When your cash
flow dries up you have a problem.
The fall of
2001 was desperate times in the travel industry. In the aftermath of the dot COM
crash we had lots of debts to pay off and we were doing the best we could. But
clearing a debt of more than a million euro on a cash flow of less than
100.000€ a week is not easy, considering that you have to pay salaries, rents,
marketing etc. After September 11 it became even harder. For a couple of weeks we
had negative cash flow. Coming out of that shock things were starting to look a
bit better. Then a SAS plane crashed at Linate in Milan. And for a while Swedes
stopped to travel. It was the definitive blow to many travel companies in
Sweden. We battled to survive, but had no intention to give up.
run an IATA accredited agency, like Travelstart, you are allowed to collect
money on behalf of the airlines. You either pay the airlines cash once or twice
a month or you pass on the customers’ credit card and collect your own fees
separately. If you are a new agency or an agency with low liquidity you have to
come up with some sort of collateral, typi.jpgcally a bank guarantee. Unless you
are sleepi.jpgng with the bank manager you have to back up the guarantee with some
cash. I only sleep with my wife so we had to give cash as collateral. We had a
couple of hundred thousand locked in doing no good to anyone. If we could free
that cash I figured it would take us to Christmas. The only issue was that
without the cash as collateral we could no longer issue tickets. Catch 22.
negotiated with a consolidator to issue tickets on our behalf and give us a
line of credit. It was a clear win win deal. I would get my money from the bank;
he would issue my tickets and make money. We would survive. IATA agreed on
keepi.jpgng our licence dormant for a period of six months. The consolidator, the Swedish
Travel Group and their founder Dan Ströborg and I went years back. In 1989 when
I ran a large consolidator firm I helped him with a line of credit to get going
and to expand. Now it was his turn to help me. But Dan is much a better businessman
than I ever was. He wanted handsome payment and shares in the company to help
me. I had just bought my shares back and it broke my heart to have to give them
up again. We agreed on 5% for a credit line of 200.000€.
We were in
business again and the customers didn’t knew the difference. But it would take
me quite some time to get the ship in proper shape and I had the 6 months
extended from IATA to one year.
months a Swedish Travel Group henchman would call me every Friday at 4 to cancel
our credit arrangements. But it always ended the same way, we got more credits.
At the peak of our intensive collaboration we owed the company up to 600.000 €.
The 5% was suddenly 10% and the
fees for issuing tickets got exorbitant.
favours the brave and we grew. Late 2002 we paid off our last debts to them and
got our IATA license reinstated. That was a happy day. It took me another year
to come up with the money for my shares that now was worth quite a bit.
But all in
all it was a great little collaboration. We saved the company. My suppliers made
tons of money on tickets and selling back shares. This journey taught us many valuable
Travelstart has an AAA rating, which is the highest form of credit
rating. It’s in fact better than 95% of the banks in Scandinavia.
are stories that you normally don’t read in press releases.