Turnaround of a Market Leader France - TUI · PDF fileTurnaround of a Market Leader France...

Turnaround of a Market LeaderFrance

Bart BrackxManaging Director, Western Europe

Agenda

� French Leisure Travel Market

� Turnaround in Nouvelles Frontieres and Corsair

� Delivering Market Leading Growth

TUI Travel PLC | Turnaround of a Market Leader |

Market environment

Customer

FRANCE

Growth prospects Steady growth +3%CAGR forecast between 06-102

Travel market size Comparatively small outbound market

Circa 85% of leisure travel is domesticonly 15m outbound trips compared to 39m for UK1

Distribution High distribution costs with strong control of market by retailersAverage commission 13-15%

1 Source - Eurostats 042 Source -The Market for Travel and Tourism in France 2006, Euromonitor3 Source - L’Echo Touristique Nov 064 Source - CETO (Nov 05 – Dec 06

Market structure A fragmented market with few large TO’sAmong 200+ tour operators, more than 90% have a turnover less than €100m3

Preference for French speaking destinationsMorocco and Tunisia top 2 overseas destinations for French travellers in 20064

Products Increasing demand for activity / cultural holidays30% walk, 22% go sightseeing and 20% visit monuments and natural sites on holiday2


Key market players

Retail Estate359

Nouvelles Frontieres - 223Havas Voyages - 120

Aventuria - 11Marmara - 5

TUI Travel

Pax(incl airline)

€1,778m €939m €395m

Tour OperatorMarket share 33% 21% 11%

Exclusivehotel content

(Pax excl airline)

Club Marmara,Koudou & Paladien

40%Club villages

71%Framissima Clubs

32%

1,245 80

2,558k 803k 502k

Aircraft 8 long-haul aircraft 3rd party flying only 3rd party flying only

Club Med FRAM

€294m

3%

Thomas Cook Villages

19%

458

291k

3rd party flying only

Key brands

Revenue(incl airline)

Thomas Cook


TUI Travel France - Tour Operators

Marketpositioning

Rev per pax

ControlledDistribution

€2,036€493 €2,342

Pax

Top 5 destinations

Flying Model

�Mainstream market� ‘Value’ offering �Multi-specialist� Long & medium haul

�Mainstream market�Aggressive price position�Destination specialist� French customer hotels only

1. Morocco2. Tunisia3. Turkey4. Greece5. Egypt

20% in-house33% in-house long-haul

3rd party – Destinationcarriers

3rd party - Scheduledcarriers

25k947k 954k 10k

€830

TUI Travel - France

= Controlled

1. Canada2. Africa3. United States4. Australia5. Asia

1. West Indies2. Polynesia3. Indian Ocean4. Maldives5. Dom Rep

3rd party - Scheduledcarriers

1. Guadeloupe2. Martinique3. Morocco4. Dom Rep5. Tunisia

�Niche market�Premium offering � Long haul packages

�Niche market�Premium offering � Long haul and soft

adventure packages

22%

78%


100% 100%0%

Agenda





Insights

� Overcapacity

� High dependency on 3rd party tour operators

� Scattered airline network

� Outdated inflexible system

� Operational silos

� High cost base

� Limited direct selling networkTUI Travel PLC | Turnaround of a Market Leader |

Turnaround in Nouvelles Frontieres and Corsair

� Bankruptcy of Air Lib (Air Liberte &AOM)

� Fleet renewal (replacement of 747-300 with 6 747-400’s)

� Medium haul B737 operations halted

� Rationalisation of retail estate

� Head office centralisation

� Late arrival of B744

� Redundancy plan� Purchase of Havas

Voyage travel brand

� Creation of franchise network

� Overcapacity� One-off events

(Chikingunyaoutbreak in La Reunion, World Cup)

� Corsair and NF restructureannounced

� Corsair and NF restructure plans implemented

� New management in place responsible for airline and tour operator

� Capacitymanagement

Underlying EBITA (03-07)

2003 2004 2005 2006 2007 2008

Notes:03-05 EBITA based on Dec year-end06-07 EBITA based on Sep year-endTUI Travel PLC | Turnaround of a Market Leader |

� As part of the turnaround to break even in FY08, Q1 has delivered a significant improvement over weak Q1 07

Turnaround ProgrammeCorsair (1)

� Redundancy plan for 185 FTE in place – completed June 2007Staff reduction in Corsair

Reallocation of capacity

Capacity and yield management

Actions Progress to date

� Capacity reduced by 11% in FY07 – reallocated to reduce dependency on certain routes

� But 10% increase in fleet utilisation

� Re-mix to clustered long-haul regions � Reposition to attract leisure travellers

� Higher barriers to entry

� Reduced competition from low cost carriers

� Reduced dependency on 3rd party tour operators

� Capacity aligned to fleet profile

� Highest margin routes

��Scheduled

��Charter

Long haulShort haul

2002 2008

��Scheduled

��Charter

Long haulShort haul

Transformation from mixed model into a long-haul leisure carrier


Turnaround ProgrammeCorsair (2)

… to 2 major long-haul area, Caribbean and Indian Ocean

Caption

Canada6%

Senegal4%

Caribbean

55 %

Israel3%

+25%

-7%Ocean Indian

32 %

Canada6%

Senegal4%

Caribbean

55 %

Israel3%

Ocean Indian32 %

From more than 50 destinations in mixed model …

FY08 capacity


Turnaround ProgrammeNouvelles Frontieres

� Rationalisation of back office functions (66 to date)Re-organisation

Yield management

Increase online sales

Actions Progress to date

� 133% increase in on-line sales mix in from FY05 to FY07� Adaptation of product portfolio to ensure better web orientation

� Joint capacity management team implemented to cover NF and Corsair� New reservation system implemented to drive product flexibility and yield

14%

96% 94%

6%4%

86%

2002 2005 2007Online Offline

+133%

On-target to meet 20% by

2010

Online sales mix

(bookings)

Good progress - further work to be doneTUI Travel PLC | Turnaround of a Market Leader |

Agenda





Two very different brands….

Marketpositioning

Rev per pax

ControlledDistribution

€493

Pax

Top 5 destinations

Flying Model

�Mainstream market� ‘Value’ offering �Multi destination specialist � Long & medium haul

�Mainstream market�Aggressive price position�Destination specialist

(6 destinations)� French customer hotels only

1. Morocco2. Tunisia3. Turkey4. Greece5. Egypt

20% in-house33% in-house long-haul

3rd party – Destinationcarriers

954k947k

€830

= Controlled

1. Guadeloupe2. Martinique3. Morocco4. Dom Rep5. Tunisia

The No1 and No 2 French tour operators now part of TUI

Travel

Distinct market positions

Limited destination overlap

Flying capacity opportunities

Complementary channels22%

78%


100%

….with two different business models

Marmara benefits from greater hotel and flying purchasing power as a result of its destination focus.

The dedicated retail network (139 owned and 84 franchises) of Nouvelles Frontieres is more efficient than the predominantly 3rd partydistribution strategy of Marmara

GroupeNouvelles

Frontieres1Marmara Delta

GP 1

GP 2

OperatingProfit

Overheadcosts

Distributioncosts

12 %

5%

(3%)

8%

7%

19%

8%

4%

4%

11%

+7 ppts

+3 ppts

+7 ppts

+4 ppts

-4 ppts

TUI Travel PLC | Turnaround of a Market Leader | 1 Groupe Nouvelle Frontieres includes Corsairfly and Nouvelles Frontieres

Comments

Driving Market Leading GrowthBusiness model

� Process re-engineering:� Shared overhead structure for NF and Corsair (capacity

management, web, communication, legal, IT, back office)� Embed increased cost consciousness into the organisation� New reservation systems – tour operator & airline

� product flexibility � yield management and pricing flexibility� effective management information� operational cost reduction

� Cost synergies from merger:� Coordinated procurement of air� Joint capacities to strengthen offering from regional

airports� Improved benchmarking and purchasing power (hotels,

brochures, incoming services etc)

� Efficient cost base

� Reduced air costs

� Yieldimprovements

� Marginenhancement

Busi

ness

Mod

el


Driving Market Leading GrowthContent

� Increased differentiated and exclusive offering:� Through Club Marmara, Paladien Hotels and Koudou

Clubs� Expand activity and escorted tours offering� Introduce specialist brands from elsewhere in the Group

e.g. marine and adventure products

� Rationalise NF product portfolio� Reduce hotel content

� 20% of products generate 80% of sales

� Revenue Synergies� Distinct market and destination positioning� Taking benefit from combined expertise

�Yieldimprovements

� Improvedoccupancy rates

�Cost savings

�Revenue growth

�Marginenhancement

Cont

ent


Driving Market Leading Growth Distribution

� Roll out of Nouvelles Frontieres franchise programme� Increase number of franchise shops from 84 to 189

� Extend market coverage from 46%-60%� Support regional flying growth

� Leverage distribution channels � Improve Marmara distribution through our controlled

distribution network� Grow online sales

� Introduce more online content I.e. car hire, seat reservations, hotel only

� Cross-selling across brands

� Wider direct sell

� Reduced cost of customeracquisition

� Flexible business model

� Revenue growth

� Marginenhancement

Dist

ribut

ion

Increased controlled distribution and lower average commissionTUI Travel PLC | Turnaround of a Market Leader |

Summary

Market leading position – brands, content & distribution

Fragmented market place with significant growth potential

Turnaround in Nouvelles Frontieres on track

Clear growth strategy in place

Translating market leading positions into market leading margins


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