Dnata buys Travel Republic

http://www.travelweekly.co.uk/Articles/2012/01/03/39180/travel-republic-sold.html

Travelrepublic are the largest on line travel agency in the UK and are now owned by Dnata which is fully owned by EK. I spoke with a person yesterday who is well placed within the business side of the travel industry and he said that Dnata were also looking to do a similar buy in Germany. It is also reported that the Dnata group along with it's parent EK are looking for an airline to use as both a holiday airline and a feeder for EK to bring pax from all over Europe to the EK departure points throughout Europe. Look out Easyjet someone may want to buy you.

O what a thought !!!!!!??????######

Can you imagine EK and FR and the Irish Sheikh Michael Amed Amadinajhad O'Leary getting together at the Oaisis in that dry dusty desert called Europe.

Well bless my Camel

Counterpoint:
For gigantic European travel agencies or LCCs desparetly looking for investors <<in that dry dusty desert called Europe>>, that oasis may be EK itself. Of course, the camp+regulators that oppose any investments in Europe with an Arab/Islamic origin will paint/ensure that oasis as nothing more than a mirage.

Anywhere in the world, the travel agency industry is a cash-rich but ultra-low margin biz....sort of like the consumer retailing sector. The only way for it to survive is to grow/expand much faster than the underlying inflation rate/rise in labor costs(Not necessarily salaries). If U don't grow, U don't just drop in mkt share/ranking but can go bust pretty quickly. So where can an already gigantic travel agency find investors to fuel its continuing growth in an extended gloomy econ environment?

Obviously not the credit/bond mkt given that most major banks/institutions in the EU hv been suffering serious liquidity issues thx to unrealistic debt-financing for the gov'ts of Greece and other <<rogue>> states in the Euro zone. In a nutshell, few big boys can lend anymore and even if they do, they tend to be extremely reluctant. The stock mkt will also be a no go right now as asset values in pretty much all sectors hv been depressed for most of 2H 2011 due to a lack of confidence in the econ outlook. For a private travel agency to do IPO during a stock mkt low tide is more than unwise in terms of getting a fair mkt valuation. The only realistic option remains is direct wholesale acquisition by Institutional funds/Venture capitalists(VC) or another Corp in the same/similar industry. I hv got many friends who are seasoned investment professionals and all of them said the rule-of-thumb lately in the world of Institutional funds/VC has been de-leveraging(Jargon-free translation: cash-in/sell whatever assets U are already holding and reduce/completely eliminate investment in more assets).

That leaves M&A by another Corp as the only practical outcome right now. Look around Europe today. Which company really has real financial strength to be able to absorb(Not just the purchasing price tag but also the costs of integration over a few yrs @ least) a whale-size travel agency in the U.K.? I hazard to guess none. And I imagine the story is not that different for a hi-growth European LCC(IAG acquiring Bmi is a special case because unlike Travel Republic or Easyjet, Bmi is relatively small and has been bleeding seriously so IAG properly bought it for not much more than a song).

The inconvenient truth is that realistically, there're only a few buyers out there(Nearly all outside Europe or the U.S.) with enough cash to buy Travel Republic now and EasyJet or its peers in the nex couple of yrs.

FLX I do agree with your sentiments. Investment companies don't want to know anything about Travel Agencies or Airlines at this time. Europe has seen a large number of Travel companies hit the wall over the last year and a number of them were well respected companies who with the proper investment and management could have been saved but who is going to invest in companies who can only in a compeditive market offer a net margin of around 7%. We just need to look at Thomas Cook right now who are closing over 300 shops, cutting the size of their fleet and making large numbers redundant.

TUI have the money to go out and buy other travel companies and by redundancies and other measures incorporate these smaller companies with the larger brand to 1. squeez the competition and 2. offer in some cases a lower end holiday but still generate the revenue all business need for survival.

High street independant travel stores are almost a thing of the past and on the high street it is only the big brand name that will survive. I predict more of the independant on line travel companies who are doing well will start to come under the influence of more of the LCC / Charter carriers if not bought outright as the generation of the mark up from the holiday cost and the various commissions from Hotels, Car Hire Companies and other sources will all help The Corporate Company to survive.

As far as the Mid East is concerned let me say I have no problem with Islam. The Arab culture in business has given me a few problems but yes the major investments in the Travel Industry and expansion of Airlines, apart from a few Western groups (IAG) will come from two areas of the world; The Middle East and China.

I and some business aquaintances are trying to do >something< within the industry but raising the finance is very difficult for the reasons stated but there are a number of Mid Eastern and Chinese companies who do want to talk but it all depends on how much control we want to give them or they want to have and rightly so for at the end of the day it is their money we would be using.

Irish Sheikh Michael Amed Amadinajhad O'Leary wouldn't last a week in the Muslim world. Holy Imam El Hajj Ahmed Abdullah Killajew would behead him for violating Sharia by charging people to urinate.

The occupation of travel agent has been dying a slow death for years now. First it was Thomas Cook, American Express and the mega-chain agencies rendering all of the small time agencies obsolete, later it was Expedia, Travelocity, Hotwire and all the online travel sites rendering Thomas Cook and American Express largely obsolete. If Dnata and its parent EK buy into this dying industry they'll come to regret it.

As for Dnata/EK buying a European LCC, why would they do that when they already own a substantial share of Emirati LCC Flydubai? [Am I correct on this?] Why not just expand Flydubai and use it as a feeder from secondary European airports into DXB?

Two good points you make Mabel . Guess which two ?????

Mabel:
<<Why not just expand Flydubai and use it as a feeder from secondary European airports into DXB?>>

To the best of my knowledge re the current EU aviation policy, only carrier/operator registered/domiciled in any EU member state is allowed unlimited rights/freedoms to operate EXCLUSIVELY between any 2 points within the EU region. Technically speaking, that's 7th or 8th freedom(e.g. FR, an Irish registered carrier, can terminate all of its flights to/fm/within its home country tomorrow but still continue to legally operate unlimited flights between the U.K. and Spain or between 2 points within Germany/any EU state indefinitely).

Flydubai is 100% registered outside the EU and to fly between 2 points within EU, the best that it can achieve is via 5th freedom(i.e. The right for a non-EU foreign carrier to fly between 2 points within EU ONLY as an extension of a flight originated fm outside the EU). Unlike an EU registered carrier, such right for Flydubai is not guaranteed and subject to the discretion of the EU authority. Even if the right is granted, the related bi-lateral agreement typically will severly limit the goeg extent+frequency of such ops within EU. In a nutshell, a feeder network(Hi-frequency+large geog coverage are musts) within EU solely relying on 5th freedom won't work.

QR wants a similarly unlimited feeder network within EU and that's precisely why it bought AirBerlin, a 100% EU registered operator, very recently. To play within the EU(Not to/from EU though), U must be an EU carrier and obviously follows all the related rules-of-the-game(e.g. Labor laws, tax regimes, possibly non-EU foreign ownership % limit, etc.) governing any EU carriers.

Thanks for the explanation FLX. Hopefully the EU will enforce its rules, because I have a feeling EK/Dnata will try hard to circumvent them.

They will not be the first to circumvent rules, that is the major reason why we have the current worldwide financial crises, it originates from simple greed.