March 12, 2010
par André Désiront

Colin Hunter, President of Sunwing:
is There a Future for the Signature Brand in Quebec?

Is there a future for the Signature brand in Quebec? We asked Colin Hunter, the chief executive officer of Sunwing Group. His answer: in Toronto and in western Canada, where the brand is still strong, absolutely! But it's far from being a sure thing in Quebec, where Signature has become a minor player!

The president of Sunwing talks to us about Signature's losses, the brand's goals and his determination to become a major player in Europe. Furthermore, he makes a few predictions, somewhat surprising yet logical….

 

 

 

 

Why did TUI pursue this partnership and why did they hand over control of Signature Vacations to you?

Because Signature was experiencing heavy losses and their market share had been persistently eroding over the past 15 years.  

The people at TUI approached us some two years ago, but we weren't really interested. However, a year ago, we realized that we needed additional resources is we wanted to continue expanding at the same pace.

There were extensive negotiations because we involved Scotia Capital, the division of Scotia Bank responsible for mergers and acquisitions: a public corporation such as TUI requires the caution of a large financial institution to justify this type of transaction to its shareholders.

TUI knew that we were rapidly eating up market share in Canada, while their subsidiary, Signature, was persistently losing ground. In 1995, Signature facilitated travel for some 800,000 clients. Last year, their clientele was down to 300,000 and, over the past 15 years, they had amassed $60 million in losses.

In the United Kingdom, T.O. haven't changed their methods to adapt to discount carriers: they are continuing to sell travel packages of 7 to 14 days, while demand for more flexible packages is quickly increasing. This is driving consumers to discount and low cost opportunities. 

Similarly, Signature executives in Canada, was not adapting to the market's new constraints. We learned from the European experience: we introduced three, four, 10 and 11 days travel packages four years ago, and we are selling more and more of them.

"In Quebec, where barely 25,000
people used their services over the winter,
the Signature Vacations brand
doesn't mean much!"

True, but low cost are less competitive in North America! This doesn't come close to explaining Signature's difficulties!

Yes, they are less competitive. But when Air Canada or WestJet promote seat sales to sun destinations, we feel it too. Even if, once taxes and fees have been added, their fares aren,t that interesting, there are thousands of consumers being lured.

How many people did Signature Vacations employ and how many of them will you be keeping?

Signature had about 300 employees, thirty of which worked in Quebec. Here, we kept one, per group. For the rest of Canada, I can't answer that question because reorganization is still ongoing.

You declared that you intended to keep the brand. Won't it be difficult to market two brands at once? Transat is doing it with Transat Holidays and Nolitours, but everyone knows the in reality they both represent the same company…

Travel agents and members of the industry know it, but the majority of consumers don't. In terms of Signature being a brand that still means something to consumers, we would be crazy to interfere with that. However, we will make sure to make the Sunwing and Signature portfolios distinct from each other.

Although we are determined to maintain the brand, this is not necessarily the case in Quebec. We'll be keeping it in the rest of Canada, where the brand is well-rooted. But in Quebec, where barely 25,000 people used their services over the winter, the Signature Vacations brand doesn't mean much! So we may not keep it for the French market.

"We knew WestJet Vacations was going to
try to increase its market share,
but nobody expected them to
hit this hard."

Signature facilitated travel for some 300,000 consumers in Canada and Sunwing did the same for 600,000. What are your goals for the next few years?

I would like to tell you that our objective will be 1 million travellers for 2011. But we also know that when there are mergers, 2 + 2, doesn't always add up to 4. Therefore, 600,000 plus 300,000 may add up to 800,000 instead of 900,000 or 1 million. We will try to make it all add up to 1 million, but it's going to depend on market conditions and a whole lot of other factors.

Will you continue to do business with carriers other than Sunwing Airlines to fly Signature clients?

The season is almost over and the contract that bound Signature to Air Transat is also coming to an end. As early as this summer, every passenger who buys a Signature travel package will fly aboard Sunwing Airlines.

When you buy seats from your biggest competitor, you are playing with fire. It's completely normal for a competitor to resell its seats at conditions that are not as appealing as when they are being sold to their own wholesaler, which does not lead to a pleasant business relationship. 

Tours Mont-Royal has been doing it for years and it has remained a key player!

I don't think this was done within the framework of a pleasant business relationship. And to finish answering your question, Signature is still bound to Skyservice for the next two years in the rest of Canada. The carriers' executives made a tentative approach to sound us out. We'll see where our discussions will lead.

Do you think the Canadian market will be seeing other consolidations?

Thomas Cook is losing money. They won't be able to go on losing much longer at this pace. If I were one of Thomas Cook's European executives, I would approach Transat seeking a merger and a partnership similar to the one we've just concluded with TUI.

You recently launched a program of flights to Europe with Corsairfly, which is one of the many subsidiaries of TUI. But it is a relatively modest program if we compare it to your sun destinations operations. Do you intend to hit harder next summer and furthermore, offer European flights departing from Toronto?

It is effectively a modest program. Corsairfly has other good clients in Quebec, notably Tours Mont-Royal and Skylink, so they couldn't assign us as many seats as we would have liked.

We won't be marketing flights to Europe departing from Toronto this year, but that could change as early as next year. Canada and the European Union have just signed a new air transportation accord that considers the European Union as a single country. For example, this would allow a German company to fly to Canada from France, the United Kingdom or any other country that is part of the European community. Basically, it will give our TUI partner added flexibility to deploy fleets to its different airlines.

By the end of the summer, we'll have a clearer vision of what we'll be allowed to do. One thing is certain; we are determined to become a key player for European destinations. Will this be as soon as next year? We hope so, but we want to give ourselves enough time to do things right.

"Thomas Cook can't to on
losing so much money in Canada.
If I were one of Thomas Cook's European
executives, I would approach Transat
seeking a merger and a partnership similar
to the one we've just concluded with TUI."

Transat has just declared a net loss of $13.9 million and a drop in revenues of 9.7% for the quarter ending January 31. Did you also experience a drop in revenues for that same period?

The drop influenced our margins, but we did not experience any loss. We were able to limit damages because we have tight control over our costs and we anticipated a drop in demand. So we reduced our fleet from 14 to 12 aircrafts for the winter.

The loss experienced by Transat – and the drop in demand here – can be explained by a drop in demand but also to a wild card (joker) that no one saw coming, at least not with such drive: WestJet Vacations.

Although they maintained a rather low profile in Quebec, such was not the case in Ontario and western Canada where they bombarded the market with ads inserted into all major dailies and magazines. We knew WestJet Vacations was going to try to increase its market share, but no one expected them to hit this hard.

Do you have any plans to expand into other countries?

Not at this time. When I was working with Adventure Tours, we had a sub-office in Dallas where we sold a hotel in the Bahamas, and that was very successful in both the Texas market and in Canada: the Jack Tarr Village located on Grand Bahama Island.

The Dallas market has an interesting potential, just like other big cities in the southern United States, especially Atlanta and Miami. But at this moment, we have a lot to keep us busy in Canada, so there is no question of launching a foreign offensive. First, we want to pursue our expansion in Canada.

To expand even more, you'll need capital… Do you foresee becoming a publicly traded corporation?

I don't see the necessity of doing this now. Our partnership with TUI will give us access to sufficient resources that we will not be forced to seek capital from the stock market. They have planes, hotels, cruise ships…

André Désiront