April 2023 Newsletter
The Summer Commeth
Whilst the first summer tourists will no doubt have arrived on the Black Sea already, the month of May is considered the month when the summer season typically starts, then the theory goes that visitor numbers gradually increase to reach a peak in July and August. The Tourism Ministry will no doubt be getting ready to dust down its PR releases and cut and paste the updates, the numbers on them merely changed to read a higher number, but whilst many a true word is said in jest, there does seem to be a sense of optimism surrounding the forthcoming summer season. The Russians may have gone and whilst last summer plugging the gap they vacated was something of a challenge, the tourism industry has had twelve months to tackle potential new source markets and sell Bulgaria as an attractive, value for money destination with great beaches to boot. One thing however that the tourism sector will be well advised to get a grip on, is their pricing.
The past winter was poor for those local tourism providers with an emphasis on winter sports; the lack of snow being a force majeure that is difficult to control although other European ski destinations seemed to be able to manage the situation rather better when faced with similar challenges. One thing though that became abundantly clear was that the pricing for winter tourism locally whilst being significantly cheaper than say France or Switzerland, was probably no cheaper than Italy and Austria and certainly not when comparing value for money. Which offers the better value – 90 Leva for 70 kms of piste (some closed) or 110 Leva for 250 kms of piste that is fully open and working! Whilst this is a random sample comparison, the truth is that most local skiers have now discovered new locations and new scenery. There is absolutely nothing wrong with the Bulgarian ski resorts and their evolution over the past decade or so has been admirable but they are not unique in the wider tourism world.
If Bulgaria is now very much on the circuit for certain sectors of the ski world, the same may be said of the Black Sea resorts, though many will argue their commercial approach (over building) may well be the Black Sea’s ultimate downfall. Another potential threat to the Black Sea is the fear that, like many retail outlets across the country have been accused of, over pricing of goods has become the norm and the fear is that if this practice persists on the Black Sea during a summer of opportunity, word of mouth, or in today’s world, social media will quickly spread the word that the value for money holiday that the Black Sea had become associated with, no longer prevails. Greece and Spain for summer can replace Italy and Austria for winter. Last summer many people also noted that the cost of a holiday in our southerly neighbour was possibly even cheaper than their own Black Sea options and likewise offered a far superior experience; aka quality.
It would be foolish to predict what will happen for summer 2023 when push comes to shove, but the trend would seem to be that more and more locals venture overseas for their summer break, so let’s hope the marketing teams have done their work to stimulate visitor interest from overseas.
Jamadvice Travel | BCD Bulgaria
The Modern Loss Leader Concept!
The historic theory of marketing would no doubt have a section on the “’loss leader’” concept where an item would be sold at a small loss in the hope to stimulate other sales of more profitable items. Is an airfare these days the new form of “loss leader?”
Worldwide, ancillary fees sold by airlines generated some 2.6 billion USD in 2006, by 2008 this figure had reached 10.25 billion USD. Fast forward to 2019 and that figure reached 109.5 billion USD. In the Covid recovery year of 2022 (remember it was only around 9 months of semi normality), it was 102.8 billion USD.
Many airlines nowadays make more from ancillary sales then they do from the actual initial sale of the seat a passenger places his backside on. Think of that as a concept and think how ridiculous that would have sounded a few decades ago.
How To Get To Know Your Clients
Turkish Airlines is following the (new) trend and is to offer free and limitless inflight messaging on its international flights, a project that will be gradually rolled out across all of its fleet. Included will be messaging through Facebook, WhatsApp and iMessage.
The only catch is that to use it, passengers must be members of the airline’s Miles and Smiles Loyalty Programme; a brilliant piece of marketing that will likely be emulated by other airlines.
Turning the Greens Red
Dubai International Airport (DXB) has retained its position as the world’s busiest airport for the ninth year running. The total number of passengers who used the airport in 2022 stood at just over 66 million.
London Heathrow came in second with 58.2 million passengers, Amsterdam was next with 52.47 million.
In the Dubai figures, it is interesting to note the main destinations passengers flew to and therefore by default, where they originated from, India was top with a massive 9.8 million passengers followed by Saudi Arabia with 4.9 million and then the UK with 4.6 million. The top destination cities were London with 3 million passengers, Riyadh 2 million and Mumbai with 1.9 million.
Other spurious numbers show that 2022 levels globally were 73.8% that of 2019 which can largely be explained by both a slow start to the year with traffic not starting in earnest until the second quarter, but also by the loss of China as a serious market due to Covid restrictions. Another interesting fact that will see Environmentalists turning rouge is that 19.7 billion passengers will travel through airports by 2040 – the current figure being 7 million.
The Elephant In The Corner
The Lufthansa Group may be making healthy profits again, but it might soon take a hit on its bottom-line figures. Fifteen years ago, a Saudi businessman signed an agreement to invest in the now Lufthansa owned Austrian Airlines and injected 150 million Euro into the cash strapped airline in return for 20% of the shares. Subsequent financial analysis revealed that the figures the businessman was being presented with prior to his agreement were being understated to hide the true financial situation of the airline. The airline then turned to Lufthansa who, in December 2008 agreed to take a 41% stake in Austrian making it a subsidiary airline.
In March 2023 an Austrian Court exonerated the Saudi businessman and agreed with him that Austrian had mis-represented their figures and he was entitled to withdraw his offer. The court also dismissed a claim by Austrian of an annual payment of 156 million Euros plus 12.2% interest citing that the conduct of the airlines management was misleading and violated market rules/ Following on from this judgement a claim against Austrian has now been lodged claiming damages of, wait for it, 1.1 billion USD by the Saudi.
So, the winners will no doubt be the lawyers and one can also sense that the Lufthansa shareholders might be a tad agitated with the possible implications.
Schiphol – Forcing Beliefs
Those making decisions at Amsterdam seem to be determined to go down in history for one reason or another and their latest idea is to both ban night flights at the airport as well as banning private jets in an attempt to cut air and noise pollution.
The new proposals call for a ban on flights between 00.00 – 05.00, which translates to cancelling 10,000 flights per year – unless they are re-scheduled. The announcement also seems to throw down a challenge to those ‘not off the same mind set’ by saying “the airport connects the Netherlands with the world and that they need to maintain this but do it better and the only way forward is to become quieter and cleaner more rapidly. We need to be sustainable for our employees, the local environment and the world and that such moves are the only way to regain the trust of employees, passengers, neighbours, politics and society”.
Of course, the airline community led by KLM is not amused and for a second time is asking why such proposals are being suggested without consultation with any of the impacted parties. Its almost as if the airport management has become judge, jury and prosecutor for a second time.
The airline community has already successfully challenged the airports actions in attempting to reduce flight numbers without adequate consultation, a move that contradicts EU laws as passed down in a judgement from the EU one day before the latest plans of the airport were released!
One can’t but help think that the airport managements approach to consultation and democracy is akin to that in Russia today.
Delay In The Growth
The growth of Wizz Air across Europe has been spectacular but, perhaps like Ryanair before it, that growth can at the expense of reputation, unless you consider all types of PR to be free PR (think the Sex Pistols!). Wizz Air is already infamous for its lack of Customer Service when it comes to trying to contact the carrier and it has now been named as the UK’s worst performing airlines for delays during the past year.
Their average delay was 46 mins and 6 seconds, which puts it bottom of the pile and was followed by Charter Airline TUI with an average of 40 mins and 18 seconds, who in turn were followed by Qatar at 31 mins and 48 seconds and Turkish with 29 mins and 30 seconds.
Dubai based airline Emirates has a new staff member; Sara the Robot, who is “employed” at the newly opened City Check in centre in the financial district of Dubai. She (is that politically correct these days?) is tagged as a “Check-in” assistant and matches the customers faces with scanned passports, checks them in and guides them to the luggage drop off area. Apparently, she will also offer extra services: we mean like seat upgrades!
No mention is made about her terms of employment and days holiday per year. Which then begs the question if such robots will become the norm in future much like self-check in desks have become the norm. At least a robot can’t go on strike; unless it is French.
Sofia Airport Re-Build
Sofia Airport seems to be progressing with plans for its reconstruction with the selection of architects and engineers announced. A local Bulgarian firm has been selected as the architectural and engineering company and will be supported by two international firms with experience in airport design and aviation infrastructure.
The plan is to do a complete re-development of Terminal 2 i.e. the “new” terminal, which will also absorb the traffic from the “old” Terminal 1 which will be taken out of operation. Additionally, a new Terminal 3 will be built though this won’t be in operation until 2030.
The new Terminal 2 will have a brand-new baggage management system, will see a doubling of the check in counters, new border control area, 2000 sqm of Duty-Free shopping, new catering options and additional aircraft boarding bridges.
Question: why wasn’t the “new” Terminal 2 built properly in the first place some 17 years ago? Which by most measures is relatively recently.
There is always a way to work your way through adversity and a British man did just that after he and his family’s flights to Portugal were cancelled at just three hours’ notice by Wizz Air. The man was forced to book new flights at a considerably higher price with another airline and he had to extend his stay by one extra night at his destination due to the new flights. Under EU law a refund for the flights is due in 7 days but it took a month before he received his refund. Also, there is the question of a fixed compensation amount due to the cancellation and this was paid some 3 months later to him. The family though were still some 4000 EUR out of pocket and despite the man emailing the airlines CEO, his communications were ignored.
Not wishing to throw in the towel he took his claim to the County Court but Wizz ignored the judgement! So, he applied for Bailiff action and again Wizz ignored the case. At which point he also discovered there was a further 1000 court judgements against Wizz in the UK alone! So as the chase continued, he then, for a small fee, arranged the bailiff to visit Wizz at Luton Airport and collect his money; which they duly did! The other option for the bailiffs at the airport would have been to remove the Wizz Air computers, chairs and tables.
Such actions may sound drastic, but airlines will do whatever they wish to do in a timeframe that suits them, not their clients. Taking court action and engaging bailiffs may sound complicated, but in reality, the small amount of effort it takes is more than worth it when financial losses are re-couped. Maybe this could serve as a warning to other airlines who are reluctant to pay their dues.
Finding The Value
The deal for Lufthansa to acquire or partially acquire new Italian national carrier ITA has been extended until Mid-May as final details are thrashed out. The plan is for Lufthansa to acquire an initial 40% stake in the airline and take an additional stake in due course. Whether this additional stake is the full 60% is, as yet, unclear.
Also unclear is the value of the 40% which is reported to be around 200 million Euro, although as is usually the case with Italian airlines, their annual losses verge on eye watering; some 486 million Euro for 2022. Which then begs the question as to what is the real value of 40% of shares in a loss-making entity?
Turkish Delight Down Under
Australia cut itself off somewhat from the rest of the world during Covid and the country still seems to have a siege mentality prevailing. As a destination however, it will always be attractive for many reasons and as far as its connectivity with the wider world is concerned, it depends almost entirely on air travel, a fact that has been successfully exploited by airlines such as Emirates. Etihad and Qatar. They are possibly about to be joined by Turkish.
The Chairman of Turkish was recently in the Australian state of Victoria and made no secret of the fact that it has flights to Australia on its radar. The question the chairman threw out as a carrot was should they fly to Sydney or Melbourne first or to both?
This plan however may be a while away as its likely Turkish will need to add to its long-haul fleet of Airbus A35-900’s and Boeing 787-9’s before it can roster such flights. It does have 14 and 9 respectively of these plane types on order but these are not slated for delivery just yet. That is not to say though that they couldn’t snap up a few of these before their scheduled delivery. What is sure is that there is every likelihood that this talk will, unlike much talk in the aviation sector, actually happen.
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