, Egyptair, TAP Portugal, Virgin Atlantic, Air Botswana, Royal Jordanian, Alaska Airlines, Aer Lingus, Ethiopian Airlines, Sichuan Airlines, MIAT Mongolian Airlines and Hong Kong Airlines.

Cover-More sale under way

Cover-More Travel Insurance directors have unanimously recommended a takeover offer from Zurich Insurance Company, which values the business at $741 million. Cover-More shareholders will receive $1.95 in cash per share, a premium of almost 50% on the trading price in the days before the deal was announced in December. If the scheme is implemented it will end Cover-More’s time as a publicly listed entity, just over three years since the business was floated at $2 per share. Key clients of the business include Flight Centre, although since it floated Cover-More has worked hard to diversify its operations including a significant international expansion.

Cover-More chairman Louis Carroll said the Zurich offer was an attractive outcome for shareholders, reflecting the “strategic value of Cover-More’s business including its strong market position, global distribution footprint and its ability to deliver growth into the future”. He confirmed that Zurich proposes to operate Cover-More as a separate business and retain the existing management team. The deal is subject to a range of conditions including shareholder and court approval, with further details expected to be forthcoming this month in the lead-up to a meeting to vote on the proposal, to be held in later March or early April 2017.

CTM expands in Australia, UK

Corporate Travel Management (CTM) has continued its relentless growth curve, announcing a $71 million capital raising in December to fund the acquisition of Tasmania’s Andrew Jones Travel and UK-based Redfern Travel, a major TMC based in Bradford in northern England. The majority of the funds will go to the purchase of Redfern Travel, with this deal worth 40 million — about 80% in cash and the remainder in CTM shares. The addition of Redfern to the company’s UK/Europe operations will make it a top-seven TMC in the UK, with annualised TTV of about 550 million, and give Corporate Travel Management strong exposure to UK government sector business.

In contrast, the Tasmanian acquisition is much smaller for CTM, while giving the company access to key clients including Tasmanian government departments and some of Australia’s largest sporting bodies. Andrew Jones will receive $5.265 million for his business, including $1 million in shares.

The deal will have a significant impact on the Magellan Travel Group, which was co-founded by Andrew Jones in 2010. The ASX release about the acquisition confirms that Andrew Jones Travel contributed $43 million in TTV to the group in 2015/16 — about 5% of Magellan’s overall revenues. While Andrew Jones Travel will no longer be part of Magellan after the deal settles on 1st February 2017, Jones himself will remain as chairman. He downplayed the effect on the agency group, saying he was “looking forward to being more able to focus on Magellan’s growth and development going forward”.

Tiger’s Bali stoush

Tigerair Australia will be working to rebuild its relationship with Indonesia after last month’s public stoush with regulators and ensuing ban on its Bali flights.

A disagreement over the conditions of its operating licence led to the abrupt cancellation of Tigerair’s Denpasar flights from Melbourne, Adelaide and Perth, throwing the peak summer holiday plans of thousands of passengers into chaos.

A brief operating window was granted by Indonesian authorities to bring passengers home, after which all services were cancelled.

Tigerair Australia insisted it had been hit with new conditions on its operating agreement, though the Indonesian Director General of Civil Aviation said the low-cost carrier had breached existing requirements by selling one-way fares from Indonesia online.

The dispute appeared to have been resolved at the time travelBulletin went to press and flights were set to resume on 03 February, though no word had been given on the terms and duration of the new agreement.

Helloworld’s creative counting

Helloworld last month excitedly confirmed significant growth in its network over the last few months, with an ASX announcement touting a total of 2,049 members across its branded, corporate, associate and affiliate models. That was a hefty increase of 383 year-on-year — up an impressive 19%.

Interestingly, for the first time Helloworld separated out agents operating under the ‘travel broker’ model which now numbers 439 across its MTA and NZ-based Travel Brokers brands. “It’s very pleasing to see our network growing on both sides of the Tasman… this is recognition of the strong value proposition Helloworld is providing our franchisees and network members across all parts of our retail leisure and corporate offerings,” enthused ceo Andrew Burnes.

However, a quick analysis of the figures reveals that the actual growth is unlikely to be as significant as is being claimed, In particular, the MTA group, which is now 50% owned by Helloworld, constitutes approximately 350 agents. Prior to the acquisition, MTA was already a Helloworld associate member — meaning 350 of the “new” members now being separately accounted for were part of the network anyway. Nevertheless Helloworld has apparently seen a strong renewal rate among its corporate membership, with Reho Travel, Goldman Travel Group, Orba Travel Brokers, Bayview Travel, Complete Business Travel, Sanford International Travel, Travel & Sports Australia and Eden Travel all re-signing.

Virgin Australia transPacific partnership

Virgin Australia and Air Canada plan to enter into a strategic cooperation agreement on flights between Australia and Canada, having signed a new memorandum of understanding (MoU). Phase one of the partnership, to be adopted early this year, will enable Virgin Australia passengers to book flights with the Canadian carrier on sectors from Los Angeles to Toronto, Vancouver, Calgary and Toronto. The MoU will enable Air Canada pax flying to/from Sydney or Brisbane to connect on VA metal to Adelaide, Canberra, Cairns, Melbourne, Perth and Auckland, as well as from Sydney to Brisbane, Sydney to the Gold Coast and Brisbane-Wellington.

Later stages of the arrangement will see Virgin’s code placed on Air Canada flights from Vancouver to Sydney and Brisbane. The pact will also extend to a reciprocal frequent flyer redemption scheme. Air Canada’s Director Asia Pacific Lee Poh Kait (PK) told travelBulletin in October that “Australia is one area where we feel there could be a more strategic and sustainable relationship, and that is something we hope to hear some good news soon.

The arrangement with Virgin Australia would enable Air Canada to be more competitive in this market against Qantas.” PK suggested the MoU may also span a joint venture involving a sharing of costs and potentially revenue sharing, down the track.