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October 2017 Newsletter

Editorial

Bed Time Stories

The acceleration of the date when Bulgaria will take over the seat of the EU presidency from the second half of 2017 to 1st January 2018 will no doubt have sent the local state employees, brought up on a culture of ‘” if we really have to do something then let’s do it at the last minute” into an absolute frenzy. Work that could have been done a year or even two years ago is hastily being put together in an attempt to make the city and indeed the country look dynamic and spick and spam. If Bulgaria wants to show the EU exactly where and how (within reason) it has spent the EU coffers, then now is the time to do it; hopefully this will encourage more funds to follow suit.

In the midst of all this and listening at first hand to some comments from current EU government officials, the good news is that all seem impressed with the smart new (ish) airport, the speed by which one can get to the city centre compared with most European capitals and the breathtaking backdrop Vitosha Mountain provides. From a tourism perspective this will also be a marvelous opportunity to show case the tourism product and what the city and the country has to offer. However, niggles remain in the back of the mind.

Bulgaria is currently enjoying a boom in tourism both during the winter and summer seasons. Allied to this, its rise in popularity as an ideal short weekend break destination has been nothing short of meteoric.  Great climate, decent inexpensive food and drink in a café society and good value modern hotels. So if Sofia is going to be flooded out with thousands – as we are led to believe – of EU bureaucrats and their hangers on, where do they stay? The answer will of course be in the city’s key business hotels such as the Hilton, the (soon to be) Intercontinental and the Grand Hotel; that being the case, what happens to the room rates? Will the hotel owners apply sound supply and demand logic and realise that demand for their higher standard properties exceeds supply and thus they can hike up their rates? By doing so will this frighten off “normal’’ visitors and indeed give the perception that Sofia is an expensive city. Indeed, the question also begs, will certain high profile restaurants also hike up their prices to milk the daily diems of the EU’s unaccountable masses?

Back to the hotels: Sofia has only a small number of higher end business hotels, the majority are mid and even lower level hotels which despite being cheap, usually are new and offer excellent value for money. In theory there should be enough of these to go round and to satisfy the traditional sources of demand on them from ‘normal’” people and in so doing leave the high end hotels to battle it out amongst themselves and to make hay whilst the sun is shining; at least mid-week! The Euro mases tend to work short weeks at the best of time and therefore these same hotels should be empty Friday to Monday!

One hopes that the first six months of next year will indeed be seized upon by the city, the country and the people to portray a positive image of the lands in which we reside. That hopefully will also mean the authorities ensure that first impressions count and that may well include getting rid of the dodgy taxis from the airport!

Mark Thomas

Managing Director

HRG Bulgaria

Generosity delayed

The new and dare one say it, generous hand baggage rules that Ryanair are introducing are being held back from 1st November until after the New Year.

The new allowance will see those who pay 5 Euro’s for priority boarding, be allowed to take two items of hand baggage to the boarding gate; the larger one will then be handed over to ground staff located at the gate and placed into the hold of the aircraft whilst the smaller one can be taken onboard the aircraft.

 

Welcome (tax) to Greece

The Greek government is introducing a new tourist tax from 1st January. Depending on the category of accommodation, the tax will range from 0.50 cents per person per night for a one or two star hotel up to 4 Euro per person in a five star hotel.

The tax has to be paid direct to the hotel on arrival.

 

Waiting for the inevitible

It wasn’t very long ago that the word ‘drone’ was unknown to most people and then the first time the word was heard was during early Gulf War Conflicts. Drones are known by everyone these days and aside of their obvious leisure attraction, they do have commercial attributes also. That aside, drones are starting to become rather irritable to aircraft during takeoff and landing and even more of an annoyance than the age long issue of potential bird strikes on arriving and departing aircraft. Hardly a week goes by without yet another scare of a drone almost colliding with a commercial aircraft.

In Canada this month possibly the first recorded incident was announced where a drone had crashed into a plane at an altitude of 450m as the plane was descending into Quebec Airport. No injuries were reported and there was little damage to the plane but it would appear that it’s only a matter of time before a drone strike will result in human fatalities.

Which also begs the question, if a drone can potentially accidentally cause such a catastrophe then what if it wasn’t accidental?

Easy to battle it out

European carriers Lufthansa and Easyjet are just two of seven companies who have submitted bids for troubled Italian airline Alitalia. The issue though is that both of them have publically stated that they only want parts of Alitalia and not the whole entity. This is at odds with the powerful Italian trade unions who want their government to sell the airline lock stock and barrel; a point that may ultimately be a deal breaker for any suitor as Alitalia as a total and single entity is totally untenable to any serious buyer. That however may not deter the unions who for long appear to have a lemming type approach to their potential future.

 

Air boom in Bulgaria

Bulgaria had the largest percentage increase in air passenger numbers across all EU countries during 2016. The increase being a whopping 22.5%. The total number of passengers being 9.32 million, a modest figure when compared with the largest number which were recorded in   the UK with 249 million followed by Germany with 201 million.

Romania followed Bulgaria in the growth figures with a 20.5% growth followed by Cyprus 18.1%. At the other end of the scale, Belgium and Slovenia saw contractions of 2.7% and2.2% respectively.

The busiest airports in Europe were London Heathrow with 75.7 million (+1.0%), Paris Charles De Gaulle with 65.8 million (+0.3%) and Amsterdam Schiphol with 63.6 million (+9.3%) passengers.

 

October ski season

On the 14th October, as the sun shone down on Sofia and the population lapped up the late summer sun, the ski season opened in Kitzbuhel. This was the first ‘resort” in Austria to open for the winter season albeit skiing is only possible on the higher slopes in the region. Most other ski areas open their lifts on the last weekend of October. There layeth the problem for the Bulgarian winter resorts: the length of the winter season.

The best the Bulgarian resorts can realistically offer is around 15 weeks of solid skiing and the business that exist in Bansko, Borovets and Pamporovo have to try make their money in that short period of time. Thankfully, the recent years has seen some of the better hotels in these areas focusing efforts on making themselves a year round destination and serving the Meetings, Groups and Events sector. The Kempinski and Premier Hotels in Bansko have been particularly successful in this area and by being successful and attracting footfall they are also helping the municipality and its inhabitants by providing both year round employment and year round income.  The Rila and Samokov Hotels in Borovets also have a similar focus away from the main ski period.

The days are long gone when a hotel could open 15 weeks a year and this applies to both the snow based hotels as it does to the beach based ones. Those hotels who have the foresight in realizing that there are all sorts of markets out there and who have a need for hotel space 52 weeks of the year will be the most successful ones. That in turn requires the hotels to have owners and managers with both foresight, experience and industry knowledge.

 

Definining dangerous

The subject of travellers placing laptops in their ‘checked’ hold luggage is a thorny one and that’s not because of the increased risk of theft at certain airport. The recent move to ban people carrying laptops from certain Middle East countries merely highlighted the issue further.  That issue is the fact that laptop batteries are highly inflammable and exploding batteries have already been blamed for the downing of at least three cargo planes in the past decade.

Recent tests by authorities saw an aerosol can of dry shampoo exploding within 40 seconds when strapped against a laptop battery.  Other products were placed next to batteries including nail polish and hand sanitizer, each resulting in fires being started.

So whilst “’safety is our main concern”’ remains the mantra of airlines, this is hardly the case if they insist on travellers putting laptops et al in their hold luggage. Passengers equally should be aware of the risks they create even if they decide to do just this on a voluntary basis.

Jumbo’s in Berlin

By the time many people read this Newsletter Air Berlin will have ceased operations. The Berlin based airline will operate its last flights on the 28th October. The assets of the carrier are currently being fought over with Lufthansa appearing to have – for some strange reason – squatter’s rights over much of Air Berlins remnants. Air Berlin operated most of the long haul flights out of Berlin and this has created an interesting situation.

Lufthansa has now scheduled no fewer than 60 flights using Jumbo 747 aircraft on the busy Frankfurt – Berlin route. The reasons are twofold: one; that Lufthansa, now that it has a monopoly on the route, wants to boost capacity which is easier to do by introducing bigger planes than it is by adding extra flights and two; Berliners are now expected to do their long haul flying via Frankfurt (although the Gulf carriers may yet have a say in this theory).

Either way, the sight of Jumbo jets operating flights of such a short duration: 1 hour, is a rare one in any country.

 

At last

Around 80 million Euro’s is to be spent on the making the road between Sofia – Kalotina (Serbian Border) highway standard. The stretch of road under discussion is a mere 32 kms and when the motorway linking Belgrade to the Bulgarian border opens very shortly – most of it is already open – then the Bulgarian side of the link will be the final piece in the jigsaw of highways that links Western Europe with the Near and Middle east, reaching, so we are told, Calcutta in the east.

 

Another airline excuse goes

As lawmakers set rules and regulations to try make clearer the rights and obligations of both air passengers and the airlines, the airlines approach has generally been to find a loophole in these laws, such as their parade of ‘” force majeure, operational/safety/maintenance requirements to justify late or delayed flights. The lawmakers gradually caught up with the airlines on this and determined that most of their excuses were foreseeable and could be planned for. The airlines then unilaterally decided amongst themselves that when their passengers are flying via a hub outside the EU and a flight issue arises causing the passenger to be late arriving at his/her EU destination, then they are not liable for this. Except the EU lawmakers have now caught up with this and decreed that ‘” just as a passenger’s itinerary is linked via connecting flights, so too is the airlines liability. The excuse that this was a connecting flight is no longer acceptable”.

This move is targeted at the likes of Emirates, Turkish, American, Etihad and Singapore Airlines who were five airlines subjected to an enforcement order earlier this year over their failure to comply with passenger’s rights on compensation for missed or delayed connections.

The free market

A rather interesting soap opera is developing in North America where Boeing, having noted that American airline Delta was about to make a large order for Canadian made Bombardier aircraft, decided they would have to scupper these plans somehow as this was clearly threat to them.  A threat not in the sense that Boeing could supply any similar types of planes; the Bombardier planes being circa 100 seaters whilst Boeing smallest current offering  has usually a minimum of 140 seats and their next generation ‘’small’” planes or short haul planes will be 172 capacity, but obviously Boeing prefer to have just one rival i.e. Airbus rather than having to contend with two as will be the case in if Bombardier are successful with their new planes which already  are gaining much attraction as they are a much improved  technical offering in what has been a stagnant  sector of the airline industry. If, so the thinking at Boeing must go, they (Bombardier) have got this new plane model ‘” spot on’” and they may sell lots of planes which might then mean they may step onto our patch and make bigger and more competing planes similar to what we offer!  A successful lobby of the US government then saw Washington decide that the Canadian and British Government (where the plane’s wings are made) had provided state subsidies to Bombardier which they consider as unfair competition and the result was a 300% surcharge on the sale price of the plane in the USA. So, problem solved thought Boeing and their supporters in government. Except it wasn’t.

As anyone and everyone knows, the US aviation industry, including Boeing, has received billions of US dollars in State ‘” help’” over the decades but the Americans are much better at rewording their ‘” help’” than other governments.  Indeed, if the American government had not given state ‘” help”” to its airline industry not only would there be no Boeing today there would definitely be no or hardly any American airlines operating as almost all at some stage or another has been through Chapter 11 bankruptcy. Anyway back to our story.

So faced with a 300% surcharge on the price they would have to sell their planes at if they sold them in the lucrative USA market, Bombardier threw in a joker card: they entered into a partnership with Boeings rival Airbus who have a manufacturing plant in the USA and they agreed to make the highly thought of new planes their and thus avoid the 300% tax. Boeing were outsmarted, out thought and out maneuvered.

The curious thing about this is that whilst Airbus themselves have planes that have a 124 seat capacity, their new small planes will be 140 seaters and they also see a huge market potential for these smaller Bombardier planes that are state of the art and which would cost Airbus billions in R&D costs to develop themselves. The other point is that if you were to look at which manufacturer, Airbus or Boeing, the Bombardier series of planes would complement the most, it would be Boeing and not Airbus as the gap between the core size of plans – Boeings smallest 737’s will soon be 174 seat capacity – is greater between Bombardier and Boeing than it is Bombardier and Airbus. Also just for the record, it is estimated that within the next decade, there will be a demand of around 6000 for such 100 seater aircraft! Thus the move by Airbus looks even smarter.

Only time will tell how successful this new partnership will be but clearly it has left Boeing not only licking its wounds, but also looking incredibly stupid.

 

 

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