PS Group, which earlier this year sold its Pacific Southwest Airlines holdings to USAir Group for $279 million, has acquired 81% interest in a Rockville, Md.-based holding company that owns five travel agencies, PS Group said Monday.
The San Diego company would not say what it paid for that stake in USTravel Systems, a privately held company founded in December, 1986, by Peter Sontag, an airline industry consultant. Sontag, who previously served as a travel agency executive, and two other shareholders retained a 19% interest in the company.
Growth Is Expected
USTravel has acquired three agencies in the Southwest and two agencies in Washington. Sontag hopes to build "one of the largest companies, alongside American Express, Ask Mr. Foster and those kinds of industry leaders," PS Group Vice President Lawrence Guske said.
The company will buy "sizable regional travel agencies with the goal of establishing a travel agency network," Guske said.
PS Group acquired the majority interest in USTravel because its executives were familiar with the industry and with Sontag, who had consulted for PSA. PS Group, which will pay for the acquisition with cash generated by the PSA sale, also owns energy sales and production companies and a commercial aircraft leasing company.
"Day-to-day operations will be handled by Peter, but (PS Group) executives do hope to use their past experience in the (airline business) to provide direction and assistance," Guske said.
PS Group will provide USTravel with $18 million in cash and $46 million in "credit supports" that USTravel will use to buy additional travel agencies and travel-related businesses.
Sontag "wants to build (USTravel) into one of the nation's largest companies," said Guske, who described the year-old company as one of the "top 10 travel agencies in the world" based on its $200 million in anticipated gross annual revenue.
Consolidation Is Trend
USTravel has about 20 workers in its Rockville headquarters who help provide "travel agency management" assistance to the company's five agencies, Guske said. Those agencies employ about 520 people.
The travel agency industry is experiencing a consolidation of sorts, according to Ron Santana, a spokesman for the White Plains, N.Y.-based Assn. of Retail Travel Agents.
"There's been a leveling off of growth in the business, and most of the consolidations involve the larger agencies with big dollar volumes and relatively small numbers of locations," Santana said.
Santana, who calls USTravel "a pretty unique idea," predicted that the firm will face tight margins in the industry.
"No matter how good their program is, they're dealing with an industry in which (profit margins) are pretty negligible," Santana said. "It's kind of surprising to see (PS Group) move from the airline industry into the travel business."