Closures, Cutbacks and Clawing Back: The sense of encouragement that one might have experienced from recent surveys suggesting that, no matter what, most Brits remain stubbornly determined to enjoy their holidays, was doused somewhat in the last two weeks by a steady stream of news that, overall, the UK’s travel and tourism industry, both inbound and outbound, is going through its worst period ever—worse than the shock and aftershock of 9/11, and worse than the Great Recession of 2008-2009.
First, the Closures and Cutbacks: Furloughs, layoffs and terminations of workers have been matched by bankruptcies and a lack of sufficient capital or assistance to help smaller businesses survive until we get to the other side—whenever and whatever that is. Following is a sampler of some of the more notable news items that have chronicled a near-daily stream of depressing news.
—UKinbound, whose members bring in over 50 percent of all international visitors, to the country, said that 60 percent of businesses will be forced to make further redundancies as early as next month when the a job retention program fades away and some 88 percent of businesses are expect to lay off between 25 percent and 100 percent of their staff. And in a survey of its members, UKinbound indicated that 53 percent of its members said they expect their businesses to last no more than six months.
—Funway Holidays is to cease trading on September 30 after 27 years. The tour operator, which specialized in the U.S. and Caribbean product, said it had made the “difficult decision” to close Funway Holidays International because of the ongoing impact of COVID-19. New bookings and re-bookings stopped beginning July 7. All bookings departing on or after September 1 have been cancelled. As well as Fleetway Travel, it traded under names including Exclusive Luxury Breaks, Explorer’s Collection, Late Bargains, Luxury Holiday Collection, Phone & Fly, Sail Away, Silversurfers Holidays and Travelsmart.
—The Association of Corporate Travel Executives (ACTE), has ceased operations and filed for bankruptcy following the collapse of business travel events due to COVID-19. Based in the Washington, D.C. area, the organization issued a statement confirming it had filed for Chapter 7 bankruptcy in the United States, blaming the COVID-19 pandemic and cancellation of its Asia conference in Hong Kong. The statement said that recent spikes in COVID-19 infection rates had “made investors and partners justifiably pessimistic around the viability of event-based organizations.” ACTE was set up 33 years ago and operated globally organizing and partnering on events for the corporate travel sector and representing its interests.
—The bad news is not all that bad. Yes, Q2 was lowest on record for M&A activity, says Henry Wells, managing director of M&A at Duff & Phelps. He told a recent Travel Weekly webcast that that total M&A deals across Europe for businesses under £200 million ($252 million) were down about two-thirds between April and June compared to the same quarter in 2019. “There’s about a third of the volume than there was last year,” he said.
However, Wells noted, that although he expected much of the activity to be “distressed or opportunistic,” he was optimistic of an eventual return to pre-COVID levels over the course of the coming two to three years. As reported in TW, Wells said: “You’ve got trade buyers with strong balance sheets that want to access or execute some sort of strategy. They wanted to do that pre-COVID and they still want to do that so we’re working with them as to how to how to best execute.”
He added, “In 2019, there was £110 billion ($138.4 billion) of what’s called ‘dry powder’ (across all sectors), which is money that was raised in that year, but not invested. That means there’s £110 billion that needs to be invested.”
—And some good news: Virgin Atlantic bailed out. Virgin Atlantic, a key player in the inbound leisure market for the U.S., has secured refinancing package worth £1.2 billion ($1.51 billion) and declared the measure “a big step forward” in securing the carrier’s future. The restructuring is based on a five-year business plan which envisages the carrier returning to profitability from 2022.
The refinancing includes cost savings of about £280 million ($352.2 million) a year and £880 million ($1.11 billion) in re-phasing and financing of aircraft deliveries over the next five years.
In a statement announcing the package, Virgin Atlantic said shareholders Virgin Group, which owns 51 percent of the carrier, and Delta Air Lines (49 percent) will provide £600 million ($755 million) in support, including a £200 million ($252 million) investment by Virgin Group and £400 million ($503 million) in shareholder deferrals and waivers of payments. U.S. hedge fund Davidson Kempner Capital Management will provide £170 million ($214 million) in financing.
Virgin Atlantic has grown to be a major presence in the USA’s inbound tourism market from the UK. It provides service from the UK to Atlanta, Boston, Las Vegas, Los Angeles, Miami, New York, Orlando, San Francisco, Seattle and Washington, D.C. Also, Virgin Atlantic, while not a part of a formal airline alliance, has several partners, including Delta Air Lines.