Issues & Trends – August 2010
QH profits soar in wake of re-focus on agent needs
THE Jetset Travelworld Group results for the financial year to June 30, demonstrate that agent-friendly policies can pay off for whole-salers in dollars and cents. The results, released earlier this month, reveal a dramatic turnaround in the profitability of Qantas Holidays.
That’s the same Qantas Holidays (QH) that was named as Best International Wholesaler at this year’s AFTA National Travel Industry Awards. The award is widely seen as an endorsement by the travel agent community of QH policies designed to win back agents’ support following a period when agents were suspicious of the wholesaler. (See story, page 13 of August issue.)
But the bean counters at parent company, Jetset Travelworld Group, are likely to be even more impressed by the financial results achieved over the period that QH has re-focused on travel agents.
A JTG investor presentation shows that in the second half of the 2008/09 financial year, QH lost $3.6 million before tax.
In 2009/10 the wholesaler achieved a full year pre-tax profit of $17.1 million. That included $8.3 million in the second six months – an $11.9 million improvement on the same period of 2008/09 even though total transaction value remained roughly the same around $200 million.
The investor presentation specified the strength of QH’s Trip agency reward and recognition program as a key factor in the dramatically improved result. QH was the only division of the company to increase profitability. The more than doubled QH profits are now virtually level-pegging with the retail division as JTG’s biggest profit generator. (Retail operations contributed $17.5 million in pre-tax profits, slightly down on last year’s $17.9 million.)
Overall, JTG’s results for 2009/10 are down on the previous financial year with pre-tax profit dropping from $23.8 million to $14.5 million (after deducting $4.5 million of costs associated with the proposed merger with Stella Travel Services). The company will not pay a second-half dividend.
Offset against the positive retail and wholesale results are losses of $3.6 million in business travel plus $12 million good will write-downs.
JTG chief executive Peter Collins said: “This result reflects the emergent recovery in the travel and tourism industry and the stringent cost control measures we have implemented to ensure overall profitability”.
Reflecting this, Collins reported that profit before tax in the second half was 59 per cent higher than the profit before tax in the first half (before merger costs) and that this improvement was largely driven by recovery in the leisure sector and strong cost control.
A JTG statement said “the proposed merger with Stella Travel Services is the principal short-term focus of the company”.
It described the rationale for the merger as “compelling” because it will provide “the ability to reduce unit cost of distribution and compete in an industry where online aggregators, online suppliers, competitor owned and controlled networks and new home based competitors are developing at a rapid pace”.
The statement continued: “The company will benefit from strong shareholders and business partners and a strong balance sheet.”
The ACCC is expected to announce its decision on the proposed merger on September 2 with shareholders to vote at a general meeting on September 6.