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January 2016 Newsletter

Editorial

As we start the New Year let us wish all of our readers and travellers a successful 2016 with as little hassle as possible whilst on our travels. This will of course require airlines, airports and their respective employees to also realise they are in the service industry and not to use their employment as a bargaining chip through strikes. No specific company is in mind when we say this!

Why show the pass?

Moving on, have you ever wondered why you have to show your boarding pass when you buy something at the ‘duty free shop’ at an airport? Many of us have grown used to this routine and even if you ask the person talking your money at the cash desk in the duty free shop, they will likely also have no idea why they record your boarding pass – or pretend to do so. The reason why they take your boarding pass is apparently so that the shops can claim back some of the VAT spent on goods by those people travelling outside the EU. Indeed it is unclear what in reality the process should be at such shops for whilst travelling in the EU forbids people from benefitting from VAT exemptions on items purchased in such shops (the word ‘duty free is surely a misnomer these days?), those travelling outside the EU can claim the VAT back. So are the shops supposed to have two prices: one for sale to those travelling to another EU country and one for those leaving the EU? Or is the purchaser of these goods then supposed to take his VAT receipt to the VAT reclaim office next door and queue there for a refund? Either way you look at it, the Duty Free shop has no requirement whatsoever to record your boarding pass details, unless that is, they are doing something with the VAT they don’t want to admit to. A fact that has now attracted the attention of the UK Government and who seem keen to get to the bottom of the ‘”duty free scam’’. No doubt other EU governments will also be watching with keen interest.  So the next time you buy something at the VAT refuse to show your boarding pass and see what happens! Unfortunately you are not likely to gain anything other a high blood pressure as the game is so established it’s now also embedded into the employees of duty free shops work culture. At the end of the day they are not paid to think nor to ask questions of their employees.

Mark Thomas

Managing Director

HRG Bulgaria

Why transparency

The airline community were quick to seize the excuse of ‘transparency’ as an argument to justify imposing fuel surcharges when they needed to increase revenue but didn’t want to be seen to be increasing their fares. The same argument was used to justify any other fees from charges for carrying bags to even choosing a seat number. At the same time, it’s strange then that when we buy a washing machine or a bag of potatoes the seller doesn’t break down the cost showing how much the fuel cost is for the truck to get the products to market. If the seller wants to make more profit then up goes the price of the washing machine or the potatoes. Of course airlines want to blind us with science; all in the name of transparency. So then, the airlines now have a major problem which, to all intents and purposes, has meant that the word ‘transparency’ has been put on the shelf – at least for the time being. That problem is the record low price of oil!

The airlines cried foul when the price of oil was around 150 USD per barrel but now it’s less than 30 USD a barrel, have the airlines – in the interest of transparency – reduced their fuel surcharges? Nope.

No-one begrudges any business, this includes an airline, to make a healthy profit, but why do they have to trick travellers into believing black is white and white is black. Just increase the fares; the cost of fuel is an integral part of the ticket cost of any travel just as it is with a bus or rail ticket.

So a New Year message to the airlines – “please try be honest….and transparent, just for once in your life”.

 

The CAT’s here

The period between early December and mid February is often referred to by us as the ‘foggy season’’. Historically the low laying Sofia Airport could be closed for days due to fog which always appeared during this period. This in turn caused a huge amount of cancelled flights and frustration amongst passengers. It also meant a huge amount of repetitive work for our own staff trying to constantly re book travellers onto ever decreasing numbers of seats. Part of the route cause of this circle of events was not the fog itself but the fact that Sofia Airport had never invested in the technology required by the aviation industry for landing planes in adverse weather conditions. For decades Sofia Airport had only ‘ÇAT1” level of landing technology whereas planes require the highest level, i.e. CAT 3, when the fog arrives. Therefore if any regular local traveller has noticed that his/her travel is no longer being interrupted due to fog at Sofia Airport, the reason is that Sofia now operates CAT3 landing capability.

It should also be noted that for CAT 3 to work, the planes themselves need also to have the latest landing technology; a fact that nowadays ceases to be an issue as virtually all modern planes, including Bulgaria Air’s newish fleet, has the corresponding technology on board.

Thus if a flight is reportedly cancelled due to fog in Sofia; its likely the airline is using an old plane you maybe wouldn’t want to be flying on anyway.

 

What’s a billion between friends

Just in case you ever wanted to know and even if you didn’t; Delta now claims to be the second largest US airline after edging past United Airlines in terms of annual passenger traffic.

Delta posted 209.6 billion revenue miles in 2015 compared with United’s 208.6 billion miles.

No doubt United will counter the claim by arguing that they have more toilet seats/computers/staff/aircraft wheels/check in counters/staff etc.. The truth being you can make figures read whatever you wish them to; that’s what accountants make a career of isn’t it?

 

Trapped cash

Venezuela may have become a basket case of a country in recent years but that hasn’t stopped them from wreaking even more havoc on the capitalists to the north of them.

American Airlines has just written off 592 million USD of revenue it has in cash which they have trapped in Venezuelan and which they can’t repatriate.

According to IATA, airlines combined have a grand total of 3.7 billion USD trapped in banks in Venezuela.

Jumbo sized “by-by”

Air France this month became yet another airline to retire its Boeing 747 jumbo fleet after 45 years of service. The final 747 flew between Mexico City and Paris CDG.

Air France first 747 launched on June 3rd 1970 between Paris and New York and took a total of 73 Boeing 747’s during this period.

Half a story

German national carrier Lufthansa is claiming a record year in 2015; not from the number of strikes its employees held (sic) but in terms of passenger numbers. The airline carried 107.7 million passengers in 2015, an increase of 1.6% on the previous year and achieved load factors (how full the planes were) of 80.4%.

It makes one wonder how many more passengers they could have actually carried if they hadn’t been on strike so often!

What the press release didn’t say however is how much profit Lufthansa made, or rather didn’t make. Now that’s another story for some later month.

 

Fuel for thought

All business whether it’s through the guilt factor or for genuine economic reasons value the effect of making the right noises when it comes to environmental issues. Airlines have been amongst those at the forefront when it comes to testing biofuels as a long term replacement for good old traditional ‘oil’ based fuels. Now that the price of oil is at a record low, the thirst to invest in bio fuels seems to have waned.

British Airways, who were recently named as amongst the least fuel efficient airlines operating transatlantic flights has also announced that it has ditched its flagship environmental project to turn carbon rich household waste into biofuel for aircraft.

Whilst the airline blames the government for not supporting the move through incentives coupled with the current low price of fuel, there may well be another reason why the project was ditched.

The company with whom BA was partnered went into bankruptcy three months ago. The airline might also have figured that there was also no track record of the biofuels company having produced any such biofuel nor having the capability to do so. Indeed no company has ever produced such a fuel from gasified waste.

It might be that this venture to which BA bought into might best be bracketed under the word ‘scam’. Better for BA to rid itself now of the liability before any PR damage is done further down the road.

 

Greece going backwards again

Another year another strike in Greece, this time it was Greek Civil Aviation Authority who called a 24 hour strike across the country to protest about the Greek governments plans to privatise 14 secondary airports in Greece.

These were not the main airport e.g. Athens or Thessaloniki but secondary small airports and so would have little or no impact on the bigger travel industry picture. Indeed putting such facilities into private ownership could likely stimulate activity and local employment as owners strive to bring new business to an area or to the local region. One has only to think about the economic benefits once little known towns have had in the likes of Poland, France and Italy when the likes of Easyjet and Ryanair land on their doorstep. More tourists, more spend, more income, more employment and more taxes for the region! It’s as simple as that. Except that is if you don’t believe in the free market economy in which case wouldn’t you be better off in North Korea?

Unfortunately many within the EU have such beliefs, even today.

Wrong direction

Malaysian Airlines have had a tough time of it over the past couple of years and luckily acknowledged that it needed to ‘change’ if it were to compete with rival regional airlines. What therefore it doesn’t need is any ‘own goals’ from its own team members. Cue the bizarre decision recently to stop accepting any baggage on any of its flights to Europe!  A move later rescinded and then came the interference of a local Islamic preacher who begged Malaysians to plead with the airline for female crew to wear ‘appropriate Muslim dress’. Oh yes, and to ban alcohol.

Maybe we in the west think differently in business and no-one can say what is right and what is wrong, nor what will work and what wont work.  The world is a global stage and imposing individual beliefs onto an airline like Malaysian is not a recipe for success.

 

Feeding the old boys

In 2015 we wrote about the gradual move by the so called Low Cost Carriers to act as ‘feeders’ for traditional airlines long haul routes. Non of the major European airlines make a profit on their short haul operations and often the main reason why they continue to operate is to act as a feeder for their own long flights that traditionally hub out of just one or two ‘home airports” and that do make an operating profit. It would thus seem appealing to them (the traditional airlines) to rid themselves of the burden of operating many of these short haul flights and sub contract them out to someone else. That ‘someone’ else is more than likely to be Ryanair and Easyjet etc.

As if to bring this notion out of the closet and a step closer to reality, Ryanair has revealed it is talks with TAP Portugal and Norwegian Airlines to use Ryanair flights into Lisbon and London Gatwick to act as a feeder to the Portuguese and Norwegians long haul network.

As long as the public perception about varying quality standards can be overcome, this notion is likely to become an industry standard very soon indeed.

 

Lightening smack for airlines

A UK judge has made a ruling that is likely to have a significant knock on effect to other EU countries regarding lightening strikes. The ruling is against airlines and in favour of passengers when a plane is struck by lightening which causes delays in excess of three hours. This three hour limit is the limit whereby any further delay forces airlines to pay passengers up to 600 Euro in compensation.

The airlines, in this particular case, Monarch, argued that a lightening strike was an ‘extraordinary circumstance’ and indeed the Civil Aviation Authority (CAA) listed lightening as one of those circumstances that could be deemed ‘”extraordinary’. The judge’s reasoning was that a ‘lightening strike may well be unexpected but is not extraordinary. Bad weather is not the airline fault but it is their responsibility, if they are not willing to put measures in place to deal with delays caused by the weather – something which is a daily concern – they must be prepared to compensate passengers for their loss of time ‘

The judge also made the point that any list that the CAA produced for guidance was not legally binding and was simply a subjective list of its own opinion.

 

If you’d like to subscribe your friends or colleagues and for all your travel requirements, reservations or for more information about any of the items mentioned in the newsletter, please contact us:

Tel:+ 359 (2) 943 3011;
Fax:+ 359 (2) 946 1261;
e-mail:mark@bg.hrgworldwide.com