July / August 2020 Newsletter
Winners and losers
Before I start, the figures below are widely available from wherever one looks; whether they are factual in reality is a totally different matter. Also, the opinions or thoughts given seem, perhaps surprisingly, to resonate with many who care to “be bothered” about the current never-ending pandemic farce. Whether they are correct or not is probably no worse in its accuracy as the decisions being made across the globe by people ill equipped and without any pre-requisite knowledge of the subject matters they are giving an advice on (bureaucrats), nor of the repercussions these ill thought out decisions are having on much of the population across the globe.
The first obvious comment is that aside of the fact that those making decisions both globally and within Europe are often the least best positioned to do so, the other side of the fence is that as long as they can, these people will continue to make themselves invaluable so that their salary continues. Indeed, those least affected by the coronavirus are the ones making the decisions: a most definite self-interest bonus. Week after week these same decision makers are the ones who get “Caught” doing the things they shouldn’t after spending countless amounts of energy telling others to do exactly what they are not doing. Their crime would appear to be; ”Getting caught”. It’s almost as if there is one rule for some and one rule for the rest and like with many people who have risen by fair means or foul, the rules for the masses they seek to control don’t apply to them. The benefits of Social distancing and the wearing of masks is of arguable benefit at the best of times and would appear to be more of a test of discovering how people respond to civil order requests than it is to reduce the spread of a virus. Having just watched the Champions League Final with its thousands of protocols in place such as the separation of the teams before the game and the spreading out of the small number of staff allowed in the stadium, even with the teams substitutes spread 3 seats apart; what happens at the final whistle? The whole entourage rushes onto the pitch and hug and kiss each other. A perfect example of paying lip service to a situation (literally) if ever there was one.
However back to the Travel and Tourism sector and without doubt this sector, globally, has been affected the most by political decisions. Numbers can be made to read whatever they wish, ask any accountant, but let’s look at a few and add two plus two. Using Bulgaria and Greece and their tourism base, Greece generates usually roughly 21.6 Billion Euro in Tourism Revenue and Bulgaria 3.7 Billion Euro. For 2020, this figure will be decimated. The European Union as part of their bailout has ear marked Greece to receive 72 Billion Euro and Bulgaria 29 Billion Euro over four years. The four year aspect is interesting as the question would seem to beg whether this is their random guess how long it will take EU country economies to recover or, whether this is the time frame set in the master plan. Would it not be reasonable to hope/assume that by summer 2021 the economies of our countries will be bouncing back and the pent-up demand for people to travel will make summer 2021 a bumper year? Is it not possible that by this time the next year the state coffers will have reaped the benefits of income from travel and tourism that will be roughly at the same or even better than they were before the events of this year? Tourism in Greece is 20% of GDP, in Bulgaria its is 11%. In short, the generosity (sic) of the EU and the money from it will enable the state coffers of many countries including our two examples to not be running at any noticeable deficit; countries will be able to work on similar sized state budgets as is normal, with the state’s themselves deciding how the money is spent and who gets it. The “who gets it” is an interesting point as in theory, the Travel, Tourism and Hospitality sector that is worst impacted at the grass roots level should be a main beneficiary; it is doubtful or questionable if they will be, funds will be directed and re-directed however the decision makers decide.
It’s just over a century ago since the end of World War 1 when around 20 million people lost their lives either as a direct or indirect consequence of the Great War. Most of these were rank and file working class citizens who signed up to the cause in the case of the military or who suffered as civilian’s, very few came from the Upper Classes or the so-called elite class. The current Coronavirus is a much hyped virus that has evolved through medical and political neglect (over many years) and those that will suffer are not the politicians and decision makers but rather like ‘the innocents’ in World War 1, the collateral damage this time is the small hotel owners and their employees, the restaurants and its waiters, the hotel and bar cleaners, the souvenir shop owners, the transport companies, the airline staff from check in staff to admin staff, the travel agency community and the workers in small enterprises that feed the massive travel, tourism and hospitality industry, They make up millions of people globally; they would appear though to be the “expendable”.
Jamadvice Travel | BCD Bulgaria
The end of an iconic era
Not long ago we wrote about the ceasing of production of the “superjumbo” Airbus A380 as the demand for the plane had not reached the much-hyped expectations. Now it has been announced that the plane the A380 was about to challenge/replace (depending on which side of the fence you sat), the iconic original “’jumbo”’, the 747 is also to meet the end of its life. Production of the plane is due to stop in 2022.
The expression “’the end of an era’” is significantly over used in the current day and age, but the end of the production of the 747 will indeed be the end of an era. Of course, the plane will still be in commercial operation for many years to come, so maybe we can re-classify the announcement as the “beginning of the end” rather than the actual “end”.
Regardless of what your opinion is, there has hardly ever been a bad word said about the Boeing 747 since its first commercial flight in 1970. When the production does stop, it will mean that there will be no three or four engine passenger jets in commercial production with the passenger traffic that once graced these planes, now being switched to the more fuel efficient A350 and Boeing 777/787 planes.
Very few people would have guessed even a decade ago that the future of aviation would be in the hands of smaller rather than bigger aircraft. Though the writing was on the wall for the 747 for some time with many airlines originally planning to retire their 747 fleets in the coming years anyway. The Coronavirus has rather expedited these plans as opposed to changing them. During the pandemic, BA, Lufthansa, Qantas, Virgin Atlantic and KLM all announced the planes early retirement.
BA were in fact the airline with most still in operation as a part of its fleet with 31 planes still in service though interestingly, their average age was a surprising 23 years old. It is worth re-iterating that planes which are 23 years of age of any type are of a differing technology to the newer planes and are far less fuel efficient and fuel efficiency is the number 1 consideration of airline fleet planning in the modern era.
Stopped in their tracks
The majority of us, in this part of the world anyway, associate travel issues and Coronavirus with air travel, in other words the cancellation and reduction in services by airlines. Rail travel is not that popular in this part of the world although in many parts of Western Europe travelling by rail is the most common form of transportation even between countries. Whilst we now accept the cancellation of flights, we are not familiar with the same issues with rail travel but that is most definitely the case across many countries.
A recent travel bulletin issued by our BCD Network warned that 8000 people were about to have their rail tickets cancelled in Italy as the authorities announced trains could only travel with 50% occupancy.
Rail travel transports many more people each day than aviation does and the potential impact of reducing people’s ability to travel between A and B and hence their ability to actually get to work should not be under estimated. Which, we suppose, only adds fuel to the culture of working from home.
IATA (International Airline Transport Assocation), the ever-pessimistic body that is the enforcer for the airline industry, seems to have been taking depressant tablets. It now predicts that it will be 2024 before airline passenger traffic returns to pre-pandemic levels. The reasoning behind its latest pessimistic report is that it cites the failure of the USA to control the virus and the lack of clarity on the future of corporate travel. Indeed, it says Business travel may never properly recover.
Think about this: if airlines reduce their fleets, reduce their staff and reduce everything else they can get their hand on, then there isn’t the supply infrastructure in place even if there is a demand from people to start flying again. It a self-fulfilling prophecy. The deeper question though is whether this is the intended consequence of their actions or an inadvertent one.
Contrary to the way many executives in their ivory towers think, in many parts of the word, including Europe, air travel would bounce back immediately to around 75% of where it was if it were given the chance. It seems the airlines don’t want to give people the chance.
Unless of course, the people who sit at the top of the airline ladder are party to master plan the world is being subjected to.
Touch free check in
Self-check in desks (for the want of a better word) divide opinion amongst regular travellers and indeed, they are probably even more of a battle for “once a year” leisure travellers. Whether they simplify or complicate the checking in process vis a vis dealing with a human being at an actual desk is an endless discussion. The bottom line is – whether airlines admit it or not – it’s cheaper (forget about the “service experience”). The level of de-humanisation might be taking one step further.
United Airlines has introduced what it claims to be the “’first touchless check-in experience of any airline” at London Heathrow Airport. The explanation is that the new system avoids people having to touch anything even at the check in kiosk by using new technology (think Coronavirus).
Passengers scan their boarding passes from their mobile phone or their printed copy which then automatically prints out any luggage tags that may be required. Passengers can also scan their boarding passes at the Gate readers.
Who needs humans anyway? Though this is not a question to direct at your wife/husband/partner.
Loss, losses and more losses
It’s hardly headline news these days but there are some impressive numbers coming out of the aviation sectors various HQ’s. IAG, better known as the owner of BA and Iberia have announced losses of 2.2 billion Euro’s for the 2ndfinancial quarter (not even a half year!). The group does however have liquidity of some 8.1 billion Euro. Lufthansa meanwhile recorded their worst ever loss of 1.7 billion Euro for their second financial quarter. Asian carrier Singapore Airlines posted a loss of 1 billion USD for their first quarter. Aircraft manufacturer Airbus announced a net loss of 1.0 billion Euro for the first half of the year whilst rival Boeing rolled out an impressive loss of 2.4 billion USD.
No doubt these figures will get worse as time ticks by.
Pay before you send tourists
Some of the Caribbean’s top hotels have told (mainly) UK Tour Operators such as TUI, Virgin and Dnata to pay their bills upfront for new guests after being left with millions of dollars of unpaid bills from before the lockdown. The hotels, who appear united in their stance, are also complaining that the same Tour Operators are using the unpaid invoices as bargaining chips to get better deals in the short term.
Tour Operators and airlines across Europe have often been far from ethical in their stance towards suppliers with airlines in particular reluctant to give travellers their money back from cancelled flights.
Sir Richard Branson was a visitor to Bulgaria not so long ago to give a presentation on his life in business, though even he will not have been prepared for what lay ahead for his own business empire, in particular his aviation elements. The very first of his assorted airlines, Virgin Atlantic entered Chapter 15 bankruptcy in early August which came as a surprise to many as the noise coming from the airline recently was that they had enough cash to last 18 months! Chapter 15 bankruptcy is the mechanism by which the assets of foreign companies in the USA are sheltered whilst the financial restructuring of the company takes place in its home country.
Another of the Branson empire airlines, Virgin Australia went bankrupt in April and its not been a good year for Sir Richard as another of his key investments; Flybe, closed down in March in the UK. Just for the record, Virgin Nigeria, Virgin Express and Virgin Sun Airlines have also come and gone over the years together with Virgin America which was sold to Alaska Airlines in 2016 after failing to get the much-hyped business traction.
However, Virgin Galactic seems to be doing well, doesn’t it? It was in the news recently (again) as Sir Richard claimed that rides would start “any time now” to the outer reaches of the earths atmosphere. Shares in that venture have increased some 55% since the start of the year. That’s obviously great news, except that investors may recall that this same first flight was promised in 2007, then it was pushed out to 2009, then 2010, then 2011, 2015, 2019, 2020 and now 2021.
If you book a car with Hertz and decide to extend the hire, be very careful as some 20 people landed in gaol after doing so. After the hirers extended, Hertz claimed the cars had been stolen despite their being a clear record of conversations and timely payments for the extensions. Hertz refused to budge for several months causing financial ruin to many of the affected.
A large compensation claim is in process in the American courts although maybe someone from Hertz should sample a few months behind bars perhaps. Little wonder that Hertz in the USA recently filed for bankruptcy!
Airlines always seem to be imaginative when it comes to getting us to part with our money, usually the travelling public have to dip into their wallets to pay for things long taken for granted. So when times are even harder as they are currently, the same airlines are proving resourceful in generating cash now that the public are not travelling. The latest novel idea comes from BA who auctioned 17 paintings they own at the prestigious Sotheby’s Auction House at the end of July. The sale is expected to raise over 2m GBP when the sale figures are finally totted up.
Which begs the question, why were BA acquiring art with their profits as opposed to investing the money in their business?
Five star opening
Hopefully the time is right for two new premium hotels that have just opened/are about to open in Sofia; the Hyatt Regency and the Grand Hotel Millennium. Both hotels were originally slated to open some time ago but their opening was delayed due to the ” you know what”.
The Grand Hotel Millennium is part of the same organisation that owns the 5-star Grand Hotel Sofia and the Suite Hotel and is located in the Millennium Towers adjacent to the National Palace of Culture (NDK). The 400 roomed 30 storey high hotel is massively impressive in its offering and is not dis-similar to a “’Dubai” Hotel in its presence and facilities. The hotel is indeed a destination within itself and is also targeting the Meetings and Events industry with its impressive offering of meeting and event space as well as its accompanying facilities from its 10 restaurants to its impressive spa facility. The hotel also has a large rooftop bar area that is likely to soon become the place to be seen.
The Hyatt Regency has a superb location on Levski Pametnik where once stood the old Serdika Hotel. Levski Pametnik is the site where Bulgarian national hero Vassil Levski was hung by the Turks in 1879. The hotel is of course a part of the global Hyatt chain which has a hotel presence in 60 countries with the brand being synonymous with providing premium quality hotel accommodation. The hotel has 183 rooms including 22 suites rooms as well as state of the art meeting and event facilities and a spa. The fashion for rooftop bars continues with the hotel having its own “The Scene” with spectacular views over the city and Vitosha Mountain.
One of the things that travellers have grown accustomed to over the recent years has been the ability to travel from point to point between cities that not too long ago were “unconnected”. Often, getting from one city to the other required transiting an airline main hub such as Frankfurt, Vienna or Heathrow. To many extents it was the Low Cost airlines that started to change that way of thought and started flying between secondary cities, in part, to help passengers avoid those very same hubs. With the Coronavirus pandemic, it looks possible that the virus may have facilitated a track back in time in favour of airline hubs – at the “re-start” at least.
The reason is that passenger numbers are down or will be down for some time to come and if airlines try operating many point to point flights (to secondary airports), there may well be a lot of empty seats and empty seats means losing money. The revenues from point to point passenger traffic is often marginal and relies on volume e.g. 80% or more occupancy to make the ink black. Getting 80% on many routes will be almost impossible in the short term and therefore the old traditional hub and spoke airlines like BA, Lufthansa and Air France, may accidentally have a more profitable business model for the short term when the world restarts.
However, the ability of the Ryanair’s and Wizz’s of this world to make the impossible possible should not be under estimated. Nor should the ability of the same traditional legacy carriers in snatching defeat from the jaws of victory be ignored.
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