February 2023 Newsletter
It must be Brexit – no, wait
As the world of travel gets back to near normality its perhaps curious to observe the challenges some profess to still encounter whilst at the same time questioning whether the challenges are real or if they are more smoke and mirrors to satisfy ulterior motives. “Near normality” is the expression that the sensible world uses to describe the situation now compared with the last “normal” year i.e., 2019, as compared with the bizarre and unexplainable habit in business of comparing everything with last year when surely a business plan covers several years and not simply last year v this year! “Travel is down (say) 20% in 2022 compared with 2019: correct but 2019 had 12 months of normal travel habits, 2022 had between 9 and 10 months. So clearly the message that numbers are down is a rather opaque message. A case in question is the ever-important Lufthansa group who have done a great job in turning the ink black from red, strong demand through the back end of last year means the airline group may make as much as 1.5 billion Euro profit in 2022, up from its initial forecast of a half billion made during the summer. Perhaps more importantly its average yields for passenger flights was well above pre -pandemic levels. Translated, the revenue it earns per flight from passengers has increased significantly. Its profit in 2019 was some 2 billion Euro. Thus if 2022 had been a real normal year then clearly its profits would indeed be back to normal! So, what might the smoke and mirrors be in such a good news story?
Well, German media outlets are reporting that Lufthansa plans to cut 34,000 flights from its planned 2023 schedule as the carrier still experiences staff shortages. This figure also excludes potential cancelations being added by sister carriers such as Swiss and Eurowings! That’s 34,000 flights that people already have bookings on and have already made travel plans around, such as paying for hotels and car hire etc. Of course the PR spin says that the cancellations are being done ahead of schedule to allow passengers “a more reasonable window of time make alternative arrangements and adjust their travel plans”. One wonders if they will also pay for the required new bookings that will no doubt cost significantly more for passengers than what they would have been if they had been booked several months ago, as well as for the time and inconvenience this creates for travellers and travel bookers such as travel agencies? Then what, if any, is the impact of adverse publicity with this move or is the travelling public now accepting of being treated like second class citizens during the travel process. A side point worthy of mention at this juncture is the fact that some of the flights that airlines generally have had to “reluctantly trim” have been the ones contributing least to the profit margin and indeed contributing the negative yields! A fact the airlines will happily omit to divulge.
However, generally if “any lesson need be learned” to use an overworked cliché, learning not to listen to accountants will be one lesson learned the hard way by airlines. Accountants have no doubt saved hundreds of millions of Euro’s in cost saving measures such as reducing staff levels in the aviation sector; it’s just that the same moves cost them billions in lost revenue. Hopefully accountants are kept away from the top table in future years. Lufthansa also does not have the luxury of blaming Brexit for their current hiatus.
Jamadvice Travel | BCD Bulgaria
The Portuguese state-owned airline TAP is in its early stages of privatisation and as might be expected the traditional key players in European aviation; Lufthansa Group, IAG and Air France -KLM are sniffing around with initial reports that its Air France – KLM who seem the most interested.
TAP has a very strong presence in Brazil with flights to 10 destinations in the country from the Portuguese capital Lisbon and that is the carrot that attracts the interest. Regardless of whether all the aforementioned groups are seriously interested or not, they will each no doubt pretend they are if only to force the asking.
Those who forecast that travel will never be the same again post covid will no doubt have moved onto their next prophecy some time ago and left reports about the end of the travel industry as we know it to the PR gurus in the Greens Political Parties, however random theory should always submit to reality and the reality of most of the world is; people want to travel. To accommodate this demand the hotel industry is doing its bit to ensure that travellers, regardless of motive, have somewhere to stay.
In Europe there were 1700 new hotel projects in the pipeline by the end of 2022, these will add a further 261.000 rooms to the present European bed stock. Of these, 784 hotels are already under construction and 403 that are about to start. This construction is going ahead as there is total confidence in the European travel sector continuing its rebound post covid.
France based Accor has the most new European properties in the pipeline with 286 (this includes projects in Bulgaria), followed by Hilton with 195, Marriott with 185 and Intercontinental with 153. In terms of hotel brands, Accor’s Ibis budget chain leads the way with 99 projects followed by Hilton’s Hampton Inn brand with 74. Behind these two comes InterContinental’s Holiday inn and Holiday Inn Express with 77 projects.
The UK has the most new projects in total with 295 hotels followed by Germany with 257 and France with 152. In terms of cities, London tops the list with 75 projects, next comes Paris with 31 and Dusseldorf with 42.
Stealth tax coming
There are many ways to skin a cat and there are many ways the EU finds to extract more revenue from the European public. One of its new pet projects is set to indirectly increase the cost of airfares as EU ministers have given their initial approval for changes to the EU’s emissions trading scheme (ETS). Normal human beings will find the ETS mechanism totally beyond comprehension but in short, currently it’s a fudge for companies or people to pretend they have green credentials with the minimum amount of investment required from them. When the current free emissions allowances that airlines are granted disappears in 2026 the cost re-directed by the EU to airlines, will in turn be passed back onto the airlines passengers and this will be around 10 Euro per ticket. The bad news doesn’t stop there.
The EU is also trying to enforce the use of sustainable aviation fuel (SAF) in the aviation industry and the cost of this is significantly more than the fuel used in aviation today; this will see yet a further hike in the cost of travel and whilst all airlines play the game for PR consumption that they are experimenting with SAF, are they in effect making a rod for their own backs? If the cost of travel becomes so high then people simply wont travel and the more cynical might argue this is the bigger picture game plan anyway. The problem will then rebound back to the EU as the collapse of travel will mean less taxes are collected throughout the whole travel chain and the ability for governments to look after its citizens on a social level will also collapse.
Who needs enemies in the EU when you have friends like this? The resilience of the European Public though has shown that despite the barriers put in front of it in the form of travel restrictions and increasing costs, the public will do what they want and not what the EU bureaucrats want.
Getting the world moving
A total of 1.94 billion passengers travelled through European Airports last year, that’s almost double on the previous year but still 21% down on 2019 with just 27% of European airports having returned to pre pandemic levels.
However, before any opinion or deduction is made re these figures, it should be borne in mind that in real economic terms (travel activity) 2022 really only started in April so comparing the months of real travel activity means more or less that the world of travel has returned to 2019 levels. Or it would almost certainly have if a number of key European airports had not placed restrictions on passengers as they were under staffed.
Istanbul remained the busiest airport handling 64.3 million passengers and were followed by London Heathrow with 61.6 million. Paris CDG came in third with 57.5 million then Amsterdam with 52.5 million.
Europe is indeed getting back to the old normal.
Varna and Bourgas Airports have received European Commission approval for state aid to the value of 5.8 million Euro from the Bulgarian Government. The aid comes in the context of support for “liquidity in-balances” caused by Russia’s invasion of Ukraine.
No doubt the money will be well spent.
183 Million Leva is on its way to facilitate 33.4 km of new motorway that will link the Serbian – Bulgaria border at Kalotina with the Sofia Ring Road. Some 16.95 km is already in use and will be modernised and this will be connected to a new 16,46 section already under construction.
When finished it will connect travellers onto the already finished motorway in Serbia that runs from the border to Belgrade and then onwards to Croatia and the rest of the European motorway network.
Many people will already be familiar with the new Hyatt Regency Hotel in Sofia but it will shortly be joined by the Hyatt Regency Pravets Hotel. This is a revamp of the original popular Pravets hotel with the new version featuring 244 guest rooms and 16 halls for meetings and events. The hotel will also have its popular spa facility and Championship Golf Course that is already host to many national and international competitions. The current opening date is 1st May.
Bulgaria maintained its position as the second worst in Europe for deaths on the road; the country with the dubious honour of having the worst drivers once again belongs to Romania. The death rate in 2022 for Bulgaria was 78 deaths per million inhabitants which is a small decrease on 2021 when it was 81 per million and also on 2019 when it was 90 per million. Romania has 86 per million.
Across the EU, 20,600 people died in road accidents in 2022 a 3% increase on the previous year though one can reasonably argue that 2021 still saw driving restrictions due to Covid. On the bright side comparing the pan EU figure of 2022 this is a reduction of some 2000 deaths or 10% from the figures of 2019.
The largest decreases in deaths i.e., where driving quality improved was in Lithuania and Poland with a 30% decrease followed by Denmark with 23%. The safest roads being those in Sweden with 21 deaths per million inhabitants and Denmark with 26 per million. The EU average was 46 deaths per million.
One interesting trend of this data is that within Urban areas, the fatalities of cyclists and powered two wheeler drivers and also including pedestrians is a huge 70% of the total! In France for example the country saw a 30% increase in cycle deaths alone. Thus whilst the move to cycling is lauded across Europe, there are drawbacks to it.
Noise generated by airports is constantly in and out of the news depending on the narrative of the news story in question. In Dublin, a somewhat amusing story has appeared which shows that in 2022 some 26,196 complaints were made about excessive airport noise, an increase of 13,000 on the previous year. Of these, 24 431 claims were made by one person.
One cant help wonder how on earth anyone has the time to make 84 claims per day; maybe get him/her a job as a baggage handler at the airport if he/she has so much free time available.
EU continues rail message
The EU continues to encourage travel by train across Europe and has agreed to support ten pilot projects to establish cross-border rail links and to improve existing international services. There is no direct funding for the projects but the EU will support the projects by “facilitating the coordination of stakeholders and assessment of the compatibility of the legal framework as well as the promotion of the new services”. Yawn.
Included in the project are new services connecting Hungary, Austria and Western Romania; sleeper services between Barcelona and Amsterdam and Milan and Paris; new services between Munich, Vienna and Budapest and increased usage of the London -Amsterdam route. Projects on the Iberian Peninsular and in Scandinavia also exist. Missing on any projects is Bulgaria.
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