Seat capacity and pricing returning to normal after Monarch collapse, says On The Beach

Manchester-based OTA has set aside £7m to fulfil Atol obligations Continue reading →

On The Beach says it has seen airline seat capacity and pricing revert to normal levels for the summer following the collapse of Monarch Airlines last October.

The Manchester-based OTA revealed in a six month trading update it had put aside £7 million so that it could fulfil its obligations under Atol to refund and replace flights for customers.

It was able to recoup £5 million of that through credit card chargebacks in March. The firm also says it has Scheduled Airline Failure Insurance (Safi) in place.

The estimated loss due to reduced winter bookings as a result of the lack of seat availability and pricing due to Monarch’s failure was £1.1 million.

Simon Cooper, On The Beach chief executive, said: “We isolated the impact of the Monarch failure so that in the main it only impacted on trading in the winter months.

“There was the headache of a lack of seat supply across the winter.

“When you look at the summer most of that has been recovered but there are still pockets of shortage some of which will be programmed by the summer, some will take until 2019 to be re-set.”

Cooper said the market has benefitted from the eastern Mediterranean, particularly Turkey, coming back strongly which has alleviated some of the price inflation in the western Med.

And he said On The Beach was well-placed if signs that consumer sentiment is declining and people look to reign back on spending on their annual holiday.

“There has probably been a little bit of a reaction to the announcements by the Bank of England that interest rates will rise further and faster.

“Most people won’t feel a rise of 0.25% but if it’s the start of 10 successive rise they will start to look after their pennies.

“What we have said previously is that if there is a weakening of consumer sentiment people seek value and On The Beach will be a net beneficiary of that.

“They will find we offer value that cannot find offline. We try to maintain a competitive price position. We are not the cheapest in the market by any means but we are at the sharp end of value.”

Should traditional tour operators have to ditch prices for unsold product in the lates, Cooper said OTB has a “natural hedge” on that as it will take advantage of additional cheap seats in the market.

And Cooper said On The Beach’s scale and flexibility in its cost base would stand it in good stead if there is a serious downturn.

The firm’s six month figures revealed revenue was up 19% to £44.4 million in the UK and £45.3 million for the group.

In the UK marketing costs were 19% higher at £23 million and the proportion of branded and free traffic it generated rose to 62% from 56.7% in the same period last year.

On The Beach said the phasing of offline marketing activity this year was “significantly different” to last year and weighted more towards the end of the period, setting it up for a strong lates.

The firm has run a high-profile TV advertising campaign for a third successive year and headline sponsorship of the latest series of ITV sitcom Benidorm for a second year.

The OTA said it was driving growth through “out-innovating” the market through “agility in talent and technology”.

In the six months to March 31 the firm saw unique visitor growth of 23.9% to 34.1 million and 5.8 million logged-in sessions, a 16% increase in the first half of last year.

On The Beach claims to have a 20% share of the UK online short-haul beach holiday market and has a long term vision to become Europe’s leading retailer of beach holidays.

The agent is due to launch in its third international market Denmark this month. International revenues increased 51% with Sweden and Norway seeing growth.

However, EBITDA (profitability) on its international operations was a recorded as a loss of £1.6 million, up from £1 million last year.