FOR A man waiting on tenterhooks for the European Commission to allow him to become the biggest tour operator in the country, Airtours chairman David Crossland is looking remarkably relaxed.
We’re sitting in one of the lounges of the four-star Sunbird, the latest addition to the Sun Cruises fleet, at its launch in Palma.
Airtours’ bid for First Choice has been accepted by shareholders and the UK Government. Now Crossland is just waiting for EC clearance to proceed. At the time these pages went to press, this had still not been granted. But win or lose, Crossland is adamant his group’s phenomenal growth will continue.
“We think we’re just starting,” he said. “We think there are lots of opportunities throughout Europe and throughout America.”
Airtours still has the bulk of its £250m raised from a convertible bond, which will be used for overseas targets.
“At the time of the offer document, we said we had 17 transactions that are at various stages, although they will not all come to fruition.”
Despite personal wealth estimated at over £200m, Crossland’s desire to achieve more is frightening and, if anything, intensifying.
He likes to start work when the rest of us are either just getting in from a night out or are in a deep sleep.
“I tend to wake around 4am. If I think I’ve got a chance of going back to sleep I actually like to put a Sky film on but that tends to wake my wife and she says ‘Whatever you are thinking about, just go down into your office and do it.’ I like the mornings. Everything’s clear and it is when Ihave my best thoughts.”
No wonder you won’t find him swigging beer or indulging in small talk at any of the many industry dinners or balls. To prepare for the early rise, he’s tucked up in bed by 10pm at the latest.
You also get the impression that his senior management team have to show similar dedication in return for their substantial pay packets.
“The other morning I woke up at 2.30am and I had this blindingly obvious idea which I will not tell you about.
“It needed to be done quite quickly, but I left it until 3am before I rang any of our guys because I didn’t want them to think I was off my rocker. They took it really well.”
Airtours tried unsuccessfully to acquire First Choice – then known as Owners Abroad – in 1993. Crossland first resurrected the deal about a year ago and between December and January held lengthy negotiations with the First Choice board in an attempt to get them to recommend a takeover to their shareholders.
Crossland’s tone suggests he was insulted by his subsequent treatment by First Choice and you feel that revenge will be sweet if the deal goes through.
“We put a similar offer to the First Choice board on condition they recommend it and we thought they would go for it. We went round to their offices for what we thought was a final meeting on how to settle the timetable and I was handed a piece of paper which said they had done a deal with Kuoni.
“They wouldn’t see me. Their chairman Ian Clubb came on the telephone and asked me if I had got the piece of paper.”
Clubb has done an excellent job for First Choice, but he is unlikely to figure in Crossland’s long-term plans.
Crossland denies the hostile bid was an emotional reaction to being rebuffed by First Choice.
“We went away and thought about it and we felt we owed it to our shareholders to put basically the same offer to them, the owners of the company,” he said.
Thomson has been heavily criticised over its plans to increase capacity and launch a budget brand later this year in response to Airtours’ bid for First Choice.
Crossland respects Thomson, saying it runs a “good, efficient tour operation” but clearly would have acted differently. He doesn’t think much of the policy of launching a budget brand with one and two-star beds.
“If it was a good strategy, we would have done it because the beds were available to us at the end of the buying season, around December, and we decided not to buy them.
“They are beds the British market was using 10-12 years ago, now mainly on the Russian market. They became available because with a 50% devaluation of the Rouble, only half the number of Russians will be travelling.
“But everything we see, the customer is saying ‘no, I’ll pay you a little bit more money but I want a good quality holiday.'”
But Crossland is not among those predicting the imminent demise of Thomson.
“If you look at Thomson, no-one is saying it won’t be the biggest brand in the UK,” he said.
Crossland is sceptical of Lunn Poly’s plans to cut down on sales of First Choice and massively increase bookings for Thomson.
“I just query whether you can have 75% of Lunn Poly’s sales for Thomson (Travel Weekly May 24). We’ve looked at it and it just does not add up.
“We are happy to make available to Lunn Poly as much First Choice product as it has now, provided the commercial terms are right.
“If it stopped selling First Choice, I think it would be flawed from an economical point of view and a customer choice point of view.
“In Going Places, we sell holidays for 120 other suppliers besides Airtours group companies. If we didn’t sell anyone other than Airtours, we wouldn’t have a profitable retail operation.
“There is no possibility of Going Places only selling in-house company products, period. It does not work.”
Crossland believes digital television will revolutionise the industry within 24 months but has faith in high-street agents.
“Good travel agents will put technology in the high street and that’s why we’ve invested £25m in our Matchmaker system. You certainly cannot have less information available in the travel agent than a customer can have in his own home, because if you have, then what’s the customer proposition?
“There is a future for agents which can offer better service, knowledge and a price advantage.
“The best travel retailer I have been in for a long time was Travelworld in Chester. I asked them if they could open at 7am to let me in. It was an amazing shop fit. They had these flat plasma screens so you don’t have big, horrible computers on your desk – and they even had nice coffee. It felt like going into a Conran restaurant.”
Airtours also has plans for six hypermarkets, but Crossland does not believe claims that they are worth 15 shop equivalents.
“A reasonable Going Places has a turnover of £3m,” he said. “I just don’t see a hypermarket with a turnover of £45m.”
TABLE: “But everything we see, thecustomer is saying ‘no, I’ll pay you a little bit more money but I want a good quality
holiday.'”
Despite doom and gloom throughout the industry, Crossland predicts this year will be similar to last year.
Although Greece and Turkey have suffered, he expects them to pick up in high season because Spain will be full.
“It’s not unreasonable, considering a recession was expected,” he said.
“Broadly the most difficult months are May and June. Usually June is tougher and this year May has been tougher. Average load factors going forward are good and people are trading up, buying three and four-star accommodation.
“Majorca is heaving. Go outside and talk to the taxi drivers. It is very, very full.”
Opponents of Airtours’ planned purchase of First Choice claim that it is against the customer’s interest because choice will be restricted – there will be a reduction in airline charter seats offered to specialist operators and in distribution for those small companies.
Much of the £35m cost savings will be achieved through the merging of Airtours’ airline, Airtours International, and First Choice’s Air 2000.
Airtours sells around 10% of its charter capacity to third parties. First Choice, which brokes a far higher percentage of seats to other operators, is likely to be brought in line.
But Crossland denies that specialist operators will be left high and dry without carriers to satisfy their needs.
“Look at the overall market of saleable charter seats, the number of players, particularly now with European Unionregulations where you can fly anywhere inside the EU, and there is absolutely no shortage whatsoever of aviation capacity,” he said.
“There are approximately 50 aircraft in the UK charter market not aligned to the big three companies. There are 69 aircraft in Spain which are not aligned to the top guys to give just an example.
“I think if you want proof of what airlines are available for charter, just ask how many airlines were found within two weeks to run down to Barcelona for the Manchester United v Bayern Munich European Cup Final. There were over 80 aircraft on charter for three days between Barcelona and the UK and none of them had anything to do with any of the top players.”
I believe it is now more difficult than ever for new entrepreneurs to succeed, because the market is very different from when Crossland started and distribution is so heavily controlled by the major players. But Crossland refutes this, quoting British National Travel Services statistics which state that in 1998, 62% of holidays were sold through travel agents.
“Let’s assume, and I can never imagine this ever happening in my life, Airtours, Thomson and Thomas Cook all got together to push up prices. They have broadly 50% of retailers, so they could arguably control half of the distribution through travel agents – around 31% of the whole market.
“So about 69% of the access to market has nothing to do with the big players.
“And anyway, the idea of these three players sitting down and trying to carve up the market is quite abhorrent.
“If you look at history, there has never been the opportunity for anyone to push up prices in the past 36 years.
“Margins are 4%-5%, which is slim by most industry standards.
“If you try to put prices up, other guys will just come into themarket.”