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May 2016 Newsletter

Editorial

Two into one

The concession to operate Sofia Airport has been talked about for some time; each time the topic arose it seemed the government quickly poured cold water over it for whatever reason. Now we are told that the proposed tender is for real and that the length of the contract will be for 35 years although no further details were provided. So, these are the facts – but they only start to begin the real story.

The (successful) concessions for Varna and Bourgas Airports were won by a partnership of German based Fraport and Bulgaria Air owners TIM Group. This has worked very well for all concerned and for Bulgarian Black Sea tourism with not only increased tourist numbers but also much improved airports. The jewel in the crown though has always been the possibility to control Sofia Airport; the issue is that apparently Freeport does not want to extend the current partnership to try win the Sofia concession. This would leave TIM and Bulgaria Air as the main contender to operate the capitals airport, a scenario that one could hardly deny would be a serious conflict of interest. There’s more though.

It has been a public ‘secret’” that Bulgaria Air owe Sofia Airport huge amounts of money in un-paid landing fees and this has been the case for many some time. The country managers of several of the foreign airlines that fly to Bulgaria have long complained that the playing field is far from level with these fees and yet they seemed powerless or unwilling to do anything to force the national airline to pay the same fees as they were paying. Enter Ryanair.

Ryanair could never be said to be ‘shy’’. If the kettle is black they will say its black and the Irish based airline, who are about to start operations from Sofia in a massive way appear to have the guts to say what is black and what is white. They have publically said that if the landing fees are not paid they will take the issue to the European Commission as this would be deemed unfair competition through state subsidy. Ryanair are turning the wheel around in this situation because they have also been the victim of such EU action whereby they were given preferential agreements by state owned airports across Europe only for this to be deemed illegal by the EU. So what’s good for the goose is good for the gander apparently. It should also be borne in mind that when Ryanair start its Sofia operations in earnest, the airline most vulnerable to its arrival will be, yes Bulgaria Air.

One might cynically suggest that Ryanair are trying to weaken the opposition in advance of their arrival, although from the other side of the coin, ethically they are correct. Not too long ago the way to deal with these things locally was for the government to ensure competition did not occur, but in 2007 something changed that for sometime, took a while to sink in what the effect for business would be. Bulgaria joined the European Union and its ability to shape proceedings suddenly became restricted. For the better that is.

Mark Thomas

Managing Director

HRG Bulgaria

Neighbours increase hotel activity

There’s a lot of activity going on in the capital cities of our neighbours to the west: Serbia and Macedonia in terms of hotels. In Belgrade plans are afoot to open a new Kempinski, a St Regis (Sheraton family) and an Intercontinental; these will join the Hyatt, Radisson, Courtyard by Marriott, Crowne Plaza, Holiday Inn x2 and Tulip Hotels already in operation and aside of the Hilton and W hotels also under construction. Meanwhile in Skopje, the recently opened Ibis has now been joined by a brand new Marriott which opened its doors this month and additionally, sister brand Courtyard by Marriott will open soon in the building next to its big brother.

This raises the question as to why international global brands are shying away from Sofia? One would think the being a capital city in a European Union country would attract the big players; obviously this has not been the case so far. Yes we have a Hilton and a Radisson which is about to become an Intercontinental, plus we have a Park Inn (Radisson), Holiday Inn and Ramada but we seem to be falling behind in the global hotel brand stakes. That said, we should however pass on the whisper that plans are well advanced for both Marriott and Hyatt to make an appearance here in Sofia. More details to follow hopefully.

 

The light gets further away

Lufthansa seem unable to see any light at the end of a very dark tunnel at the moment. They have just announced that they lost 8 million Euro for the first 3 months of 2016, a negligible figure indeed but compare that with a profit of 425 million Euro in the previous year for the same period and the word ‘”ouch’’ springs to mind. This is despite lower than ever low fuel prices which have enabled just about every other airline across the world to make whacking profits in the past year. Emirates, at the same time, announced it had made a mere 1.9 billion Euro profit last year!

Back to Lufthansa and the reason for such a performance is being blamed on pricing pressures from its competition. Put another way, other airlines are cheaper.

We have said this before and we say it again, Bulgaria needs Lufthansa and its partners Austrian and Swiss to facilitate business with the rest of Europe. Presently no other airline or grouping provides the connectivity that the Lufthansa group does for local travellers though as they also realise, Ryanair are prowling.

 

Visa spat

An interesting spat is developing between the European Union and America regarding visas.  Of course many European countries citizens are exempt from requiring a visa to travel to the USA, instead they fill in an online application to obtain a………visa (by another name). The point of  the EU though is ‘”all for one and one for all” and citizens from the likes of Bulgaria and Romania amongst many, still have to go in person for an interview at a US Embassy in order to obtain a visa – or not to be issued one as the case may be. Meanwhile All American’s can travel visa free to any EU country. The EU commission is now discussing a one year ban on visa free travel to Europe for our American cousins which would require them to somehow obtain a visa to enter Europe.

The move is more politically than economically motivated and indeed as we know, EU politicians know very little about economics. That said, one admires, albeit with tongue in cheek, the ‘”common policy’” stance of the EU and which can only benefit Bulgaria based travellers at al.

Again with tongue in cheek, could it be that the EU is pre-empting the possibility of a certain Mr Trump coming to power who may in turn look to offload several million people to somewhere whom he chooses not to like too much?  The Americans already clearly don’t like certain elements of the European population and restricts their possibility of free movement  so this is merely may be a tit for tat reaction by the EU!

 

Relationship cruise forward

The first ‘”giant step” in normalising relations between the USA and Cuba took place earlier this month when a cruise ship docked in Havana carrying some dozen Americans of Cuban origin amongst its 700 passengers.

The Cuban government had previously blocked Cuban born citizens from travelling to the island but rescinded the law several days prior to the sailing.

The cruise ship will dock in Cuba twice per month.

 

Romanians top of visitor list

The length of the Bulgarian summer season, or the lack of it, was again highlighted by Romanian tourism figures from 2015. During last year some 1million Romanians visited Bulgaria making them the most numerous foreign visitors and with them came an average spend of between 600 – 800 Euros per person which equates to around 1 billion Euros into the local coffers.

Bulgaria and Greece are apparently equally popular amongst Romanians and have the same levels of perception with regard to service and quality. Where Greece does win however is that the season to the south is some 30 – 45 days longer i.e. a month to a month and a half longer.

That’s a lot of missed revenue for Bulgaria.

 

Air Serbia gets on with it

The media and spurious local airlines have long spouted about starting, or should we say more accurately talked about ‘’re-starting’’ flights from Sofia to the USA but speaking pragmatically, there seems no business sense these days as pent up demand to “”escape’’ to the USA has rescinded with mainland Europe and the UK being seem as easier/better alternatives for whatever the requirement. It is eye catching therefore to see that Air Serbia has just taken delivery of its first wide bodied aircraft ahead of the airlines launch of flights to New York direct from Belgrade. Sofia or Bulgaria based travellers can connect excellently twice weekly via Belgrade to NYC and as long as the price is right, it might prove an attractive option for anyone travelling westwards.

It should be noted that Air Serbia is part owned and controlled by mega bucks Etihad Airways and operating from and creating secondary hubs from less obvious places such as Belgrade is part of their wider plan.

 

The story that won’t go away

Debris found on beaches in Mauritius and South Africa is almost certainly from the missing Malaysian Airlines MH 370 that disappeared over the Indian Ocean in March 2014.

A Rolls Royce engine cowling was found in Mossel Bay, South Africa and a piece of an interior door was found off Rodrigues Island, Mauritius.

Ultimately it may prove difficult for authorities to claim the plane disappeared where they claimed it did when everyone knows it didn’t!

Bags of improvement

The airline industry’s focus and investment on bag tracking technology over the past few years seems to be paying off. The rate of mishandled baggage is now a mere 6.5% bags per thousand passengers which is less than half of the amount in 2003. This is despite an 85% rise in overall passengers since 2003 with more than 3.5 billion passengers travelling by air.

By 2018 all bags will be able to be tracked on their journey, just like a parcel can be tracked nowadays.

 

How much cash?

Theft on board planes is not new but a recent case on an Emirates flight heading to Hong Kong from Dubai caught the eye. A Turkish businessman reportedly had around 200,000 Euro in cash (!!!!!!) as well as valuables stolen from his hand luggage which was placed in an overhead compartment.

The first question has to be ‘”what about currency regulations” and the second has to be whether you believe the story or not!

If true the theft is clamed to be the most costly in years.

There is no mention if the passenger was in Economy class or not.

 

BA plans wifi

British Airways parent group IAG has announced it is to offer high speed wifi on its long haul fleet of 118 aircraft. The first aircraft kitted out will be in service next year with the bulk of installations ready by the end of 2019.

Interestingly enough, airlines generally appear to be listening to their passengers and are reluctant to allow calls during flights despite obviously having the technology to allow such.

Long may this continue.

 

A sense of proportion

Bulgaria is a small country and sometimes we loose sense the sense of proportion when it comes to travel and tourism in other countries and just what the implications are of that. We have oft cited the figures that emit from China in this area but we make no apologies for using them again as even to seasoned professionals, the figures are impressive.

China has 8 cities with over 10 million population and 102 conurbations with over 1 million population. By comparison there are 35 in Europe and only 9 in the USA. China has built more than 50 civil airports in the last 10 years making the total in operation 200, 30 more airports are under construction. However, 150 airports cannot break even in financial terms.

On the railways, China operates more km of rail track than the rest of the world combined.

The bottom line is maybe that having an adequate transport infrastructure is a base line necessity for any economy to develop. The point should be headed in Europe.

PS unlike the French and Germans, the Chinese workers also appear not to strike.

 

Be prepared to wait in the USA

Travellers from across the globe are being warned that they should give themselves up to three hours to get through security channels in the USA during the summer months.  The worst airports or the ones facing the biggest crises are reported to be New York, Detroit, Atlanta and Chicago although the majority of the country’s main airports are also vulnerable.

American Airlines claimed that during one week in March, 6800 of its passengers alone missed flights due to delays in security screening.

The entire total number of security screeners employed in the USA is just 42,500 although the authorities intend to add 768 more by summer – big deal!

It seems hard to understand how such an advanced country such as America with its hugely developed transport infrastructure could perform worse than one would expect from some despot third world country when it comes to service and efficiency? The sad fact of the matter though is that the airlines themselves know its going to be a nightmare summer but are powerless to prevent the crises happening.

It may also be pointed out cynically that there is no record of the security people ever catching anyone of relevance who may pose a potential threat of some sort and their only function seems to be to confiscate toothpaste from hand luggage and the odd (legally held) gun that a red neck left in his rucksack.

 

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