We were burnt by Unister collapse, admits Travelport boss

We were burnt by Unister collapse, admits Travelport boss

Travelport has admitted it has been burnt by a deal struck with German travel company Unister last August, under a year before it went spectacularly out of business.

Speaking as the GDS announced second quarter trading had been undermined by the collapse to the tune of $11 million, chief executive Gordon Wilson described the deal as “not the norm”.

However, he said Travelport had been confident enough in the Ab In Den Urlaub and Fluege.de holding company to strike a long-term agreement based on pre-payments and incentives.

“We did the deal based on them generating a lot of business for us because they were growing fast,” said Wilson.

“It was a long-term deal and they had started moving some business to us when they went insolvent.

“From an accounting point of view there was little likelihood of generating enough business to pay off the pre-payments so we have taken it as a charge in the second quarter.”

Unister filed for bankruptcy after its founders, Thomas Wagner and Oliver Schilling, were killed in an air crash in Slovenia after a trip to Venice as they attempted to refinance the business.

Reports at the time suggested the crashed light aircraft was found with large quantities of cash in it.

Although Unister has been seeking a buyer since 2014, Wilson said Travelport had done its due diligence although he said: “At the end of the day travel agency businesses are pretty low margin.”

He added: “Upfront payment and pre-payment on incentives are not really the norm for us. We have been burnt on this one.

“Concern in retrospect is a great thing. I guess if someone is particularly concerned about getting money upfront that should set off alarm bells.”

Despite the impact of Unister, Travelport was still able to announce a 1% increase in adjusted EBITDA to $139 million on the back of rising net revenue to $606 million, up 9% year on year.

“In underlying performance in real terms we grew 9% at the top and 9% at the bottom. The bottom got wacked because of the provision we had to take on Unister.

“What we can see going forward I have full confidence of reaching 6% growth on a full-year basis in bot top and bottom lines.”

Travelport was able to shave three quarters of a percentage point of its debts interest rate in June saving it £18 million in repayments for the full year and improving its cash position.

Wilson picked out Travelport’s eNett payments division as a rising star after quarterly revenue 85% to $38 million, thanks to increasing transactions through global OTAs in particular.

“This is new important business as OTAs recognise and embrace what it can do. It’s accelerating rapidly as it gains more share and agents move from lodge cards and direct debits,” he said.

“It’s a no brainer; you’re protected against the risk of fraud and insolvency, it gives you efficiency in your business and we have better foreign exchange rates. I’m very bullish about this business.”

Wilson said eNett’s growth was down to a mixture of new customers but predominantly existing customers putting more of its payments through the system.

He said clients tend to start slowly before ramping up their activity through eNett, so it was now benefitting from acquiring new customers.

Regionally only the US saw a reduction in revenue of 2% in the second quarter which was put down to Expedia-owned Orbitz going multi-GDS, and was an improvement of a 4% fall in Q1.

Wilson said the US business was relatively low-margin so a 6% reduction in volume was not reflected in revenue and this was also an improvement on Q1’s 12% volume reduction.

Revenue growth in Europe of 22% outstripped all other regions and was above international (non-US) aggregated growth of 15%.

Travelport continued to see an increase in Revenue Per Available Segment (RevPas) thanks to what Wilson claimed was a market leading attachment ratio of car hire or hotel to air tickets of 48:100.

“We think we have the highest attachment rate in the industry and we have just completed another release of Smartpoint, version 7.1 which has even more improvement s in hotel and car hire shopping,” he said.

Car rental through OTAs like Expedia with which it has a global deal, is doing particularly well,” added Wilson.

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