Globespan – How a good company fails with 100,000 forward bookings?

In the light of the sad demise of Globespan it seems entirely sensible to recommend two areas for serious investigation by the Office of Fair Trading, the Administrators Price WaterHouse Cooper (PwC), and lastly but probably most importantly, the CAA.

In the first instance, I would like to suggest an Independent Review be commissioned (not sure who would pay for it, but paid in part by the key parties – in this case CAA, FSA, and the Government, representing lost PAYE, VATand Corportaion Tax – the taxpayers purse). The review’s brief should be a thorough examination of the mechanism for reimbursement of consumers’ monies (paid in advance, or reimbursement of expenses to complete their holiday) in the event of a (travel) company collapse.

The system now, which simply requires Credit Card Companies to bail out their cardholders, is not responsible, and may well have, in this instance and in hundreds of other cases, made a signficant contribution to the premature demise and eventual failure of a successful travel company like Globespan. I say successful, because at the time of its collapse in December 2009, it has 100,000 advanced bookings, which considering it is December is an oustanding achievement in anybody’s books.

The second suggestion is for Senior management and for all UK Travel consultancies. Tom Dalrymple MD of Globespan, the CAA, and the Travel consultancies, need to reflect deeply about the substantial power Dalrymple allowed E-Clear to have over his business. Allowing any other entity to weld such power is nothing short of co-dependence, completely irresponsible and appears to be an act of desperation more than inspiration. The problem with these kinds of heavily dependant relationships is that it is unhealthy for either party. Either the other party simply cannot bear the burden (as might have been in this case) or it seeks to walk away, causing potential havoc, and treating the relationship with disrespect (that it may deserve).

The sad demise of a much loved, well established and respectable Scottish travel firm, Globespan group, tells a dark tale.

An excellent commentary and feedback on Globespan, entitled The Missing Millions, written by Douglas Fraser, Business and Economy Editor at BBC Scotland gives the online researcher a broader picture of the Globespan story, and comes with the added bonus of the feedback from his army of avid Frazer ledger readers.

Did Tom Dalrymple have the best business support, advice and assistance around him, and the people he really needed to help him manage the crisis? Even if he didn’t have the ‘right muscle in his corner’ going into the crisis, it is little excuse these days as there are now much easier ways to find trustworthy, cost effective expertise fast, at the click of a button, using free online business support location services like Business Support Finder and the like, as well as the Regional Development Agencies (RDAs).

On another point, if I was a client of E-Clear I would seriously think of changing card processing company. This relationship should be ‘put in competition’ on an annual basis (as with all supplier relationships).

Scottish minister for Finance, Mr Swinney, quoted recently in the Scotsman believes vehermently that Globespan could have been saved. If you would like to read more try reading the article in the Scotman entitled:”Flyglobespan could have been saved“.

The demise may in large part be due to the contractual and operational arrangements that Globespan had with its card processing company – in this case a card transaction processing company based in London called E-Clear. This company is alleged to have been (with-) holding £35m from Globespan, and it transpired that it may be the legal obligations of card processing companies in the event of airline failure that could have been a key ‘driver’ in the behaviour and actions of E-Clear. If so, this would be a monumental professional oversight by the industry watchdogs, both travel and financial

Quoted in travel publication the TTG, in July 2009, Elias Elia is credited as saying that the travel industry is becoming riskier”. This is interesting since a previous client of E-Clear was collapsed businesses XL Leisure Group and Zoom Airlines. Interesting also is that Elia was quoted during the XL collapse as saying that his firm was insured for any exposure and the impact was “nothing we could not handle”.

A Slovakian low-cost airline SKY EUROPE which went into administration in June also appears to have had difficulties in obtaining its monies from E-Clear.

E-Clear has been also involved this month with the failure of Allbury Travel Group, which includes Libra Holidays, Argo and Jetlife. Libra Holidays had a good reputation, as well as Argo. They handled considerable holiday business each year, consistently providing good quality holidays and value for money for its hundreds of thousands of happy clients and customers.

Looking at E-Clear, prior to August 2008 the highly rated Deutsche Bank acted as E-Clear’s guarantor. It has not been explained why the bank ended the relationship, but it is likely that Deutsche Bank consider the risks has become too great to warrant the returns.

Looking for answers is always hard in the travel industry which, over the decades from the collapse of Clarksons in the 1970s, Intasun and Air Europe, Laker Airways, right up to XL Leisure, is a graveyard including good travel businesses as well as the bad (ask the CAA and ABTA for a list).

 Successfully managing medium or large travel organisations is not for the faint hearted, and it can be any number of factors that can cause the demise of a successful travel organisation.