Travel series (4): Flight Centre Group – Book review “Family Village Tribe: The Evolution of Flight Centre”

Flight Centre, the Australian based travel company is a company which is on 2 to do lists of mine:  The Australian list as well the travel series list. By chance I discovered that there is a book about Flight Centre. I decided to kick-off the analysis with this book review as part 1 of a Flight Centre analysis.

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The book covers the complete story of Flight Centre and its founders from the start in 1973 until 2013 and was written by an “insider”, a former employee who worked as head of the UK operations.

The story starts interestingly 1973 in a beer hall (Hofbräuhaus) in my hometown Munich when two Aussie students decided to start a bus travel company in London.

Using old military buses, the quickly grew to a fleet of double-decker buses that toured through Europe, Africa and the middle east. The company called “Top Deck Travel” as such was chaotic and bootstrapped. Some years later, after a few crisis they sold the business and one of the founders, “Skroo” Turner returned to Australia.

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He soon discovered that selling airline tickets was a much nicer business, especially as the airlines just were deregulated at that time. He started kiosks that sold flight tickets and was the first in Australia to “discount” them, i.e. charging less commissions than other travel agents, He did this by keeping costs down and hiring people without business experience.

Another thing he implemented early on was that people would have a share in the commissions they generated, what until then was not very common in travel agencies.

The discount model quickly succeeded and the company grew strongly.

The company was always run quite decentralized but this approach and the company culture got more formalized after Turner read a book about “tribal leadership”. The theory behind this approach is that humans lived for 4 mn years as hunters and gatherers and only for the last 8000 years or so as farmers. So our social intelligence is not really equipped to work well in large groups the theory says. In a tribal system, the company is therefore structured in groups or “families” at the lowest level which are maybe 6-9 people. Then 15-20 or so of those families from a “tribe” which then again are grouped into “villages”. Once a family, tribe or village gets too big, it is split into 2 and so forth.

He combined this model with giving managers virtual shares in the agencies which they call “businesses”.

Turner took the company public in 1995 at a price of 0,95 AUD a share, which already made a lot of Flight Centre employees millionaires.

After that, the company had its up and downs but was always growing strongly with the share price multiplying many times over the next years. In 2007 Turner tried to take the company private in a leveraged MBO but did not succeed.

The book includes many interesting insides, both into the company and the airline industry. I liked a lot that the book not only praises the success of the company but also has detailed accounts of the biggest “fuck ups”.

One of the interesting episodes was the time when Turner brought in Bain Consulting to execute a cost cutting program (“Full Throttle”) which failed spectacularly. Another very unique episode was when they tried to commercialize back office processes which sometimes worked well, whereas in some cases it failed completely.

Some other observations

  • a lot of Australian companies didn’t make in the US (exception Westfield)
  • Flight Centre did a lot of smaller acquisitions. Some were very good (Britannic, 2003), some really bad (Liberty Travel US, late 2007, India)
  • They made a big push into the internet in 2000/2001 but both attempts failed
  • Founder Skroo Turner for a long time didn’t believe in the internet
  • they now try to establish an “omni channel” business model

 

Summary:

Overall I liked the book a lot. It portrays Flight Centre as a sometimes chaotic but overall very dynamic company which has a clear and distinct company culture.

The company has delegated a lot of power to its “front line” people who have a lot of incentives to sell a lot and keep costs down. Managers have a share in the business and are incentivized to think as owners. This has worked very well in a classical retail model but it remains to be seen if this translates well into the internet age.

 

P.S.: If someone knows similar “Insider” books about interesting companies, please let me know.

7 comments

  • If I may add another one that I just finished reading: “Junk to Gold” by Willis Johnson, founder of Copart. I enjoyed especially the second half of the book that focuses more on the business, e.g. IPO, competitive landscape and international expansion… Highly recommended!
    (The Kindle Edition is available for €6.46)

  • You may have read some of these but I can suggest:
    – Plain Talk by Ken Iverson (Nucor)
    – Made in America by Sam Walton (Walmart)
    – The habits of labor by Stef Wertheimer (Iscar – though too much of the book focuses on his political activities)
    – limping on water by Phil Bleuth (ABC cap cities from the perspective of an employee rather than CEO)
    – Shoe Dog by Phil Knight (Nike)

  • Sebastian Schrick

    I can definitely recommend “Walking the narrow path – The FANUC story”. It’s a great book, written by the founder (Dr. Eng. Seiuemon Inaba) and he thoroughly describes his management philosophy and practice.

  • Sounds like an interesting read, thanks for bringing my attention to this book and this company.

    Also, the stock looks reasonably priced on a first glance, although there seem to be some challenges (profit margins) currently (?).

    As I really like companies with relatively decentralized organizational structures, I am “gespannt wie ein Flitzebogen” on your next part 🙂

    Tom

  • The last part sounds a lot like Les Schwab which I would recommend if you hadn’t read it yet 😉

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