Attachment C5

 

Travel & Tourism Guide

 

 

 


 

Attachment C5 – Travel & Tourism Guide

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Travel & Tourism

Reference Guide

 

 

 

 

 

 

 

 

 

 

 

 

.travel TLD – Attachment C5

 

September 2000

 

 

 

 

                                                                                                       

 

 

 

 

 

 

Part I – Travel & Tourism Industry

 

Travel & Tourism Definition

 

The Travel & Tourism Industry consists of vendors/suppliers who aim to support and/or provide the end customer with travel experience.

 

 

Introduction

 

Travel & Tourism is the world's largest industry and accounts for 11% of the world GDP and 8% of total employment. It has been described as one of the most powerful global forces for positive change and development in an economy and a society. Forrester Research predicted that by 1999 travel would be the number one electronic commerce category, with sales topping $2.8 billion.

 

Travel & Tourism in the U.S. generates the largest balance of trade surplus of any industry, which totalled almost $25 billion in 1998. U.S.A. tops the list of tourism earners ($71 billion in receipts in 1998) and tourism spenders ($51.2 billion in expenditure in 1997) and is third on the list of the world’s top tourism destinations (France is #1, Spain is #2).

 

World Travel & Tourism has largely weathered the Asia/Pacific financial crisis, thanks to the economic strength of the North American and European Union regions. In 1999, Travel & Tourism was estimated to generate some $3.5 trillion of GDP and almost 200 million jobs across the world economy – approximately one third of this comes from the industry itself and the remainder from its very strong catalytic flow-through effect in other sectors such as retail and construction. Travel & Tourism has emerged strongly from the Asia crisis with leisure tourism expected to grow by 4.7% in 1999 and business travel by 4.4%.

 

Travel & Tourism Trends

 

General trends affecting the travel industry include increased competition through globalisation (new players coming from abroad) and through deregulation (competitors coming from other industries), changing customer demands (different lifestyles, for instance the look for specialised trips such as adventure or edutainment and different demographics with increasing numbers of seniors) and increased expectations (more convenience and value, getting used to the customisation of offerings). At the same time, customers are becoming ever more knowledgeable (direct marketing is certainly one of the drivers) and growing accustomed to automated technologies (such as phone-based systems, various travel websites and multimedia kiosks).

 

Looking at the trends of international tourist arrivals during the decade 1989-1998, the growth rate of arrivals worldwide slowed in the second half of the decade to 3.5% from 5% in the first half. For the ten-year period 1989-1998 overall, the annual average was 4.3%. East Asia and the Pacific performed the best throughout, registering 6.8% growth a year on average over the 10 years. South Asia was the only region of the world which recorded faster growth (6.8%) in the second half of the decade, whereas the Middle East exhibited stable growth during the whole period (6.4% growth a year). Growth in Europe, Africa and the Americas slowed significantly during the second half of the decade. Nevertheless, Europe performed better than expected due to the significant increase in tourism to Central and Eastern Europe. In volume, the total number of tourists worldwide increased by 209 million between 1989 and 1998.

 

Historically, the industry has been an early adopter of new technologies, for instance Computer Reservation systems (CRS). As technology becomes more pervasive, traditional consumers begin to use tools formerly reserved for travel professionals. In the case of CRS, consumers who have access to similar systems through their home computers and open networks can now take over some functions traditionally performed by travel agents.

 

Some other trends affecting the travel & tourism industry are:

·         Code-sharing agreements between business partners

·         Scheduling and marketing pacts between top airlines

·         Consolidations/Mergers/Acquisitions

·         Commission capping by airlines

·         Intermodal transportation

·         Privatisation of airlines and airports

·         Outsourcing (legal, financial, consultants, IT etc services)

·         Wireless Travel Service (joint project Delta/IBM/Modern Media Poppe Tyson)

·         Travel Superstores; offering everything from luggage to guidebooks to full reservations under one roof. Ex TravelFest Superstores.

·         Green Travel; 83% of travellers are inclined to support “green” travel companies and are willing to spend on average 6.2% more for travel services and products provided by environmentally responsible travel suppliers.

·         20% of all business trips include two household members, 28% included some time for pleasure travel and 38% included an overnight weekend stay.

 

The WTO reports bright outlook for Tourism in 2000 following 2 years of limited growth. International tourist arrivals are expected to increase by 4-5% mainly due to Asian and European travel growth. 

 


 

Overview of the Travel & Tourism Process

 

The following provides an overview of the travel & tourism process when all segments/components are present.  The traveller (customer) contacts the ‘Travel Vendor’ (segment #1) to make arrangements for his travel. The travel vendor makes the necessary reservations for the traveller using a variety of available ‘Tools’ (segment #2). The vendor also relies on the ‘Support Facilities’ (segment #4) available in order to obtain additional information and settle the transaction once completed. The travel vendor sells the travel product offered by the ‘Travel Suppliers’ (segment #3). The customer then ultimately enjoys the ‘Travel/Tourism Experience’ (segment #5).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


Travel & Tourism Segmentation

 

For purpose of this project, the travel & tourism industry has been divided into five main segments.

Segment #1: Travel Vendors

In order to provide their product to the end consumer, travel suppliers (airlines, hotels, car rental companies, etc.) are heavily reliant upon the Travel Vendor segment. This segment is composed of the following categories, which ultimately form the travel distribution chain:

·         Travel Agents
Travel Agents are essentially retailers, selling the services and packages of other organisations and they are the  first link in the distribution chain; they sell the travel product at the agreed retail price, for which they are paid a commission and/or fee.

·         Tour Operators
A Company that assembles the various elements of a tour.  The tour operators control/dictate the price at which retailers can sell holidays.  Generally 10% commission is paid by the tour operator/wholesaler to the travel agents on the sale of a particular service.

·         Consolidators
A company or individual who negotiates bulk contracts with an airline (or other travel supplier) and then sells that space to a travel agent or the general public, usually at a discount.

·         Electronic Travel Agencies (ERSPs – Electronic Reservation Service Providers)
Any entity which provides on-line booking or other electronic medium of travel products.

 

Travel Distribution Chain

The travel product can reach the final consumer through any of the following methods:

 


(1) A tour operator assembles a package which includes a variety of travel products such as air transport, car rental and hotel stay.  This package is then sold through a travel agency to the end consumer at the retail price.  In this case, the travel agency will make a commission or fee on the sale of the package. In the UK and Europe a small number of the major tour operators are “direct sell” i.e. their products are sold directly to the consumer and not through the retail agent.



(2) A consolidator has pre-arranged agreements with airlines who furnish him with bulk amount of seats at a reduced rate.  He then sells these seats at a mark-up he determines can be sustained in the market either directly to the end consumer or through a travel agency who will collect a fee or commission.

 

 



(3) The travel agent sells individual travel products or combines them into a package for sale to the end consumer.

 


(4) The consumer accesses an electronic travel agent through the Internet and makes a purchase on-line.  Electronic travel agents have a wide range of functionalities, some are full service and enable consumers to reserve, buy and obtain tickets for a combination of travel products while others allow only reservations of a single travel product.


 

 



(5) The consumer buys their travel product directly from the travel supplier, either through a company outlet, a reservations centre or via the Internet.

 


There is some consolidation going on within the European travel industry.  Retails chains and airlines are forming co-operations to strengthen their position in the market (i.e. vertical integration of sorts by forming alliances).

 

(Note:  The term ‘wholesalers’ is a generic term used interchangeably with consolidators and tour operators)

 

Segment #2: Travel Purchase Facilitation Tools

The Travel Purchase Facilitation Tools are key components that enable the travel vendors to access travel supplier inventory and process reservations for the end consumer.  These can be classified into the following categories:

·         CRSs/GDSs
Any of several proprietary computer systems allowing real-time access to airline fares,

schedules, and seating availability and offering the capability of booking reservations and generating tickets.

·         Internal systems
This category includes any internal system operated within a travel supplier company related to inventory management, billing & settlement and management functions.  (For example a rental car company needs a system to track the movement of its fleet of vehicles). In some cases, travel vendors are given access to these internal systems in order to enable them to view product information/inventory and sell the travel product.

·         Other Automated Systems/Products
Apart from GDSs and internal supplier systems, travel vendors use other automated products to access supplier information and inventory. (Note: not all travel vendors subscribe to GDS services, and GDSs do not carry the inventory for all travel products).  This category includes the following: 
(1)  Online products available through the Internet
 Example: “Saint”  operated by Viator Systems enables travel agencies to access a wide 

 variety of leisure product including sightseeing tours, theatre & restaurant packages etc. via  the Internet
(2)  Software database products
Example:  Farenet operated by Jetset Tours offers instant unlimited access to consolidated airfares and enables travel agencies to manage their business better.
Example:  InfoHub offers tour query software to travel agencies and independent travel consultants which allows them to sell tours in the InfoHub database to their customers.

 

Segment #3: Travel Suppliers

The Travel Suppliers provide the traveller with the actual travel product to enjoy the travel and tourism experience. These suppliers rely heavily on the travel vendor segment for the distribution of their products and services.  The following categories have been outlined for this segment and are self-explanatory; for detailed descriptions refer to the individual category profiles.

·         Charter Airlines

·         Coaches

·         Cruise

·         Hotel/Resorts/Motel

·         Car Rental

·         Railways

·         Ferries

·         Travel Insurance

·         Airports

 

We have limited the scope to the actual travel suppliers only (i.e., hotels and resorts, car rental companies, etc.) and have excluded their suppliers (i.e., florists, caterers, etc. for the hotels & resorts).

 

Segment #4: Support Facilities

The Support Facilities segment provides the additional support needed for the travel vendors to carry out their business activities.  The following categories have been defined:

 

·         Associations
These include travel industry associations such as IATA and UFTAA which offer an operating framework for the travel vendor, as well as various travel agent associations.

·         Tourist Boards
These include country, regional and municipal tourist boards whose function is to market their location to the end consumer. They provide expert destination information to the travel vendor or end consumer.

·         IT systems/infrastructures
These include any external systems or networks which are used by the travel vendors/suppliers to carry out their business process such as settlement systems (i.e. Hotel Clearing Corporation, IATA BSPs), scheduling systems (OAG).

 

 

Segment #5: Travel/Tourism Experience

The Travel/Tourism Experience is the end result of the travel distribution chain.  The previous four segments form the delivery mechanism that enables the traveller to obtain the travel/tourism experience. The following categories have been outlined for this segment and are self-explanatory; for detailed descriptions refer to the individual category profiles.

·         Theme Parks

·         Restaurants

·         Casinos/Gaming Facilities

·         Attractions

·         Museums/art galleries

·         Monuments

·         Historic sites

·         Convention centres

 

 

 

 

 

 

 

 

 


 

PART II : Category Profiles

Segment #1: Travel Vendors

Category: Travel Agents

Profile


Travel Agents are essentially retailers, selling the services and packages of other organisations directly to the public. They sell the travel product at the agreed retail price, for which they are paid a commission and/or fee. Although the Internet looms as a huge threat to the traditional travel agency business process, many are realising that the Internet also represents opportunity; it gives them a means to reach a much larger audience whether they serve a niche or the mass market.  In addition, travel industry studies show that consumers typically use the Internet to compare prices, then turn to travel agents for actual bookings.  Online travel brings in only about 1% of the $101 billion of travel products sold by travel agents.  The following chart depicts the breakdown of travel agency bookings(source: Encyclopedia of American Industries):

 


The US market has more than 30 000 independently owned, locally operatedoffices, whichbook 40% of American travel and tourism-related reservations (70% domestic, 30 % international). Business travel makes up slightly more than half of sales.  Leisure travel offers a greater profit potential but is more labour intensive.

 

Trends

·         Travel agents continue to change with the times.  Since 1995 the industry has been consolidating.  Many single-office agencies have closed or merged with others, the result of the commission cap on tickets by most major US airlines. The bigger you are, the more likely you are to be profitable: 9/10 agencies doing more than $5 million in business made a profit whereas those doing business under $1 million, only 6/10 were profitable. (1997 statistics).

·         A new breed of travel agency has also cropped up the travel superstore where everything is offered from luggage to guidebooks to full reservations under one roof.

 

 

·         Profit margins in travel retailing have shrunk in recent years because of industry rationalisation and increased competition from call centres and online operators.  To compete, retailers must invest large sums.

·         Retailers must move into electronic commerce immediately, or be left behind.

·         Due to the recent commission caps imposed by the airlines, the following trends have occurred:
- shift away from selling air to other travel products such as cruise and tour packages which provide a higher commission;
- a shift from selling business travel to leisure travel (now 50-50); and
- the charging of fees directly to corporate clients or consumers for services rendered to survive, about two-thirds of agencies now charge ticketing fees, compared to 10% five years ago.

·         Ticketless bookings now accepted by most U.S. travel agencies.

·         Internet access by agencies have gone up dramatically.

·         Companies are changing their payroll basis by hiring more commissioned salespersons versus salaried agents.

·         The need for experienced, highly trained corporate agents is on the rise.  This is due to the rise in on-site branches (i.e. travel agencies located within corporations). ARC figures show that the number increased from 195 in March 1995 to 2860 in 1998.

·         Smaller agencies are now affiliating more with leisure-oriented consortium or marketing groups such as GEM, Travelsavers or Giants.  In the last 10 years the figure has jumped from 36% to 54%.

 

Major Players

#

Name

HQ

1998 Sales in US$ Mil

Outlets/staff

Presence

Additional Comments

1

American Express

USA

13392.4

/85000

160 countries

·         #73 in Fortune 500

·         73% sales US, 13% Europe, 7% Asia, 7% Other

2

Japan Travel Bureau

Japan

12757.5

1100/ 9343

17 countries

·         60% sales from domestic travel

·         Originally government own (until 1963)

·         Private company

3

Carlson Wagonlit Travel

Netherlands

11000

3000/ 20100

140 countries

·         Co-owned by Accor and Carlson Group

4

Nippon Travel Agency

Japan

7000

309/ 6899

Japan, US + 7 countries

·         Domestic travel accounts for 65% sales

·         Kinki Nippon railway owns 30.4%

5

World Travel Partners

USA

4000

1700/ 5000

US

·         WorldTravel Partners and BTI Americas merged in October 1998

·         Private company

·         80% of business corporate

·         5% of  sales from Software/Internet products

6

Rosenbluth

USA

3500

1300/ 4500

25 countries

·         Private company

·         Philosophy: customer comes second i.e. employee is first

·         Corporate market based on fees rather than commissions

·         Majority stake in Biztravel.com

7

Navigant

USA

3300

(1999)

1150

         -

              -

8

AAA

USA

3100

(1999)

1000

         -

              -

9

Thomas Cook Group

UK

2416

4500/ 20000

100 countries

·         Owned by Preussag (50.1%), Carlson 22%

·         #3 in UK travel market

·         UK tour operator

10

Havas Voyages

France

2403

615/ 3770

France

·         Partnered with Amex for corporate onsite agencies

11

Maritz Inc.

USA

2200

240/ 6500

US + 40 countries

·         Owns majority stake in GTM which operates 1250 offices in 40 countries

·         Private Company

·         Concentrates on corporate travel, consulting and event management

12

Nokyo Tourist Corp

Japan

1429

/1500

Japan

·         Sells package tours/inbound travel service

·         Official agent for Japan Railways and Japanese airlines

·         In Agricultural Cooperatives market

13

Liberty

USA

1320
(1997)

200/ 1700

East coast of U.S.

·         Private company

·         Focus on leisure market

·         Does not franchise

·         GOGO division offers wholesale packages

14

Sato Travel

USA

1200

(1999)

1500/

2000

US + 18 countries

·         Dedicated agency of the US government and US military and Fortune 500 corporate travel

15

Flight Center

Australia

1181
(1999)

450/ 900

Australia, NZ, South Africa, Canada, UK

·         Largest retailer in Australia by sales

·         14% market share in Australia

16

Mccord Travel Management

USA

585

95/ 1000

US

·         Private company

·         Focus on corporate clients

·         Offers a software system that allow users to book trips and track expenses

 

Category:  Tour Operators

Profile

Tour Operators are travel vendors of enjoyable, convenient and affordable sun and leisure vacations, some of which are all-inclusive. The scope of the business entails selecting, purchasing and processing of services and products for use in package tours and tailored travel arrangements.  The holiday package might combine various services such as flight, hotel accommodation, coach transportation, local services etc. and is sold at a total price designated in advance.  Tour operating is tailored to the needs of the customer segments in individual countries. Incoming tour operators are the complement to outgoing tour operators. At the destination, they assume certain responsibilities, such as the transfer of travellers from the airport to hotels, the availability of guides, and the organisation of excursions and tours.

 

Trends

A wave of consolidation is sweeping the travel industry in continental Europe. Market is likely to be dominated by 4 to 5 big players in the future (Thomson, Airtours, Preussag). Recent mergers/acquisitions might lead to either price wars or further consolidation in the industry. This would harm the consumers as less travel operators means less competition and higher prices. 

 

Most large companies operating in the industry have adopted vertical integration of production and distribution methods. This approach makes it possible to bring tour operators and air carriers under one roof, as well as, in several cases, travel agencies and incoming tour operators.  Integration allows companies not only to control the entire production and distribution process, but also to add value to each level of production. For the tour operator, these formulas secures, on the one hand, loyalty from the distributors for the sale of its packages and, on the other hand, control of its seat inventory to destinations where it has blocked hotel rooms.

 

Multinational activities are becoming increasingly important because through growing turnover and passenger volumes tour-operators are able to improve the terms on which services can be delivered.  In the business travel segment, corporate customers require a global reach on the part of their travel company. Additional trends are value orientation, specialist destinations and winter holidays. British Travel Groups have been the most successful in recent years. The reasons for this are, among other factors, the significant turnover consolidation resulting from their high degree of vertical integration, a strong British pound and a liberal approach to night flights.

 

 Major Players

#

Company

Group

HQ

Sales in 1998

US$ mil

Additional Comments

North America

1

Transat Holidays

 

Transat A.T. Inc.

 

Montreal,

Canada

618.4

Transat A.T. 921.2

Owner of 9 tour operators

2

Pleasant Holidays

 

 

CA, USA

350

Providing travel agents with a Web site through which they can make travel reservations.

3

American Tours International

 

CA, USA

136

- US leading inbound tour operator

- Private company

4

Global Vacation Group

 

Washington DC, USA

90.4

 

-

Gogo Worldwide Vacations

Liberty Travel

NJ, USA

Liberty Travel:

1,320

Travel Agents-only website

-

MLT Vacations

 

 

 

 

- One of US’ largest wholesale vacation travel companies.

- Nearly 1 million vacationers/year

-

Signature Vacations

 

 

 

- Wholly owned by First Choice, UK

- Canada’s largest Tour Operator

-

Royal Vacations

 

 

Royal Aviation Inc.

 

 

 

-

Alba Tours International

 

 

 

 

 


Europe

1

Hapag Touristik Union

 

 

 

Preussag/West LTB

Germany

9,600

- #1 in Europe

- Merger between TUI and Hapag-Lloyd

- Majority shareholder of Thomas Cook/Carlson UK (50.1%)

- 3,469 travel agencies, 51 tour operators, 5 cruise liners, 63 aircraft,

18 incoming agencies, 164 hotels (80,000 beds)

2

Airtours

 

Airtours Plc

UK

Airtours Plc

4,678

- #2 in Europe

- #2 in the UK

3

C&N

(Condor & N-U-R/Neckermann)

Lufthansa 50%

Karstadt 50%

Germany

4,000

 

Second biggest Travel Group in Germany

5

Thomson Travel

 

UK

4,078

- #5 in Europe

- #1 in the UK

- Owner of:

Air Travel Group Limited

Britannia Airways

6

Kuoni Travel Holding Ltd.

 

Switzerland

2,100

- #6 in European market

- The 1998 World Travel Award for Best Tour Operator

7

LTU Group

SAir Group 49.9%,

Pvt  Investors 39.9%

Germany

 2,100

 

8

First Choice

 

 

UK

1,900

- #3 in the UK

- Owner of Air 2000

9

Nouvelles Frontières

 

France

1,400

 

#1 in France and one of the largest T/O in the world;  Owner of a cruise line

Asia/Pacific

1

Japan Travel Bureau

JTB

Japan

-

-Handles 50% of total business in Japan

- 60-70% of business is domestic

-

Kuoni Travel (India) Ltd

Kuoni Group

India

-

- Kuoni brand name in Asia

- #1 tour operator in Asia outside Japan

-

Jalpak Co Ltd

JAL Group

Japan

-

- JTB owns 5%

- 135 offices worldwide

-

Jetset Tours Pty Ltd

Jetset Tours

Australia

932.2

- business comprises retail franchises and Jetset-owned stores

-

HK Four Seas Tours Ltd

Four Seas Consor-tium

Hong Kong

-

- Wholesalers and travel agents in Hong Kong

- 4 offices in HKG + offices in China

-

HK Wing On Travel

Ananda Group

Hong Kong

-

- Wing On Travel is retail agent with presence in Asia/Pacific and Europe

-

Allo Pacifique

        -

         -

-

                              -

-

AAT Kings Australian Tours

        -

         -

-

                              -

 

 

 

 

Category:  Consolidators

Profile

A consolidator is a company who buys tickets from the airlines in bulk or carries its own contract with the airlines.  Consolidators usually get very low fares, often from 20 to 50% lower than the airlines’ best published fares.  Some consolidators then sell these tickets to travel agents at a mark-up while others may sell them to the general public directly. Consolidators traditionally have been small, with low-overhead operations that make the owners a tidy but not spectacular profit.  Airlines have used them because consolidators help them fill sets they are unlikely to sell at regular retail price. Customers use them for low-price, no-frills tickets. (They are the equivalent of warehouse retail stores: low prices, limited selection, and minimal service). In addition travel agents can earn up to 30% commission on consolidator tickets versus 8% on standard tickets. Consolidators basically fall into three categories:

1)       Wholesale-only consolidators
These generally have no retail or advertising and deal only with round trips originating in the country where they are based.  Common in the US, UK and Australia.

2)       Destination specialists
These specialise in a particular destination or region and often have negotiated discounts on tickets to that region which they offer both to their own customers and to other agencies as a wholesaler. Frequently an agency operating and retailing tours to a particular country will have a discount agreement with the airline it uses for its tours.  (Sometimes these wholesalers are the ‘general sales agents’ for that carrier)

3)       “Bucket Shops” and other multi-stop specialists
These are discount retail agencies that specialise in trips more complicated than simple round trips, often to a wider range of destinations or to multiple destinations, they are also mostly concentrated in a few world cities.

 

In the U.S. there are consolidators that sell directly to the public; they use newspaper advertisements, 1-800 numbers and the Internet as their primary dissemination vehicle.  In other countries, consolidation activities are regulated and they are prohibited from selling to the public.

 

Trends

·         Since 1995, when the major airlines began reducing the sales commissions they paid to the traditional travel agencies, several big travel companies have begun entering the consolidation business, where profit per ticket sold can be higher than with other tickets, therefore creating a few large new players in the field.  Also other consolidators that historically sold to travel agents only have started selling to the public which has created even greater competition.

·         Some Internet sites now access consolidator fares from many different consolidators i.e.1travel.com and EconomyTravel.com.

·         Travel agents are now using them more since commission cuts as they can earn more on consolidator tickets.

 

 

 

 

Major Players

This table is a sample of some of the major consolidators worldwide.

 

Name

HQ

1998 Sales in

US$ Mil

No. of airline suppliers

Customers

Additional Comments

North America

Jetset Tours Inc.

USA

 

65

Travel Agents

Maintains FareNet software system – Travel agent tool

Travel Services Int.

USA

129.9*

 

Travel Agents/ Public

largest cruise sales distribution company in the world, selling nearly 10% of all cruise vacations

About 50% rev from consolidation type activities

350,000 airline tickets in 98

 

Travac

USA

 

20

Travel Agents/ Public

75 000 airline tickets/year

Intertransit

Canada

 

 

Travel Agents

 

Consultour

Canada

60

 

 

Part of Air Transat group

Europe

DER Travel Services

Germany

4000*

30

 

Member of USACA

6300 wholly owned agencies around the world

Wholly owned by Deutsche Bahn (German Railway)

Citibond

UK

 

All Major

 

 

L’Tur

Germany

230 (1999)

 

 

 

Asia/Pacific

Concorde International Travel

Australia

1010*

 

Travel Agents

Consolidation activities is one of 4 divisions

Ever Sun Travel Ltd.

Hong Kong

 

 

 

Leading in Hong Kong, Macau, China, + SE Asia

* Includes all sales of company not only consolidation division

Note: USACA = United States Air Consolidators Association (requires members to do at least $10M in business each year)

 

Category: Electronic Travel Agencies  (ERSPs – Electronic Reservation Service Providers)

Profile

As outlined in the travel vendor segment overview, the consumer has the option of obtaining travel products through the following channels: Traditional Travel Agency, Consolidator, Tour Operator, Travel Supplier (traditional methods – phone, ticketing office, supplier location), Electronic Travel Agency and Travel Supplier (electronically via the Internet). As evidenced by the appearance of the last two distribution channels above, the Internet has changed the landscape in the way that travellers search, reserve and buy travel products. This has both enabled suppliers to bypass the traditional distribution channels and sell directly to the traveller and also created a whole new category of travel vendors, which we have termed “electronic travel agencies”.   In the marketplace today there is a proliferation of Internet sites designed to compete for the online travel dollar. However all sites do not maintain the same functionality nor do they generate revenue in the same way. For the purpose of this analysis the following types were defined:

·         Full Service sites:
The traveller can search through schedules, obtain availability and pricing, book the travel product, receive confirmation and purchase online.  These electronic agencies carry a full selection of travel products including air, hotel, car rental, cruise and possibly tour packages.  (Most of these are still being powered by GDSs)

·         Travel Product Specific sites:
The traveller can search through schedules, obtain availability and pricing, book the travel product, receive confirmation and purchase online.  However, these electronic agencies carry only a specific type of travel product, i.e. only hotels or only air.

·         Listing/Referral sites:
The traveller can search through schedules, obtain availability and pricing. However to book the travel product they are referred to the travel supplier web site or need to call a 1-800 number.

·         Unique Selling Point sites:
This type of agency will have a unique selling point or angle to cater to the traveller such as ‘travel auctions’ or ‘name your price’.  As an example, “priceline.com” has potential customers outline their travel requirements including dates, destinations and price.  The customer commits to purchase the travel product fitting those requirements.  The site then tries to find a travel supplier willing to fit the outlined requirements.

·         Supplier sites:
The traveller can search through schedules, obtain availability and pricing, book the travel product, receive confirmation and purchase online.  However this type of site is dedicated to the specific travel supplier i.e. American Airlines or Via rail.  The distinct benefit of these sites is that travellers may obtain electronic tickets if the company supports it.

·         Vendor sites:
These sites are operated by the traditional vendors such as Tour Operators, Consolidators and Travel Agencies.  The site will list travel products available only through that particular vendor.  In this way the traditional vendors are still able to retain their commission or mark-up for the product.  

 

Web portals are also key aspects of the online travel business, sites such as Yahoo and Excite are the doorway that many customers use to access the online agencies.

 

There are a number of different ways the online agencies can generate revenue; either by obtaining a referral fee, a commission on the segments sold, or by the mark-up between the price they have paid by buying in bulk and the price the consumer has paid (some companies also charge buyers a handling fee). It is of special note that although the major electronic agency Web sites generate a large amount of traffic volume and gross sales, they are not yet profitable.  It requires a lot of investment to develop the needed technology and even more investment to attract and retain customers, especially when those customers can get to competitors by clicking a mouse.  Travelocity and Expedia, in fact, expect to spend more money before they try to turn a profit, primarily on promoting themselves to Web users.  However, some smaller online agencies are already profitable. 

 

Trends & Statistics

The following depicts trends and estimates for the online and online travel market, however it is growing and changing at such a rapid pace that no sooner can research statistics be compiled than they are already out of date and the numbers have doubled or tripled.

·         The online travel market is the largest retail e-commerce category, projected to grow from $7.8 Billion in 1999 to $32.1 billion by 2004.

·         The European online travel industry is expected to generate US$ 1.7 billion in sales by 2002, up from US$ 7.7 million in 1997.

·         According to “Advertising Age” in a nation-wide American survey the top 5 uses of the Internet for those with home Web access in all age groups included buying travel-related products.  28% identified the Internet as their primary source of information on new products in the case of travel and leisure.

·         Although an online agency may have high traffic volume, this does not mean necessarily that they are selling a lot of travel booking. As many customers will review and obtain information through the online agencies and then book their trip through a traditional travel agency.  For examplePreview.com has 8 million registered users, but fewer than half a million (about 7%) book travel plans with the company. In fact, almost a quarter of its revenue comes not through bookings, but through advertising on its Web site.

·         In order to capture audiences, online companies need to advertise on other media, for example they spent $72.6 million on television ads in June 1999, a $67 million jump from June 1998, and almost $19.5 million on radio ads, more than a $8.6 million increase from 1998.

·         Currently, the most developed and lucrative sector of the online travel market is flight sales (they represent 84% of all online travel revenues), however online package holiday sales are expected to grow substantially in the future.

·         Over $32 billion in annual sales, travel is currently the second most profitable sector for online transactions currently on the Internet.  The investment bank Bear, Stearns Co. Inc. estimates hotel reservations made via the Internet will generate $3.1 billion in revenues in 2002, up from less than $100 million in 1997. That compares to a total market for hotel reservations of $58 billion.  (of special note: 28% of visitors to hotel sites book)

·         Forrester Research predicts that mid- and lower-tier travel sites will begin to thin out by 2003, with many larger sites swallowing smaller sites.

·         Jupiter research predicts that travel suppliers will account for an increasing percentage of online travel sales (currently at 50-50 split).

·         increasing trend of aiming portals at specific demographics and industries, commonly known as "vertical portals," (example: “Biztravel”)

 

Major Players

The dominant players in the full service sites are Expedia, Travelocity and Preview Travel.  The planned merger between Travelocity and Preview Travel will create a combined membership base of 17 Million and more than $1 Billion in projected travel sales. A potential new dominant player is an online agency to be formed by Continental, Delta, Northwest and United in first half of 2000. 

 


The following table outlines the major players for the full service sites and gives typical/-popular examples of companies which fall into the other types. (L=Leader)

 

#

Name

Statistics

1998 Sales US$ Mil
[growth]

1998
Net Income
US$ Mil

Additional Comments

Full Service

1

Travelocity

9M members

285

 

·         Is merging with Preview Travel

·         3M airline tickets sold online since March 1996

·         Offers electronic ticketing

·         Sales figure is gross travel sales

2

Expedia

4.2M hits/month (2Q 1999)

38.7* [179.9%]

(19.6)

·         The most visited online travel site for 7 months in a row (Oct 99)

3

Preview Travel

$200.1M gross bookings 1998
7M members

14 [2.9%]

(27)

·         Is merging with Travelocity

·         Primary travel service on AOL

·         Only 7% of users book travel plans (about 0.5M)

·         76% of sales from transactions and 24% from advertising

L

Cheap Tickets

1.8M registered users

171.1 [66.4%]

1.1

·         The company sells airline tickets through retail outlets, by phone, and through its Web site

·         60% of sales are through air sales – acts as a consolidator

·         30% of gross bookings currently are through Internet

L

Travelscape

 

20.9 [67.9%]

(4.4)

·         Over 90% of sales come from hotel rooms (niche market)

·         Maintains a proprietary booking engine technology

·         Considered a wholesaler

-

Getthere.com

 

6.4* [113.3%]

(15.6)*

·         Internet Travel Network is the consumer site

·         Provides online booking capability  for Trip.com and Travel.com

·         Link corporate Intranet or Web site to their online booking and travel management data centers

·         affiliated with American Express

-

LowestFare

 

224.4

9.1

·         Most of its sales come from discounted tickets on TWA

·         Internet sales account for only 4% of total sales.

·         Internet sales only account for $8.6M

-

Trip.com

1M registered

Private co.

Private co.

·         Top rated travel site

·         Caters to business travellers

·         FlightTrackers – real time flifo

·         Owns THOR – 24 hour online reservation firm

-

Travelnow

28000 bookings /month

.886 [156.4]%

0.03

·         Latest revenue figures 1.4M for last 6 months

·         Principal source of rev is commissions on hotel bookings


Unique Selling Point

L

Priceline

3M customers

35.2

(112.2)

·         “name your own price" for airline tickets, hotel room

·         accounts for over 2% of leisure airline tickets sold in the U.S.

·         Marketing alliance with Preview Travel and Travelocity

-

Ebookers

 

6.9M [337.6%]

0.2

·         Web sites in English, French and German

·         Offers a bidding service where travellers nametheir own price
UK based company and full service

·         European online leader

Travel Product Specific

-

Worldres

 

 

 

·         Specialises in hotel bookings

·         completely Internet-based and independent of older, mainframe-based airline CRS or intermediary systems

·         WorldRes takes a commission of between 3 and 10 percent of the cost of the booked room

-

Hotel Reservations Network

 

66.5 [91.2%]

1.7

·         80% of rev comes from online

·         estimate of $120M rev for 1999

Vendor

-

Direct-Holidays

 

 

 

·         Tour operator marketing direct to customer – UK based – part of Airtours

-

Biztravel

 

Private co.

Private co.

·         Biztravel.com is a line of business of Rosenbluth Interactive, a newly formed affiliate of Rosenbluth International

·         Concentrates on business traveller –niche (rated #1 business travel site)

Referral

-

Lastminutetravel

 

Private Co.

Private co.

·         travellers browse through travel products –only distressed inventory - and are connected to supplier site for booking

* 1999 statistics

 

Note: Net income is being reported here to emphasise the fact that these companies are still operating with a negative bottom line because of the high investment costs for development and maintaining their online systems.

 

The following is a listing of travel suppliers which are dominant in the online industry:

Airlines:

·         American Airlines

·         United Airlines

·         Delta

Cruise:

·         Carnival Cruise

·         Renaissance Cruise

Hotels:

·         Hotel Discounts

·         Norwegian Cruise Lines

 

Segment #2: Travel Purchase Facilitation Tools

Category: CRSs/GDSs

Profile

A Central Reservation System or Global Distribution System is a computer system, which allows real-time access to airline fares, schedules, and seating availability and offers the capability of booking reservations and generating tickets. The CRSs generate revenue by charging fees for booked segments and ticketed segments.  The CRS market is dominated by four major players who account for most of the travel reservations worldwide. Although the advent of the Internet may have spelled the end for the domination of the traditional GDSs, they have actually prospered by aggressively taking advantage of the Internet business opportunity.  Amadeus forged a Web deal with Wal-Mart.  Sabre is of course the engine behind Travelocity.com, Worldspan provides reservation services to some of the leading travel sites including Expedia.com and Priceline.com.  Finally, Galileo is launching its own consumer site in the first quarter of 2000.  Despite this fact, the Internet will continue to be a potential area which will foster many competitors for the GDSs.  Many players are getting into the game who can develop unique tools using current technology rather than being saddled with systems relying on old architecture.

 

Trends

·         Air segments booked through GDSs increased for the 12-month period ended Sept. 30 1999, by 6%.

·         Booking volumes in the U.S. continue to outpace the rest of the world.

·         Airlines are terminating access to same-day gate and flight information usually accessed through the GDSs.  Originally the intent was to provide the data to the travel agents to pass on to the end consumer, however Internet sites are beginning to take over this functionality.  The sites also maintain the functionality to deliver the information to pagers, cell phones and other hand-held devices.

·         Worldspan has joined the United States Air Consolidators Association, it plans to develop and implement automation solutions designed to assist and strengthen the air consolidation businesses.

·         A number of wholesale tour systems providers are in various stages of developing leisure travel portals, using their own hosting service to aggregate inventory and distribute it via the Internet, either directly to consumers or with the help of travel agents.

·         Channel based pricing is becoming more prevalent.  Lower fees are charged for any bookings generated through a channel that is owned and managed by an airline.  Amadeus said it was sharing the savings of agency distribution costs with its airline customers, in Sabres case the company is providing an incentive of 30% off regular booking fees for carriers to sell the corporate system.

 

 

 

 

 

 

 

 


Major Players

Name

Areas of Ops/ dominance

No. Agency Locations

Mkt Share – Air Seg. Booked (rank)*

Mkt Share – Agcy Locations (rank)

Sales Break down

1998 Sales in US$ Mil

Additional Comments

Sabre

USA, Canada

35439

32.8% (1)

24.3% (3)

57% GDS

43% IT svcs

2306.4

operates in 45 countries

1/3 of the world’s travel reservations are booked through Sabre

Galileo

USA, Canada

39000

30.3% (2)

28.4% (2)

91% GDS

9% IT svcs

1480.8

operates in 100 countries

Amadeus

Latin America, Caribbean, Europe

44102

25.1% (3)

34.3% (1)

 

1395.5

Europe accounts for 60% of bookings;
25% owners: AF, IB, LH

Worldspan

 

17900

11.8% (4)

13% (4)

 

637

Joint venture DL, NW, TWA;

operates in 60 countries

Abacus

Asia/Pacific

7300

 

 

 

 

Joint venture with Sabre

Axess

Japan

6800

 

 

 

 

 

Infini

Japan

6257

 

 

 

 

 

Topas

Korea

2240

 

 

 

 

 

* Figures 12 months ended Sept. 30, 1999

** Nov. 30, 1999

 

Segment #3: Travel Suppliers

Category:  Charter Airlines

Profile

Charter airlines cater to a wide range of customers including tour operators, groups, governments, sport teams, corporations and individuals (including personalised requirements) either for a series of flights or on an ad-hoc basis.  Their offering may include: a team of experienced professionals, state-of-the-art equipment, a superior training facility and a full service maintenance and engineering facility.  Charter carriers often provide a network of holiday flights to destinations around the world. Charters are a key component of the holiday package.

 

Charter should be considered when:

1.       The entire group must travel together on a single aircraft

2.       Custom non-stop aircraft routing is required

3.       VIP group requires first class aircraft configured

4.       Schedule allows travel during off-peak times

5.       The group is willing to pay for the convenience of having exclusive use of an aircraft

 

The cost of a charter is a function of distance, aircraft size and aircraft positioning.

 

Trends

Charter carriers continue to expand transcontinental, international, domestic and interregional services and are thereby fuelling competition to major scheduled airlines. Some of the larger and most reputable charter airlines work in partnership. These partnerships provide an important distribution vehicle for the product and ensure competitiveness. The Charter Industry has doubled since 1980.

 

Currently some regulatory restrictions which prevent charter carriers from providing equal competition (Canada).  Under Open Skies, 90% of Canada-US transborder operations are scheduled services.

 

Major Players

#

Company

Group

HQ

Fleet

1998 Sales in

US$ Mil

Additional Comments

North America

1

Air Transat

Transat A.T. Inc.

Montreal, Canada

20

349.7

 

Transat A.T. 921.2

- 2.5 million pax/year

- Canada’s leading charter airline with  45.3% Canadian Market share (1997)

2

Amtran, Inc

 

Indianapo-lis, USA

54

Charter:

340.2

Total Group:

919.4 

37% charter

56% scheduled

Principal Subsidiary:

American Trans Air (ATA)

North-America’s largest Charter carrier

11th largest carrier in the US

3

Royal Airlines

 

 

Montreal, Canada

8

1999 Sales:

339

One of Canada’s largest charter operator. Partner with Signature Vacations

18.9% Canadian Marketshare (1997)

4

Canada 3000

 

Toronto, Canada

 

 

26% Canadian Marketshare (1997)

Executive Charter:

1

1.1.1.1.1 Executive Jet

 

 

 

1997 Est. Sales: 500

World’s largest fleet in business jets.

2

Jet Aviation Intl, Inc

 

Zurich, Switzerland

140

403

Largest international provider of executive charter (corporate and private jets, helicopter).

For the last three years Jet Aviation's charter operations in the U.S. ranked among the best charter provider according to the "Professional Pilot" poll.

Europe

-

Airtours International

Airtours Plc

UK

42

Airtours Plc

4,677.6 mil

 

Airtours Plc owns Air Belgium, Airtours International and Premiair

-

LTU International Airways

SAir Group 49.9%

Priv Investors 39.9%

West LB 10.2%

Germany

28

1996/1997: 2,064

 

-7.2 million pax/year

-Private company

 

-

Britannia Airways

Thomson Travel Group

Luton, UK

44

 

-UK’s biggest charter

-7 million pax/year

-

Air 2000

 

UK

25

Private Company

-2nd largest UK charter airline

-30,000 flights a year; 5 million passengers

- 1999: “ Best UK Charter Airline”  by Travel Weekly Golden Globe

-

British World Airlines

BWA Group Plc

Stansted, UK

 

 

 

-

Edelweiss Air

Kuoni Travel Grp

 

4

 

Airline of Kuoni Travel Group

Expands into the long haul sector

-

Corsair

 

 

9

 

Airline of Nouvelles Frontières (No. 1 Tour Operator in France)

 

Category: Motor Coach Operators

Profile

Motorcoach companies offer quality ground transportation services for the business or leisure traveller. Motorcoach transportation often represents a very affordable option for the traveller.

 

Companies range from one and two vehicles to those with many hundreds of coaches; from small tour-specific companies to those performing intercity route service and charters. Charter services include local shuttles, single or multiple day trips, and long-distance charters nationwide for such groups as meeting planners, convention services, companies, schools, civic, and church groups. Tour Operators offer city-, regional- or multi-country tours.

 

The scope of services is furthermore increased by agreements /alliances with other companies in the industry to meet the total travel needs of its passengers, by bus, air or rail. Some of the main competitors are airlines and railways. Very fragmented/regional business

 

Trends

·         Intermodal alliances and partnerships with other coach operators, airline companies and/or   railway companies

·         Increase in trips of more than 1,000 miles – thus competing with discount airlines   (US)

 

 

Major Players

#

Company

Group

HQ

Fleet

(buses)

1998 Sales in

US$ Mil

Additional Comments

North America

1

Greyhound Lines, Inc.

Laidlaw, Inc.

Dallas, USA

2,500

846

Largest coach operator in the US

22 million pax/year

2,600 destinations in US and Mexico

2

Coach USA, Inc

Stagecoach Holdings

Houston, USA

9,500

803.6

 

-

Boston Coach

Fidelity Investments

 

 

 

One of Coach USA’s main competitors

-

Greyhound Canada

 

 

400

 

2 mil pax/year

Europe

1

Arriva Plc

 

UK

 

(1999)  2,583.4

#3 in UK 

2

Stagecoach Holdings

 

UK

12,000

(1999)  2,495.7

UK’s largest bus and rail company

30 subsidiaries

3

First Group Plc

 

UK

 

(1999)  2,371.8

 

4

National Express Group

 

UK

 

Group: 2,195.1

Buses & Coaches:  592

 

-

Eurolines

 

 

 

 

Europe’s largest scheduled coach operator

-

Greyhound South-Africa

 

 

 

 

 

Asia/Pacific

-

DelGro Corporation

 

Singapore

 

482.7

Bus operations:

69

 

-

Greyhound Australia

 

Australia

 

 

 

-

Transit Regency Bus Coaches

 

Australia

 

 

South Australia’s premier bus and coach co.

Tour Operators

-

Gray Line Worldwide

 

 

 

 

Tour Operator

-

Trafalgar Tours

 

 

 

 

Tour Operator

-

Skylink Tours

 

India

 

 

Tour Operator

 

Category: Cruise Lines

Profile

Cruise lines enable vacationers to embark on an adventure that unfolds amidst the beauty and charms of the seas, aboard a luxurious ocean liner. The package usually includes a stay in luxurious suites and cabins, dining on gourmet cuisine, entertainment by top-quality performers, accessibility to a pool, salon, library, cinema, casino, duty-free boutiques and the list goes on. The length of a cruise package could vary from a weekend getaway to several months in the high seas. The cruise lines cater to an International customer base, who can do their bookings through a travel agent, consolidator or directly with the cruise company. The customer must pre pay the cruise charges which may or may not include the port charges.

 

Trends

The cruise business is totally dominated by US citizens. About 80-90% of the passengers are Americans.  There is a lot of activity within the European Union and the Baltic market is also expected to grow. There is a growing emphasis on ‘value for money’, which a cruise voyage provides in good measure.  According to the 1999 benefits study conducted by CLIA  (Cruise

Lines International Association, an organization representing the North American Cruise Industry), cruise sales among CLIA-affiliated travel agencies accounted for 50% of all vacation sales. Referrals are the primary source for cruise business (92%), followed by direct mail. Seven-day cruises are the most popular.

 

Major Players

#

Group*

HQ

Cruise Lines

No. of Ships

Destinations

Market

Share

1998 Sales

in

US$ Mil

1

Carnival Corporation

Florida,

U.S.A.

Carnival Cruise Lines, Holland America Line, Windstar Cruise Line

25

Alaska, Caribbean, Europe, Mexico, South Pacific

35%

3,009

2

Royal Caribbean Cruises Ltd.

Florida,

U.S.A.

Celebrity Cruises,

Royal Caribbean International

16

Alaska, Canada, Caribbean, Europe, Scandinavia

25%

2,636

3

Star Cruises PLC

 

 

NCL Holding ASA

Singapore

 

 

 

Oslo,

Norway

95% ownership of Norwegian Cruise Line

 

Norwegian Cruise Line, Orient Lines, Norwegian Capricorn Line

11

 

 

 

10

Asia-Pacific destinations

 

 

Alaska, Antarctica, Australia, Bermuda, Canada, Caribbean, Europe, Hawaii, New Zealand, South America

-

 

 

 

10%

392

(1999)

 

 

770

4

Princess Cruises Inc.

California,

U.S.A.

-

-

Africa, Alaska, Caribbean, Mediterranean, South America

16%

-

-

Royal Olympic Cruises Ltd.

Piraeus,

Greece

-

6

Mediterranean, Europe, Central and South America

-

121

 

Category:  Hotels & Resorts

Profile

Hotels develop, manage, own, operate and offer lodging facilities under two tiers: full service and limited service. Within these tiers are motels, economy hotels and inns, mid-range hotels, quality hotels, luxury hotels, extended-stay lodging and time-share vacation companies. Resorts provide recreation and entertainment to vacationers and are usually all-inclusive. Most resorts are specialised – beach resorts, fishing resorts, golf resorts, casino resorts, etc. About 60% of the lodging industry rooms are affiliated with a national or regional brand. The chains are either hotel property owners or hotel franchisers, with a significant international presence. These rooms are aimed at corporate travellers as well as vacationers, who can do their bookings directly with the hotel, through a travel agent, CRS or on-line. The customer can either pre-pay the lodging charges or settle them at the end of his stay, though a minimum payment credit card guarantee is required.

 

In the case of some hotel chains, the marketing and sales function is outsourced to outside organisations. For example, Leading Hotels of the World is the prestigious sales, marketing and reservation organisation representing 315 of the world’s luxury hotels.

 


Trends

Worldwide, the hotel industry makes about $41 billion. In the US alone, there are 3.8 million hotel and motel rooms on 49,000 properties. A booming trade in globe-trotters helped boost international profits as well as revenues, even though the industry remained fiercely competitive. It is going through a merger and acquisition boom with chains preferring to buy other properties as it is a lot cheaper to buy than to build. There is a trend of link-ups and alliances to ensure synergies in terms of geography and complementarity of businesses, as well as offer wider range of services and facilities. Extended-stay hotels, which cater to people staying five or more nights, are the hottest category: The number of rooms has risen 60% since 1991.

 

Major Players:  Hotels

Group*

1.1.1.1.21.1.1.1.1                     HQ

Brand Names

Type of

Hotel

Number of Locations

1998 Sales in

 US$ Mil

Additional Comments

Starwood Hotels & Resorts Worldwide

New York,

USA

St. Regis,

The Luxury Collection, Westin, Sheraton, W, Caesars World, Four Points

Upscale full service, business traveller hotels

700

4,700

#1 lodging company

Marriott International Inc.

Maryland,

USA

Courtyard, Marriott, Ramada International, Ritz-Carlton, Fairfield Inn, SpringHill Suites,

Mid-priced, economy, extended stay, full-service, luxury

1,900

7,968

 

Operates food and related supplies distribution service

Cendant Corporation

New York, USA

Days Inn, Howard Johnson, Ramada Inn

Middle and economy priced hotels

6,000

5,284

Owns world’s #1 time share exchange service (Resort Condominiums International)

 

Choice Hotels International, Inc.

USA

Comfort Inn, Clarion, Quality Inn

Middle and economy priced hotels

4,100

165

#2 franchiser

Accor

Evry,

France

IBIS, Sofitel, Novotel, Mercure, Motel 6, Red Roof Inns, ETAP Hotel, Formule Hotel

Economy, business and leisure hotels

3,170

6,566

Owns 50% of world’s largest travel agency – Carlson Wagonlit

Bass PLC

London,

UK

Holiday Inn, Crowne Plaza, Intercontinental

All types

2,700

6,220

Britain’s 5th largest hotel group

Hyatt Corporation

Chicago,

USA

-

Business and upscale destination oriented vacationers

190

3,400  (1999)

-

Hilton Hotels Corporation

Beverly Hills, USA

-

-

275

1,769

 

Raffles International Limited

Singapore

Raffles, Raffles Merchant Court, Raffles Resorts

Deluxe and Landmark hotels

13

-

-

Shangri-La Hotels

Hong Kong

Shangri-La

Upscale full service

37

-

- all hotels in Asia/Pacific

Hong Kong & Shanghai Hotels

Hong Kong

The Peninsula Hotels

5-star upmarket, city hotels

9

-

- 5 properties in Asia + 4 in USA

ITC Hotels Ltd

New Delhi, India

Sheraton, Fortune Hotels, WelcomHeritag

Luxury, palaces, mid-price range

33

-

-

* parent company, ownership company

 

 

Major Players: Resorts

Group*

HQ

Number of Locations

1998 Sales in

US$ Mil

Additional Comments

Club Mediterranee S.A.

Paris,

France

120 resort villages in 36 countries +

11 villas

1,512

A cruise ship operator + owns a French tour operator

Vistana, Inc.

Florida,

USA

8 time share resorts

234

Subsidiary of Starwood

Boca Resorts, Inc.

Florida,

USA

6 luxury resorts + 1 golf resort

387

(1999)

Huizenga controls 98% of Boca

* parent company, ownership company

 

Category: Car Rental Companies

Profile

Car Rental Companies provide comprehensive automotive transportation and vehicle management solutions with strengths in car rental, vehicle leasing and vehicle management services. The typical car rental customer travels for business or leisure. The rental locations may be company owned, licensed or franchised. Most of the rental companies have subsidiaries that offer liability and auto insurance. The customers can do their bookings directly with the car rental company, through a travel agent, CRS or on-line and can guarantee the payment either when making the reservation or when renting the car.

 

Trends

The car rental company is going through a period of intense consolidation with changes in ownership or management thereby reflecting the industry’s new emphasis on profitability. The rental companies are also entering into partnerships with airlines and hotels. The companies are also entering into cooperation agreements with other rental companies in terms of geography and to enable exchange of reservations. As car prices, insurance rates, and labour costs continue to climb, rental car companies will operate fewer locations, discontinue discounting, and increase surcharges.

 

Major Players

Company

HQ

Ownership

Number of Locations

Number of Vehicles

1998 Sales  in

US$ Mil

Additional

Comments

The Hertz Corporation

New Jersey, USA

Ford (81%)

6,000

500,000

4,154

#1 rental company

Avis Rent A Car, Inc.

New York, USA

Cendant Corporation

4,200

1,000,000

2,298

#2 rental company

Avis Europe plc

Berkshire, UK

D’Ieteren (57%)

2,500

81,000

839

#1 rental firm in Europe

Alamo Rent A Car, Inc.

Florida, USA

Auto Nation

550

150,000

1,520

-

National Car Rental System, Inc.

Minnesota,

USA

Auto Nation

3,000

250,000

-

-

Dollar Thrifty Automotive Group, Inc.

Tulsa,

USA

Dollar Thrifty

1,619

932,000

-

-

Enterprise Rent-A-Car

St. Louis,

USA

Enterprise Capital Group

-

370,000

4,180 (owner’s total rev)

Biggest US car rental fleet

Budget Rent-A-Car

Florida,

USA

Budget Group

6,400

-

2,616

#2 renter of moving trucks in US

Europcar International

St. Quentin-Yvelines, France

Volkswagen (100%)

In 98 countries

-

-

-Ranked #2 in Europe

- 70% of business is corporate

Sixt AG

Pullach,

Germany

Erich Sixt (Chairman)

700+

-

2,760

Leader in Germany

Category: Railroads

Profile

Railroad is a form of transportation consisting of mainly freight cars and passenger cars. The scope of our research is limited to passenger transportation. Railroads are primarily used by vacationers who can do their bookings directly with the railway company, through a travel agent or on-line. The traveller pays the transportation charges before commencing his travel.

 

Trends

Railways have come a long way from being driven by steam-powered engines in the 1800s to high speed passenger trains, such as the bullet and TGV trains, developed in the 1980s in France, Germany and Japan. In most countries other than the U.S., railways have long been nationalised or heavily subsidised by the Government, but in the 1990s there was a movement towards privatisation and reduction of subsidies in several West European countries. Railways are facing strong competition from airlines. Europe’s rail companies are pushing to keep pace with the airlines in the race for the wired traveller. 15 of Western Europe’s 16 national operators meet customers on-line, as do most commuter rail companies and the 2 major cross border ventures, Eurostar and Thalys.

 

Major Players

Area

Company

 

HQ

Ownership

1998 Revenues in

US$ Mil

Passengers Transported

Related T&T Activities

N. Am.

VIA Rail

 

 

Amtrak

Montreal, Canada

 

Washington, DC, USA

-

 

 

National Railroad Passenger Corp

200

 

 

2,285

 

3.8 mil p.a.

 

 

21 mil p.a.

-

 

 

-

Eur.

Eurostar

UK

Eurostar UK, SNCF France, SNCB/NMBS Belgium

-

-

-

SNCF

France

State Owned French Railway Co.

10.92 bil

-

-

Deutsche Bahn AG

Frankfurt,

Germany

State Owned German Railway Co.

18,011

-

-

Trans-Siberian Railway

Russia

State Owned

-

-

-

Asia

East Japan Railway Co.

Tokyo,

Japan

-

20,851 (1999)

16.5 mil daily

-

West Japan Railway Co.

Osaka,

Japan

-

1.2 bil

(1999)

-

-

Guangshen Railway Co. Ltd

Guangdong,

China

State Enterprise  owned (70%)

235

25 mil p.a.

-

Tranz Rail Holdings Ltd.

Wellington,

New Zealand

Wiconsin Central Transportation Corpn. (25%)

292

-

-

Indian Railways

India

State Owned

5.3

11 mil daily

-

Category:  Ferry Operators

Profile

Ferry Operators transport passengers and vehicles (cars, coaches, trucks and trains) on domestic coastlines, inter-island or international seas. In addition, the main companies provide a wide range of other services such as freight, logistics, port operations etc. The scope of our research is limited to passenger transportation. There are synergies with cruises in serving the leisure end of the market and more specifically in areas such as customer services, purchasing of supplies, crewing, training and relations with shipyards. Combined rail & ferry service is particularly common in Europe. 

 

Check-in time is commonly 30-60 minutes and tickets should be purchased in advance, either through travel agency or directly with ticket office. Some larger ferries offer restaurants, boutiques, children’s playroom, cinema, currency exchange and meeting facilities.

 

The largest multi-purpose ferry in the world can carry 2,600 people aboard 17 decks.

 

Trends

·         Fast ferries

·         The growth of the developing and newly industrialised economies has reduced western industrialised nations' share of world shipping, as it has their share of other industries. Changing patterns of world seaborne trade have shifted the geographical focus of growth towards different trading routes, in particular those to, from and within the Far East. 

 

Major Players

#

Company

HQ

Fleet

(vessels)

1998 Sales in

US$ Mil

Additional Comments

1

P&O
The Peninsular and Oriental Steam Navigation Company

London, UK

 

9,813

# 1 in UK

Ferries, cruises and ports are core activities.

Established in 1835

2

Nippon Yusen Kabushiki Kaisha

Tokyo, Japan

 

8,104

Passenger ships, cargo and warehousing.

3

Stena Line AB

Göteborg, Sweden

26

973.2

10.4 mil pax/year

4

Finnlines Group

Helsinki, Finland

21 (80)

681.8

German subsidiary: Poseidon Schiffahrt AG

 

5

BC Ferries

Vancouver Canada

40

264.9

21.4 mil pax/year

-

Grimaldi Group

 

 

 

#1 in Italy

#6 in the world

-

Cenargo International Group

 

 

 

 

-

Washington State Ferries

Washington, USA

27

 

25.6 mil pax/year

-

DFO

Deutsche Fährgesellschaft Ostsee

Germany

 

 

Largest ferry operator in Germany

-

Silja Line

Finland

 

 

First large shipping company in the world to be awarded ISO Environment Certification

-

Brittany Ferries

UK

 

 

 

-

Moby Line

Corsica

13

 

 

-

Sydney Harbor Ferries

Sydney, Australia

27

 

 

-

China (18 ports)

 

 

 

 

 

Category: Travel Insurance

Profile

Travel insurance companies provide travellers with superior protection and insurance during their travel. They take care of the travel insurance needs, from overseas medical and dental expenses, through to a comprehensive range of insurance benefits and services to cover the travel inconveniences a traveller may encounter during his trip. These include any or all of the following – trip cancellation and interruption, default by a travel provider, trip delays, medical expenses, emergency medical transportation, lost or damaged luggage. The coverage can be on a per trip basis or on an annual basis. Travel insurance must be bought and paid for by the traveller before commencing his trip. The insurance fee is typically a daily charge and varies with the age of the traveller. The insurance brokers act as go-betweens for insurance buyers and sellers, arranging for clients the most suitable insurance with the most appropriate insurers.

 

Trends

Traditionally, the insurance industry was regulated by the individual states, which oversaw rates, coverage and cancellation requirements, and settlement provisions. U.S. Insurance companies, like all financial companies, are increasingly internationalised. Throughout the 1980s and 1990s, the insurance industry, like many other industries has consolidated through mergers and acquisitions. Insurance companies face increasing competition on their own turf as banks broaden their range of services. in the 1990s, Japan passed the U.S. as the world’s largest insurance market.

 

 

Major Players

Rank

Company

HQ

Revenues in

US$ Mil

Risk Coverage in

Additional Comments

9

American International Group, Inc. (AIG)

New York,

USA

3.77 bil

130 countries

US’s largest underwriter of commercial and industrial coverages

10

Royal & Sun Alliance

London,

UK

24,988

130 countries

UK’s largest general insurer

-

Travel Guard International

USA

-

-

-

-

Smart Cover

Australia

-

-

-

-

Universal Travel Protection Insurance

USA

 

 

 

 


Category: Airports

Profile

Airports provide airlines with the infrastructure to handle passenger, cargo, freight and mail. Its purpose is to provide high levels of safety and security, customer service and business operations to passengers, tenants and employees ensuring the airport is a gateway and valuable business enterprise for the city. Airports are the gateways to and from the cities and countries they serve and are responsible for all aspects of airport operations such as terminal management (the buildings, passenger services and cargo) and airfield management (the runways, aprons and taxiways). Priority is ensuring safety and security of passengers in airport environment. They also manage the commercial facilities at the airport including shops, restaurants, pubs, car hire, car parks, duty-free (which may also be operated by subsidiary companies). Their main source of revenue is landing fees, parking fees, building and land rentals, passenger facility charges (PFCs), etc.

 

Trends

There is an increase in the number of passengers passing through most airports (average in Europe 7.5% at the top 10 airports). Growth rate of cargo traffic is lower than passenger traffic. Brussels has the highest growth figures (8.6%), a result of the airport’s strong position on the relatively fast growing express market. Nearly every airport is faced with the problem of poorer punctuality as a result of capacity problems in the European air space. Adjusting noise zones and allowing selective growth of air transport movement so that fewer dwellings around airports are affected by noise pollution, i.e., noise measurements are starting to play a key role. Another recent trend to comply with restrictions on night flights, has been to move air traffic to newly built airports on artificial islands. The aviation industry views the offshore option as more realistic once continued growth at current location has reached its maximum aircraft movement level. Privatization of airports is now a worldwide trend. It is becoming necessary to remain competitive and to gain access to the capital market so that it can finance future activities and make the enterprise move efficient.

 

Major Players

Rank

Airport

Owned by

Managed by

Total Passengers Mil

1998 Revenue

US$ Mil

Airlines

Served

1

Atlanta Hartsfield

City of Atlanta

Dept of Aviation

73

236

52

2

Chicago O’Hare

City of Chicago

Chicago Airport Systems

72

444

50

3

Los Angeles

City of L.A.

L.A. World Airports

61

-

-

4

London Heathrow

British Airport Authority

British Airport

Authority

61

3160 (1999)

-

6

Frankfurt

Flughafen FRA/Main AG

Flughafen FRA/

Main AG

43

-

125

9

Paris Charles de Gaulle

Government of France

Aeroports de Paris

39

1,413

364

11

Amsterdam Schiphol

Schiphol Group

Schiphol Group

34

NLG 569

 

16

New York John F Kennedy

City of New York

Port Authority of NY and NJ

31

-

-

23

Hong Kong

Hkg Government

Airport Authority

28

-

60

Segment #5: Travel/Tourism Experience

Category: Amusement & Theme Parks

Profile

Amusement parks are commercially operated parks offering various rides for entertainment. A theme park is an amusement park in which the settings are based on a central theme. A majority of the park operators belong to brand-name conglomerate, whose businesses range from movies to beer to snacks. The parks are either ‘regional parks’, which draw the bulk of their visitor base from areas nearby, or ‘destination parks’ which pull visitors from further away. The visitors can either pre-pay the park entry fee and purchase the ticket from a travel agent or a tour operator, or pay the fee and purchase the ticket on-site.

 

Trends

The amusement park business is booming and a lot of investors are looking for leisure ideas. The park operators are having a ‘phenomenal year’ with significant increase in season pass sales and attendance. Parks themselves are beginning to chip in their share to ride the wave of interest. A recent study showed that for the first time in five years, the cost of going to a park has declined for a family of four. A recent trend is to offer customers with a special promotion through an alliance with a business partner.

 

Major Players

Group*

HQ

Amusement & Theme Parks

Type of Park

Revenues

US$ Mil

1999

Other T&T  Related Products

The Walt Disney Company

Burbank,

USA

Walt Disney World, Disneyland

Destination

Parks

6.1billion

Disney Cruise Line, Disney Resorts

Seagram Company Ltd.

Montreal,

Canada

Universal Studios in USA, China, Japan; Universal Studios Port Aventura in Spain, Wet ‘n Wild in USA

Destination

Parks

5 billion

Universal Studios Escape Resorts,

Universal Studios Vacations (Travel Co)

Euro Disney S.C.A.

Cedex,

France

Disneyland Paris Resort

Destination

Park

1053

 

Includes 7 themed hotels, theme park, Disney Village Entertainment, Golf Centre

PremierParks, Inc.

Oklahoma,

USA

Six Flags, Walibi, Waterworld, White Water

Regional Parks

814

-

Tokyo Dome Corporation

Tokyo,

Japan

Tokyo Dome stadium surrounded by Big Egg City (an amusement park)

Regional Park

981

Hotels and resorts

Cedar Fair, L.P.

Ohio

USA

6 amusement parks in USA

Seasonal (winter prone Parks)

420

Hotels

ViaCom Inc.

New York,

USA

Paramount’s Parks in USA and Canada

Regional Parks

21.1 billion

(from all ViaCom business)

-

Anheuser-Busch Companies, Inc.

USA

11 adventure parks in USA including SeaWorld

Regional Parks

450

-

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment C8

 

IATA Information Technology Services

 

 

 


Attachment C8 – IATA Information Technology Services

 

 

IATA employs 73 IT staff world-wide.

 

 

Karin GEBERT

Senior Director, Information Technology Services

IATA

 

 

Ms. Karin Gebert is the Senior Director Information Technology Services (ITS) in IATA, reporting to Vice President Corporate Services and CFO. Ms. Gebert graduated with a Bachelor of Computer Science from the University of Sherbrooke (Quebec, Canada). During her career she has worked in the areas of banking, police computer services and IATA. This included areas of software development, project management, general IT management and developing IT strategies to meet IATA's business needs.

 

Ms. Gebert's department is responsible for all areas of information technology in IATA, including infrastructure, telecommunications & networks, systems & operations, applications development and IT strategy & architecture. Ms. Gebert is Secretary to the Information Technology Steering Committee and the Information Management Committee. As Secretary to the Information Technology Steering Committee, she is also responsible for developing IT strategies based on IATA's developing business requirements.

 

She manages a team of IT professionals in Montreal, Geneva, Singapore, London, Miami and Beijing. In addition to managing full IT services in the main offices, she is also responsible for providing infrastructure strategy and services to over 80 field offices.

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment C9

IATA Business Standards & Ethics Guidelines

 


Attachment C.9 - IATA BUSINESS STANDARDS & ETHICS GUIDELINES

 

 

Introduction

 

The object of these guidelines is to set out IATA’s Corporate Policy regarding the business standards and ethics that the personnel of IATA must follow in their relations with:

 

(a)     other employees;

 

(b)     our Members;

 

(c)     other clients;

 

(d)     suppliers, and;

 

(e) the community in general.

 

These guidelines are consistent with IATA’s Mission and Goals.

 

We must all respect the basic guidelines set out in this document. Failure to observe these guidelines may give rise to disciplinary action.

 

Written policies are not enough, however, I also count on the good judgement of all employees to ensure that both the spirit and letter of these guidelines are respected.

 

Pierre J. Jeanniot o.c. Director General

 

01 May 2000


 IATA Policy Guide

 

IATA EXPECTATIONS & REQUIREMENTS

 

IATA expects its employees to carry out their responsibilities in a professional and ethical manner in accordance with applicable laws.

 

IATA expects its employees to pay due respect to the customs and practices of other people.

 

IATA requires integrity from its personnel. Every employee’s behaviour must be of a standard such that it will not undermine the Association’s reputation or compromise the ability of employees to carry out their duties. To help meet these standards, all employees shall act in accordance with the following guidelines:

 

Equal Opportunity

 

IATA is an equal-opportunity employer. In all aspects of employment, no regard shall be given to race, colour, religious belief, sex, age or national/ethnic origin.

 

Conflict of Interest

 

Employees have a primary professional obligation and a duty of loyalty to IATA. Accordingly employees must avoid direct or indirect conflicts of interest.

 

Employees must avoid any act or omission which may prejudice, or be seen to prejudice, impartiality of decisions made on behalf of the Association. All questions regarding possible conflict of interest should be referred to the appropriate Division Head or to an Ombudsman.

 

Acceptance of Gifts

 

Acceptance of a gift or favour by an employee can prejudice the Association’s interests by affecting the employee’s judgement or by creating an unfavourable impression. The same is true regarding the offering of gifts or favours.

 

Employees shall use prudence in relations with suppliers of goods and services to IATA, and ensure that their independent judgement will not be influenced or impaired in any way by the acceptance or grant of any benefit.

 

Only gifts of nominal value may be personally accepted or given.

 

External Professional Activities

 

Prior authorisation in writing from the employee’s Division Heads shall be obtained before undertaking any external professional activity, including other employment, other consulting work or directorship.


                                                IATA Business Standards and Ethics Guidelines

 

Financial Interests

 

Employees must avoid engaging in any financial transaction which could undermine, or be perceived as undermining, the impartiality of decisions relating to IATA. Impartiality could be compromised if a close relative (such as a spouse, common-law spouse, co-habitant or dependant) directly or indirectly owns an interest in a business that is a competitor to the Association or deals with the Association.

 

An interest not exceeding 5% of the capital shares of a public company shall not be deemed to be the basis for a conflict.

 

Employment of Relatives

 

Relatives of employees are eligible for employment with the Association, and thereafter for promotions or transfers within the Association, if no first-level or second-level supervisory relationship exists between them.

 

Confidential Information

 

IATA considers the protection of confidential information and trade secrets of utmost importance Employees shall not disclose, any confidential or other information relating to the affairs of the Association.

 

Relations with Members

 

IATA Members are our “shareholders” and our clients. Each employee must treat them with respect and respond professionally to their needs.

 

In conjunction with the activities of the Association, IATA Members may provide employees with information that they do not want divulged. Such information must be treated as confidential and should not be given out without the Member’s permission.

 

Contacts with the Media

 

Requests for information from the media or any other source which falls outside the scope of the ordinary duties of an employee should be referred immediately by the employee to their immediate superior or the Member Relations & Communications Division, as may be appropriate.

 

Accounting Procedures

 

Procedures relating to financial commitments, expenditures and the reimbursement of personal expenses are set out in the Business Travel Regulations and in the Accounting Policy and Procedures Manual.


 IATA Policy Guide

 

 

Contractual Arrangements with Outsiders

 

No individual employee shall have the right to commit the Association financially or legally at any time. All contracts shall have a Contract Clearance Form duly completed and signed in accordance with the Accounting Policy and Procedures Manual. The same procedure shall apply for all Purchase Orders.

 

Antitrust Compliance

 

Antitrust and competition laws regulate the way in which businesses compete. Among other things, they govern how competitors may conduct joint activities. IATA’s activities involve the participation and co-operation of airlines that compete with one another, often market and sell services to the same customers, and often purchase supplies from the same vendors. For this reason familiarity with, and awareness of, the possible implications of the antitrust laws is essential for IATA employees.

 

In approving the updated IATA Antitrust/Competition law Compliance Guide (2nd edition 1994), the Board of Governors, recognised that an express policy of compliance with competition law, together with an awareness of the need to comply, on the part of IATA Members and staff, will assist in reducing exposure to investigations and lawsuits. Employees must familiarise themselves with the contents of the Guide, apply its Guidelines, and consult the Legal Department whenever a particular situation may be unclear.

 

Use of Information Technology and Internet

 

The storage of data on computers and the use of the Internet is governed by a continually evolving body of national law and, in certain cases, may expose the owner, sender and his employer to criminal and/or civil action. In order to reduce the risk of such exposure, IATA has developed an Internet Acceptable Use Policy (IAUP) and all IATA employees must adhere to this policy

 

Application of Guidelines

 

Should any employee have a question regarding the application of these guidelines on the part of other employees, the employee is urged to discuss the issue with the appropriate Division Head, IATA Ombudsman or the Chief Auditor

.

PERIODIC DECLARATION

 

 

In order to ensure that employees are aware of the business standards and ethics expected of them, an Employee Declaration shall be completed periodically.

 

A copy of this declaration is reprinted below.

 

 

 

 

 

 

EMPLOYEE DECLARATION

BUSINESS, STANDARDS & ETHICS

GUIDELINES

 

IATA Corporate Policy

 

IATA’s Guidelines for Business Standards and Ethics set out the requirements for IATA personnel with respect to their relations with other employees, Members, clients, suppliers and the community in general.

 

This is to confirm that I have read the IATA Guidelines and am aware of the standards of conduct that are expected from all IATA employees. I further recognise that failure to conform to these Guidelines can result in severe disciplinary measures.

 

NAME  __________________________________________________________________________

 

DIVISION: ________________________________________________________________

 

DATE: ________________________________________________________________________

 

SIGNATURE:  __________________________________________________________________________

 

This form should be signed and returned to Bill Twinn, Senior Director, Human Resources, IATA Geneva. If you have any questions, please contact an IATA Ombudsman or the Chief Auditor.

 


 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment C12.A

 

IATA Audited Financial Statements

 


Attachment C12.A – IATAAudited Financial Statements

 

Deloitte & Touche, llp

Chartered Accountants

1 Place Ville-Marie
Suite 3000
Montréal QC   H3B 4T9

Telephone:     (514) 393-7115

Facsimile:       (514) 390-4104

 

 

 

 

Auditors' report

 

 

To the Members of

International Air Transport Association

     Montréal, Canada

 

We have audited the consolidated balance sheet of International Air Transport Association as at December 31, 1999 and the consolidated statements of revenue and expenditure, surplus and cash flow for the year then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Association as at December 31, 1999 and the results of its operations and changes in its cash flow for the year then ended in accordance with the International Accounting Standards.

 

 

 

 

 

Chartered Accountants

 

May 5, 2000

Montréal, Canada

 

 

 

Page 1 of 13

INTERNATIONAL AIR TRANSPORT ASSOCIATION

Consolidated statement of revenue and expenditure

year ended December 31, 1999

(expressed in 000's of US dollars)

                                                                                                                    1999                  1998

                                                                                                                       $                        $

 

 

Revenue

     Training sales                                                                                             10,781                   8,654

     Product and service sales                                                                          117,023               108,379

     Financial income                                                                                        10,451                 10,185

                                                                                                                    138,255               127,218

 

Expenditure

     Salaries and employee benefit plans                                                     82,961                77,500

     Travel and accommodation                                                                   12,800                  9,924

     Office services                                                                                       15,479                13,425

     Printing and distribution                                                                          51,893                53,551

     Data processing                                                                                     39,421                36,465

     Depreciation and amortization                                                                 8,357                  7,081

     Other expenditure                                                                                  33,506                29,119

     Financial charges                                                                                     4,715                  4,164

     Taxes                                                                                                          795                  1,014

     Unrealised foreign exchange (gain) loss on long-term debt                   (3,584)                1,661

     Other foreign exchange (gain)                                                                (1,609)                    (20)

                                                                                                                  244,734              233,884

 

Excess of expenditure over revenue before

     Members’ contributions                                                                      (106,479)           (106,666)

 

Members’ contributions                                                                            110,105              107,109

Excess of revenue over expenditure                                                     3,626                     443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 2 of 13

 

INTERNATIONAL AIR TRANSPORT ASSOCIATION

Consolidated statement of surplus

year ended December 31, 1999

(expressed in 000's of US dollars)

                                                                                                                    1999                  1998

                                                                                                                       $                        $

 

 

Balance, beginning of year

     As previously reported                                                                            14,747                14,304

 

     Reclassification of surplus (Note 8)                                                        (4,987)               (4,987)

 

     As restated                                                                                               9,760                  9,317

 

     Cumulative translation adjustment brought forward                               (2,333)               (2,591)

                                                                                                                      7,427                  6,726

 

Cumulative translation adjustment for the year                                              (896)                   258

 

Excess of revenue over expenditure                                                            3,626                     443

Balance, end of year (Note 7)                                                                 10,157                  7,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 3 of 13

INTERNATIONAL AIR TRANSPORT ASSOCIATION

Consolidated balance sheet

year ended December 31, 1999

(expressed in 000's of US dollars)

                                                                                                                    1999                  1998

                                                                                                                       $                        $

                                                                                                                                          (restated)

 

 

Assets

Current assets

     Cash and term deposits                                                                        39,034                32,952

     Funds held in trust (Note 4)                                                                 460,288              738,838

     Membership dues receivable                                                                   8,927                18,561

     Accounts receivable (Note 4)                                                               221,110              109,857

     Inventory (Note 3f)                                                                                    9,324                11,098

     Other current assets                                                                                6,849                  6,052

                                                                                                                  745,532              917,358

 

Fixed assets, net (Note 5)                                                                          44,327                45,453

Goodwill                                                                                                        1,230                  2,937

Deferred pension asset (Note 12)                                                                6,375                  1,051

Other non-current assets                                                                                982                  3,624

                                                                                                                  798,446              970,423

 

 

Liabilities

Current liabilities

     Bank loans and overdrafts                                                                     16,333                17,755

     Accounts payable (Note 4)                                                                   682,544              843,094

     Accrued liabilities and deferred income                                                 51,444                55,053

     Other current liabilities                                                                             5,881                11,271

     Current portion of long-term liabilities (Note 6)                                           792                     871

                                                                                                                  756,994              928,044

 

Long-term liabilities (Note 6)                                                                       31,295                34,952

                                                                                                                  788,289              962,996

 

 

Surplus (Note 7)                                                              10,157              7,427

                                                                                                                  798,446              970,423

 

 

Approved by the Board

 

 

....................................................................... Chairman, Chair Committee

 

 

....................................................................... Director General

 

 

....................................................................... Chief Financial Officer

 

Page 4 of 13

INTERNATIONAL AIR TRANSPORT ASSOCIATION

Consolidated statement of cash flow

year ended December 31, 1999

(expressed in 000's of US dollars)

                                                                                                                    1999                  1998

                                                                                                                       $                        $

                                                                                                                                          (restated)

Operating activities

     Excess of revenue over expenditure                                                       3,626                     443

     Items not affecting cash

          Depreciation and amortization                                                            8,357                  7,081

          Pension credit                                                                                    (1,367)                        -

          Effect of exchange rates on long-term debt                                      (3,584)                1,661

                                                                                                                      7,032                  9,185

 

     Cash provided from (used in) other working capital items

          (Decrease) increase in accounts payable                                         (3,363)              18,089

          (Decrease) increase in accrued liabilities and deferred income       (3,609)              22,206

          (Decrease) in other current liabilities                                                 (5,390)               (1,076)

          (Decrease) in current portion of long-term liabilities                               (79)                  (135)

          Decrease (increase) in membership dues receivable                       9,634              (14,827)

          Decrease (increase) in accounts receivable                                    10,110              (19,502)

          Decrease (increase) in inventory                                                        1,774                (3,904)

          (Increase) decrease in other current assets                                        (797)                   828

                                                                                                                      8,280                  1,679

                                                                                                                    15,312                10,864

 

Investing activities

     Net acquisition of fixed assets                                                                (5,524)             (12,026)

     (Increase) in deferred pension asset                                                      (3,957)                  (531)

     Decrease (increase) in other non-current assets                                   2,642                (2,615)

     Effect of exchange rates on foreign assets and liabilities                         (896)                   258

                                                                                                                     (7,735)             (14,914)

 

Financing activities

     Repayment of long-term liabilities                                                             (871)             (27,883)

     Increase in long-term liabilities                                                                    798                29,629

                                                                                                                          (73)                1,746

 

Trust activities (Note 4)

     (Decrease) increase in accounts payable                                         (157,187)           (135,620)

     (Increase) decrease in accounts receivable                                      (121,363)               (9,910)

                                                                                                                 (278,550)           (145,530)

 

Net cash inflow (outflow) operations                                                             7,504                (2,304)

Net cash (outflow) trust activities                                                            (278,550)           (145,530)

Cash position, beginning of year                                                              754,035              901,869

Cash position, end of year                                          482,989           754,035

 

Cash position comprises cash and term deposits, funds held in trust and bank loans and overdrafts.

 

 

 

 

 

Page 5 of 13


 

INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

1.           Description and legal status of the Association

International Air Transport Association (the "Association") is a non‑governmental organization whose purpose is to represent its members. Its principal objectives are to promote safe, reliable and secure air services and provide a means of collaboration among airlines engaged in international air transport. It provides technical and professional services to its members and sells a range of products and services related to the airline industry and international air transport. It was created by a special act of the Canadian Parliament in 1945 as a not‑for‑profit organization.

2.           Basis of consolidation

The consolidated financial statements of the Association include the accounts of all wholly-owned subsidiary companies and IATA's Settlement Systems over which the Association has effective control. The consolidation includes five settlement operations that were not owned by IATA as at December 31, 1999. Negotiations to bring ownership in line with control are continuing and it is anticipated that transfer of ownership of all the consolidated entities will be substantially completed during 2000.

 

In respect of the IATA Settlement Systems, the consolidated accounts include only those amounts that are recorded in the books of account. This does not necessarily represent the full cost of the system to the members as certain processing costs are passed directly to the members.

 

During the year the Association entered into a 50% joint venture relating to the publication of air tariffs.  The results and assets and liabilities of this joint venture have been proportionately consolidated in the consolidated financial statements.

3.           Accounting policies

The financial statements have been prepared in accordance with International Accounting Standards (IAS).

 

The principal accounting policies are as follows:

 

a)      Fixed assets

Fixed assets are accounted for at the historical cost. Depreciation and amortization are generally computed using the straight‑line method with rates based on estimated useful lives of the assets as follows:

 

                 Building                                                                              50 years

                 Furniture and fixtures                                                           5 years

                 Equipment                                                                      1 - 5 years

                 Leasehold improvementslower of 50 years or terms of the leases

                 Computer software                                                         2 - 5 years

 

 

 

 

 

Page 6 of 13


 

INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

3.           Accounting policies (cont'd)

b)      Goodwill

Goodwill represents the excess of the cost of the investments in International Airline Publication B.V. (IAP) and in The Air Cargo Tariff B.V. (TACT) over the fair value of the net identifiable assets acquired and is amortized over its expected economic useful life of three to five years.

 

c)      Foreign currency

The activities of many of the foreign branches are treated as an integral part to the operations of the Association. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non‑monetary assets and liabilities are translated at historical rates. The Association hedges most of its net foreign expenditure through the use of forward exchange contracts. Hedged foreign currency transactions are translated at the hedged rate of exchange, all other transactions are translated at the average rates for the period. Translation gains or losses are reflected in the statement of revenue and expenditure.

 

The Association also holds investments in foreign self-sustaining entities. The assets and liabilities of these entities are translated at the closing rate of exchange and revenue and expenditure items are translated at the average rates for the period, the resulting exchange differences are shown in cumulative translation adjustment in the statement of surplus.

 

d)      Capital leases

Assets acquired through capital leases are amortized using the straight‑line method based on the estimated useful lives of the assets. Minimum lease payments reduced by imputed interest are presented as long‑term liabilities.

 

e)      Retirement benefits

The Association offers retirement benefits to various groups of employees based on arrangements adapted to comply with local legislation and agreements. Employees generally contribute to defined benefit plans and pensions are based on the length of service and on the average end‑of‑career salary. The cost, based on actuarial valuations, is charged to revenue and expenditure accounts. When the cost for the year differs from the Association's contribution, an asset or a liability is recorded to reflect the timing difference. The cost of servicing defined contribution plans corresponds to the funding required during the year.

 

f)        Inventory

Inventory is valued at cost less provision for slow moving or obsolete items.  In respect of Standard Traffic Documents (STDs) inventory does not include amounts held by agents.

 

 

 

 

 

 

 

 

 

Page 7 of 13


INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

4.           Funds held in trust

There are four main activities under which the Association is holding monies on behalf of third parties. These are:

·         The Clearing House, under whose regulations, the liability of the Association to any member arising from clearing transactions is subject to the payment of the balance due by debtor members;

·         Air Traffic Control (ATC) Enhancement and Financing which holds funds in trust on behalf of the Air Traffic Control organizations in various countries;

·         the IATA Currency Clearance Services (ICCS), whose funds are held in trust on behalf of members for international currency trading; and

·         the funds related to the IATA Settlement Systems.

 

The following amounts are included in receivables and payables in respect of these activities:

 

    

1999

 

1998

 

Receivable

$

Payable

$

 

Receivable

$

Payable

$

Clearing House Members

15,880

42,090

 

13,801

48,280

Air Traffic Control

1,926

53,266

 

2,708

37,347

IATA Currency Clearance Services

-

22,823

 

-

24,406

IATA Settlement Systems

177,140

537,055

 

69,074

714,388

 

5.           Fixed assets, net

 

                                                                               1999                                             1998      

                                                                        Accumulated

                                                                         Depreciation

                                                                                and                 Net Book            Net Book

                                                     Cost            Amortization                Value                  Value           

                                                        $                        $                         $                         $

 

 

Building                                         37,972                  7,666                30,306                31,060

Furniture and fixtures                     9,637                  7,261                  2,376                  3,166

Equipment                                    15,754                13,147                  2,607                  2,531

Leasehold improvements              9,742                  1,891                  7,851                  7,564

Computer software                        7,942                  6,755                  1,187                  1,132

                                                     81,047                36,720                44,327                45,453

 

Page 8 of 13


INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

6.           Long-term liabilities

                                                                                                          1999                  1998     

                                                                                                             $                        $

 

First rank mortgage CHF 30,047,000

      (1998: CHF 30,047,000)                                                              18,771                  21,876

Second rank mortgage CHF 6,934,000

      (1998: CHF 6,934,000)                                                                  4,332                    5,048

Unsecured loan CAD 6,620,440

      (1998: CAD 6,231,639)                                                                  4,562                    4,057

Medium term loan NLG 2,550,000                                                              -                    1,359

Capital lease obligations                                                                     1,510                    1,965

                                                                                                           29,175                  34,305

 

Current portion                                                                                       792                       871

                                                                                                           28,383                  33,434

 

Other long-term liabilities                                                                    2,912                    1,518

                                                                                                           31,295                  34,952

 

The First and Second rank mortgages relating to the building in Geneva bear interest at a fixed rate of 4.70% per annum. This interest rate is fixed until June 1, 2003. The mortgages are repayable in semi-annual instalments of CHF 500,000 ($312,363), starting on December 1, 2001.

 

The unsecured loan of CAD 6,620,440 bears interest at a fixed rate of 6.0% and is repayable in monthly instalments, the final instalment becoming due in January 2009.

 

The medium term loan is repayable as follows: NLG 150,000 ($68,213) on March 31,  2000 and a final payment of NLG 2,250,000 ($1,023,192) on November 15, 2000. The loan bears interest at LIBOR plus 0.70%.  The loan is included in Bank loans and overdrafts in the Balance Sheet as at December 31, 1999.

7.           Restricted surplus

The retained earnings of the subsidiary companies are not distributable to the Association. In addition, the surpluses of those IATA Settlement Systems not owned by IATA are considered restricted in their use. Included in surplus are restricted amounts totalling $3,764,000 (1998 - $20,355,000).   The significant decrease in the level of restricted surplus arises from a reclassification of most of the IATA Settlement System balances from restricted to free due to the control now exercised over these entities by IATA.

Page 9 of 13


INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

8.           Reclassification of surplus

The opening balances in respect of surplus and accrued liabilities and deferred income have been restated to reflect the reclassification to deferred income of amounts previously reported in surplus.  This reclassification has been made in order to match the revenue stream and costs associated with the IATA Settlement Systems activities in respect of the procurement and distribution of Standard Traffic Documents for the airline industry.

 

The effect of the reclassification is to reduce the 1998 reported surplus, and increase deferred income, by $5,742,000

9.           Commitments

The Association has the following rental and equipment lease commitments:

 

 

                $

 

 

2000

4,902

2001

4,864

2002

4,272

2003

3,185

2004

2,491

Thereafter

33,934

10.      Related party transaction

While providing services to the industry, the Association purchases goods and services at market value and recovers costs incurred from its members in the normal course of business.

 

 

 

 

 

 

 

 

 

 

 

Page 10 of 13


INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

11.      Financial instruments

The Association does not trade in derivative financial instruments for speculative purposes, but uses them to hedge foreign currency transactions. At December 31, 1999, the Association had the following outstanding exchange contracts for the purchase of foreign currencies:

 

                                                                                                                                Average

                                                Nominal                                                                     rate to

Currency                                 amount              Maturity date                                 maturity

 

Canadian dollars              CAD 33,637,000       Monthly 01.01.00 to 31.12.00        1.4744

Swiss francs                    CHF 51,288,000       Monthly 01.01.00 to 31.12.00        1.4648

Swiss francs                    CHF 17,287,000       Monthly 01.01.01 to 31.12.01        1.4684

Singapore dollars             SGD   7,200,000       Monthly 01.01.00 to 31.12.00        1.6526

Belgium francs                BEF  48,000,000       Monthly 01.01.00 to 31.12.00       37.6000

British pounds                  GBP   4,800,000       Monthly 01.01.00 to 31.12.00        0.6181

 

The Association is also exposed to credit risk on the outstanding exchange contracts in the event of non‑performance by counterparties. The non‑performance is not anticipated as the Association deals only with highly‑rated financial institutions and manages the concentration of credit risks.

12.      Employee benefits

The Association maintains a number of contributory and non-contributory defined benefit plans for a significant proportion of its employees where the benefits are based on the length of service and the end-of-career salary. The Association’s funding policy is to make contributions to the pension plans, as permitted by local legislation, based on actuarial cost methods. The actuarial cost reflects the actuarial assumptions concerning future investment returns based on the fair value of the plan assets, the discount rate, salary projections and future service benefits. Variance between such estimates and actual costs are amortized over the average remaining service lives of the employees estimated at 11 to 13 years. The Association is responsible to adequately fund the plans.

 

The main assumptions used to calculate the pension credit for accounting purposes for the year are as follows:

 

Average remaining service life of the group of employees

11 to 13 years

Discount rate

3.0% to 5.5%

Expected rate of return on plan assets

3.5% to 6.0%

Inflation

1.0% to 2.5%

Future salary increases

2.0% to 4.5%

 

 

 

 

 

 

 

 

 

 

Page 11 of 13


INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

 

Employee benefits (con't)

 

The pension credit for the year includes the following components:

                                                                                                       1999

                                                                                                           $

      Current service cost                                                                 7,746

      Interest cost                                                                              5,381

      Expected return on plan assets                                              (6,701)

      Transition amount                                                                   (7,793)

      Pension credit for the year                                                 (1,367)

 

The changes in benefit obligations and in the plan assets for the year are as follows:

 

                                                                                                       1999

                                                                                                           $

Projected obligations                                                                                           

      Projected benefit obligation, beginning of year                     136,262

      Current service cost                                                                 8,377

      Interest cost                                                                              6,834

      Plan amendments and changes in assumptions                  16,643                 

      Benefits paid                                                                           (6,904)

      Effect of foreign exchange rate change                                (12,527)

      Projected benefit obligation, end of year                       148,685

 

Fair value of assets

      Fair value of assets, beginning of year                                173,961                 

      Actual return on plan assets                                                  20,662

      Employer contribution                                                              3,522

      Employees contributions                                                          2,494

      Plans expenses                                                                         (723)

      Benefits paid                                                                           (6,904)

      Effect of foreign exchange rate changes                              (15,696)

      Fair value of assets at end of year                                  177,316

 

 

      Funded status                                                                        28,631

      Unrecognized net asset from experience differences          (22,256)

      Deferred pension asset                                                        6,375

              

 

Page 12 of 13


INTERNATIONAL AIR TRANSPORT ASSOCIATION

Notes to the consolidated financial statements

year ended December 31, 1999

(expressed in 000's of US Dollars)

13.  Segmented information

For management purposes the Association’s operations are organised under three separate activities, as follows:

 

·       Central Activities, comprising the Association’s traditional membership services activity, financed through membership dues and through the sale of products and services

·       IATA Settlement Systems (ISS),

·       Subsidiaries, operating a tariff publishing business in the Netherlands, and serving the Passenger and Cargo agent communities in North America

 

Segment information for these operations is presented below:

 

                                                                  

Central Activities

 

ISS

 

Subsidiaries

                                                        1999      1998           1999      1998           1999      1998

                                                            $            $                 $            $                 $            $

Revenue                                                                                                                                 

      Members’ contributions           20,678    20,395       88,581    85,902            846         812

      Other revenue                        100,621    86,937       18,999    20,898       18,635    19,383

      Total revenue                         121,299  107,332     107,580  106,800       19,481    20,195

 

Expenditure

      Total expenditure                   109,061  111,674     116,431  103,889       19,242    18,321

 

      Current year surplus (deficit)   12,238     (4,342)       (8,851)     2,911            239      1,874

 

 

Balance Sheet

      Current assets                       155,905  151,033     578,311  756,459       11,316      9,866

      Non-current assets                  48,493    45,937         2,369      2,969         2,053      4,159

      Total assets                           204,398  196,970     580,680  759,428       13,369    14,025

 

      Current liabilities                    167,688  170,966     581,080  749,566         8,735      8,267

      Long-term liabilities                  29,451    32,364         1,845      1,309                 -      1,279

      Surplus (deficit)                          7,260     (6,360)       (2,245)     8,553         4,634      4,479

      Total liabilities & equity           204,399  196,970     580,680  759,428       13,369    14,025

 

 

Working Capital

      Surplus (deficiency)                (11,783)  (19,933)       (2,769)     6,893         2,581      1,599

 


 

 

 

 

 

 

 

 

 

 

 

 

 

Attachment C12.B

 

Pro Forma Initial Budget

 

 


Attachment C12.B – Pro Forma Initial Budget

 

Estimated 10% Confidence level

 

Pro Forma Initial Budget

Prep. + Y1 Ops

Y2 Operating

Y3 Operating

Y4 Operating

all $ figures in US$

 

 

 

 

 

 

 

 

 

Pricing

 

 

 

 

   Applications (Accreditation Process)

 

 

 

 

      Global Applicants (one-time)

$500

$500

$500

$500

      Domestic Applicants (one-time)

$100

$100

$100

$100

   Subscriptions (per TLDomain name)

 

 

 

 

      Global Domain Services (annual)

$500

$400

$300

$200

      Domestic Domain Services (annual)

$100

$90

$80

$70

   Discounts

 

 

 

 

      Renewal & Volume discounts

n/a

-30%

-30%

-30%

 

 

 

 

 

Market Size

 

 

 

 

   Total Eligible Market (Applicants)

675,000

702,000

730,080

759,283

   Total Eligible Market ("20 Names")

13,500,000

14,040,000

14,601,600

15,185,664

   Total Growth Rate

 

4.0%

4.0%

4.0%

   Global Sector ("international")

21%

23%

26%

30%

   Global Eligible Market

141,750

161,460

189,821

227,785

   Domestic Sector ("non-international")

79%

77%

74%

70%

   Domestic Eligible Market

533,250

540,540

540,259

531,498

 

 

 

 

 

Penetration

 

 

 

 

   Global Penetration

13.0%

29.25%

43.88%

57.04%

   Global Growth Rate

100.0%

125.0%

50.0%

30.0%

   Domestic Penetration

4.0%

14.00%

31.50%

47.25%

   Domestic Growth Rate

100.0%

250.0%

125.0%

50.0%

Total Market Penetration

8.5%

21.6%

37.7%

52.1%

 

 

 

 

 

Domain Applications

 

 

 

 

   Global

18,428

28,800

36,057

46,639

   Domestic

21,330

54,346

94,506

80,951

Accredited Applicants

 

 

 

 

   Global

13,821

21,600

27,043

34,979

   Domestic

19,197

48,911

85,055

72,856

Accredited Names (New)

 

 

 

 

   Global (5 names per applicant)

65,648

102,598

128,452

166,151

   Domestic (1 name per applicant)

18,237

46,465

80,803

69,213

Accredited Names (Renewals)

 

 

 

 

   Global Renewals

0

62,366

159,834

281,864

   Domestic Renewals

0

13,678

48,527

109,129

Cumulative Totals

 

 

 

 

   Global

65,648

164,964

288,286

448,015

   Domestic

18,237

60,143

129,330

178,342

Active Domains

83,885

225,107

417,616

626,358

 

 

 

 

 

Staff

 

 

 

 

   Management

6

6

8

8

   Administration Support

10

19

28

27

   Technical Support

3

6

6

6

   Sales & Marketing

3

3

3

3

   Quality Assurance & Accreditation

80

166

261

255

   Customer Support & Service

10

10

10

10

Total Staff

111

210

316

310

 

 

 

 

 

 

 

 

 

 

 


Estimated 10% Confidence Level

 

 

 

 

 

 

FINANCIAL PROJECTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Inflow

 

 

 

 

   Financing

 

 

 

 

      Capital Investment/Loan

$10,000,000

($4,000,000)

($3,000,000)

($3,000,000)

   Accreditation

 

 

 

 

      Global Applicants

$9,213,750

$14,399,775

$18,028,413

$23,319,485

      Domestic Applicants

$2,133,000

$5,434,560

$9,450,605

$8,095,127

   Subscription/Renewal

 

 

 

 

      Global Domain Services

$6,564,797

$13,197,117

$17,297,189

$17,920,608

      Domestic Domain Services

$1,823,715

$5,412,902

$10,346,372

$12,483,962

  Discounts on Global Names

$0

($1,496,774)

($2,877,013)

($3,382,366)

  Discounts on Domestic Names

$0

($369,302)

($1,164,647)

($2,291,709)

Total Cash Inflow

$29,735,262

$32,578,278

$48,080,919

$53,145,108

 

 

 

 

 

 

 

 

 

 

Cash Outflow

 

 

 

 

   Personnel & Related Costs

$10,282,263

$13,667,095

$20,368,488

$19,967,183

   Office Infrastructure

$2,184,998

$3,147,290

$4,742,075

$4,643,978

   Awareness & Education Support

$2,000,000

$1,000,000

$500,000

$500,000

   Accreditation Fees

$1,677,702

$4,502,146

$8,352,323

$12,527,150

   Registrar Fees

$1,136,763

$1,628,914

$2,404,046

$2,657,255

   Advisory Board Costs

$1,000,000

$500,000

$500,000

$500,000

   Audit and Control Costs

$1,000,000

$1,000,000

$1,500,000

$1,500,000

   Technical Fees

 

 

 

 

       Development

$3,000,000

$1,000,000

$500,000

$500,000

       Operating

$1,000,000

$1,000,000

$1,000,000

$1,500,000

       ICANN (Registry)

$250,000

$250,000

$250,000

$250,000

       Maintenance (Registry)

$100,000

$100,000

$100,000

$100,000

       Per Domain (Registry)

$503,311

$1,350,644

$2,505,697

$3,758,145

   Consulting Fees

$1,000,000

$500,000

$500,000

$500,000

   Legal Fees (Contracts/Arbitration)

$2,000,000

$1,000,000

$1,000,000

$1,500,000

   Financing Costs

$1,120,000

$800,000

$480,000

$240,000

   Other Expenses

$892,058

$977,348

$1,442,428

$1,594,353

Total Cash Outflow

$29,147,094

$32,423,438

$46,145,056

$52,238,065

 

 

 

 

 

Annual Cash Surplus/(Deficit)

$588,168

$154,840

$1,935,863

$907,043

 

 

 

 

 

Reserve (Working Capital)

$352,084

$371,504

$1,339,435

$1,792,957

Contributions Fund

 

 

 

 

 - Special Projects Funding (see Note)

$352,084

$371,504

$1,339,435

$1,792,957

 

 

 

 

 

Note*: INTERNET Fund for Projects to be decided by .travel Advisory board

 

 

 

 

 

 

 

 

 


Estimated 50% Confidence Level

 

Pro Forma Initial Budget

Prep. + Y1 Ops

Y2 Operating

Y3 Operating

Y4 Operating

all $ figures in US$

 

 

 

 

 

 

 

 

 

Pricing

 

 

 

 

   Applications (Accreditation Process)

 

 

 

 

      Global Applicants (one-time)

$500

$500

$500

$500

      Domestic Applicants (one-time)

$100

$100

$100

$100

   Subscriptions (per TLDomain name)

 

 

 

 

      Global Domain Services (annual)

$500

$500

$400

$300

      Domestic Domain Services (annual)

$100

$100

$70

$50

   Discounts

 

 

 

 

      Renewal & Volume discounts

n/a

-25%

-25%

-25%

 

 

 

 

 

Market Size

 

 

 

 

   Total Eligible Market (Applicants)

675,000

702,000

730,080

759,283

   Total Eligible Market ("20 Names")

13,500,000

14,040,000

14,601,600

15,185,664

   Total Growth Rate

 

4.0%

4.0%

4.0%

   Global Sector ("international")

21%

23%

26%

30%

   Global Eligible Market

141,750

161,460

189,821

227,785

   Domestic Sector ("non-international")

79%

77%

74%

70%

   Domestic Eligible Market

533,250

540,540

540,259

531,498

 

 

 

 

 

Penetration

 

 

 

 

   Global Penetration

10.0%

22.50%

33.75%

43.88%

   Global Growth Rate

100.0%

125.0%

50.0%

30.0%

   Domestic Penetration

3.0%

10.50%

23.63%

35.44%

   Domestic Growth Rate

100.0%

250.0%

125.0%

50.0%

Total Market Penetration

6.5%

16.5%

28.7%

39.7%

 

 

 

 

 

Domain Applications

 

 

 

 

   Global

14,175

22,154

27,736

35,876

   Domestic

15,998

40,759

70,880

60,713

Accredited Applicants

 

 

 

 

   Global

10,631

16,615

20,802

26,907

   Domestic

14,398

36,683

63,792

54,642

Accredited Names (New)

 

 

 

 

   Global (5 names per applicant)

50,498

78,922

98,810

127,809

   Domestic (1 name per applicant)

13,678

34,849

60,602

51,910

Accredited Names (Renewals)

 

 

 

 

   Global Renewals

0

47,974

122,949

216,818

   Domestic Renewals

0

10,258

36,395

81,847

Cumulative Totals

 

 

 

 

   Global

50,498

126,895

221,759

344,627

   Domestic

13,678

45,108

96,997

133,757

Active Domains

64,176

172,003

318,756

478,384

 

 

 

 

 

Staff

 

 

 

 

   Management

6

6

8

8

   Administration Support

8

14

22

21

   Technical Support

3

6

6

6

   Sales & Marketing

3

3

3

3

   Quality Assurance & Accreditation

60

126

197

193

   Customer Support & Service

10

10

10

10

Total Staff

90

165

246

241

 

 

 

 

 

 

 

 

 

 

 


Estimated 50% Confidence Level

 

 

 

 

 

 

FINANCIAL PROJECTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Inflow

 

 

 

 

   Financing

 

 

 

 

      Capital Investment/Loan

$12,000,000

($3,000,000)

($4,500,000)

($4,500,000)

   Accreditation

 

 

 

 

      Global Applicants

$7,087,500

$11,076,750

$13,868,010

$17,938,066

      Domestic Applicants

$1,599,750

$4,075,920

$7,087,954

$6,071,345

   Subscription/Renewal

 

 

 

 

      Global Domain Services

$5,049,844

$12,689,536

$17,740,707

$20,677,625

      Domestic Domain Services

$1,367,786

$4,510,751

$6,789,807

$6,687,837

  Discounts on Global Names

$0

($1,199,338)

($2,458,985)

($3,252,275)

  Discounts on Domestic Names

$0

($256,460)

($636,917)

($1,023,084)

Total Cash Inflow

$27,104,880

$27,897,159

$37,890,575

$42,599,513

 

 

 

 

 

 

 

 

 

 

Cash Outflow

 

 

 

 

   Personnel & Related Costs

$8,988,288

$10,935,715

$16,055,600

$15,782,094

   Office Infrastructure

$1,868,693

$2,479,619

$3,687,813

$3,620,956

   Awareness & Education Support

$2,000,000

$1,000,000

$500,000

$500,000

   Accreditation Fees

$1,283,526

$3,440,057

$6,375,122

$9,567,676

   Registrar Fees

$1,005,244

$1,394,858

$1,894,529

$2,129,976

   Advisory Board Costs

$1,000,000

$500,000

$500,000

$500,000

   Audit and Control Costs

$1,000,000

$1,000,000

$1,500,000

$1,500,000

   Technical Fees

 

 

 

 

       Development

$3,000,000

$1,000,000

$500,000

$500,000

       Operating

$1,000,000

$1,000,000

$1,000,000

$1,500,000

       ICANN (Registry)

$250,000

$250,000

$250,000

$250,000

       Maintenance (Registry)

$100,000

$100,000

$100,000

$100,000

       Per Domain (Registry)

$385,058

$1,032,017

$1,912,536

$2,870,303

   Consulting Fees

$1,000,000

$500,000

$500,000

$500,000

   Legal Fees (Contracts/Arbitration)

$2,000,000

$1,000,000

$1,000,000

$1,500,000

   Financing Costs

$1,120,000

$960,000

$720,000

$360,000

   Other Expenses

$813,146

$836,915

$1,136,717

$1,277,985

Total Cash Outflow

$26,813,954

$27,429,181

$37,632,317

$42,458,990

 

 

 

 

 

Annual Cash Surplus/(Deficit)

$290,926

$467,978

$258,258

$140,522

 

 

 

 

 

Reserve (Working Capital)

$203,463

$379,452

$508,581

$578,842

Contributions Fund

 

 

 

 

 - Special Projects Funding (see Note)

$203,463

$379,452

$508,581

$578,842

 

 

 

 

 

Note*: INTERNET Fund for Projects to be decided by .travel Advisory board

 

 

 


Estimated 90% Confidence Level

 

Pro Forma Initial Budget

Prep. + Y1 Ops

Y2 Operating

Y3 Operating

Y4 Operating

all $ figures in US$

 

 

 

 

 

 

 

 

 

Pricing

 

 

 

 

   Applications (Accreditation Process)

 

 

 

 

      Global Applicants (one-time)

$500

$500

$500

$500

      Domestic Applicants (one-time)

$100

$100

$100

$100

   Subscriptions (per TLDomain name)

 

 

 

 

      Global Domain Services (annual)

$500

$500

$490

$450

      Domestic Domain Services (annual)

$100

$100

$90

$90

   Discounts

 

 

 

 

      Renewal & Volume discounts

n/a

-10%

-10%

-10%

 

 

 

 

 

Market Size

 

 

 

 

   Total Eligible Market (Applicants)

675,000

702,000

730,080

759,283

   Total Eligible Market (“20 Names”)

13,500,000

14,040,000

14,601,600

15,185,664

   Total Growth Rate

0.0%

4.0%

4.0%

4.0%

   Global Sector (“international”)

21%

23%

26%

30%

   Global Eligible Market

141,750

161,460

189,821

227,785

   Domestic Sector (“non-international”)

79%

77%

74%

70%

   Domestic Eligible Market

533,250

540,540

540,259

531,498

 

 

 

 

 

Penetration

 

 

 

 

   Global Penetration

7.0%

15.75%

23.63%

30.71%

   Global Growth Rate

100.0%

125.0%

50.0%

30.0%

   Domestic Penetration

2.0%

7.00%

15.75%

23.63%

   Domestic Growth Rate

100.0%

250.0%

125.0%

50.0%

Total Market Penetration

4.5%

11.4%

19.7%

27.2%

 

 

 

 

 

Domain Applications

 

 

 

 

   Global

9,923

15,507

19,415

25,113

   Domestic

10,665

27,173

47,253

40,476

Accredited Applicants

 

 

 

 

   Global

7,442

11,631

14,561

18,835

   Domestic

9,599

24,456

42,528

36,428

Accredited Names (New)

 

 

 

 

   Global (5 names per applicant)

35,349

55,245

69,167

89,466

   Domestic (1 name per applicant)

9,119

23,233

40,401

34,607

Accredited Names (Renewals)

 

 

 

 

   Global Renewals

0

33,581

86,064

151,773

   Domestic Renewals

0

6,839

24,263

54,564

Cumulative Totals

 

 

 

 

   Global

35,349

88,827

155,231

241,239

   Domestic

9,119

30,072

64,665

89,171

Active Domains