November 2020 Newsletter
Optimism or Pragmatism
As the first snow of the year appears, thoughts at this time of year usually turn to the forthcoming ski season, this year is of course somewhat different than anyone can remember and the thought of whether to ski or not, let alone where to ski, is more than likely on the back burner. The summer resorts on the Black Sea made a decent attempt of rescuing some sort of business from the summer months despite the deck of cards being stacked against them. Just how successful or not they were is left open for discussion as the usual Press Releases from whatever Ministry is responsible that usually start with “this year XXXX was % higher than the same period last year’, regardless of what they were referring to, seem to be noticeable by their absence. This year that template has most definitely gone out of the window. So now we come to the ski season and the main resorts of Bansko, Borovets and Pamporovo are no doubt chewing their finger nails as to what the winter holds in store for them.
The one thing that is for sure is that winter will be a battle for survival and that battle is not being helped by the governments of Germany, France and Italy proposing to the other Eu members that their ski resorts remain shut until January. Austria is against this suggestion and so too is Bulgaria. The Bulgarian Ministry of Tourism perhaps rightly, arguing that the Bulgarian ski resorts are meeting all the criteria laid down with regards to sanitary and the general health of safety of people using these resorts. To this argument, one can not argue. However, when it then says that the resorts will rely on domestic tourists and tourists from neighbouring countries, then that is the time to start to worry.
Skiing is not a cheap pastime and the ski resorts may well not be helping themselves either. The cost of skiing at the three main resorts will roughly be the same as last year but how many families can afford the 50—60 Leva per adult per day just for the ski pass? Plus the cost of possible equipment hire and then there is the cost of accommodation and the cost of food in what are generally overpriced (by the national standard) restaurants who aim or prefer to service the unknowing foreigner. That’s not to say there aren’t good restaurants in Bansko etc as there are many, but these often remain a well kept secret for those in the know and do not rely on the foreign tourists. Anyway, we digress: the domestic tourist is significantly keener on taking a summer holiday than a winter one: the same tourist also has a wide selection of Black Sea options from cheap to expensive in both accommodation and places to eat; the ski resorts do not necessarily follow the same pattern of thinking. So will the tourists from the neighbouring countries take up the slack? Unlikely is the simple answer. They too will be faced with unknown travel restrictions, pressure not to travel and the new state of normality that has already seen them miss a summer holiday overseas so missing a winter one will not be earth shattering. This is aside of possible financial limitations the new state of being may have also created for potential tourists.
Much is made of the fact that (apparently) some 100,000 Bulgarians travel across Europe for ski holidays each winter season. The hope of the Tourism Ministry seems to be that rather than spending a week in Austria or Italy etc, these people will spend a week in the Bulgarian ski resorts and spend the same amount of cash. It seems that the habits of skiers are not understood. These same people will, almost certainly, ski in Bulgaria: they always do, every year; but this is for the weekend or the odd day every other week and does not generally see them willing to or wanting to spend a week in a ski resort they can drive to in 1 hour or so and where the size of the ski area is miniscule to the ones offered in the likes of Austria and Italy, which is the reason they travel there in the first place. Bansko, Borovets and Pamporovo have top class European standard facilities and pistes, what they don’t have is size to keep the avid skier interested.
Figures can and do paint whatever picture is intended for them and the latest bullet point figures that the numbers for the winter season are 40% down on last year, really needs to be qualified. At this time of year i.e. November, it may be that usually only 10 or 20% of the people that intend to go skiing have actually made firm plans. Thus, another way of looking at the figures might be that so far this year only 6 or 12% of the usual total year on year bookings have been made! If the ski season ends up with only a 40% decrease, then this will be fantastic news for the ski resorts. The reality is that seeing that there are very few flights that will operate this winter from the key source markets e.g. Germany, UK and Spain and that the charter flights will be non-existent, the hole that these absent skiers leave cannot ever be filled, despite the optimism.
Everyone hopes that those involved in the ski sector survive to fight another day. One can be optimistic but it is perhaps currently better to be pragmatic and to think and plan accordingly.
Jamadvice Travel | BCD Bulgaria
A good one to lose?
The Bulgarian government has given final regulatory approval to the French infrastructure investor Meridiam and Munich Airport together with Strabag to acquire the exclusive rights to operate Sofia Airport. The pair offered a concession fee 24.5 million Euro lower than some of its rivals but its bid featured an ambitious plan for growing the airport infrastructure, committing to invest 608 m Euro and also to grow passenger traffic.
If ever there was a good time to lose a tender: this might have been it. The fun though, may only just be starting.
Apparently, the Management at Sofia Airport are being encouraged to increase the costs for users of the airport (airlines) prior to the hand over. After the handover such increases appear to be forbidden. In keeping a straight face, the airlines are being told they will need to increase their passenger fee prices by 60.3%, the security fee they pay by 94.6% and a noise charge by 59%. It doesn’t require a rocket scientist to deduce that this is a highs stakes game and the potential result is less flights as airlines pull the plug on expensive flight operations; indeed, Ryanair have already suggested as such. Also, in this time of an unprecedented crisis in all forms of travel, is this really the smartest move or is it desperation from the new operators?
The proposed move would almost certainly reduce any chance of restoring passenger numbers to Sofia Airport, indeed, the smarter approach would be to reduce fees to entice people back into travelling and hence create a win win scenario for airlines, passengers and airport through increased ( as opposed to reduced) footfall.
Sofia Airport has seen its numbers reduce from 6 m passengers per year to just 2.6 between January and October. Yet, bizarrely there has been no reduction in employee numbers at the airport (2300)!
Indeed, as far as the other participants in the concession offer are concerned; this indeed maybe a good competition to lose.
One year and eight months after it was banned from flying, the Boeing 737 Max aircraft has been deemed fit to fly again by US regulators. Other regulatory bodies that govern the world of aviation are likely to follow suit, although some, like China, may take some while longer.
The re-certification comes after the plane was involved in two fatal crashes that killed 346 people, after which, Boeing tried to put the blame on pilot error. However, the world is not what it once was and an arrogant, indeed belligerent attitude came back to haunt Boeing.
Before the crash, Boeing churned out around 50 of these planes per month (at any cost!) and they now have a backlog of around 450 planes that were ordered although it is also estimated that some 255 of these will now be cancelled by their intended recipients; the need for such new planes right now is largely non-existent so hence, airlines are happy to get out of any deal for them.
The cost of grounding the 737 Max is estimated at 20 billion USD and investigations and litigation from the many next of kin are ongoing.
The huge question now though for the travelling public will be “”is the airline safe?’’
That question is hard to answer and it is likely that many travellers will ask for the aircraft type whilst booking a trip. Indeed, consumer associations are demanding that the “’aircraft type’’ be made sufficiently aware in the booking process and that people be free to change or cancel travel if they chose not to fly on a 737 Max plane.
The actual re-appearance of the plane though may be some while away as all the existing fleet have to be modified and their crews undertake extensive re-training on them. Yet another bill Boeing are likely to have to foot after insisting originally that no such training would be required (for cost reasons).
The road to nowhere
A rather bizarre use of planes during the recent months has seen “flights to nowhere”, a rather limp use of planes that have nowhere to go. In short, these flights are usually flights that don’t actually go anywhere but take off and land again.
Of course you can be creative with flights to nowhere and possibly the award for the most creative thus far comes from Thai Airways who operated a three hour domestic flight that flew over 99 sacred sites. Besides the passengers on board was a celebrity fortune teller who coordinated Buddhist chanting for the duration.
Oh yes, the cost: 321 USD in Premium class and 193 USD in Economy. A steal.
Scrap the take off
On the subject of awards, Lufthansa almost won one for stupidity recently when they flew 6 of their 747 planes to Twente Airport in Holland with the intent to park them there for a while, even possibly to be scrapped. They then sold 5 of them to a USA scrap yard but unfortunately the airport was not certified to allows 747’s to take off: only to land.
After attracting the attention of the words media who laughed at Lufthansa’s oversight, the airports paperwork was mysteriously amended temporarily to allow the planes to take off.
Obviously, the absurdity of the world at this moment in time knows no boundaries though it can no doubt be fixed with the correct persuasion.
Preparing for what?
London’s Heathrow Airport has lost its rank as “’Europe’s busiest airport’” to Paris Charles De Gaulle based on the figures for the first 9 months of this year.
Heathrow saw just 19 million passengers during this period, whilst Charles De Gaulle saw 19.3 million passengers. Amsterdam and Frankfurt are hot on the heels to also surpass Heathrow which is being hindered by inadequate Coronavirus testing opportunities. The other three airports all have systems up and running.
Heathrow forecasts a total of 22.6 million passengers for this year compared with 80.8 million in 2019. Looking further ahead, the frightening statistic is a forecast of just 37.1 million passengers for 2021. So clearly Heathrow knows something no one else does, or rather than being accused of “failing to prepare” for the next year, it is “preparing to fail”.
It wasn’t so long ago that airports across the world, particularly the major hub ones, were grimacing at the cost of converting terminals to accommodate the new super jumbo A380 and the 500+ passengers that would be embarking/disembarking from it each time it landed. Airports were not shy in adding taxes to passengers departing from its facilities to “’cover the expense” of the significant reconstruction that was required. Indeed, cynically one might suggest this became a means to and end for airports i.e. a profit centre. So what happens now that the A380 is being withdrawn from service by countless airlines faster than a government changes its mind about Coronavirus lockdowns.
Clearly many airports will only see a fraction of the A380’S they once played host to and even these will become a thing of the past sooner rather than later as the last one will be built in 2021. As airlines move to slightly smaller but more fuel-efficient single deck planes, these same airports will have to be re re constructed to handle the (hopefully) increasing number of standard planes that will ply the sky’s.
Of course this re re construction will come with a cost and hey presto, will this once again give airports a golden opportunity to attempt to recover the revenues lost in 2020 by, yes, you named it, adding on more airport taxes. If ever you think that airports aren’t adept at charging for absolutely anything, witness the astronomical drop off fees people are charged for dropping off friends/relatives by car at some airports. There is some irony that you are charged for bringing people to a facility that passengers are paying for already and indeed they will spend even more money inside the airport by using the overpriced facilities offered by the airport management companies.
Pay for food
Not that anyone will notice, part of the Lufthansa Group (Austrian, Lufthansa and Swiss) are to follow the lead set by BA amongst so called traditional carriers by switching to “’buy on board”” food in Economy class.
The roll out will take place in Spring 2021 (assuming people are travelling by then) with Austrian being the first of the group to make the move which will occur on short and medium length flights (Europe).
This is effect takes the group more towards the Low Cost Airline model, especially now that they are also introducing a “fluid pricing”’ model via certain booking channels i.e. where the cost of a seat may vary from one minute to the next depending on perceived demand.
Sadly, though again not surprising, don’t expect the cost of food that was supposedly built into the original ticket cost to be removed and hence fares reduced. Anyone believing that may happen should wait at the bottom of the chimney for Santa on the 24th December.
Grab the chance
In today’s bizarre world, anyone involved in travel who gets the chance to make some money, should grab that opportunity with both hands. In summer, Turkey did just that as it welcomed foreign tourists when others seeking the sun had the door closed on them. Mega airline Emirates looks like it is about to do the same.
From December it will operate a huge fleet network into the UK which, to give you an indication of the size, will include but not restricted to, 34 flights using the huge A380! The UAE is now on the UK’s so called “safe corridor” and the Emirate will be keen to grab the lucrative Christmas and New Year traffic both via people holidaying in Dubai as well as with people transiting through it now that few alternatives remain.
In 2019, it was reported that Emirates the airline made 56% of its profits from the UK market and 25% of its overall capacity was directed at the UK. It also made a profit of 235 m USD in the first nine months of last year; this year in the same period it lost a whopping 3.4 billion USD. Deep pockets indeed.
Not that many people are travelling these days but for those that are and even those that will hopefully do so soon, there will soon be the realisation that some 1 in 3 routes have disappeared. Some 50,000 routes existed globally prior to the pandemic, that figure is now down to some 33,000.
Unprofitable routes, often to sparsely populated areas have been the first to be culled but so too have thousands of domestic routes; themselves usually loss making and acting as a feeder to long haul flights.
What this means in the bigger picture is that travellers face a dilemma on if and how to travel if they usually need domestic flights at either end of their journey. Taking the train is an option and can work for those airports linked into national rail systems e.g. Frankfurt and Paris but try doing that from Heathrow.
This is just another barrier that the travel industry faces as it tries to entice people back onto planes.
Facts and figures
We could bore you to sleep with the financials that the travel industry churns out on a weekly basis; so to avoid the unnecessary the following are just some snippets to raise the eyebrows.
The airline regarded as having the deepest pockets, Emirates, lost a mammoth 2.9 billion GBP (3.8m USD in the first half (only!) of 2020. Luckily the airline claims they still have 4.3 billion GBP (5.7 billion USD) in their bank account. So, then, every airline is burning through a mountain of cash? Actually no! China Southern made a whacking profit of 106 M USD in the third quarter of this year; so obviously all is well and good in their neck of the woods. Again, maybe not as fellow Chinese airlines Air China and China Eastern lost 100 m USD and 84 m USD respectively during the same period. So making a profit or a loss is not a regional thing.
Closer to home, the Lufthansa Group lost a mere (sic) 1.3 Billion Euro for the third quarter although that’s an improvement on the 1.7 Billion loss the previous period. Once again though, its not all grim as the airline groups bank manager says they have 10.1 Billion Euro in cash reserves (which is no doubt made up of the funds from people still awaiting their ticket refunds).
It’s not just airlines or indeed hotels that are struggling with the numbers, airports across the Europe are also in the mire. European airports have lost 1.3 billion passengers this year so far and an estimated 193 airports face insolvency! Airports themselves employ some 227,000 jobs and generate 12.4 billion Euro to the European economy. Europe’s top 20 airports have increased their debt to some 16 billion Euro.
Want to invest in the travel industry? Maybe now is not the time.
The end of October saw a notable “’last’” for airplane nerds with the very last commercial flight of a Russian made TU 154 which was made between Mirny and Novosbirsk. Production of the aircraft ceased in 2013 with 1025 having been produced since 1968. Whilst some of the aircraft will continue in private hands, those of us who have travelled on this machine will shed a tear (not).
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