Europ Assistance China

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Who Moved My Cheese? -- Ancillary Income
Direction for travel industry profit growth
Europ Assistance China
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2008 Statistics of CNTA show According to the
data from 20,110 Travel agencies (1,970
International agencies, 18,140 domestic
agencies), 2008 annual revenue of domestic
travel agencies is 166.288 billion yuan, with an
increase of 1.44, Total gross profit 11.53
billion yuan, gross profit margin 6.93, total
net profit 853 million yuan, net profit margin
0.51 The net profit rate of industry in 1993
was 11.79 in 1996, it had dropped to 2.72 ...
What is worth thinking about is that the
current interest rate of 2008 was0.71...
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Who Moved My Cheese?
In 2001 the national domestic tourism spent was
449.3 yuan per capita 511.0 yuan per capita in
2008 According to China's 2008 statistics, CPI
reaches up to 5.9, then the national per capita
travel consumption figures are decreased.
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Market scale is enlarging, profit decrease is a
must for competition. In 2001, the number of
domestic tourists reached 784 million passengers
/ times, travel agencies 10,532. In 2008,
travel agencies 20,110, of which international
1970, domestic 18,140. Resources CNTA A
constant increase in number of competitors,
profit decrease becomes an inevitable trend.
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• Constantly occurring events have great impact on
  travel industry
• From SARS in 2003 to H1N1 in 2009
• Snow storm in 2008, the earthquake and the
  Olympic
• Gas price increases, adding cost to airline
  companies
• Financial crisis in 2008 ...

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Individualization in travel demands Travelers
nowadays are gaining more and more experience in
purchasing travel products. Together with the
enhancing of peoples educational level,
travelers tend to have a weakening demand on
group travel products which strictly fetter
peoples freedom and individuality. Travel
market therefore is divided naturally into
several niches. Different groups of travelers
choose different products to meet their needs.
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Travelers are constantly changing and creating
their individual needs, thereby leading to
diversification in the market. The maturation of
travel market booms a large scale of neotype
travelers, who are sophisticated, experienced,
and highly demanding. It means traditional
impassive travel consumption is being replaced
with multi-interesting and creative travel
experience. This trend results in peoples
increasing interest in self-planned traveling.
Thus, we have reason to believe that modern
traveling product is both inheriting traditional
travel model and focusing on individual need.
With the two distinct features, the new travel
product shall bring a great impact on the
operation of the travel agency.
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A legend
American Southwest Airlines has maintained a
continuous 33-year profit - which is also
unprecedented in aviation history records.
Particularly in the past five years, the industry
has undergone a fundamental change. Now a lot of
low-cost low-fare airline companies are to
compete within the area, trying to emulate the
company's success.
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Ryanair airline apparently imitated American
Southwest Airlines business mode and gained
success through further adapting the business
mode. Ryanair has been strictly following the
business mode of ASA, but it has three unique
characteristics customer oriented, cost control
and channel control.
On June 3 2009, Ryanair airline recently
publicized its annual deficit, meanwhile, its
ancillary profit has increased by 23, reaching
EUR598 million. The company alleged that it has
fulfilled the goal of a 20 (18 in last year)
increase in ancillary income a year ahead of
schedule.
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Last year, Ryanair Airline lost EUR169 million
(around USD240 million), due to impact of the
steep increase of oil cost, and devaluation of
the book value invested to competitor Aer Lingus.
After the deduction of the loss of devaluation,
the net profit of the company is EUR105
million. Total income increased by 8, reaching
EUR2,942 million, meanwhile airticket price
decreased by 8, 58.5 million passengers, an
increase of 15. A net profit of EUR 105 million
(a decrease of EUR376 million than last year) in
a year of high oil cost, which is satisfying. In
last year out oil cost increased by EUR466
million (59). In a year when most competitor
face deficit, the profit of Ryanair airline has
exceeded our expectation.
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On Dec 2, 2008 the ancillary income of Air Asia
increased by 88 from July to September than last
year. The CEO Tony Fernandes commented In this
quarter, every passenger increased there spent by
52, reaching 23.1 Malaysian ringgit. Now,
ancillary incomes takes 10.6 of our total
income, and it will be a strong increasing point
in our future growth.
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In Q3, AAs net deficit is 465.5 million ringgit,
a sharp contrast against last years net profit
of 180 million. This is the first quarter of
deficit since it was founded in Nov 2004.
Fernandes said, the strength and recovering
capacity of AA guaranteed an increase of 44 to
our total income, reaching 659 million ringgit,
which is brought by a strong increase in the
amount of passengers and ancillary income. The
amount of passengers is reaching 3 million, which
shows a strong demand in our services. In 2008,
we predicted there would be 20 million
passengers. In Q3, the attendance rate is 75, an
increase of 33. Therere 5 lines. It is
according to our expectations. The profit (profit
per seat per km) increased by 12, which is
brought by an increase of 12 in ticket price and
strong ancillary income as well.
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Home Family
Travel ????
Automotive
Health
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We have local understanding of insurance products
in EMEA, NA, LATAM, APAC markets (US example)
Price based on a 1 week trip International
destination
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Example 2 Spanair
2 products segmented per destination (domestic
and international) Clear information Amadeus
integration http//www.spanair.com/web/es-es/
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Thank you
12/30/2009
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This document is for Lucky Air reference only