Expedia execs sacrifice salary as firm raises $3.2bn during crisis

24 Apr 2020455 Views

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As the travel industry takes a hit, Expedia has raised $3.2bn, appointed new leadership and introduced savings measures.

On Thursday (23 April), online travel booking firm Expedia announced that it is raising $3.2bn in fresh capital to strengthen the company’s balance sheet as it weathers the effective shutdown of the travel industry caused by Covid-19 restrictions.

The company has also appointed a new CEO and CFO, who will not take a salary this year, according to Expedia. The company’s board members will also forgo compensation for the rest of the year, while other senior executives will take a 25pc pay cut.

Former vice-chair of Expedia Peter Kern has been named as the new CEO, while Eric Hart has been named as CFO. The company’s former CEO and CFO were ousted in December after disagreements about Expedia’s strategy.

Barry Diller, chair of Expedia, said of the savings measures: “We have one mandate – to conserve cash, survive and use this time to reconstruct a stronger enterprise to serve the future of travel.”

‘Extraordinary pressure’

Expedia’s funding includes $1.2bn from private equity firms Apollo Global Management and Silver Lake. The company is also raising a further $2bn through new debt financing.

Apollo partner Reed Rayman said: “This investment helps ensure the company has the resources to sustain market leadership and emerge from the current economic environment stronger than ever.”

Additionally, Expedia has cut back on the cost of labour, with furloughs and reduced work weeks in place for many employees until at least 31 August. The company has suspended 401(k) matching for the remainder of the year and is asking staff to voluntarily reduce their working weeks.

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Diller said: “Since the crisis began, the company has encountered an extraordinary number of challenges and just as governments around the world were unprepared, so too were we. We had limited online tools to support widespread cancellations and our call volume spiked 500pc.

“Under extraordinary pressure, our tech teams built new tools and managed to bring our call centre capacity to acceptable levels.”

Diller added that with fresh financing, the company has “a very clear focus for whatever the future brings.”

The wider travel industry

Expedia is not the only travel business to raise funding at this particularly difficult time for the industry.

Cruise operator Carnival raised $6.25bn in debt and equity earlier this month, as the cruise industry suffers from travel restrictions and incidents of Covid-19 spreading on ships.

Since the pandemic began, cruise ships have been labelled “an inherently high-risk setting” for the spread of viruses, and there have been concerns over whether the industry will recover from this pandemic.

In April, Airbnb raised a total of $2bn. Of this funding, $1bn came from key investors Sixth Street Partners and Silver Lake – the firm that has also invested in Expedia. In addition to that funding, Airbnb secured $1bn in a syndicated term loan to help the company to invest in itself and its community.

Kelly Earley is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com