As the aviation and tour operating industries continue to struggle following the 11 September atrocities and a second Gulf War, the close relationship of First Choice’s legal function with the company’s principal commercial teams has contributed to maintaining its position as one of the most profitable vertically-integrated tour operators in the UK.
First Choice’s director of legal affairs and company secretary Andrew John says: “First Choice managed post-11 September issues better than any of its competitors, and certainly better than MyTravel, which suffered to a much greater extent.”
In the last 12 months the team, which came third in the In-House Commerce & Industry Team of the Year category at this year’s The Lawyer Awards, has made a telling contribution. It has steered First Choice through two astute acquisitions to help the company grow its fledgling ‘soft adventure’ (adventure holidays, but with heightened standards of safety and comfort) holiday business.
First Choice’s legal function comprises four lawyers based in its Crawley headquarters. Additionally, it has three lawyers in Spain, from where the company’s European specialist business division is run, and a team of paralegals in the Manchester-based consumer legal services department, who deal predominantly with consumer litigation.
In addition to John, the Crawley team comprises Andrew Garner, First Choice’s general counsel for corporate, who supports the company’s UK and Ireland division, and litigation specialist Shaun Pattison, who is also the tour operator’s resident holiday law expert. First Choice also recently hired aviation lawyer Euan Sutton from Norton Rose to advise on issues concerning its fleet of 32 aircraft, which operate under the Air 2000 brand.
First Choice’s legal department is presently one lawyer lighter than it was before John joined the company. “There was another lawyer in Crawley when I joined,” says John. “But when First Choice went through the dark days that followed 11 September we simply had to control the costs of the business, and the legal department was no exception, so one lawyer was made redundant.” Nevertheless, John believes that First Choice’s legal function enjoys a much higher profile today as a result of the team’s talent.
First Choice’s business is split into five divisions: the UK and Ireland division, which is behind the mainstream package holiday; the marine division, which offers yachting and sailing holidays; the Spanish-based European specialist businesses division, which operates holidays to specialist destinations such as the Eastern Mediterranean and North Africa; the international event and destination services division; and the Canada division.
Recently, the company bought Exodus Travel and Waymark Holidays, providing it with a strong platform to expand into the soft adventure holiday market. John says: “We believe that soft adventures are up and coming in leisure travel.”
Exodus offers tours for people who want to travel the old hippy trail to Katmandu or people who would like to climb Mount Kilimanjaro; Waymark operates skiing trips in the winter and specialist walking holidays in the summer.
“At the moment soft adventure is in an incubator and will become increasingly important,” says John.
First Choice’s principal law firm is Herbert Smith, which is retained to advise on corporate, commercial and competition law issues. John says his main contacts at the firm and the people who are important to First Choice are competition partner Jonathan Scott, banking partner Clive Barnard and corporate partner David Pattison.
Nevertheless, John says that just because the relationship with Herbert Smith is a longstanding one, it does not necessarily mean that it gets all the work. “There are smaller matters on which we’ll need external help that are frankly not appropriate for the charging rates of a City firm,” says John. “First Choice has used Herbert Smith for a very, very long time, but that doesn’t mean [the firm] isn’t under pressure to deliver a cost-effective service. They are and they know that they are.”
Consequently, John established a relationship with South East firm ASB Law in 2001 to advise on smaller projects – for example on the acquisition of Exodus. “ASB Law’s charge-out rates are substantially lower than City rates,” says John. “And it’s populated to a significant extent by former City lawyers.”
Additionally, Lovells’ asset finance team is retained by First Choice to advise on aviation leasing work. At the beginning of the year the firm advised the company on a scheme designed to boost the profits of its Canada division by reducing its aviation costs. Under this scheme, it became possible to transfer surplus aircraft from the Air 2000 fleet in the UK to Canada during the winter.
First Choice is also looking at whether there is a better way to manage the cost of obtaining aviation law advice. John says that although large deals will continue to go to Lovells, he strongly believes that it is possible to get cheaper good-quality advice for smaller projects. “Lovells will simply be used in a more appropriate manner,” he says.
The company also has a property panel comprising Dechert, Eversheds and TLT Solicitors, although John leaves Garner to administer this panel. Additionally, niche firm Kemp Little advises First Choice on intellectual property and e-commerce issues.
John joined First Choice in December 2000, arriving from manufacturing conglomerate Vickers, where he was general counsel and commercial director, just as the company was taken over by Rolls-Royce. “I no longer had a job because, as is common with takeovers, the junior partner’s head office tends to be wiped out,” says John. “That’s what happened to me – I found myself without a job so I started to look for new opportunities and came across the position at First Choice.”
Oddly enough, before John took on his new role at First Choice, a potential takeover of the company by the troubled MyTravel Group was blocked by the European Commission. John says that even though First Choice operated in a completely different industry to Vickers, he was attracted to the position because there was a certain chemistry between him and the company’s chief executive Peter Long. “Chemistry is very important to me,” he says. “I wouldn’t describe myself as a lawyer’s lawyer. I’m a businessman and like to be integrated with the management team. First Choice offered me that.”
Looking to the future, John expects First Choice to continue to grow organically and through bolt-on acquisitions. “So I need my team to be able to handle a relatively constant flow of small but important acquisitions,” he says. “The package holiday is a British invention,” he concludes. “It will be sad if we lose [it] in the way we lost the automotive industry.”
First Choice Holidays
Organisation: First Choice Holidays
Sector: Travel and tourism
Turnover for 2002: £2.2bn
Annual legal spend: £2m
Legal capability: Four lawyers in the UK, three in Spain and 11 paralegals based in Manchester
Director of legal services and company secretary: Andrew John
Reporting to: Chief executive Peter Long
Main law firms: ASB Law, Herbert Smith, Kemp Little and Lovells