How to come out of the crisis stronger

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Godfrey Tracy Joseph
8 years ago
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1 How to come out of the crisis stronger 1

2 Close loss making non core business division (s) 2

3 EXECUTIVE SUMMARY CWT Brazil leisure travel business currently represents $11 million USD in traffic managed by 50 counselors and generating $20k USD in EBITDA Outsourcing this business to a third-party was identified as an initiative in the LE0 process based on the following justifications: Not a core business - management distraction and limited growth opportunity Eurail profitability decreasing as suppliers reduce distribution costs Alleviate space concerns by freeing-up 50 working spaces for future growth Proposal is for a local Brazilian agency dedicated to developing leisure products (TAM Viagens) to manage the business and pay CWT Brazil a fee between 2.5% - 3% of traffic depending upon levels achieved: CWT Brazil will retain rights to the clients/business (e.g. Eurail) and outsourcer will be required to meet SLA or forfeit rights to manage this business TAM Viagens will become exclusive option for leisure travel within our client base TAM Viagens to hire all key personnel from CWT Brazil leisure after release from CWT Brazil: Anticipated severance of $150,000 USD Half to be covered by up-front payment from outsource company (advance on fee) Contract duration of 2-3 years with escape clause based on SLA Projected to be immediately accretive to earnings: 2009 EBITDA improvement = $100k USD 2010 EBITDA improvement = $240k USD 2011 EBITDA improvement = $230k USD 3

decreasing as suppliers reduce distribution costs Alleviate space concerns by freeing-up 50 working spaces for future growth Proposal is for a local Brazilian agency dedicated to developing leisure

4 Business 4

5 BACKGROUND CWT TOURISM IN BRAZIL Financials Appendix 50 FTE SP, RIO, CWB, POA and BSB (mainly in SP and RIO - 45) 50% of the Business is sales of Rail Passes (European Trains) CWT is representative of Rail Europe for many years. 65% Directs Sales trough SP and Rio Offices (16% of Net Revenues) 35% Indirect Sales (B2B trough Travel Agencies and Sales Representatives and other cities where CWT is not located) (10% of Net Revenues) 13,9% Net Revenues but with negative trend ( % / %) 50% of the Business is Leisure Travel 60% Sales trough Rio and SP offices (sales for clients of our corporate costumers) 40% sales through leisure implants such as (Accenture, ABN, US Embassy) Clients are demanding more of these dedicated leisure implants which is increasing our staff costs and reducing our productivity 18% Net revenues (average depending on product offered) 5

65% Directs Sales trough SP and Rio Offices (16% of Net Revenues) 35% Indirect Sales (B2B trough Travel Agencies and Sales Representatives and other cities where CWT is not located) (10% of Net

6 PROCESS OVERVIEW Q CWT Brazil identifies outsourcing of leisure operations as a potential action to improve profitability during the revised budget scenario (-12%) evaluation Q CWT Brazil begins exploratory discussions with three companies: TAM Viagens Second Larger Tour Operator in Brazil. Belongs to TAM Airline but works as a separate Business Unit. Dedicated to B2C and B2B segments Submarino Viagens Largest Internet Travel Agency in Brazil working as Tour Operator as well. Dedicated to B2C segment. Stella Barros (Grupo Águia) Traditional Travel Agency owned by family members. Operation very similar to CWT Tourism Dec 2008 to Jan 2009 High-level due-diligence of prospects performed: Site inspections to understand infrastructure, service quality and product offerings SWOT analysis prepared considering operational and strategic points (appendix) Jan 2009 CWT Brazil s Management Team elaborates a rating of each prospect: 1st TAM VIAGENS 2nd SUBMARINO VIAGENS 3rd STELLA BARROS 6

Dedicated to B2C and B2B segments Submarino Viagens Largest Internet Travel Agency in Brazil working as Tour Operator as well. Dedicated to B2C segment.

7 KEY FACTORS SUPPORTING TAM VIAGENS " Company profile: " Very dynamic company " Well-respected in travel agency market with over 10 years experience " Relationship with TAM: " Bring CWT Brazil closer to leading Brazilian carrier - reports to VP of Sales for TAM " Operational support of TAM offices " Advantages to confirm TAM bookings " Superior product offerings: " Tour operator rates with mileage program access " Self-operating packages (both domestic and international) " Flexibility to work with other tour operators and carriers (?) " Best support infrastructure: " Will hire all of CWT Tourism employees " Strong marketing program " Strong IT structure focused on both B2C & B2B " 24/7 help desk 7

product offerings: " Tour operator rates with mileage program access " Self-operating packages (both domestic and international) " Flexibility to work with other tour operators

8 " Service: POTENTIAL RISKS WITH TAM VIAGENS " Percep.on of service not as good as our current CWT Tourism enjoys " No experience with implants with corporate clients " Mi.ga.ng factors: " Have agreed to take- on our employees who do have experience with corporate inplants and enjoy posi.ve service percep.on " Contract will establish a clear measurable SLA " Client percep.on of impar.ality on products offered " Damage rela.onship with GOL 2 nd largest Brazilian carrier: " Jeopardize commercial rela.onship with GOL Airlines " Lose Tour Operator rates from GOL 8

ng factors: " Have agreed to take- on our employees who do have experience with corporate inplants and enjoy posi.ve service percep.

9 Finance 9

10 COMPARATIVE ANALYSIS: Outsourcing generates more value 10

11 Follow Up Slides 11

12 IMPORTANT FACTS Outsourcing started on May 2009 Steering Committe was created to follow up strategical and operational initiatives 1 CWT Member General Managet 1 TAM Viagens Member Director Guests depending on subject to be discussed Service Quality SLA s defined 30 days after contract signature 80% client satisfaction (Monthly Surveys with at least 10% response rate) 1% of complaints (Number of transactions with complaints x Total transactions) 30 days to close a complaint Operational Issues during first 6 months Internal resistance (CWT and TAM Viagens) Definition on how to use corporate fares on leisure business (outsourced) TAM Viagens franchisees (outside of São Paulo) did not want the business Staff rotation and difficulty to adapt to a new culture Client complaints interfering on corporate business 12

of transactions with complaints x Total transactions) 30 days to close a complaint Operational Issues during first 6 months Internal resistance (CWT and TAM Viagens) Definition on how to use

13 HOW DID WE FIX IT? Bi-weekly meeting of Steering Committee Change of TAM Viagens operational supervisor Centralization of CWT Leisure Business at São Paulo office (TAM Viagens) Application of contractual fines (USD 50 K) Change of Tam Viagens contact Open Communication with CWT Brazil Board Members Allocation of leisure revenues to respective clients Creation of a VIP Leisure department under CWT management with TAM Viagens fully dedicated and experienced consultants 13

Business at São Paulo office (TAM Viagens) Application of contractual fines (USD 50 K) Change of Tam Viagens contact

14 CURRENT SITUATION Client Satisfaction Survey at 80%+ Better interaction between both companies Joint Marketing initiatives F1 Race EBITDA very positive in terms of % of sales More options to our VIP Travelers - Loyalty 14

Marketing initiatives F1 Race EBITDA very positive in

15 OUTSOURCE PROJECTIONS/ACTUAL CWT BRAZIL LEISURE BUSINESS 15

16 Brainstorming: Restructuring, cost savings, new revenues 16

17 En Noviembre 2008, an.cipando los momentos diwciles que se avecinaban, CWT España puso en marcha un Plan de Estabilización Como resultado: 7.5 M de ahorros y 145 K como nuevas fuentes de Ingresos en 2009 y 4.6M y 1.5 M respec.vamente para 2010 Gracias a este Plan, la estabilidad y crecimiento sostenible de CWT España está garan.zado 17

18 Total: +1,65 M Nuevas Fuentes de Ingresos 2009 / 2010 TASAS RECUPERADAS 776 KEUR SSC/OFC KEUR -19% 47% FEE REEMBOLSO TASAS 328 KEUR 20% MARK UP NEGOFARES 489 KEUR INCREMENTO FEES RENFE Y REEMBOLSOS 103 KEUR 6% COLA 301 KEUR 30% 18% BMF 28 KEUR 2% Na.onal Client Profit & Scope Creep 365 KEUR 22% VOIP KEUR -20% PERFILES KEUR -8% FRANQUICIAS 116 KEUR 7% SERVICIO VIP - 82 KEUR -5% 18

REEMBOLSOS 103 KEUR 6% COLA 301 KEUR 30% 18% BMF 28 KEUR 2% Na.

19 Control de Gastos 2009 / 2010 Convenciones 335 KEUR 7% Desplazamientos y Viajes 189 KEUR 4% Gastos Mensajería y Racionalización Red 469 KEUR 9% Material de Oficina 288 KEUR 6% Total: - 5 M Congelación Retribuición Variable KEUR 46% Acciones Gastos Personal 587 KEUR 12% Otros 25 KEUR 0% Servicios Exteriores 97 KEUR 2% Alquiler y Limpieza de Oficinas 221 KEUR 4% Comunicaciones 450 KEUR 9% Asociaciones y Acciones de Marke.ng 42 KEUR 1% 19

2 311 KEUR 46% Acciones Gastos Personal 587 KEUR 12% Otros 25 KEUR 0% Servicios Exteriores 97 KEUR 2% Alquiler

20 miles de euros Impacto Acciones en Gastos Ingresos Netos Proforma 58 KEur % TRÁFICO Costes Proforma 48 KEur PLAN ESTAB. Ingresos Netos Proforma - 13,7 KEur Plan de Estabilización +7,5 KEur Roll- over Plan de Estabilización +4,6 KEur TOTAL AHORROS 12 KEur 25% Costes/

21 Muito Obrigado Pela sua atençao! 21

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