Q. Was anyone else in the running for the deal other than Lowcost Travel Group and On Holiday Group?
No, certainly not for the last six months during contract talks after tender documents were sent out. Reports vary, but sources suggest Lowcost was always in the lead.
Q. How big will this venture be?
Although easyJet has sought to downplay the potential size, it is understood to be destined to become the UK’s third-largest player behind Thomas Cook and Tui Travel. It aims to have 1.5 million customers within the three-year timescale of the contract.
Q. How will easyJet Holidays look to distribute its product?
Although easyJet is the most trade friendly of the major low-cost carriers, it has been ambivalent towards trade leisure sales.
Travel Weekly understands it did not intend to distribute through third parties but observers have said this may change as distribution through travel agents is “risk free” unless you produce brochures because you only pay when a sale has been made.
EasyJet will be wanting to drive sales in-house as it looks to increase its ancillary revenue. The airline recognises it has important corporate travel business coming from agents and does allow leisure agents to book through systems such as Multicom.
Paul Evans, Lowcost chief executive, said: “We are looking at all channels. We have to reach an agreement with easyJet but agents represent very cost-effective distribution and an important route to market if we are to build the volumes we hope to.”
This week agents said they would welcome the chance to sell easyJet Holidays product.
Q. Why hasn’t easyJet done this before?
The airline has had deals in place with Tui Travel’s Hotelpia and Laterooms to supply beds, but the carrier has, until recently, been limited in terms of how much of its revenue comes from non-core activities by the original deal it had in place with founder Sir Stelios Haji-Ioannou.
However, an agreement was thrashed out last month that will see Stelios take a larger dividend in return for greater freedom using the ‘Easy’ branding.
Q. What’s in this for Lowcost?
According to sources who saw the original tender document, easyJet was pretty demanding commercially. However, Lowcost said it had negotiated a deal that was mutually beneficial and it will benefit massively from the hugely increased web traffic and bargaining power it gives it with suppliers.
Lowcost can expect to realise significant synergies from being the provider of beds to the UK’s third-largest tour operator.
Q. Will the company be regulated?
It seems not. Being an airine the holidays do not need to be covered under Atol, although easyJet has supplier failure insurance in place with IPP.
Travel Weekly understands easyJet’s stance on the need to adhere to the requirements of the European Package Travel Directive hardened after the Civil Aviation Authority’s (CAA) loss in the Travel Republic case, pending regulatory change that could bring it under the scope of Atol in the future.
It remains to be seen whether it will be caught under proposed ‘flight-plus’ or ‘click through’ reforms of Atol.
Q. So what are the implications for the travel industry?
There is likely to be some concern about easyJet Holidays. The CAA will be worried about a large chunk of Atol-protected holidays coming out of protection, reducing its revenue.
Also, the big two, despite denials, are unlikely to be happy that a low-cost airline that has been a major roadblock to a universal consumer protection regime, is poised to out-compete them by being outside the regulatory regime.
Could this be what finally convinces the big two to adopt a similar component model? Lowcost has denied claims there were plans to base the operation offshore although this would have given it an even greater commercial advantage by allowing it to avoid paying Tour Operators’ Margin Scheme VAT.
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