ALPHA RED SERVICES
Capturing global airline distribution market share with our technology aiming to save costs for airlines
Tapping air travel revenues in excess of US$200 billion, Alpha Red Services is a fast growing B2B air travel content aggregator. By pioneering an innovative aggregation system that provides structured access to air travel content via a single API interface, Alpha Red Services proprietary platform, TCommerce Gateway (TCG), connects directly to key regional airlines and their reservation systems, and allow our travel portal partners to altogether bypass the traditional, out-dated and expensive industry distribution channels existing today.
Developed since 2016, Alpha Red Services cloud-based intellectual property technology provides the core that powers the air travel aggregation solution. Built by experienced travel industry personnel to disrupt the air travel industry, we seek to manage and organize the maze of air travel content available online. With TCG, our travel portal partners mainly Online Travel Agents (OTAs) can easily assess millions of daily routes, timetables, fares and deals that have been aggregated from key regional airlines with real-time offers and availability and make bookings and buy ancillary services. For our airline partners, not only will they get to lower their transaction cost to a fraction of the industry, they can also leverage TCG to penetrate and access new markets without having to incur significant distribution and marketing spend.
TCG platform have seen significant traction where it is today among the preferred air travel booking platform used by large established OTAs within the region, including China’s largest OTAs (we serve the top five today). With links to as many as fourteen (and growing) major airlines in the region, we were previously responding to more than 15 million searches daily pre-COVID 19, and now, notwithstanding the industry still deeply affected by the ongoing COVID 19 pandemic, business is recovering faster than expected testament to the business model resilience. In fact, if not for COVID-19, given its highly scalable business model, Alpha Red Services would have already broke even this year (vs. 2019 RM 756K loss, 2018 RM642K loss) but this is now pushed back to 2021. Thereafter, we expect Alpha Red Services to make more than RM 2 million profits from 2022 onwards.
With the capital raise, we plan to continually be ahead of our users evolving industry expectations, and will constantly seek to enhance our platform with the latest technology. We will be the reliable and quality air travel content platform linking our airline partners and travel portal partners.
Despite been a relatively well developed industry, airlines have been slow to innovate and change. Plagued by each airline own complex and outdated systems linking many different industry distribution systems, airlines have not been able to functionally cope with the fast evolving global market booking behavioural change such as increasing demand for local languages and payment methods, and worst still, overseas distribution cost for airlines have continued to be stubbornly high.
Amidst OTAs themselves faced with thinning business profit margins having to compete in a highly fragmented industry, OTAs struggle to commercially justify the significant upfront investment and resource requirement to develop their own system solution that can connect to each and every airline. Instead, today, OTAs continues to put up with the significant cost and operational disadvantages as they remained stuck with no effective system solution to connect and handle the many highly complex airline booking systems.
The travel industry is in need of a single comprehensive B2B platform that can connect and transcend beyond single airlines, and that too a platform that can offer more commercial functions/options. With the market becoming more competitive, the industry desperately needs and demands a platform that can manage and organize the maze of air travel content available online. This will not only make it easier for OTAs to access, make bookings and buy ancillary services all with real-time offers and availability, but the single connection will also at same time allow airline partners to be more innovative via product bundling and value add offers.
A platform of convenience, the technology must be adept to respond and deal with the industry high volume demand as well as highly cumbersome and complex airline booking system.
Built by experienced travel industry personnel, Alpha Red Services have developed an integrated travel content aggregator platform, T-Commerce Gateway. By providing structured access to travel content via a single API interface, TCG directly connect OTAs to airlines and their reservation systems, which this will not only bypass the cumbersome outdated traditional distribution channels existing today, airlines and OTAs alike can enjoy significant transaction cost savings. A ‘bolt-on’ open system, airlines can now finally transact and innovate their products easily without disrupting the entrenched complex airline booking system and meet the fast evolving customer demand needs.
Certified with industry standard IATA NDC Level 3 Certificate, TCG own gateway technology which is hosted on Amazon Cloud, utilizes Microsoft Technology and mySQL database. Supporting both XML and JSON, the platform is highly scalable (TCG handled 15 million daily search in 2019) and by providing a single standard integration format for our portal partners, it can support any integration method with airline booking systems.
With low onboarding cost, TCG has seen strong response and traction with airlines and OTAs. Today, fourteen major airlines are connected and ‘live’ on the platform while established OTAs in the region including the top five largest Chinese OTAs (representing 75% Chinese travel market share) are now using TCG as their preferred air travel content aggregator.
Last year, with only eight airlines ‘live’ on the platform, there were 17,864 bookings worth RM 8.7mil and this compares against first full year 2018 6,806 bookings worth RM 5.1mil.
Expectedly, COVID-19 has greatly impacted the travel industry with TCG not immune. That said, after the initial COVID-19 demand slump, business is recovering. In fact, it is very encouraging to see the business recovering faster than the industry, which clearly demonstrates the resilience of the business model.
Interestingly, airlines and OTAs have taken advantage of the COVID-19 crisis to improve their eco-systems, and TCG has benefited significantly with strong number of airlines and OTAs onboarding the platform. In the last six months alone, another six airlines have gone ‘live’ while another three new OTAs are now using TCG. Recently, China’s biggest airline, China Southern has also agreed to onboard TCG, which we intend to launch as soon as Chinese borders open for travel.
In the last two years, notwithstanding positive gross margins, Alpha Red Services have incurred RM 676K, and RM 756K loss respectively mainly due to continued platform development expense. The company was expecting to breakeven this year, if not for COVID-19, and instead this is now pushed back to next year with 2020 net loss still manageable at RM642K and 2021 estimated net profit RM 487K. Given its high operating leverage underpinned by its scalable business model with more airlines onboard, Alpha Red Services forecast to make RM 2.6 million and RM 7.5 million net profit in 2022 and 2023 respectively.
An integrated travel content aggregator, we serve both airlines and OTAs on both ends. We are proud to be working with among the largest OTAs both in China and the region as well as major established airlines. We expect these to grow faster even as more demand begets demand.
T-Commerce Gateway on-sell and distribute air tickets either on commission arrangement with airlines (~3-5%) or air ticket mark-up (~1-2%), which the latter also can be seen as booking fee. Other than air-ticket income, TCG also earns additional booking fees for ancillary products, for example, seat, meal, baggage etc.
It is key to understand the scalability of T-Commerce Gateway platform. With the core technology platform largely developed and built, T-Commerce Gateway will greatly benefit as more airlines and OTAs coming onboard drive significant operating leverage. Alpha Red Services will need to respond by putting up more working capital with the increased business.
While the industry remains clouded by uncertain COVID-19 pandemic, we have seen time and time again how the global travel industry will recover testament to its resilience. In fact, up until last year, global travel has continuously recorded strong growth statistics with Asia leading the growth.
It is no surprise business data platform Statista forecast revenues to about halve this year but with the markets gradually opening up, this will recover strongly in 2021 with global demand expected to be fully recovering by 2023 (exceeding 2019).
As in almost every industry where technology can be credited to drive growth, travel will be no different. Again, business data platform Statista expects online sales to grow structurally over time which will benefit travel tech platforms. Advancements in technology will make it much easier for people, and its potential growth knows no bounds.
Global Flight Revenues
Asia Flight Revenues
Global Online vs Offline
Probably one of its kind in the region, there are only handful established competitors. But with the industry expected to continue growing and with the structural online tailwind, competition is expected to accelerate hence it is key to be ahead of the curve and gain credibility among OTA customers and users. Been a sticky market, Alpha Red Services wants to build as many beachheads and be the preferred technology platform. Alpha Red Services will focus in Asia, where local languages and payment customization can differentiate penetration and adoption.
Below is comparison between TCG platform against other established global content aggregator platform (and comments on their platform).
- Established travel content aggregator mainly to facilitate direct airline connection
- Seen as more airline friendly, travel agency incur expensive charges for bookings
- Positioned more as an airline IT solution company
- Helps implement NDC compliance ticketing gateway for airlines but this comes with high investment and maintenance cost for airlines
- Does not offer ready OTA connections to airlines
Flight Route 24 (China)
- Focus more as a content aggregator for direct connection, screen scrapping, other aggregator and GDS
- Only helps airlines save partial distribution cost
With the business largely self-funded, we are looking to raise funds mainly for working capital as we broaden commercial partnerships with airlines and support fast growing demand as more travel portal partners (mainly OTAs) onboard.
With the company forecast to breakeven next year and deliver RM 2.6 million profits in 2022, pre-money valuation RM 22 million values the company at less than 10X price to earnings ratio. We target to raise up to RM 3 million with a minimum RM 300,000 raise.
To be the preferred air travel content aggregator focused on managing and organizing the maze of online air travel content available globally
Initially bootstrapping, founder KC, together with his team at his technology consulting company, Alpha Red Solution, spend time/effort to build and develop T-Commerce Gateway in its initial stages including proof of concept. As TCG gain traction, KC incorporated Alpha Red Services to raise RM 1 million in 2018 from angel investors with diverse range of background in finance, banking, fintech and legal.
Do note that prior to this crowd funding round, as a show of confidence, and with the objective to make Alpha Red Solution a debt-free company, Alpha Red Services existing shareholders agreed to undertake rights offering with the intention to repay shareholders loan.
Super passionate towards travel tech, Cheah Kwan Cheong (KC) carries almost two decades of direct industry experience including a decade working and building technology for AirAsia in its early days, and two years at Travelport. KC also co-founded Mayflower Online, which he helped lead to digitize the conventional travel business at Malaysia’s leading travel agency, Mayflower Group.
Having experienced first-hand the structural pain experienced by industry i.e. both airlines and OTAs, this inspired KC to design and build TCG platform solution from scratch back in 2017. KC has since built the platform with great response and feedback from the industry partners.
Other than his strong core team, KC is also supported by the company advisors covering financials, legal and technology. This not only ensures the company benefits from expert industry expertise beyond its core team, Alpha Red Services is managed with varied business perspectives all serving to create and differentiate the business platform building Alpha Red Services to the company today.
A business largely built on cutting edge technology and automation, our small team comprise both tech enthusiasts/experts and super experienced travel industry team members all striving to create and deliver elevated travel booking experience to our partners. As we continue to widen and expand the base (with more airlines and travel partners onboarding), we will be on the lookout for like-minded people to strengthen the core team.
No specific press as yet on T-Commerce Gateway. See below press instead of founder KC.
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