Chinese online travel agency Ctrip plans to focus on building soon-to-be acquired Skyscanner’s airline ticket-booking business on a global scale, taking it beyond merely flight search, Ctrip CEO Jane Jie Sun told Skift.
Sun, who became the first female CEO of a publicly traded online travel agency a couple of weeks ago, also provided some detail on how the $1.74 billion Skyscanner acquisition came together.
Asked whether Ctrip looked beyond Skyscanner for acquisitions to companies such as metasearch players Hipmunk, before Concur acquired it, and Momondo, or even flight-booking business CheapOair in the U.S., Sun said acquisition targets can’t be too local, need to have scale, and must be available to buy.
Sun added that one reason Skyscanner was for sale was because the term of one of its shareholder’s funds was going to mature and and the shareholder wanted to sell his/her Skyscanner shares.
“Some of the investors … and the term of their fund was already up,” Sun said. “They needed to liquidate some of their assets. It’s an opportunity for Ctrip to move in.”
It was also an open secret that Skyscanner was mulling an IPO in 2017, although it’s unclear how Brexit might have impacted its prospects.
A company also has to be available for sale to make an acquisition work, Sun said.
“And also, some companies are available, some are not,” Sun said. “So when we heard about Skyscanner, we met the team. We just felt this company, how driven they are, how customer-oriented they are. We share a lot of common philosophies in terms of putting the customer first, invest heavily in technology so there are lots of things we can do together. We feel it’s an excellent partnership.”
Meetings and A Non-Disclosure Agreement
Ctrip officials, including executive chairman James Jianzhang Liang, Sun, CFO Cindy Xiaofan Wang and the head of its airline-ticketing business met with Skyscanner officials, who signed a non-disclosure agreement.
The deal came together “very quickly,” Sun said, adding that she didn’t know if any other companies got involved in the bidding.
“We could see their [Skyscanner’s] tremendous growth” in selling airline tickets in Asia, Sun said. “When the opportunity comes we move very fast.”
Ctrip’s mergers and acquisitions philosophy is to go after the first or second-tier player in each vertical or to expand Ctrip’s global footprint. Skyscanner, based in Scotland, is likely Europe’s largest flight-metasearch player although it is considerably smaller than Kayak.
“I think the companies we look at need to have very strong entrepreneurship,” Sun said. “Their technology needs to be quite advanced. If they are too local, too small it doesn’t really help us too much. Every year we book around 150 million tickets. The counterparts we work with need to be able to handle a similar size or more. Then it is a meaningful partnership.”
Ctrip’s Plans for Skyscanner
Sun said Ctrip plans on developing Skyscanner as a flight-booking business, a road it has already modestly undertaken, and then Ctrip will integrate its rail, car rental, and attractions inventory with Skyscanner, she added. Ctrip can integrate Skyscanner’s front-end search technology with Ctrip’s backend fulfillment tech.
“We will open all these products to them,” Sun said, referring to rail, car rentals and attractions.
There Will Be Costs Involved
Asked whether Ctrip will heavily invest in Skyscanner or invest in Skyscanner’s international growth on a more measured and profitable basis such as how the Priceline Group invests in Kayak, Sun said there will be some “some cost” involved in Skyscanner’s expansion.
Sun said Skyscanner has long been profitable, is “very solid,” and that its growth might “take some time.”
There will be “some cost” in Skyscanner’s expansion and integration but it will earn more to cover those costs and should see an increase in net profits, Sun said.
For more on Ctrip’s global strategy, including its relationship with the Priceline Group, see our in-depth interview with Sun on Monday.