June 2018 Newsletter
Does demand create supply or does supply create demand; a question that sounds like something taken from an economics class. When it comes to the Travel Industry the same question can still be asked and indeed both scenarios could be said to be equally relevant although the argument is that in today’s modern travel world, supply would seem to create demand.
If we think back to the start of Low Cost Airlines across Europe, quite often they would fly (for example) from somewhere in the UK that few people had ever heard of to somewhere in France that equally few people had heard of. One could hardly say that there was a pent up demand for travel between the two places yet the planes were full. The offer of such flights created a previously nonexistent demand for travel for whatever reason between the two places. We might transpose this onto the local level.
Sofia in particular is a boom city at the moment both on the business front and on the leisure front. On the leisure side of things, Sofia has long existed but was hardly flush with weekend breakers or short stay tourists. Marketing attempts by the government were inept and indeed still are, but something happened along the way that saw Sofia becoming a newly discovered short break destination for Europeans and non-Europeans alike. True, being a part of the EU helped although holding the EU Presidency probably didn’t! Being the ‘”cheapest’” country in Europe definitely helped as did having an excellent abundance of inexpensive new built hotels. What really is the catalyst in the supply demand theory though is connectivity; which in lay speak means flights that connect Sofia with other places.
The number of flights connecting Sofia to Europe and beyond continues to grow and a huge portion of this is down to Wizz Air and Ryanair (though not exclusively). These two airlines now carry approaching 50% of the passengers into and out of Sofia, but it’s important to note that they have largely not replaced other carriers that were already doing the job, but rather they are bringing in new flights with new travellers and on the flip side of that, introducing air travel to Bulgarians who previously could not afford such a luxury, with the result that passenger footfall levels year on year using Sofia Airport are increasing by around 8%. In effect the circle of having the perfect combination of flight connectivity, great inexpensive hotels, value for money eating and drinking, great climate and enough history and culture to keep most occupied for a few days, means Sofia is probably either in the Premier League of European City breaks or is about to enter it.
Whilst on the theme of supply and demand, we can also take a local view on the same theory with flights to the Middle East. Not so very long ago, apart from flights to Tel Aviv there were no flights to the likes of Dubai and Doha, yet just a handful of few years later we now have 16 flights a week combined to these destinations, the breakdown of passengers being a mixture of business and leisure travellers but with the emphasis on the latter. If we take the leisure section of this then quite clearly the vast majority of people have/had never travelled to not just the Middle East but beyond into Thailand and Bali etc, the sudden availability of this option via the airlines created the demand, a demand that is equally as buoyant as the incoming short break visitors to Sofia. Equally, we should turn full circle with the supply and demand theory for flights to the Middle East and realise that not insignificant number of visitors from these areas are now also coming to Bulgaria be it for skiing, shopping or even gambling. The ongoing cycle creates a win win scenario for all aspects of our industry and long may it continue.
Now, who said Demand creates supply?
When the boot is on the other foot
Technology is something the travel industry occasionally fails to get to grips with and this is especially true with the aviation sector. Every so often the media reports on ‘” tech’” issues that sees airlines selling unusually, even absurdly cheap fares only for the airline concerned to realise their error some hours later and withdraw the offers and nullify the bookings that had already been made in good faith. The most recent farce on this subject saw BA inadvertently selling tickets to Tel Aviv and Dubai at “” mistakenly low fares” prices only to pull the plug and cancel tickets already issued. To their credit aside of the full refund, BA also gave 100 GBP vouchers to those affected; but what if these people had already booked nonrefundable hotels, cars or transfers along with the flights? BA don’t care about those? What is bizarre is that BA claim that because an ‘” error was made, under contract law there is no binding contract in place’”!
Which also raises the point that BA as well as most airlines have an almost zero tolerance policy for travel agents or indeed individuals who make errors in bookings such as wrong dates or wrong name spellings. If any change is indeed allowed the airline happily financially punish those making the mistake. Indeed, as stats from North America show, such a revenue stream from such scenarios are now a critical part of an airline revenue stream to the extent of 2,9 billion USD and one they can ill afford to lose through goodwill. Maybe BA et al should adopt the same stance on errors when the boot is on the other foot.
Ryanair conquer Europe
It wasn’t very long ago when the then big boys of airline travel dismissed Ryanair as irrelevant in the battle for the skies, probably those execs who had that view have long been put out to graze or have ended up working in another industry! Just for the record, Ryanair now carry more passengers than BA and EasyJet combined according to figures released by IATA.
Ryanair carried nearly 129 million passengers in 2017, the highest of any European carrier. EasyJet was second with 77 million and Lufthansa third with 60 million. Air France were fourth with 46 million and BA fifth with 45 million.
Internationally Southwest carried the most passengers with 158 million followed by Delta with 146 million and American with 145 million.
Top ten airlines by passenger numbers for 2017
- Southwest 158m
- Delta 146m
- American 145m
- Ryanair 129m
- United 106m
- China southern 92m
- China Eastern 88m
- EasyJet 77m
- LATAM 67m
- Turkish 66m
At Germany’s cost
Jubilant Mexico fans triggered an earhtquake in Mexico City when Mexico scored the winning goal against Germany during a World Cup Game in Russia. Seismic monitoring reported that at 11.32 local time, an “artificial trigger caused an earthquake in Mexico City which was probably caused by “massive jumps””.
We wonder if there was such in Seoul also!
Window less planes coming
Have you ever considered flying on a plane that has no windows? Probably not but that time might not be so far away. Gulf mega carrier Emirates is adopting a three across first class seat configuration which thus will leave First Class passengers sat in the middle with no window access, but to circumvent this, they plan is to add ‘” virtual windows’” which will project the view from outside.
Not stopping there, Emirates believes that if this concept is accepted by its First Class passengers then the idea of a window less plane can be rolled out further using virtual windows as de facto the norm.
From a safety aspect such a move would not create any issue with European safety bodies and additionally (and perhaps more importantly) this would make the planes lighter and more fuel efficient! This last aspect is perhaps the real motive behind the concept.
Yet another new hotel brand is being launched by one of the big boys, keen to fill a perceived gap in their portfolio; this time its IHC (Intercontinental Hotels Group) who are launching the upmarket brand Voco. The group plan to open 200 such Voco Hotels in the next ten years, but don’t hold your breath for Bulgaria.
Hardly a week goes by these days without yet another airline announcing that they are to introduce “HBO’s.”. No, that’s not a new in flight film agreement but rather a ‘Hand bags only’” fare. The concept derived from the Low Cost Carriers and such was the uptake that people readily accepted the move. This was not least because the cost conscious didn’t want to pay a Leva or Euro more for a suitcase to be checked in. The result initially was people trying to squeeze everything including the kitchen sink into the overhead luggage bins, a sight that became particularly common on flights from this neck of the woods. As time went by some sense of normality arrived with stricter controls on the size of bags passengers could carry aboard.
Back to the point though, HBO fares are, whether we like it or no are here to stay for the foreseeable future and there is a very good reason for this. Airlines might like the travelling public to think they are doing their passengers a favour with such low fares! The reality is that if they don’t have lower fares they don’t appear at the top of peoples searches for cheap flights! Airlines have a dislike of transparency, so whatever fare can find its way to the top of the cheap list is fine with them; regardless of what it does and doesn’t include. The real price a passenger pays will become clearer much further down the booking process but part one of the battle for attention is to get to the top (or close to it) of the visible list by fair means or foul.
With the above in mind, its therefore interesting to note that Emirates are the latest considering HBO fares, no doubt because they are seeing their low fares being out maneuvered by rivals, despite the fact they may be cheaper in the long run. Emirates reasoning is that the stereotype of a typical passenger has changed and these days he/she is much more likely to just travel with a back pack or hand luggage only than was the case several years ago. Analysts suggest something different: they suggest that in real terms Gulf Carriers are essentially Low Cost Airlines anyway and they too need to bring in extra revenue as they mature just like more ‘” typical” LCC carriers have done.
So the next time you are asked if you are flying with a Low Cost Airline, you might be able to answer ‘” yes, Emirates”. The airline execs might differ on this comparison however!
No suitcase on Ryanair?
At HRG Bulgaria we operate an out of Hours Emergency Contact Set up and by far the most popular call is not for an urgent flight or hotel booking but rather to suggest that their Ryanair flight booking wasn’t booked with a suitcase! Looking at a Ryanair boarding pass we would defy any normal sighted person to actually see where it says they have a suitcase booked! If you look closely, indeed very closely, under the box on the top right which shows the routing, seat number and date et al, just underneath where the time is shown when the boarding gate closes is a size two font that says “” 20KG BAG”’ in capitals…… but capital letters at size two font really don’t help.
We have often wondered why such a vital element as the fact that a suitcase has been booked appears to be very much an afterthought on the part of the airline and why they don’t make this clearer or larger or bolder? We are sure there is an obvious reason why not but we just can’t seem to think of it.
If your business had a market share of around 44% you might feel smug with yourself. If your 44% market share was made up of one mega client and a couple of smaller ones you might feel less content; especially if the mega client made up 40% or the 44% share! What happens if this client leaves you? This very same scenario is just being played out at Sofia Airport where the airports own Ground Handling Company serves Wizz Air who now carry close to 40% of the passengers arriving and departing from Sofia Airport. Wizz have just tendered for a Ground Handling agent and awarded their contract to Goldair: rivals of the airports own ground handling company.
What that means to the 400 or so workforce of the incumbent Ground Handler remains to be seen though one assumes they may be offered new positions in the new provider. Meanwhile, as the tender for the concession to operate Sofia Airport hots up, one assumes that this may also slightly devalue the worth of the airport concession for any potential bidder.
The last couple of Newsletters have contained tongue in cheek articles surrounding US airline policies on ‘”emotional support animals”’, or put into plain English, which animals the airlines will be allowed on the plane with you (to share a drink and chat with you mid-flight). The latest PR release we need to keep a straight face on comes from Jet Blue who have announced that from July 1st, they will only allow dogs, cats and miniature horses in the cabin!
We suppose thus that the cabin crew will sell carrots along with the pretzels!
Beware of the internet
As we all know the internet is the be all and end all of human life as we know it today. Here we find the truth about everything and anything that exists in our world. Except that is that suddenly the penny has dropped to many that indeed, the internet will only tell us what someone wants us to see or hear – partially. This being the case, a couple of interesting points arose at a recent high profile Travel Event in the USA where it was pointed out that only 52% of all travel inventory appears on the internet therefore anyone who relies on it to book travel is excluding 48% of the options available. Aspects such as whether a hotel has free parking or not or whether the kids eat free are often buried deep or not even existent in many cases. The event also suggested that despite the rise of the shared economy, customers don’t really want to rely on it nor on any sort of travel information flow that is not subjected to verification. The example – rightly or wrongly – was used of TripAdvisor which had morphed from being a great idea to a booking engine like everyone else.
April 1st again
Boeing has unveiled designs for a new hypersonic plane that will be capable of travelling between Europe and Australia in five hours and between London and New York in 2 hours.
The jet will travel at around 6500 kmph and size wise is slightly smaller than a current Boeing 737 aircraft. Don’t expect to see the plane anytime soon though as work won’t start on it until 2020 and the earliest the plane could be seen in the skies is around twenty years after that.
Almost April 1st again perhaps?
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;