Synergy from Kuoni deal will start in Q4, 2016: Thomas Cook

Both Thomas Cook and Kuoni India will function as separate entities and compete too

Thomas Cook expects the synergy benefits from its Kuoni India acquisition to flow by end-2016, the company's managing director Madhavan Menon said here on Tuesday.

Last week, Thomas Cook had concluded the acquisition of Swiss tour major Kuoni's business in India. The acquisition of Kuoni Hong Kong, which was a part of the same transaction, had been completed a month earlier.

“We are only integrating the inbound tour business in India. Kuoni’s destination management business, which functions under the brand name Sita, will be merged with Travel Corporation of India (TCI). TCI handles the inbound tour business of Thomas Cook. Other than this, there will be no integration,” said Menon.

Both Thomas Cook and Kuoni India will function as separate entities  and will continue to compete in outbound travel, meeting-incentive tours and corporate travel businesses.

“There are customers who are loyal to Thomas Cook and then there are customers who are loyal to Kuoni India. I don’t want to disturb it. The two units will manage product development, advertising and service delivery independently,” Menon added.

Since there is an overlap in the business of the two companies, there is also a duplicity in some of the functions. Menon says his immediate task is to build synergies.

“We will drive synergies in shared services such as invoicing, purchase of airline seats, hotel rooms, IT and human resources. My priority is to have a shared services platform in place and I expect synergy benefits will start from the last quarter of 2016,” Menon stated.

Thomas Cook has a larger e-business and domestic tour portfolio and is assisting Kuoni India in growing business in these two segments.  “We will deliver quality products in both the companies. It is my responsibility to ensure there is no destruction of value,” Menon noted.

He, however, declined to share the current year data. In 2014, Thomas Cook and Kuoni carried around 200,000 passengers on foreign tours – both leisure and meeting-incentive segment. In the inbound segment, the two companies handled 235,000 passengers and in corporate travel, the two firms issued 1.2 million air tickets.

The Rs 535-crore acquisition of Kuoni allows Thomas Cook to use the SOTC brand (including SITA) in perpetuity. It can use the Kuoni brand in India for 12 months and in Hong Kong for five years. Over the next few months, Kuoni India will be re-branded as SOTC India.

Thomas Cook India, which is owned by Canadian financial services major Fairfax, has the permission to use the Thomas Cook brand name till 2025. This acquisition means that Thomas Cook does not have to focus energy on creating new brands.

Will the Thomas Cook brand get subsumed by SOTC? “That is not something I have to worry about today. We will decide about it later. Today, we will let the two companies operate the we they do now,” said Menon.