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November 2016 Newsletter

Editorial

The shape of things to come

A recent announcement by Ryanair contains news that, on the face of it, might start to make the likes of Lufthansa, BA and Air France sweat somewhat. It said that by the end of this year, Ryanair will fly to more primary airports than secondary airports. An example of a primary airport might be London Heathrow or Frankfurt Main; secondary ones would be London Stanstead or Frankfurt Hahn.

Translated this means that Ryanair is slowly but surely starting to intrude on the space that was once the ring fenced sole domain of the traditional carriers. This announcement though contains something far more reaching.

This will no doubt result in a banging of the table by the traditional airlines who typically pay a larger airport landing fee than the so called Low Cost Carriers but there are also the interests of the airport operators to bare in mind and who indeed see their own future growth and expansion as coming not from traditional carriers but from the new kids on the block like Easyjet and Ryanair. Then there are the BA’s Air France and Lufthansa’s of this world; which is where the real story behind the story is found.

Ryanair have also muted that they wouldn’t discount flying to London Heathrow and have already announced the start of flights into Germany’s main airport and Lufthansa HQ at Frankfurt Main. Airlines such as BA and Lufthansa have for years struggled to even break even with their own short haul flights which quite simply are a loss leader and like Air France, have been playing around with their own “Lower Cost’’ operation structures aka Eurowings and Hop. The lower cost sister companies of the big boys can do the job required to some extent but they struggle to the full task that is really required of them; namely to transfer passengers from the regions to the main big boys long haul flights at their hubs in Heathrow, Paris CDG and Frankfurt. Enter the likes of Ryanair and Easyjet.

These latter two airlines already have a) the route networks and b) the passenger numbers and c) the infrastructure (to a degree) to simply work in collusion with the big boys and supply them with passengers, All they need do is change the airport names i.e. Stanstead to Heathrow and Hahn to Main; its still London and Frankfurt.

Whilst this concept may sound fanciful; it isn’t and within the next 3- 5 years it will likely become a reality. Already in the USA, some of the second tier Low Cost operator’s work with the main carriers to good effect and what generally happens in the USA follows on into Europe.

There will however by some technical issues which are actually more complex than the outsider may imagine. The through connection of bags, the onward ticketing onto different carriers e.g. Easyjet onto BA all require significant investment in their operational infrastructure and this cost is not small, as surprising as that may sound. There are also the legal issues such as undertaking a journey with one IATA and one non IATA airline combined together. That is, of course, aside from the massively different on board service standards that airlines possess and quite frankly comparing say Ryanair and BA would be like comparing a Dacia with Mercedes’ both will do the job asked of them but…!  How also does an airline justify a First Class or Business Class fare when the first leg is with a Low Cost carrier – would they get free food and drinks or would they have to pay like everyone else?

Clearly there are a lot of technical issues in play otherwise this concept would already be operational. These issues will gradually be eroded and this erosion is likely to be sooner rather than later.

Mark Thomas

Managing Director

HRG Bulgaria

Big is better

If a similar situation had been found in Australia as opposed to in the USA then there may have been riots; imagine the doomsday scenario – the pub without beer! At New York’s Newark Airport recently two of United Airlines lounges were forced to stop selling beer not because the apprentice had forgot to order any (or indeed any type of alcohol), but rather because someone forgot to renew their liquor licence, which actually had expired at the end of June……it was now the end of September!

So much for an airlines ‘attention to their high value client’s comfort’.

 

Free rides – The future?

Outspoken Ryanair boss Michael O’Leary is heard less and less these days, thankfully, but his comments this week about his vision for the future of air travel will have made the hair on the neck of other airlines CEO’s stand to attention. The difference between Mr O’Leary and other CEO’s who like to hear their own voice such as Richard Branson, is that Mr O’Leary often delivers on his word; the others don’t. So what did he say that was eye catching?
The Ryanair boss envisages that in between five – ten years from now he will abolish fares altogether! The revenue instead of coming from passengers in the form of seat sales will come from items like revenue sharing from airport shops. Whilst admitting that this recipe may not work at large airports that concept assumes smaller airports will gain the passenger numbers and passengers would generate income for the airport.

Sound idea, but limited

A new website set up by London based Bulgarian expats deserves mention for its simplicity; it re-sells flight tickets that the buyers cannot use. The concept is a sound one and without wishing to invent a new business that redesigns the wheel, this is a simple business idea and perhaps one not thought of before. It will probably be a success but, here’s the crunch, with only limited reach.
Some local media jumping onto the PR blurb say that ‘”most airlines will allow name changes for a fee’”, the fact of the matter is that the huge majority of airline wont in fact allow name changes no matter if the ticket is business class. Unused tickets are a nice earner for the airlines and they can over sell a flight safe in the knowledge that a percentage of passengers won’t turn up. The site lists the airlines that will facilitate name changes and these include Wizz and Ryanair from the airlines that fly to Sofia and also Thomson and Tui who likely operate to the Black Sea during the summer season. Other European carriers include Aer Lingus, SAS, Vueling, Norweigen and Finnair but it’s the ones that are not listed such as Lufthansa, Austrian and BA that catch the eye. Also, the cost for a name change is often around 100 Euro and in many cases this is more than buying a new ticket! In the USA, major airlines listed are Jet Blue and Air Canada but none of the likes of Delta, Southwest, American and United etc.
One interesting model for this site (this is a ‘free” idea), is to strategically choose some busy flights e.g. immediately after the New Year when demand is high, book the entire flight for say 100 or even 200 Euro a seat well in advance and advertise them at three hundred percent mark up, including the change fee. If the person wants to travel on that flight he will have to buy from you and even better if you leave the sale to the last minute when people get desperate for seats.
PS not sure the airlines would appreciate this idea though!

Most popular cities

Card provider Mastercard has just released its forecast of the worlds most visited cities as defined by overnight international visitors as well as those cities which are increasing the most. The Worlds ‘’Top 10 Most visited Cities’” are:-
1. Bangkok 21.47m
2. London 19.88m
3. Paris 18.03m
4. Dubai 15.27m
5. New York 12.75m
6. Singapore 12.11m
7. Kuala Lumpur 12.02m
8. Istanbul 11.95m
9. Tokyo 11.70m
10. Seoul 11.20m

Paris in particular may have suffered with this years figures due to terrorist attacks but equally Bangkok has also had its fair share of terrorism. One curious city here is Istanbul as since the summer, the visitor numbers to Istanbul have fallen off a cliff.
The cities with the largest growth were identified as:-

1. Osaka 24.15% increase
2. Chengdu 20.14%
3. Abu Dhabi 19.81%
4. Colombo 19.57%
5. Tokyo 18.48%
6. Riyadh 16.45%
7. Taipei 14.53%
8. Xi’ an 14.20%
9. Tehran 12.98%
10. 10 Xiamen 12.93%

Osaka has seen a surge due to its proximity to China and its reputation as a ‘”foodie’” place. For the rest, maybe get out the atlas.

Deja vous

Lufthansa has once again caught the French disease of staff inflicting their grievances against its employers by launching rolling strike action. What makes this current bout worse is that the unions involved have been adding and adding an extra day as the week progresses. By doing this the airline staff is losing any sympathy they may have had from the people who ultimately pay their wages: the customer.

Speaking logically, if a traveller has incurred any loss whatsoever due to the strike action, this should be recoverable from the people who failed to provide the service i.e. the airline. Whether or not the courts would consider lost hotel bookings or rail tickets to be a part of the coverage is unsure but certainly any cost whatsoever connected with the airline e.g. re-booking fees, charges on credit cards, transfers connected with the flight, car parking costs etc etc, by law should be recoverable from the people who failed to provide their part of the contract; the airline itself.

Can someone please put this in the European Court?

The airline can then recover their own lost costs from the Unions!

An affront to the intelligence

British Airways may be assuming that fare paying passengers are ambivalent to the odd new fee they choose to add to their fares, but such an assumption might also be an affront to their passenger’s intelligence. From December 14th customers paying via credit card will be charged 1% of the total cost of the ticket up to a maximum of 20 GBP. The airline stated they ‘’don’t make a profit from these charges’.

It should be noted, as in fact it has, that since March 2016, interchange regulations came into force that the fees merchants have to pay to credit card networks of 0.3%. Thus by charging 1%, the airline will make a profit of 0.7% on all of its tickets that are less than 7000 Euro.

Ryanair will be miffed they hadn’t patented the idea.

Visa free to Canada

Along with the signing of the CETA Trade Agreement between Europe and Canada comes the news that as a direct result of this finally being settled, Bulgarian citizens will soon be allowed to travel visa free to Canada. Except that is, they will still need a visa, but it’s not called that!
From around March 2017, Bulgarian passport holders who have travelled to either the USA or Canada will be allowed to obtain their ‘”entry permit’’ electronically. Such a procedure already exists for travel to the likes of Australia, India and the UAE. Then from around November 2017, it is expected that all new applicants will be able to apply for an electronic ‘entry permit’ to Canada.

Chasing the horse

It might be a case of closing the stable door after the horse has bolted but in the UK, the Civil Aviation Authority has launched an enquiry into the hidden fees charged by airlines and the way costs are presented to customers. Anything that is an additional charge will be looked at such as name changes, re-issuing of boarding passes, check in costs at an airport, meals, seat selections etc etc.
Whilst this may seem to be just another door stop generating piece of paper, the CAA also has the power to get its findings included in EU legislation. The investigations will also not just apply to EU carriers but all carriers that operate, in this case, to the UK. Its quite possible that the results from this will find their way into legislation but knowing how fast these things work, or don’t work as the case may be, it will be a few years yet before anyone sees the benefit and in the meantime, the airlines will ensure they reap the benefits of opaqueness.

Life after the game

Former Manchester United football stars Ryan Giggs and Gary Neville are planning to open 25 football themed hotels across Europe and Asia. The ‘Hotel Football” brand they are a part of already has one hotel in Manchester.

Change the software

Bad news for the green brigade around London after the new UK government did what previous governments daren’t do: give the go ahead to a third runway at London’s Heathrow Airport. The runway is long overdue and even now the approval has been given there will be legal challenges which in real terms will mean the piece of concrete will not be ready until after 2030 – the year that is and not the time in the evening.
A ‘funny’ connected to this comes with data that shows that Heathrow generated some 25,300 noise complaints during the summer! However closer analysis shows these were from, wait for it, 10 people. Three individuals complained 1,280 times per day over a three month period which averages 14 times per day. One suburb of London close to the runway generated the most complains; 3944 but these were from only 22 people!
Software analysts also detected that anti runway expansion groups had used software to lodge complaints when planes flew overhead. The discovery was made when complaints were being received when the airport was closed; the software system reporting the complaint had failed to take into account the fact that the clocks had been put back one hour during the autumn.

Accommodation sharing company Airbnb’s rise to fame has been nothing short of meteoric. The company founded in 2008 as a means by which people could rent out their homes to mainly leisure travellers has grown into a giant with a share value that would rival even someone like Apple. The Airbnb product is spreading into providing specially accredited accommodation for business travellers, an area which is rather more difficult than one might imagine due to employer duty of care responsibilities etc.
Here are some mind blowing facts & figures that show the rise and rise of Airbnb:-

Year 2008….. Company Founded
2009 = 21,000 guest arrivals……2015 = 40 million guest arrivals……100million arrivals since 2008
2011 = 120,000 accommodation listings…… 2016 = 2.5m accommodation listings
Present in………….191 countries…….34, 000 cities
Market Value 30 billion USD

 

Wow.

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