Despegar Sees Brazil Gains After Alleged Airline Ticket Ponzi Scheme Goes Bust

Latin American travel agency Despegar is gaining market share in Brazil now that a competitor some claimed was a Ponzi scheme filed for bankruptcy.

“We are starting to gain share in the Brazilian market, but also the competitive dynamic of having such an irrational player in the market has changed dramatically,” said Despegar CEO Damian Scokin during the company’s third-quarter earnings call Thursday. “So we expect that situation to continue providing ample room for growth of our brands in Brazil.”

Scokin was referring to competitor 123milhas, a popular airline ticket and vacation package company. In August, 123milhas cancelled thousands of airline tickets and suspended its “Promo” feature, which provided deeply discounted airline tickets and vacation packages with flexible dates.

Scokin claimed it was “basically a Ponzi scheme that has been hurting the travel market significantly over the last couple of years.”

Brazilian congressman Ricardo Silva issued a report in October that said that the feature in question, which had travelers selecting a range of dates for travel rather than specific ones “likely” operated as a “pyramid or Ponzi scheme in which the value obtained with new purchases was used to issue tickets for earlier clients and, of course, to enrich the owners, until the scheme collapsed,” according to The Brazilian Report.

Scokin said his company began to see a positive impact from 123milhas’ demise during the third quarter, and looked to see it more gains in the fourth quarter. Airline tickets alone made up half of Despegar’s 2.4 million transactions in the third quarter.

Despegar, which operates under the Decolar brand in Brazil, offers a hybrid travel agency model; it does roughly half of its business online and the other half offline.

Depegar’s Vrbo Partnership

In other news, Scokin referenced a new partnership with Expedia Group’s Vrbo that would expand Despegar’s vacation rental inventory to nearly 1 million units by the end of the year. In the third quarter, Despegar’s vacation rentals increased 87% year over year to 750,000 properties.

Expedia Group is an investor in Despegar.

In the third quarter, Despegar narrowed its losses to $300,000, from negative $9.3 million in the year-ago period, on revenue of $178.1 million, a 22% increase.