Thomas Cook close to concluding talks to buy Russian travel business

The Thomas Cook Group is within weeks of concluding a deal to buy a Russian tour operation and retail business, chief executive Manny Fontenla-Novoa has revealed.

The group has been looking at acquisition and joint venture opportunities in Russia and China for the last 18 months following expansion into India and Egypt last year.

Fontenla-Novoa said the process in Russia had been lengthy as the company does not want to operate in the country’s black economy but said talks were ongoing  with two to three companies, one of which was at a “very advanced” stage.

If successful, the deal is likely to include a travel agency network because of the increased margins available by owning an inhouse shop chain, he said.

“We will come to a conclusion in the next two to three weeks,” he said. “We want a tour operation and retail [business] – we want controlled distribution.”

Russia was a particularly attractive market, with most holidaymakers booking seven or 14-night traditional beach package holidays, he said. The most popular destinations for Russians tend to be Turkey and Egypt. “This is because the visa requirements are quite low and these countries allow old Russian aircraft which are not allowed to fly into European countries,” he added.

Thomas Cook is also in “advanced” talks with four companies to set up a joint venture in China, which has a large domestic travel market. These talks are likely to reach fruition next year. “It takes time and you have to build up trust,” he said.

Meanwhile, Fontenla-Novoa added that further growth was likely to come from expansion of its independent travel and financial services divisions as well as through mergers and acquisitions. Package holidays made up 85% of revenues when the company merged with MyTravel in 2007 but now made up 82% of revenues.

He said: “We never thought package holidays were dead and mainstream holidays are still by far the most profitable thing we do, however it’s [package holiday sales] not growing and therefore, independent travel, financial services and growth through mergers and acquisitions will be how we get our growth going forward.”

He added that 2010 was set to be an even tougher year for the UK market because of the weakness of the pound and increased levels of unemployment. “I think next year will be even tougher. Trying to get financing for next year is really difficult and will be a challenge for lots of companies.”

More information:

*Holiday prices to rise, says Thomas Cook boss (May 19, 2009, Travel Weekly)

* High-street agents remain most profitable, says Thomas Cook boss (May 19, 2009, Travel Weekly)

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