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December 2014 Newsletter

Editorial

Another year draws to a close and it’s at this time we reflect on the past year and look forward briefly to the year ahead.

Without doubt the biggest talking point in travel this year has surrounded Malaysian Airlines; though for all the wrong reasons. If anyone had gone into a bookmakers and tried to place a bet that the well respected Asian carrier would lose two of its aircraft within a few months of each other, both in bizarre circumstances, they would have been taken away in a little green van. MH 370, the plane that remains ‘lost” somewhere (we are led to believe) at the bottom of the Indian Ocean, is likely to join the ranks of who really shot JFK and other great mysteries of our time. Our opinion is that there is rather more to this incident than meets the eye. Just as fifty years on from the shooting in Dallas of John F Kennedy, we are now able to extract and analyze more of the information than was possible at the time, fifty years from now no doubt we will also know more about the events surrounding the planes disappearance than what we do now. It really depends on how quickly various authorities admit they know more than they do. With the second Malaysian Airlines plane, MH 117 that was downed in Ukraine this is rather more clear cut. Downed by a Russian missile, it is largely irrelevant who pulled the trigger. Two things emerged from this: firstly that the spies in the sky really do know every movement of every missile and every piece of tin in the sky, thus one assumes they therefore know more about the flight path of MH370 that remains missing! Secondly that Russia, in trying to flex its muscles even further after its annexing of the Crimea, shot itself in the foot via its actions in Ukraine as the civilized world tuned even further against them and the repercussions are now being felt in the Russian economy almost like never before. Winning a war does not always come via the battlefield but what can be dangerous is an injured bear. Put it in a corner, who knows what it can do. What happens in the next months in and around Russia may well affect Europe generally and thus the European economy and our own travel industry.

The good news is that many airlines globally are making record profits which allow them to invest further in new fuel efficient machines which make travel easier and more comfortable as well as being more environmentally friendly. The price of oil has tumbled (which also is another bullet in Russia’s body) and is now at its lowest level for five years. The expectation is that as a result of this, airfares will fall by around 5%. The real question is whether the airlines will pass this saving on or pocket it!  Airlines have been very good at adding a fuel surcharge onto the passenger’s bill the moment the price of oil increases, but they have been rather reluctant to pass on these savings when the price of oil falls. Their response will be that they buy oil now for use in the future so the oil they use now is oil they bought at a higher price. Even a US Senator asked the same question in Washington! If air fares are increased when the price of oil increases, airlines have to be honest and transparent and reduce them when oil prices are low; lets see if airlines turn over a new leaf in the new year and become honest, ethical and compassionate; we doubt it.

All in all, oil might be an interesting commodity next year that plays its part in more than airfares.

Wishing you all a very Merry Christmas and A Happy and Prosperous New Year

 

Mark Thomas

Managing Director

HRG Bulgaria

 

Double Decker chop?

A few short years ago the battle of the aircraft manufacturers was all about size v range and efficiency. Translated, this means that airlines perceptions about the future were either that size matters; hence the birth of the Airbus A380 superjumbo to compete with the Boeing 747, or range and efficiency would prevail. In this latter category we now see the Boeing 787 Dreamliner which is made from composite materials yielding anything around 18% more fuel efficiency and this will shortly be joined by the fuel efficient Airbus A350.

Whilst the order books for the 787’s and the A350’s are more than healthy, that cannot be said about orders for the big planes; the 747 and the A380’s. Indeed, it was muted this week that Airbus is considering halting production of the plane which has seen 147 of the model delivered out of an order book of 318. Of these 318, Emirates has orders for 140!  This year saw just 14 new orders for the plane in total. If this sounds bad then it’s even worse for the 747. First introduced into service 46 years ago Boeing is reducing the rate of manufacture from 1.5 per month to 1.3 per month whilst at the same time, little brother the 737 model range is seeing production increase to 47 per month.

If Airbus cuts its losses on the A380 then the impact on Emirates will be massive to say the least; their business model is based around the machine along with the hub and spoke principle which it feeds.

The war is certainly being won by smaller planes and another part of this reason is “range’ element. The 787, A350’s and even the smaller 737’s and A320’s are now able to operate further and cheaper. This means they can also fly from secondary airports to either hub or other secondary airports and thus avoid the clutter and cost of big airports like Heathrow, Frankfurt and Paris. This also suits the travellers current desires who are also fed up with the hassle and stress of big airports and see their time as being best served by using more convenient less crowded secondary airports.

Its fun and games in this battle but both Airbus and Emirates will be big losers if the A380 is abruptly dumped, in which case the only solution might be for the “Emirate’” to actually buy the airline manufacturer!

 

Going Nuts

A story that has run and run this past week concerns the antics of the daughter of the Chairman of Korean Air. In a culture where nepotism is still the order of the day, daddies little girl was also a Senior Vice President of the airline (based on her experience and knowledge obviously) and part of her remit was supervision of Cabin crew. On this particular Korean Air flight from New York on which she was a first class passenger (obviously), she forced the plane to return back to the gate and threw off the cabin crew member after he served nuts in a bag rather than in a bowl. Then the fun starts.

Whilst she thought she could still get away with such actions in ‘”daddies firm”, the power of the media vilified her. On realising that she had made a rather childish error of judgment she resigned her post at the airline as well as numerous other posts in several of daddies firms and even went to the crew members home to apologise; though he was out at the time. Subsequently, the Korean Authorities are suggesting she may have violated Article 23 of the Aviation Safety Law which becomes a criminal act.

One wonders if she will ever look at any nuts again (pardon the pun).

 

 

It’s a gas

Vegetables on board an Air France flight bound for the Dominican Republic forced it to make an Emergency landing in Ireland. Gasses and odours from the vegetables triggered a smoke alarm in the cockpit. Passengers were asked to leave the plane after the emergency landing before the cargo doors were opened; carefully.

 

UFO or Drone

Drones are starting to become something of a pest. After news recently of a drone playing havoc at New York JFK Airport, the British authorities have revealed that in July, a plane reported coming dangerously close to a Helicopter style drone. The threat received the category A rating which translates to a ‘”serious risk of collision””.

The problem with drones is there are very few laws that govern their operation.

 

 

Brakes in Car Rentals

It’s not just the airlines that the European Commission is keeping its beady eye on; the car rental industry is also the focus of its attention. Car hire firms are kindly being requested (this is the step before it is officially “told” to comply with its request), to stop the practice of charging EU based customers different prices depending on which country they are based.

The example given was of a customer from Germany who saw a car rental request jump in cost by 100% when he added his country of residence (Germany).

This practice has gone on for many years with the car rental firms reluctant to change their established (unethical) practices.

 

It’s dynamic stupid

Dynamic pricing is a term used frequently by the travel industry and refers to the ‘fluidity” of pricing depending on the time or day when the travel service is required. For example a Monday morning flight might be priced differently than a flight that afternoon and the fares even for the morning flight might vary depending on the level of demand. Note here we are talking about the fares as opposed to the cost of ancillaries such as checked luggage or seat assignments. That may soon change.

It is being muted that airlines – albeit in the USA for the time being – are considering charging their ancillary fees on dynamic pricing principles. The inference being that the airlines will increase them during busy periods. This of course will give them greater revenues which is always the object of the game, although the fare paying passenger might be just a tad cheesed off with paying different costs on the way out or on the return portion of a flight. Airlines are however, nothing but cute and have successfully attuned the traveller to paying all sorts of different and varying levels of fees, thus one more spin on the concept probably wont draw too much attention.

 

Begrudgingly Generous

In yet another technology glitch, Singapore Airlines found itself selling business class fares at economy rates recently with 900 bookings made at the “’special offer rate’”. Five Star airline Singapore then shot to one star with the rather curt announcement that they would not honour these bookings and anyone who had booked these fares would have to pay the difference or obtain a refund. The powers that be at the airline quickly realised that with the power of technology also comes responsibility and the world had already heard about the glitch as well as the airlines response, which was proving a PR disaster.

Common sense and business acumen quickly dawned and the airline rapidly back tracked on its threat and allowed the existing bookings to be maintained.

One wonders if the same attitude of generosity would have prevailed in some European Airlines?

 

 

Oh Boy

It used to be the unwritten rule that if a baby was delivered i.e. born, on board a plane whilst mid air, then it would be eligible for free flights for the rest of its lifetime. Just how many cases there were of this actually occurring is another matter but one can guess than in today’s austere times, the last thing an airline will do is give anything away for free. It will therefore be interesting to see how American airline Southwest react after a baby was born onboard a flight travelling between San Francisco and Phoenix.

As is always in the script, a doctor was onboard the flight and the baby boy was delivered safely.

 

Peace in the air

Top marks to British Airways. Much to the relief of their passengers they have announced they will definitely not allow its passengers to make in flight telephone calls. They will allow text messages but that’s where the line will be drawn.

BA rightly say that ‘”these days, people are so busy, they see that the time spent on a flight is thinking time and the only real “me” time they get these days”.

The airline will however look at installing wifi across its short haul (European) fleet but even there, research shows that there is only a 20% uptake on it and the cost of investment would mean they would have to charge for it anyway.

The only potential game changer with these comments is if rivals do something different and it proves to be successful.

 

Bizarre in Berlin

For an airport that was supposed to have closed four years ago, Berlin’s Tegel Airport must be smiling after it was announced that it is to have a 20 m Euro makeover.

This comes as a result of the ongoing saga concerning the new Brandenberg Airport that remains ready, but unopened and there seems to be no date when it will be given the green light to open; though no-one really knows the true story why! Meanwhile, it is costing a fortune to keep the new unopened airport ‘ticking’ over; the airport having a new hotel with no guests and a brand new railway station with no guests or trains.

A very strange story indeed.

 

 

Hiltons digital step

Hilton Worldwide is rolling out digital check in and room selection offerings across thousands of its properties globally. Members of its frequent stay programme, HiltonHHonors, will be able to check in and also choose their actual room based on digital floor plans. Additionally they can also make advance requests to customise their rooms.

This option will be available on desktops, tablets as well as portable devices.

The digital age is here!