Hotelbeds Agrees to Buy Wholesaler GTA

Hotelbeds Group

Hotelbeds Group is buying GTA. The deal is still subject to regulatory approval. Hotelbeds Group

Skift Take: Hotelbeds appears determined to buy up the competition in order to retain its dominant position. What is unclear though is what happens to Kuoni Group once the transaction completes as GTA represents almost two-thirds of its turnover. Will it continue on as a smaller company or continue to be broken up?

— Patrick Whyte

There looks set to be further consolidation in the wholesale accommodation sector after market leader Hotelbeds Group announced a deal to buy rival GTA from Kuoni Group.

The new owners of Hotelbeds, Cinven Capital Management and the Canada Pension Plan Investment Board have pursued an aggressive strategy of consolidation since purchasing the company from tour operator TUI Group for $1.3 billion.

Wholesalers like Hotelbeds source rooms and other travel products before selling them on to tour operators, airlines and travel agents.

No figure has been given and it is still subject to regulatory approval but if it is given the green light the newly enlarged Hotelbeds will have a dominant position. Earlier this year it also agreed to acquire Orlando-based Tourico Holidays.

GTA is currently part Kuoni and it is unclear what the sale means for that business.

The Swiss company is a shadow of its former self having sold off its tour operating brands and been taken private by private equity firm EQT.

According to Kuoni’s most recent financial accounts, GTA made up about 60 percent of its total turnover and accounted for about a third of its total operating profit.

When the sale is complete the company will consist of a B2B group travel business, destination management unit and visa processing division. It is possible that Kuoni could continue to be broken up by its new owner.

Interestingly, the deal does not include inbound travel company MTS Globe, which GTA only bought in December last year for $59 million. The company has been taken back by its previous shareholder for a undisclosed fee.

When the deal is completed Kuoni will hold a “significant minority position” in the combined businesses. But until then it will remain a separate entity, as will Tourico Holidays.

Joan Vilà, executive chairman of Hotelbeds Group commented: “It gives me great pleasure to announce that GTA will be joining Hotelbeds Group.

“This deal brings another great bedbank to the Hotelbeds Group family, following the announcement in February that Tourico Holidays will also be integrating with us. Both of these important deals clearly underline our steadfast commitment to accelerate the growth of our business both organically and via M&A activity.”

Ivan Walter, Chief Executive of GTA added: “We are excited by the opportunity that combining forces with Hotelbeds Group brings. Our history and proven track record speak for themselves, and by coming together with Hotelbeds Group we can bring together a wealth of experience, commitment and a clear strategic focus on the B2B sector. We believe that today’s news is a milestone for the industry, and great news for our respective suppliers and customers. ”

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JetBlue Wants to Add Flights From Fort Lauderdale and Boston to Havana

JetBlue Airways

Ground staff cheer one of JetBlue’s first flights to Cuba in August 2016. The airline wants to add more flights to Havana. JetBlue Airways

Skift Take: This is a curious move. In May, JetBlue will start flying smaller airplanes to Cuba, as demand is not as strong as expected. But now the airline wants to add more daily flights. Perhaps this is more of a long-term play.

— Brian Sumers

Three U.S. airlines have given up on Cuba since March, but JetBlue Airways still sees opportunity.

The airline on Thursday asked the U.S. Department of Transportation to let it fly seven new weekly flights to Havana — six from Fort Lauderdale and one from Boston. JetBlue already flies 13 times per week from Fort Lauderdale to Havana, but, in the initial awards, it did not win the rights for a Boston flight. Under an agreement between the United States and Cuba, U.S. airlines may fly only 20 daily flights to Havana, and when the frequencies were made available, airlines applied for far more flights than were available.

But much changed since mid-2016, when the U.S. government selected which airlines could fly what routes. In the past six months, several airlines have reported Cuba flights were less profitable than expected, and some have decided they no longer want to fly them. Spirit Airlines will pull out of Cuba on May 31, while Frontier will drop its lone flight from Miami to Havana on June 4. Small regional airline Silver Airways is also dropping all nine of its routes to the island as of Saturday.

American Airlines has also cut some of its Cuba service, though it still has a strong schedule, especially from Miami.

“Cuba continues to be a flop for all involved,” Hunter Keay, an analyst with Wolfe Research, wrote last month.

JetBlue has had its own challenges, and in February said it would fly smaller jets to Cuba. Beginning on May 2, JetBlue is subbing a 150-seat Airbus A320 for a 200-seat A321 on flights from New York, Fort Lauderdale and Orlando. Also, from Fort Lauderdale to Santa Clara, Camaguey, and Holguin, the airline will use a 100-seat Embraer E190 rather than an A321.

It’s not clear why JetBlue would cut capacity on the Fort Lauderdale-Havana route and then ask for a third flight on most days. JetBlue did not immediately respond to a request for comment.

As for Boston, this is not the first time JetBlue has sought the right to fly the route. After losing in the initial awards, the airline tried to get the government to take away a Cuba flight from Alaska Airlines and give to JetBlue.

It happened after Alaska asked to delay the start date of its Los Angeles-Havana flight from Nov. 29 to Jan. 5. JetBlue objected, saying if Alaska was not ready, the award should instead go to JetBlue, which would use it for a Boston flight. The Department of Transportation rejected the claim, and Alaska is now flying to Havana.

JetBlue wants to add the extra flights on Nov. 1.

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Video: Kayak CEO Says He Wants to Give Consumers a Choice

Skift Take: Hafner reveals his admiration for new acquisition Momondo Group, expresses his bother at Trivago’s add spend, and pooh-poohs Skyscanner’s analytics approach in a frank discussion that cut to the core of what makes metasearch different.

— Jason Clampet

Metasearch has tried to make sense of the multiple travel booking options available to consumers, but metasearch itself has become a crowded field.

At Skift Forum Europe in London earlier this month, CEOs and top executives from Momondo Group, Skyscanner, Trivago, and Kayak spoke about the competitive landscape and their respective advantages over their rivals.

Kayak CEO Steve Hafner, who was interviewed by Skift Executive Editor Dennis Schaal, played the role of the industry veteran, both because of Kayak’s early moves in the space and because of its pending acquisition of Momondo Group, which operates Cheapflights and Momondo — “Two great companies that we’ve admired for some time,” as Hafner described them.

Hafner returned repeatedly to the topic of consumer choice. “People want to price shop,” he said. “The best place to buy a hotel is on the hotel’s own website, the best place to buy an airline ticket is on the airline’s own website. But people still need to cross shop and Kayak, Skyscanner, Expedia, those are all good places to cross shop.”

Despite a similar product, Hafner argued that there are clear differences in user experience and what the sites ultimately offer. “We’re not selling flavored water,” he said. “We actually do have different search results, different technology, speed, comprehensiveness, accuracy all matters.”

Hafner also offered a glimpse into his competitive focus: “What energizes me is the self-awareness that our product still stinks. It’s better than the competition in a number of ways, but ultimately as a consumer our service is not where I want it to be.”

You can watch the full discussion below.

Note: Initial planning is in full-swing for our flagship event Skift Global Forum, which will be held September 26-27 in New York City. We wanted to make sure our most loyal Skift readers were able to purchase their tickets early and were rewarded for doing so. That’s why we’ve re-opened up our previously sold out early bird discount for an additional 35 tickets. Attendees can now save $800 per ticket on the largest creative business conference in travel.

Read more coverage of Skift Forum Europe 2017.

At this year’s inaugural Skift Forum Europe in London, travel leaders from around the world gathered for a days of inspiration, information, and conversation on the future of travel.

Visit our Skift Global Forum site for more details about 2017 events, including our New York City event September 26-27.

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Acquisitions Add to AccorHotels’ Strong First Quarter Revenues

Travel Keys

AccorHotels plans to complete its acquisition of private vacation rental broker Travel Keys by the end of this month. Shown here is Turtle House from Travel Keys. Travel Keys

Skift Take: Honestly, we’re just wondering what’s on their list of things to buy up next.

— Deanna Ting

Fueled by several strategic investments and acquisitions from last year, including the $2.7-billion purchase of Fairmont Raffles Hotels International (FRHI), AccorHotels is “off on a good start” in 2017.

That was the message from AccorHotels chief financial officer Jean-Jacques Morin while reporting the Paris-based company’s first quarter revenue.

AccorHotels’ consolidated revenue for the first quarter was $456 million (€425 million), up 35.4 percent from the same period last year. Of that total, new acquisitions and disposals of businesses added $88 million (€82 million) to the company’s revenues, thanks in large part to the addition of Raffles, Fairmont, Swissotel, Onefinestay, and John Paul, a concierge service provider.

The quarter also marked the first time in two years that the company has had such a strong growth, 5 percent, in revenue per available room (RevPAR). Morin attributed much of that growth to occupancy driven by leisure travel, especially in the European and Asia Pacific regions.

The company also added more than 7,000 rooms spread out across 35 hotels globally during the first quarter.

In a press release, CEO Sebastien Bazin said: “The trends observed in the first quarter in the vast majority of regions reflect a favorable environment for the hotel industry. This is particularly the case in our three main markets, France, Europe and the Asia-Pacific region. The new businesses also performed well, thanks in part to the support of AccorHotels.

“At the same time, the Group further entrenched its growth, its move into new businesses and its leadership in the luxury segment through numerous value-creating acquisitions, namely Rixos and BHG in hotels, and Availpro, Potel & Chabot and VeryChic in new businesses. Lastly, the process of transforming AccorInvest into a subsidiary is underway; AccorHotels is therefore perfectly in line with our 2017 objectives.”

A Highly Acquisitive Company

While Morin focused on details of AccorHotels’ financial health during the earnings call with investors, he also touched on future plans for the highly acquisitive company, which has big plans for becoming a much more comprehensive and diverse hotel company than its peers.

For example, AccorHotels’ planned acquisition of Travel Keys is expected to close by the end of this month. The addition of the Atlanta-based private vacation rental broker will round out AccorHotels’ already fairly robust portfolio of alternative accommodations, which includes platforms such as Onefinestay and investments in Squarebreak and Oasis.

Softnesss at Onefinestay

Any softness in revenue or occupancy numbers for Onefinestay, AccorHotels’ luxury alternative accommodations platform. is attributable to travel regulations in the U.S., making it harder or more challenging for travelers from outside the U.S. to come to major cities like New York and Los Angeles.

“It’s not really [short-term rental] legislation impacting numbers,” Morin said. “It’s new regulations you have in terms of traveling and limitations on traveling. There’s a double-digit decrease of outside countries coming into big cities like New York and Los Angeles. We are not very present in North America in terms of hotels but you see the impact in New York and Los Angeles.”

The company’s pilot program, Accor Local, which promotes hotels as centers for offering services to the local community, is being powered by John Paul, the concierge service that AccorHotels purchased last year. CEO Bazin elaborated on the pilot during the company’s full year 2016 investors presentation held earlier this year.

The spinoff of Accor’s HotelInvest unit remains on track as the company pursues a more asset-light strategy favored by the majority of big hotel companies, Marriott and Hilton included.

Rebound in France

AccorHotels didn’t see any significant financial impact on its business from the recent terrorist attacks that took place in Berlin in December and most recently in London this month. Additionally, the company saw positive RevPAR in both France and Switzerland for the first time since 2015 in the first quarter, suggesting that the company’s business in France has rebounded, even though like-for-like revenues were slightly down. Occupancy rates in France were up, as were rates in Germany and the United Kingdom. Morin also noted that performance by Fairmont properties in North America was strong.

The one market, globally, that remains a challenge is South America, but AccorHotels is hopeful it will eventually turn itself around, which is why the company recently increased its investment in Brazil, even as the country battles a recession. In South America, 80 percent of the company’s portfolio is in Brazil, where it has 255 hotels. “We see the benefit of being in Brazil in the long run,” said Morin.

And finally, with the upcoming French presidential election beginning on April 23, Morin said he doesn’t see the results “going a bad way” or negatively impacting AccorHotels’ future plans. He said, “the French people know what’s right and what needs to be done. I may be wrong, but I don’t think that will be the case [where the outcome is negative].”

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Chefs+Tech: New Updates Make Facebook Messenger a Sweet Spot for Restaurants

Skift Take: Facebook Messenger’s newest additions enable restaurant discovery, reservations, and delivery, which begs the question: if you can get your food on Facebook, do you ever need to leave Facebook?

— Kristen Hawley

chefslogo_use-for-socialEditor’s Note: In September we announced that Skift was expanding into food and drink with the addition of the Chefs+Tech weekly newsletter.

We see this as a natural expansion of the Skift umbrella, bringing the big picture view on the future of dining out, being fanatically focused on the guest experience, and at the intersection of marketing and tech.

Recommendations, Chatbots, and OpenTable in Facebook Messenger

At its F8 conference Tuesday, Facebook announced several business-focused updates to its Messenger app. Facebook estimates 48 million businesses have enabled Messenger to communicate directly with new, potential, and existing customers. New Messenger functionality announced at F8 includes a directory, spotlighting popular and local businesses, bots, and, of course, restaurants.

I consider the terms “bot” or even “chatbot” a little off-putting; they sound way too techy and not nearly hospitable enough for the hospitality industry. Instead, think: businesses can automate certain conversations — location, hours, directions, menu information — and simulate a human conversation, increasing engagement and, presumably, customer satisfaction. Last September, Pizza Hut and TGI Friday’s got in on the bot action; expect a lot more restaurants to jump on this soon. As we noted in September, bot functionality starts off a bit limited (in this case, information about hours and specials.) But because users are asking these bots questions, companies can quickly see exactly what consumers are looking for and program that specific functionality, making the chatbot a lot smarter and more useful. Restaurants and other businesses can also enable a feature called Smart Replies, which Engadget calls “a way to enable automated answers to frequently asked questions.”

Also included in the announcement: the ability to chat with a group and a bot. Most notably, users can make restaurant reservations directly in Facebook Messenger using a new OpenTable bot without leaving a Messenger conversation or launching a separate app. Coming soon: smart integration with delivery.com, including recommendations, ensuring we can continue to get exactly what we want exactly when we want it, now with fewer clicks.

No One Talks About the Real Food Business

Food and restaurants are having an inarguable moment, with more attention and excitement around the space every day. Understandably, we get caught up in the glamour and excitement of new restaurant openings, big-name chefs, food television, must-eat lists, and restaurant recommendations from every corner of the planet. Less talked about is the actual economics behind the business — i.e., how do these businesses stay in business amid financial challenges and legal regulations and red tape?

To understand the industry is to understand all its workings, and three recent stories paint an interesting picture of the business today. The Boston Globe has a piece explaining how chef-owners actually make a living in Boston (it’s tough.) The New York Times profiles a day in the life of a street food vendor, from wake up to food sourcing to recipes to pricing strategy. And a news story out of Bangkok reports a major change to tourism in the city as city officials crack down on street food; those famous sidewalk stalls had to pack up their tables and cease operations by April 17. (Mobile food carts are still allowed in certain locations.)

All three stories do a good job of reflecting the food-culture ties we’ve become so familiar with, but also detail the serious challenges and impediments associated with running these businesses. Food cart licenses in New York are hard to come by and sold at a crazy markup (the profiled vendor paid $25,000 to take over a license that cost the original holder just $200). In Boston, occupancy costs for restaurants in prime locations can run tens of thousands of dollars a month, and that’s before shelling out for food, labor, decor, utilities, and, maybe, hopefully paying yourself a salary as a chef-owner. And in Bangkok, the food vendor crackdown is literally robbing the city of a part of its soul (and some real tourist cash, too). All three pieces are worth a read to understand a little more about the businesses that have become cultural centerpieces.

 

Snapchat’s Latest Ad Product Is Good for Business

As stakes increase and competitions stiffens for advertising dollars on social media, Snapchat is set to offer retailers data about whether or not an ad campaign actually drives users to a physical location. Snapchat has been testing the product, called Snap to Store, since last year, according to the Wall Street Journal.

It works like this: restaurants (or any business, really) purchase a sponsored geofilter (one of those image overlays snapchat has become known for). A person in the restaurant uses that geofilter, posting a story or sending a snap to friends. Then, the app tracks friends who saw the geofilter and visited the restaurant — and it also tracks friends who didn’t see the geofilter and visited the restaurant. Put those statistics side-by-side, and the advertiser gets a picture of the ad’s effectiveness. It’s worth noting Snapchat isn’t tracking your location unless the app is open — but users open the app an average of 18 times daily, so it’s a bet a lot of restaurant chains would likely consider strong. It’s especially strong when you consider 80 percent of Snapchat users open the app while at a restaurant. (Wendy’s tested this functionality last year, and found one sponsored geofilter drove 42,000 people to a Wendy’s location within seven days. Solid.)

 

Unhealthy Obsessions on Social Media

In case you need something else to worry about, according to the National Osteoporosis Society, “clean eating trends” that have gained popularity thanks to social media might be causing serious problems for young people. The problem: these often restrictive diets eliminate major food groups, setting the stage for future health issues. When people see these fad diets touted on social media, they often join in without seeking expert facts or advice. This isn’t a brand new problem, according to Food & Wine, but it is a tech-driven problem: health bloggers and other non-accredited health websites extol potentially unhealthy fad diets and detoxes that can do real damage.

Digestifs

  • Kimbal Musk, brother of Elon, redefines farming with technology in Brooklyn — Backchannel
  • A look (finally!) at Made Nice, the new fast-casual spot from the team behind the world’s best restaurant — Eater
  • Whole Foods may have mainstreamed “organic,” but when it comes to purchasing, customers always prefer the cheaper option — Quartz
  • One group is aiming to make Chicago the “Silicon Valley” of the food industry — Chicago Tribune
  • A new ratings system measures restaurant sustainability — FoodTank

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Screening Company Clear Raises $15 Million: Travel Startup Funding This Week

Skift Take: Long-promised improvements to airport security screening and rebooking in the event of flight disruption may finally be in the offing, thanks to follow-on rounds of fundings to the startups Clear and Freebird.

— Sean O’Neill

Each week we round up travel startups that have recently received or announced funding. The total raised this week was more than $24 million.

Earlier this week we covered Freebird’s $5 million funding round, led by General Catalyst and Accomplice. The company, focusing on serving corporate travel with enterprise services, helps travelers rebook when their flights are disrupted.

clear funding skift travel startups

>>The biometric security company Clear has raised $15 million from T. Rowe Price’s New Horizon Fund. Clear says its traveler identity software is used in 21 of the largest airports in the U.S. and it expects to launch at Los Angeles International in the coming weeks.

The company will use the funding to add more locations and more technological functionalities, such as instant payments at retailers with just the tap of a finger.

The company started with a focus on airports but is now broadening its reach to other venues and payment points, such as stadiums.

Other investors include Delta Air Lines, Jeffery H. Boyd, chairman of the board of The Priceline Group, and Robert Mylod, the former CFO of The Priceline Group.

touristly

>>AirAsia Berhad ​is acquiring half of the equity of online travel planner Touristly, a trip-planner tool, through an asset injection and loan deal valued at $2.6 million (or 11.5 million Malaysian Ringgit).

AirAsia will stash its in-flight magazine into Touristly via AirAsia Investments Ltd and extend a convertible loan to Touristly for working capital and development.

Launched in June 2015, Touristly is an interactive trip planner that features more than 13,000 deals on tours, attractions, theme parks, and activities in 70 destinations around Asia Pacific.​ It is a recipient of investment funding from Netrove Ventures Group and Tune Labs.

dreamcheaper travel startup funding skift hotel rate

>>DreamCheaper, a Berlin-based travel company that helps consumers automatically rebook their hotel rooms if the rate drops, has received a $1.61 million (or 1.5 million euro) investment in a round led by Holtzbrinck Ventures and TruVenturo. The round brings its total financing to $2.7 million, to date.

The company offers its variation of a consumer service first pioneered by Yapta in the U.S. and that has been tried with mixed success by other companies, such as Tingo. DreamCheaper says it has helped rebook 5,000 hotel rooms for users so far since its launch in 2014.

Check out our previous startup funding roundups, here.

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Facebook and Google’s Travel Ad War — Digital Marketing News This Week

Noah Berger  / Associated Press

Google and Facebook are fighting to gain a greater share of the travel industry’s digital ad spending. Who will come out on top? Here, Facebook CEO Mark Zuckerberg speaks at his company’s annual F8 developer conference, April 18, 2017, in San Jose, Calif.
Noah Berger / Associated Press

Skift Take: Facebook is challenging online advertising heavyweight Google by offering innovative products that target travel brands (and other sectors). Expect the social network to seize some market share but how much remains to be seen.

— Jeremy Kressmann

As more of travel marketers’ advertising budgets shift from traditional advertising into the digital realm, a growing “war” is brewing between two of the digital ad world’s top competitors, Google and Facebook.

Google may have the upper hand for now, with the company continuing to rake in huge search marketing deals from high spenders like the Priceline Group.

But Facebook is fighting back, thanks to an audience of more than 1.8 billion monthly users and a rapidly expanding range of ad products. The company’s growing suite of travel-specific ad products like Dynamic Ads for Travel, combined with improved measurement options, are leading more travel advertisers to give the ad platform a second look.

Which platform will ultimately be the best for travel advertisers? Who will win the lion’s share of travel industry online ad spending in the future? Google is clearly the top dog but never say never. Read on for more analysis, plus the rest of this week’s top marketing news.

Understanding Google and Facebook’s Travel Duopoly
If you’re a travel marketer planning to invest in online advertising, chances are that your ad dollars will travel through the hands of one of either two companies: Google, or Facebook. How is spending on these two online ad competitors evolving? And how is the travel industry’s perception of these two ad giants changing? Read more

Spending on Native Ads Grows in the Travel Sector
One side effect of the growing popularity of online advertising is that consumers are learning to ignore it. Thanks to tools like ad blockers and a growing distaste for intrusive ads, marketers have been looking for fresh ways to break through to consumers. It’s a fact that’s leading to more investment in native ads designed to blend into the content created by online publishers. Read more

Hotels Boost Digital Marketing Spend Amid Heavy Competition
It’s no surprise that competition is brutal in the hotel sector. Between online travel agencies that allegedly squeeze hotel profit margins, and the continued growth of upstarts like Airbnb, it’s sometimes difficult for traditional hotels to stay profitable and build awareness. This combustible stew is leading many hotel brands to increase their spending on digital and social marketing. Read more

Will Blockchain Transform the Travel Industry?
Blockchain, referring to the concept of a distributed database used to store transactions or records, is typically associated with the digital currency Bitcoin. But as some proponents now argue, the potential applications for blockchain tech extend far beyond the financial sector and could have applications in the travel industry. Read more

Tracking the Growth of Myanmar’s Growing Online Travel Sector
Not too long ago, Myanmar wasn’t even on the radar of most professionals in the travel industry. Between years of authoritarian rule, a lack of infrastructure, and concerning civil unrest in regions like Rakhine state, it’s often been difficult for the country’s tourism industry to grow. But one online travel businesses, Flymya, is doing its part to change that reality. Read more

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United Airlines President: Leaving New York’s JFK ‘Was the Wrong Decision’

United Airlines

United Airlines flights from San Francisco and Los Angeles to Newark have a special name — p.s. New United President Scott Kirby said those flight should have probably stayed at JFK, not Newark. United Airlines

Skift Take: Is there a more honest airline executive than United’s Scott Kirby? Probably not. But that’s a good thing. United’s 2015 decision to leave New York JFK was a head-scratcher, and it’s nice to see new management calling it a mistake.

— Brian Sumers

In October 2015, United Airlines pulled out of New York JFK, moving all its flights from San Francisco and Los Angeles to Newark, where it has a hub. United’s public relations staff spent considerable effort spinning the move as a positive, promising “significant benefits” and an overall “overall higher-quality experience” for flyers.

But a year and a half later, United’s new president, Scott Kirby, says moving the flights from JFK was a mistake. Many of United’s most lucrative West Coast customers, he said, want to fly into Manhattan and not New Jersey. And United lost some of them when it switched the flights to Newark, Kirby told employees at a recent town hall meeting in Newark.

“I wish I could roll back the clock and change the decision,” Kirby said, according a recording of the event. “It was the wrong decision.”

At the time, United’s management team — led by former CEO Jeff Smisek – argued the carrier had no choice. The airline claimed it had lost money on the two routes for seven years, and it was having trouble competing with four other carriers flying the same routes with similar business class and economy products — JetBlue Airways, American Airlines, Virgin America and Delta Air Lines. United’s lease at JFK was also expiring, so executives said the timing was right.

Kirby, who until August 2016 was American’s president, said American’s team was pleased when United left.

“You can probably personally blame me, at least to some degree, for the fact that United pulled out,” he said. “When I was at American Airlines, we were consciously trying to push United out of JFK. That was our goal.”

In his response to the employee at the town hall meeting, Kirby suggested United executives did not think strategically before dropping the JFK flights. The routes may have been unprofitable alone, but the customers on them were unusually important.

“The real reason it was a mistake was it let American Airlines in particular go win a bunch of big corporate accounts,” he said. “People like Disney and Time Warner — two big examples — are corporate accounts that had been United exclusive corporate accounts and not only flew United on the transcon [routes] but flew United from L.A. to Heathrow and all across the country.”

Many of the corporate contracts were unusual because the companies cared less about pricing than typical businesses, Kirby said. Actors, for example, usually must fly in premium cabins — regardless of whether the fare is $1,000 or $10,000.

“Those are the kind of corporate accounts [where] on-air talent has contracts that say they fly first class,” he said. “They pay first class fares — it’s completely irrelevant what the price is. … We opened the door and let American in on contracts like that.”

May not return to JFK

Still, Kirby did not tell employees United will return to JFK, and he noted many of the lucrative customers United lost might not come back if it did. Instead, he said, United will bolster its Newark hub.

“We would never get all those customers back but one of the things we are going to focus on is making Newark the best airport, the best schedule, the best everything for New York,” he said.

Kirby’s goal is to get United back to the 30 percent market share it held in New York when Continental and United merged. Today, he said, United has about 26 percent share. “That’s a big, big drop,” he said.

He said it makes sense to grow in New York, as United executives estimate their carrier is the most profitable major airline in the region — by a substantial margin. United operates a much larger hub than American and Delta at JFK, and that additional scale usually makes flights more profitable, he said.

“We have about 15 percent margins here in Newark,” he told employees. “We estimate Delta in New York has a 4 percent profit margin, even when times are good. And American is somewhere in between.

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Canada’s Largest Low-Cost Carrier Is Starting an Even Cheaper Airline

Todd Korol  / Reuters

A WestJet Airlines Boeing 737-700 takes off in Calgary. WestJet plans to start an ultra low cost carrier to compete with several new entrants. Todd Korol / Reuters

Skift Take: This is an interesting move by WestJet, commonly considered the Southwest Airlines of Canada. It’s likely mostly defensive, as several ultra low cost carriers plan to start in Canada. But it’s also probably an opportunistic play that may improve revenues.

— Brian Sumers

Canadian discounter WestJet Airlines Ltd. is arming itself for more fare wars by planning to start an ultra-low-cost carrier to fend off domestic upstarts.

Service is expected to begin late this year with a fleet of 10 Boeing Co. 737-800s in “high density” configuration, Calgary-based WestJet said in a statement Thursday. The venture will aim to offer “no frills, lower-cost travel options,” Canada’s No. 2 carrier said.

Founded in 1996 to cater to leisure travelers, WestJet has been moving away from its original no-frills model — patterned after U.S.-based Southwest Airlines Co. — by adding premium economy seats, rolling out a short-haul unit and starting overseas flights to European destinations such as London. Its fleet, meanwhile, has expanded from single-aisle 737s to include turboprops and double-aisle jets.

“This makes a lot of sense,” said AltaCorp Capital analyst Chris Murray. “This ULCC lets them use existing aircraft, fly to routes they already know, densify their network, plus it spreads their overhead costs better. It’s a lower-risk proposition than going to a wide-body strategy.”

Canada Jetlines Ltd. and Enerjet Ltd. have announced plans to begin operating ultra-low-cost carriers to challenge WestJet and larger rival Air Canada. Jim Scott, chief executive officer of Canada Jetlines, dismissed WestJet’s plan as “nothing more than an ‘airline within an airline’ that will not increase competition and it remains to be seen whether it will be able to achieve the full benefits of a ULCC.”

Complicates Plans

WestJet’s new carrier “significantly complicates the plans of other participants,” Murray wrote in a note Thursday. The new service will also protect WestJet from “market erosion in the highly sensitive fare category of travelers.”

The decision to move ahead with the new unit came after years of studying the market, Bob Cummings, WestJet’s executive vice president, said in a telephone interview.

“The new entrants are a factor, but only one of five or six,” Cummings said. “We think the timing is right. Were the new entrants a tipping point? No.”

Cummings declined to provide details on fares, routes or seating configurations, saying they will be announced later “for competitive reasons.”

Not Available

Canada is the only member of the Group of Seven industrialized nations that doesn’t have access to an ultra-low-cost carrier, Murray wrote. While the country probably would support an ultra-low-cost market of about 50 aircraft and 10 million passengers a year, “significant stimulation” through lower prices is “required to be effective in the space.”

With its Encore short-haul unit and widebody jets to Europe, WestJet “already has a lot of initiatives underway and we question whether there are enough human resources to also launch an all-new ULCC,” Cameron Doerksen, a National Bank Financial analyst, said in a note.

WestJet is continuing to weigh whether to add widebody jets to its own fleet on a permanent basis, Cummings said. The carrier now flies some leased Boeing 767 aircraft that are more than 20 years old.

“We’re evaluating widebodies as a line of business,” Cummings said. “That includes being able to come to terms with a manufacturer on an order, but we’re not there yet. Widebody certainly isn’t on the shelf.”

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net.

©2017 Bloomberg L.P

This article was written by Frederic Tomesco from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Ryan Wolkov

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Author: Ryan Wolkov

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Budget Airline VietJet Looks to Increase Foreign Ownership

VietJet

VietJet is ordering new planes to keep up with domestic demand. VietJet

Skift Take: After its stock market debut a couple of months ago, VietJet is attracting a lot more interest from foreign investors and the airline is looking to accommodate them. The airline won’t have much trouble securing a deal.

— Dennis Schaal

VietJet Aviation Joint Stock Co., which controls almost half of Vietnam’s domestic airline market after first taking flight six years ago, received shareholder approval to increase foreign ownership to meet investor demand in the nation’s soaring travel industry.

Shareholders meeting in Ho Chi Minh City agreed to raise the cap on foreign ownership to 49 percent from 30 percent as the budget carrier forecasts 2017 profit to rise 36 percent from $110 million (2.5 trillion dong) in 2016, the company said. Carrier’s higher foreign ownership now needs the approval of Prime Minister Nguyen Xuan Phuc because aviation is considered a restricted industry with a 30 percent foreign ownership cap.

VietJet has 136 foreign investors who own 26 percent of the company, Chief Executive Officer Nguyen Thi Phuong Thao said in an interview. Raising the foreign investor limit is not aimed at attracting a strategic investor, though the company is be open to one, she said.

“I just want to create more investment opportunities to those who want to invest in VietJet and create better liquidity in the market,” she said.

Shares of VietJet have surged 56 percent since its trading debut on Feb. 28. The stock rose 0.2 percent to 131,600 dong at the close in Ho Chi Minh City on Thursday. Shares dropped 1.1 percent at the midday break. The benchmark VN Index was down 0.6 percent.

“Vietnam’s aviation industry is very attractive to investors,” said Tran Thi Hai Yen, a Ho Chi Minh City-based analyst at ACB Securities JSC. “There are more and more foreign investors interested in this company now.”

VietJet began its service in late 2011 after being founded by billionaire Nguyen Thi Phuong Thao in 2007. The carrier competes with national carrier Vietnam Airlines, which owns 70 percent of budget carrier Jetstar Pacific Airlines Aviation JSC, with Qantas Airways Ltd. holding the remaining 30 percent. Vietnam Airlines also owns Vietnam Air Services Co., known as Vasco.

VietJet has a 42 percent share of the domestic aviation market, the same as Vietnam Airlines, said Brendan Sobie, Singapore-based chief analyst at CAPA Centre for Aviation. The rest of the market is controlled by Vietnam Air’s subsidiaries. VietJet could achieve 50 percent domestic market share within three years, Sobie added.

(Updates with remarks from VietJet chief executive officer in third paragraph.)

–With assistance from Nguyen Kieu Giang

©2017 Bloomberg L.P.

This article was written by Luu Van Dat and Nguyen Dieu Tu Uyen from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Ryan Wolkov

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Author: Ryan Wolkov

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