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May 2017 Newsletter

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Editorial

More and more low cost

The rise and onward rise in importance on the local level of both Wizz Air and Ryanair is nothing short of spectacular. Hardly a month goes by these days without a new route opening or flight frequencies being expanded. Take for example London which for a long time has been the most popular destination for passengers departing from Sofia in terms of passengers numbers, Wizz Air alone operates either twice or three times daily just to one of its destinations: Luton, this is aside of other airlines flying daily to Heathrow, Gatwick and Stanstead in the London area. It’s not just the fact that the likes of Ryanair and Wizz are operating to a myriad of new destinations and creating a demand for travel unseen previously by Bulgarians, they are also operating planes that typically carry some 180 passengers whereas in years gone by a typical plane operated by the likes of BA or Lufthansa meant around 150 seat capacity. Wizz Air have even trumped this now with the introduction of A321’s into Sofia which are carrying 235 passengers a time. That long and short of it being that more and more people are flying from Sofia to more and more destinations. All good then? Yes, if you are Wizz Air, Ryanair, Sofia Airport or one of the travelling public paying less and less to travel more. There are however losers in this scenario.

To highlight the other side of the fence one need to simply look at the new Wizz Air flight to Frankfurt. This crucially is not to the low cost hub of Frankfurt Hahn which is as close to Frankfurt as Plovdiv is to Sofia, but rather to the main Frankfurt Main airport. This very fact must be making Lufthansa quiver. Indeed, Frankfurt Main Airport recently opened its doors to Ryanair who quickly established a handful or routes out of the facility and will no doubt be adding countless more in the future. The fact that Low Cost Airlines are now being welcomed into the airport that was the bastion of Lufthansa operations would have been unimaginable not long ago but Frankfurt now has an extra runway and the airport operators who are in no way connected to Lufthansa the airline, equally want to make money and this is achieved by having people use their facility. Lufthansa as an airline are limited in how they can expand as they are having their noses pushed out of flights that head east across the globe by Emirates, Etihad and Turkish and within Europe, their operating costs are so high that they can’t compete with any the likes of Wizz and Ryanair on short haul flights. From a local perspective, no doubt the Wizz Air flights to Frankfurt will be successful due to their low prices but these flights are only applicable to those passengers travelling to Frankfurt and this part of Germany. Passengers wanting to travel for example to the USA may still need to fly with Lufthansa but Lufthansa now see half of their potential revenue disappearing out of the cockpit! That’s because a typical flight needs a mixture of both transfer and point to point passengers flying with it to make it economical. Point to point meaning those just flying to Frankfurt and not connecting beyond.  With the arrival of Wizz what will Lufthansa do to compensate for lost passengers or will the new Wizz flight simply create extra price driven passenger traffic that previously didn’t exist? Neither Lufthansa or anyone will yet know how this one will play out. Plus, we are also forgetting someone: Bulgaria Air! To say that Wizz and Ryanair have given them a bloody nose already might be the understatement of the year. The latter two airlines have eaten into a large chunk of the national carrier’s routes and market share and the national carrier seems unable to respond or compete in that one major area – price. Bulgaria Air to some extent used to absorb the point to point traffic to Frankfurt that Lufthansa couldn’t handle but what will happen on this route now?  Is this yet another nail in the national carrier’s box? Chased off or forced to cut back on its operations to a once successful and lucrative destination yet again?

The point of all this is not to talk about Wizz, Ryanair or Frankfurt but to show how quickly the dynamics of travel can change. Yes, there are winners but when there are clear winners as we have pointed out there are also losers and those who get left behind along the way.

Finally, we perhaps should feel proud of the fact that this month we celebrate our 25th anniversary here in Bulgaria. A lot has changed and a lot continues to change both in the world of travel and especially here in Bulgaria. Not many companies here let alone travel companies have reached this 25th anniversary milestone and it is something we rightly should feel proud of.

Mark Thomas

HRG Bulgaria

Pay for nothing

An interesting little legal saga is now evolving in the USA where a woman is seeking a 15 USD refund from an airline after the airline lost her bag arguing the service provider i.e. the airline didn’t fulfil its part of the deal in transporting the bag from A to B. US Airways (now a part of American Airlines) who lost the bag disagree and challenged the refund payment. A court judge in the USA agreed with the airline ruling that the airline need only make ‘” its best effort’” to ship the bag and therefore can keep the money!

Lawyers for the woman then appealed to the San Francisco Court of Appeals who sided with the woman and ruled that her class action suit could move forward.

The airlines stand to lose significant sums of money if the legal case goes against them but where else can a service provider try make a charge for not providing a service?

Just for the record, US carriers collected 4.2 billion USD in bag fees in 2016.

 

Stay connected

BA has announced the fees for its new long haul Wi-Fi service which is being rolled out initially on the airlines Boeing 747 aircraft.

Depending how fast you want the Wi-Fi to be and how long you need it for, the fees range from 4.99 GBP to 23.99 GBP.

One hopes that like hotels have slowly accepted, Wi-Fi is a free staple or a given service and is viewed as being as standard as hot water – unless you are in a beach hotel in Greece of course where hot water is not always guaranteed.

All in the figures

Curious to note that two of the world’s major airlines and two who have a significant influence on the European market have both announced large financial hits recently.

Firstly, Emirates Group reported that its annual profits were down 70% albeit to 670 million USD! The figure was reached by transporting 56.1 million passengers (an increase of 8%) and by having an additional 35 new aircraft added to its fleet whilst retiring 27 older aircraft. What is also worth noting is that Emirates now operates only Airbus 380’s and Boeing 777 planes; both generally classified as long haul planes. Its sister airline, fly Dubai handles the short haul stuff with smaller aircraft.

EasyJet has also produced some eye catching financials with a 212 million GBP loss over the winter period which is a huge leap on the 21m GBP loss the previous year. The airline blames currency fluctuations and a late Easter (!) This comes despite the load factor i.e. the % number of bottoms on aircraft reaching a record 90.2%. Late Easter holidays look like a thin excuse and it might be more a case of EasyJet getting something in the cake mix wrong.

 

TUI looks East

European Tour giant TUI appear to be looking east more and more after it announced that it had extended its joint venture with its Chinese partner until 2033. TUI made an interesting statement by saying that younger Chinese were now looking at taking holidays to the likes of Vietnam, Thailand and Malaysia in the same way that young Europeans take holidays in Spain and Greece etc.

As we all know, there are a lot of young Chinese.

 

Aussie squeezed out

An Australian passenger is seeking compensation from American Airlines after being ‘’squashed’ between two obese passengers during a 14-hour flight from Sydney to Los Angeles. The passenger is seeking 72,000 USD compensation for the uncomfortable flight which exacerbated his pre-existing scoliosis and caused back and neck injuries.

What is interesting about this claim is the fact that it has brought insurers into the equation and it is they who may force airlines to look at how they seat passengers and how much room they are given to sit in. The trend being that airlines are reducing the seat pitch or space a passenger sits in whilst at the same time the human body is getting bigger and bigger.

 

Techonology overkill?

London City Airport will become the third European Airport following two airports in Sweden to get rid of its traditional air traffic control tower. Instead of Air Traffic Controllers sitting in a tower overlooking the runway, a new tower will be built and fitted with high definition camera’s that will send images to a control centre miles away.

On the face of it this sounds great but just as we are all suddenly confronted with the real life threat of our technology being hacked, one can hardly jump up and down thinking that this is fool proof? So what if there are generators that provide and electrical back up? What if someone snips the cables that lead to the cameras? What happens in fog?

This is not meant to sound like we all want to remain in the land of the dinosaurs but get ready for a whole new set of air traffic control excuses the next time your flight is delayed.

Sample Doha

If you are heading east on your travels soon and want to try something different then Qatar Airways has launched a new Doha stopover package enabling transit passengers to take advantage of a free night’s stay in the city.

The deal will run through the summer and Qatar’s recently revised transit visa is free and allows passengers to stop over for up to 96 hours.

Typical hotels participating in the scheme include The Four Seasons, Marriott Marquis, Radisson Blu and Oryx Rotana.

Bottom of the road

Bulgaria is officially the most dangerous place to drive in Europe. During 2016, 99.7 people per million inhabitants lost their lives on our roads which is roughly double the average for the whole of the EU which stands at 49.99 per I million people.

The safest countries to drive were Sweden, UK and the Netherlands.

Wizzing ahead

Further to our editorial piece this month “More and More Low Cost”, Wizz Air, like rivals Ryanair continue to produce impressive financials. The Budapest based airline last year transported 23.8 million passengers, an increase from the 20m carried the previous year. Just to add weight to the progress the Low Cost Airline is making, they also intend to increase their seat capacity by 23% during 2017.

Last year’s figures were helped in no small way by the opening of a 113 new routes, itself no small achievement and this helped the airline reap an operating profit of 255.8 million Euros.

 

Twenty not out

The world’s first airline alliance, Star Alliance has just celebrated Twenty years since its inception on 14th May 1997. Founding members were Air Canada, Lufthansa, SAS, Thai Airways and United Airlines.

The Alliance now boasts some 28 member airlines and operates to 1330 airports globally carrying 689 million passengers annually making it the world’s largest airline alliance by passenger numbers.

 

Tsunami avoided

The month of May saw the ‘will they or wont they” story evolve regarding the potential expansion of the ban on carrying laptops and other modern day technology items as hand luggage on board US bound flights. For the time being this ‘” tsunami’” threat has been put on ice but one gains the impression that the threat may be resurrected sometime in the near future.

It’s hard to envisage travelling for business let alone pleasure without one’s laptop, tablet or kindle etc and a quick study of regular business travellers revealed that many simply wouldn’t travel if they couldn’t take their work ‘” with them”.  Indeed, it would not be an exaggeration to say that banning passengers from carrying electrical items with them on planes would likely result in the financial ruin of many airlines for the simple reason that it would be a serious barrier in convincing people to fly. The resulting financial turmoil would in fact be a success for terrorism without the need for this to be measured in terms of blowing an aircraft out of the sky. People just want to get on with their lives and by carrying on with their lives normally, this alone is the best way to thwart terrorists.

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