Trade supplier Cosmos will exceed profit expectations by double this year as parent Monarch Group completes a successful two-year turnaround by returning to profit.
The tour operating division within Monarch says it has been outperforming the market over the last two years by close to 20 percentage points.
In a trading update ahead of releasing fully audited figures next year, Monarch Group managing director Phil Boggon (pictured) said in that time it has ramped up its marketing spend.
“We are looking at a much bigger business in five years’ time. Cosmos has seen record results two years in a row. The level of profit this year was double expectations in the budget.
“A combination of sensible planning of the network with the airline and the flexibility of scheduled flying give us a advantage together with moving forward on technology and price proposition is leading to very strong results for Cosmos.”
Monarch Group said all three of its divisions were now trading profitably and although full figures were not released executive chairman Iain Rawlinson said it expects to announce pre-tax profits next year “in the mid teens of millions” in March or April next year.
This is a significant turnaround from two years ago when the group recorded a £50 million loss and had to be bailed out by its owners, the Swiss-based Mantegazza family.
Rawlinson said: “This is a very clear message that the turnaround we have been talking about is now successfully complete.
“That’s quite a significant change if you go back a couple of years when we had a £50 million loss. That is a big swing in performance.”
A major factor in Monarch’s turnaround is efficiencies in the airline division, where £52 million of annual costs have been stripped out, mainly due to savings in the fuel bill.
Rawlinson said further cost savings would be sought but that this would not come through redundancies but further operational efficiencies.
The group’s third division, aircraft engineering, is expected to contribute increasing revenues to the group after the opening of a major facility at Birmingham airport.
As well as servicing its own fleet, the Monarch Group is also taking on more third party work with customers like easyJet, DHL and Fedex.
Rawlinson said the group has “made significant progress in what has really been a programme of transformation and renewal across the group”.
In the 12 months to October 30, Monarch saw turnover rise 15.5% to £1.2 billion with growth in tour operating at 15.4% and in the airline at 11.7%.
Rawlinson said Monarch wanted to be more public about its trading despite being privately owned so that its performance could be rated alongside rivals like Tui Travel, Thomas Cook, Ryanair and easyJet.
He said this was not a sign that the group was seeking any additional outside finance. “We want to compare ourselves alongside our peer group,” he said.
Cosmos says it expects to see benefits from ditching its old legacy technology next year as it looks to consolidate its position as the 4th most recognised UK holiday brand.
The Monarch Group has brought in Codegen’s Travelbox system to replace its old Viewdata-based reservations system.
Boggon said despite the rise of the web Cosmos remains a better-recognised brand among consumers that many new web-based rival websites.
“It [Travelbox] will give us quicker speed to market in terms of things like hotel offers.
“That combined with being a tour operator that sells into a scheduled airline means we have a huge amount of flexibility in terms of days of departure and operation compared to charter.
“On short-haul beach we have 50% of flight options that a traditional charter operator would not have.”
Boggon said the key aim for the group was to instil the customer service ethos of its tour operation in all its divisions, including its retail offering.
“A lot of growth in the industry has come from online travel agents who are extremely good but do focus on creating demand and converting demand and at that stage go on to creating more demand as opposed to servicing the customer while on their holiday.
“Tour operating is about customers getting the right service levels pre, post and during their holiday.”
Monarch is convinced that while price remains key, consumers are moving away from making their decision based purely on price.
Rawlinson said: “One thing which we think has changed this year is consumers are now more discerning.
“We think there has been a step change, so it’s not only value, it’s quality of service. In travel a lot has been purely price-driven for a number of years. We think that era is over.
“Quality of service is now a more important priority for customers and that is playing to something which has been important for Monarch since its foundation.”
Boggon said the group believes the “novelty of self packaging is wearing thin [with consumers]. People have realised it can become slightly tedious and the focus on service has returned.
“All our conversations with travel agent partners show there is strong demand because of flexibility and the service levels.”
Boggon said pricing strategy would be constantly reviewed but Cosmos has not followed rival Thomas Cook in bring in online/offline price parity, as Tui Travel has also not done.
However he said price differentials between direct and trade distribution would be reduced funded by a squeezing of its own margins.
The Monarch Group plans to continue enhancing its mobile apps to improve customer service and has launched mobile responsive websites for online accommodation booking.
This sector was considered to generally cater for a younger demographic so was chosen to start the roll out of mobile-optimised technology.