Imperative 3: People & Operational Effectiveness
Summary
- Our colleagues are key to our success
- Flexible business model that can react to demand changes
- Development of sophisticated capacity and yield management systems
- Underlying operating profit margin up 30 basis points from 2.9% to 3.2%
- Integration progressing well with total synergies upgraded to £200m
The skills and expertise of our colleagues are the key to our success. Across the Group we have a unique breadth and depth of experience with innovative entrepreneurs in our specialist businesses, skilled tour operators in Mainstream, functional experts at the centre and a highly experienced and respected international management team. Our aim is to motivate and engage our teams to deliver outstanding customer experiences and results for our businesses. Talent across the Group is reviewed regularly with a focus on retaining and developing individuals to drive the business forward. See Our Colleagues.
We have a flexible business model that allows us to react to demand changes. Significant operational flexibility is retained through maintaining low bedstock commitments (71% is uncommitted), third party flying arrangements (accounting for 28% of all tour operator capacity) and the asset leasing profiles of our shops and aircraft (46% of aircraft leases and 36% of shop leases will expire in the next three years). This allows us to manage capacity in response to changes in the trading environment.
Our tour operators actively manage capacity through sophisticated capacity and yield management systems. The UK Mainstream business has a market-leading yield system to plan and manage capacity allowing us to analyse profitability for Thomson and First Choice by creating a detailed picture of profitable capacity by individual flight. This allows us to determine optimum seat capacity by each UK airport and to ensure that we maintain the most appropriate aircraft fleet size and type. This has enabled us to leverage the strength of both these brands by improving efficiency with fewer aircraft and less risk, driving an improvement in margins. Our other businesses are also beginning to implement this system; in the Activity Sector, the ski business has fully implemented the same yield management tool driving further improvements in margin.
The cost synergies arising from the integration of First Choice and Thomson and further synergy benefits in France, Austria and the UK ski businesses and Accommodation & Destinations, will contribute significantly to our profitability. We have made excellent progress to date delivering synergies of £120m in 2009 and expect to deliver further synergies of £60m in 2010, maintaining our target of £200m in 2011. In addition to the delivery of these cost synergies, the businesses are continually working to leverage their market-leading positions and scale to maximise their cost competitiveness and rationalise the cost base further through the continual improvement of business processes and systems. We are also further reviewing options to reduce the number of reservation and back office systems in the Mainstream businesses.
