How to come out of the crisis stronger

How to come out of the
crisis stronger
1 Close loss making non
core business division
(s)
2 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
=
–  2010 EBITDA improvement
=
–  2011 EBITDA improvement
=
$100k USD
$240k USD
$230k USD
3 Business
4 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 (2006 – 23% / 2007 – 20%)
• 
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 PROCESS OVERVIEW
• 
Q3 2008 - CWT Brazil identifies outsourcing of leisure operations as a potential action
to improve profitability during the revised budget scenario (-12%) evaluation
• 
Q3 2008 - CWT Brazil begins exploratory discussions with three companies:
– 
– 
– 
• 
Dec 2008 to Jan 2009 – High-level due-diligence of prospects performed:
– 
– 
• 
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
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 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 POTENTIAL RISKS WITH TAM VIAGENS
"   Service: "   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 – 2nd largest Brazilian carrier: "   Jeopardize commercial rela.onship with GOL Airlines "   Lose Tour Operator rates from GOL 8 Finance
9 COMPARATIVE ANALYSIS: Outsourcing generates
more value
10 Follow Up Slides
11 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 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 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 OUTSOURCE PROJECTIONS/ACTUAL CWT BRAZIL
LEISURE BUSINESS
15 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 Nuevas Fuentes de Ingresos 2009 / 2010 FEE REEMBOLSO TASAS 328 KEUR 20%
INCREMENTO FEES RENFE Y REEMBOLSOS 103 KEUR 6% COLA 301 KEUR 18%
TASAS RECUPERADAS 776 KEUR 47%
Total: +1,65
M€
Na.onal Client Profit & Scope Creep 365 KEUR 22%
SSC/OFC -­‐319 KEUR -19%
MARK UP NEGOFARES 489 KEUR 30%
VOIP -­‐329 KEUR -20%
BMF 28 KEUR 2% PERFILES -­‐136 KEUR -8%
FRANQUICIAS 116 KEUR 7%
SERVICIO VIP -­‐82 KEUR -5%
18
Control de Gastos 2009 / 2010 Desplazamientos y Viajes 189 KEUR 4% Convenciones 335 KEUR 7% Gastos Mensajería y Racionalización Red 469 KEUR 9% Material de Oficina 288 KEUR 6% Total:
- 5 M€
Congelación Retribuición Variable 2 311 KEUR 46% Otros 25 KEUR 0% Acciones Gastos Personal 587 KEUR 12% 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
Impacto Acciones en Gastos miles de euros 700 000 648 095 600 000 +4%
500 000 400 000 490 860 Ingresos Netos TRÁFICO 470 598 Proforma Proforma 58 KEur Ingresos Netos 300 000 Proforma 200 000 Costes Proforma Proforma 100 000 48 KEur PLAN
-­‐13,7 KEur ESTAB.
TOTAL
AHORROS
12 KEur
Plan de Estabilización Roll-­‐over +7,5 KEur Plan de Estabilización +4,6 KEur 0 2008 20 2009 2010 25%
Costes/2008
Muito Obrigado
Pela sua atençao!
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