First Travelcorp Set To Acquire Travel & Transport

<B> First Travelcorp Set To Acquire Travel & Transport</B>

By Sarah Welt

<i>Raleigh, N.C.</i> - First Travelcorp Inc., which has $181 million in air sales, this month signed a letter of intent to acquire Travel & Transport of Omaha--a super regional with $500 million in annual air sales--making the combined entity the eighth largest travel agency in the country.

The arrangement, set to close by January, gives the new company, First Travel & Transport, better geographic coverage and the scale it needs to stay competitive in today's marketplace. While T&T concentrated on organic growth, acquisitions have been a part of First Travelcorp's strategy since its inception in 1991.

The acquisition of a larger agency by a significantly smaller player mirrors last month's BTI Americas/WorldTravel Partners deal (<I>BTN,</I> Oct. 26). This arrangement furthers the consolidation trend that has gotten off to a flying start in advance of the traditional year-end agency acquisition season and shows no sign of slowing down.

The arrangement is similar to the recent acquisition of Travel One by American Express, which plans to keep Travel One as a separate operating unit (<I>BTN,</I> Oct. 26). Under the terms of the agreement, T&T will remain intact as the Omaha division of the new company. William Tech, current T&T president, will continue as division president. Fred Coward, III, executive vice president of First Travelcorp, will become First Travelcorp division president. Garland Tucker, III, now president of First Travelcorp, will lead the new company as president and CEO.

<B>First Travelcorp's 11th Buy</B>

First Travelcorp made 10 acquisitions prior to this one. "It was our business plan from the very beginning to be one of the consolidators in the travel industry," Coward said. The new company projected its U.S. booked air volume to be $900 million by year-end and intends to grow that to $1 billion next year.

T&T, for its part, "realized that though we were growing as an individual company, we were going no place as the industry continually consolidated," Tech said. "Our present ownership was looking for an opportunity to get out and First Travelcorp was willing to take the risk."

First Travelcorp will make the purchase through financial backing from the company's three founders--Tucker, Coward and Peter Swensen, who left the company five years ago but remains a shareholder.

As part of the agreement, the Omaha-based private investors who own two-thirds of T&T will own a minority stake in the new operation. The remaining one-third of the company is employee-owned through T&T's employee stock ownership plan.

The first operational change already has been decided. The combined entity will begin using T&T's 24-hour international faring service when the deal is finalized. First Travelcorp has been using Woodside Travel Trust's operation. The new entity plans to stay in the consortium.

Initial concern over overlap in senior management is over, and Coward and Tech are confident that both teams will remain. "FTC has a very strong hold in the Southeast, and we have a good stronghold in the Midwest. We don't want to tamper with that," Tech said.

While Tech expressed his commitment to the new organization, "I would be lying if I said all 950 employees are thrilled. But we have 77 people in management who are thrilled about the opportunity and I think most of our people are too, because they have been terrified we would be purchased by an Amex or a Carlson and were worried about their jobs. Now that we are larger, they feel more secure."

While there obviously will be overlap on the back end, with functions like accounting, human resources, marketing and MIS, nothing has been decided at this time.

For the most part, clients of the two companies have taken a wait-and-see approach to the news. One travel manager told BTN his reaction was one of surprise and uncertainty. "T&T has a very good management team and I am unfamiliar with the management of the principal. In a lot of situations when two companies merge, the controlling partner says things aren't going to change and they inevitably do, and that is a concern of mine. I also have the concern that a super-mega agency could buy them--that they could be sold again."

A T&T customer from a Dallas-based corporation said, "We don't see on the surface where this is going to change our relationship in the short term. We believe in the long term it's going to make it stronger, because we are going to be dealing with a stronger organization."

A First Travelcorp buyer expressed similar feelings. "It makes no difference to us in our relationship with them. It is good news for them as a company. I wish them well," he said.