Editorial Whilst growing up, the area where I lived was a test market for a…
The evolution of reality
When the current pandemic farce first became apparent in early 2020, journalists and media battled to get themselves heard: livelihoods seemed to depend on who could produce the most sensationalist stories with the second battle being how to become even more sensationalist. Facts and figures appeared from everywhere and so did the voices offering their own opinions and wanting their two minutes of fame. The truth of what has happened will be dictated by history though many of the chief protagonists creating this history will be long gone before having to account for themselves.
Remember when the first vaccination (Astra Zeneca) was passed fit to be given to the public; the first announcement was that this first jab (Vaccination) would then be followed by a second one a month later. It was the UK who then sussed that actually the second jab can be given anytime up to twelve weeks later which thus facilitated more people getting their first jabs earlier and therefore reducing the overall impact of the virus. Simple logic yet the European media were quick – indeed too quick – off the mark to say that this was wrong, it was dangerous, it shouldn’t happen because because because, whilst adding a few supporting quotes from an unknown expert who would never be heard of again. Sheep like governments also waded in with their scepticism. Where are we now? The standard operating practice across Europe is to give the second jab anytime around ten weeks (plus/minus) after the first jab.
Then we have the issue of travel; where do we start with that. How about the consistent, indeed unrelenting message we were bombarded with in those early days that “we could all travel again once we are vaccinated” and that this would be the saviour for travel and tourism not just across Europe, but globally. Except that those disseminating this message in their eagerness to sell a story failed to add that vaccines by their nature are designed to stop you getting ill, not to stop the spread of a virus. At this juncture we can throw our hands up and say that it appears that the vaccines being administered across Europe may well be stopping the spread of the virus but this is a bonus and is not a given. Maybe next year we will see whether this “bonus” is reality or was once again overly optimistic naivety. Thus, you can have had the jab but still get the virus and take it on holiday with you. Many have now had the jab but the opening of borders, as was promised, seems a long way off just yet. That’s not great news for the travel and hospitality sectors but since when has anyone cared about them?
So now the latest fad in our media that the EU is going to introduce a “Digital Green Certificate” by June which also goes by the more common name as Vaccination or Health Passport. If you are a person who likes to gamble, then rather than putting your last 10 Leva/Eu/GBP note on that happening you may be wiser going to the local casino and putting it on the roulette table. As it stands, every airline and every country is going it alone with its own systems, process’s and rules for travellers. There is currently no uniformity in technology nor in acceptable paperwork across Europe. Countries who depend on tourism have not and cannot wait for the salaried 9 – 5 employees at the EU to come up with a system that will fit across the whole of Europe, especially that there will be no way to get it tried and tested. The summer season is almost on us and Greece will not allow the EU to shaft it once again by restricting who can and who can’t travel, Greece needs tourists and has been admirably organising itself to ensure that the summers season will flourish, with or without EU systems.
The bottom line is that the past year has shown the dis-unity across Europe with each country taking back its own decision making that looks after its own interests. This Europe is also the same one whose key decision makers have been ridiculed over their procurement and distribution of vaccines to European citizens whilst doing their best to cover up their inability. To think they can introduce a Digital Green Certificate that is acceptable across all EU countries and above all else, that actually works in reality in just 4 – 8 weeks from now, might be just a stretch of the imagination too far. We are happy to be proved wrong. Meanwhile tourism dependent countries should get on with their “own thing”, otherwise they will have to go cap in hand for handouts to the same people that created the mayhem: the EU.
Trying their best
It is pleasing to see that (apparently) most of the employees involved in tourism along the Black Sea coastline will be vaccinated against the Coronavirus by the end of May and thus providing a positive PR spin for potential visitors to Bulgaria. Apparently, this equates to some 80,000 people.
What would be interesting is the legal standpoint if employees of, for example, a restaurant or a hotel refuse to get vaccinated. Such a scenario will no doubt arise across Europe as business owners do whatever they can to get activity moving again. Noting also that vaccines stop serious disease, they don’t in theory stop it being spread.
As countries push towards recovery, it is interesting to note that those countries with a large domestic airline operation are doing quite nicely on the recovery ladder.
A good example of that is in Russia, where Aeroflot has just announced that comparing March 2020 with March 2021 (remembering also that in March 2020, the ‘virus’ didn’t exist in Russia), the national carrier of Russia and its subsidiaries were only minus 6% on numbers of passengers carried. The total of all passengers was 2.78m of which, 2.4 million were on domestic flights.
In poorer parts of the world, farmers didn’t take long to discover that they could improve their income by turning their backs on growing traditional crops and instead, grow crops of the illicit nature. As the world looks to reduce carbon emissions, aviation is one of the soft targets for the green brigade and airlines are keen to appear whiter than white and go along with the same desire to reduce their carbon footprint. There is absolutely nothing wrong with this, but sometimes it seems people don’t always see the wood for the trees.
Sustainable aviation fuel (SAF) is often touted as the quick fix answer from the ills of using traditional aviation fuel as SAF can be used (we think) in the same engines that airlines use now. It is however about three times more expensive than usual fuel and economics would dictate that that will means fares have to increase. It will also likely highlight the point that travel will once again become an item for the rich.
A foundation stone of SAF is using used cooking oil, though the problem here is that most of it comes from outside the EU and there are grave doubts that enough can be supplied to meet the (potential) demand for it. That brings our farmers back into the conversation!
If farmers can smell a new quick-fire way to make money, they can in theory trigger the production of palm oil which can be passed off as “’used cooking oil”. Except that to do this they would need clear swathes of land to produce the alternative variant ie. Illegal deforestation occurs. So, the double bonus for the farmers is they can make a shed load of money from their new crops and maybe the other illicit crops are spurned, much to the benefit of the wider society. However, the bottom line is that the carbon footprint is reduced and everyone on the face of it is happy. Except that is, the Amazon and other vital organs of the earth have disappeared; cut down by the farmers who were out to make a short-term gain. All made possible but the newly found awareness of Social Responsibility.
On and on
The World Tourism Organisation has projected that the first quarter of 2021 will see a 85% global reduction in the usual number of tourists. This follows on from the 87% fall in January with the actual number of this reduction amounting to some 260 million less tourists.
Interestingly, the WTO then provides two totally different scenarios for the remainder of 2021. The first shows a rebound in July with a 65% increase year on year though this is still 55% lower than a usual July. The second scenario plans for a recovery to start in September with a 30% increase in activity year on year, though again this is 67% below the norm.
We guess with such widely diverse forecasts the WTO can’t be too far wrong – can they?
For most business’s involved in the world of travel, the past year or so has been a case of hope and fingers crossed that their respective governments are kind enough to provide some scraps of compensation for the loss of income caused by the pandemic. Very often, it seems that the more inept the business is, the more help they get.
Air France-KLM will receive a further 4 billion Euros of aid on top of the 10.4 billion Euros they received last year. In Air France’s case, this has meant they have been forced to drop domestic flights of less than 2 ½ hours – though this in theory creates a huge problem with connecting passenger traffic which is likely see the airline lose more passengers to rivals. One potential solution for the airline might be to reduce their bloated staff numbers and get their staff to work more than they strike. That would surely help them to reduce losses though it may not be enough to make the bottom line black.
Greens One – Economists Nil.
Whilst its hardly worthy of a mention in normal times, the announcement this month that British Airways are about to launch flights from London Heathrow to Wroclaw and Gdansk in Poland, Riga in Latvia and Cluj in Romania merely emphasises a point that we made in our last newsletter. That is that airlines will now fly to anywhere they think they can generate income from, and that includes places that just a couple of years ago, they wouldn’t have gone anywhere near as it did not fit their eye brow business model.
The likes of Ryanair, Wizz and Easyjet long ago discovered that there are many more ways to make a profit than flying from capital to capital and paying the associated high fees that go with flying to a capital’s airport. The traditional airlines such as BA have long turned their noses up at the new boys’ operations, but these new boys now seem to be way ahead of the game; leaving the likes of BA, Air France and Lufthansa way behind in their slip stream.
New EU wide visa
Not many people will know that in 2022, a brand-new visa scheme will operate for Europe’s Schengen area. Called the ETIAS (European Travel Information and Authorisation System), it is supposed to improve security at the Schengen Borders.
As it stands, travellers from any of the 26 Schengen countries, 22 of which are in the EU, plus 4 other countries (including Bulgaria) will still be able to move around freely. The Republic of Ireland will be alone in having its own border policy. Citizens from other countries such as the UK, USA and North Macedonia will need to fill in the online ETIAS in order to be granted access to the Schengen states.
What has not been made clear is whether there will be a charge for this “visa”, it would be reasonable to assume there will be such. It also begs the question as to whether the EU and the Schengen area are making themselves more or less accessible to visitors? All in the name of security of course.
To do or not to do
Of all the various suggestions to get the world moving again, the one most often touted as being an essential part of the jigsaw is the Digital Health Passport. Travellers, we are told, are willing to have their health data stored electronically if it means they can get on the road again. This though, may be a rather over simplistic claim.
Deeper research shows that the acceptance of such a process varies considerably from country to country. 68% of the citizens of the UK and Spain are in favour of such “passports” whilst in France it was 59% and in Germany 57%. If the question is extended out and asked if people would be happy in the longer term that such a system would be used for travel at all times, just 45% from the UK and 40% from Spain were in agreement. This number drops to 39% in Germany and 33% in France.
At the end of the day though, the travelling public will not be “asked”, they will be “told” what they have to do and they will have to like it or lump it.
During the past twelve months of mayhem, one airline has bucked the trend and endeavoured to operate as normal as it could, that airline is Turkish Airlines. Going back to October 2020, it was still managing to serve 200 destinations whilst at the beginning of March 2021 it was operating 600 flights per day. By early April it had increased its operations and was operating an average of 797 flights each day.
To quote an overworked legal term “possession is nine-tenths of the law”. When business returns to normal, other airlines may find that its former passengers are now firmly camped in the frequent flyer lists of Turkish.
It never ceases to amaze how figures can be twisted to satisfy a political agenda. During the current pandemic a fairly straight forward set of figures has been twisted by those with a preference to the colour green and translated into headline grabbing “shock horror” stories. Anyone reading such NGO sponsored articles during a two-minute coffee break and not engaging their brown matter might be suckered by the facts: anyone engaging common sense and reading carefully will wonder how such dribble came to print in the first place.
The shock horror bits are the facts that, in the USA, 12% of people take 66% of all flights, whilst in France it is 2% take 50% of all flights. Indonesia was cited as a great example of the disproportionate split where 3% of people take 56% of flights. The UK greens jumped in with 15% take 70% of all flights, adding that those 15% are the “rich and wealthy” and reflects an in balance in our society. This, they argue, is more than sufficient reason to tax these regular travellers who are no doubt jumping between their houses around the world whilst spending their evenings in casino’s.
The truth in reality is that unknown to such NGO’s groups there is a whole raft of people who don’t sit behind a desk re-arranging e-files for seven hours a day broken up only by a visit for a Vegan burger at lunch time in their carbon neutral co-share building. These are the people who actually travel around the world drumming up business as a regular part of their job on behalf of their employer to the benefit of their family, their community and the country in which they live. They help provide jobs for others to help them pay their bills and to help educate their children. Rich they most probably are not.
The world can indeed be an unfair place, especially where 0.01% of people control 99% of the worlds economy, but the notion that only the rich and wealthy fly really does show how out of touch many people are. They can discuss more when they get together in their annual conference on the other side of the world. Just don’t ask them how they got there.
The cost implications of less business travellers
It’s well known that business travellers pay more for their airline seats than leisure travellers and airlines have always considered business travel as being price “in-elastic’’ in that any fare increase doesn’t really bother the typical business traveller. On the other hand, leisure travellers are extremely price sensitive and more often than not the fares they pay are compensated by the higher fares paid by the aforementioned business traveller. If, as we expect, business travellers do return to the skies fairly soon but not in the numbers we have become accustomed to, what happens to the price of tickets generally?
The airlines may be faced with a lose or lose situation! If, for example, a plane is usually one-third full of business travellers paying 200 Euro for a ticket with the other two-thirds paying 100 Euro and suddenly there are only 50% of the usual number of business travellers, do the airlines leave the lower fares as they are to try ensure the plane is full whilst increasing the fares for those travelling on business. Or do they not push their luck with the higher revenue passengers and instead try to hike the lower fares usually taken by the leisure traveller? The problem with this latter scenario is that we have said these people are more price sensitive and thus any increase in fares may see less and less passengers which creates more losses for the airlines.
It’s often said that to make a profit of 1 Million in the airline industry you start with 10 million! The time is fast approaching when the economics of running an airline will sort out the men from the boys; alternatively, maybe it sorts out those with deep pockets and those whose wallets are empty.