Today, Flight Centre Travel Group Ltd (ASX: FLT) announced the acquisition of a majority stake in Australian online travel company, BYOjet Group.
The BYOjet.com and associated businesses are owned by Professional Performance Systems Pty Ltd (PPS), a business that is majority-owned by Disruptive Investment Group Ltd (ASX: DVI).
Initially, Flight Centre will acquire 70% of PPS with $2.52 million in new shares. Post-acquisition Disruptive Investment Group will hold 16.4% and BYOjet's founder and CEO, Lenny Padowtiz, and his associates will own the remaining 13.6%. In addition to performance payments, Flight Centre will have the opportunity to buy the entire PPS business in 2018.
Flight Centre founder and managing director, Graham Turner, said, "BYOjet.com is a profitable business with a low cost model that allows it to deliver cheaper airfares to the travelling public – both directly and via metasearch – than many of its larger online rivals."
He said the business has "strong potential" for future growth when combined with Flight Centre's deep expertise in new and existing markets. BYOJet.com, a low-cost operator, generates $100 million in total transactions a year.
So what
Today's announcement of the PPS acquisition comes after Flight Centre this morning confirmed the $US28 million acquisition of StudentUniverse.com.
Despite its superb long-term track record and enormous cash balance, some analysts have become critical of Flight Centre's bricks-and-mortar retail travel agencies – claiming that they are ripe for disruption from the likes of digital travel agents like Webjet Limited (ASX: WEB).
"While we have strong overall market share in both the leisure and corporate travel sectors in Australia and elsewhere, we see opportunities to grow more aggressively in some sections of the market that haven't previously been priorities," Mr Turner said. "The low cost airfare sector is an obvious opportunity and the investments we are making throughout our business provide further evidence of our intention to fast-track our growth and to develop stronger foundations in this space globally."
Foolish takeaway
Shares in the $3.7 billion Flight Centre came off the boil today, falling 0.5% in mid-afternoon trade, following the announcement. Nonetheless, while very small, the group's recent acquisitions are evidence of Flight Centre's enduring commitment to growth and the long-term sustainability of the business.
Indeed, Flight Centre's management appear very capable, enabling them to not only defend but grow their business in an increasingly online travel market.
