Thursday, 29 July 2010

It is Joint Venture Time for British Airways, American Airlines and Iberia.

Almost every competitor who wanted the stop them have tried and failed. The Europe and the U.S governments couldn't either. After 14 years in the making, British Airways and American Airlines have finally been given the long-sought anti-trust immunity that will permit the carriers to coordinate schedules, fares and marketing.
British Airways and American Airlines argue that it is all about staying competitive with airlines in other alliances that already enjoy the privileges of joint ventures. Routes between the U.S. and London's Heathrow, the two airlines' biggest strengths had become the largest source of contention among other airlines and regulators. Before receiving approval to move forward from EU regulators, the two airlines had promised to relinquish a few pairs of slots (take-off and landing rights) between the U.S. and Heathrow. This concession was received positively by the U.S. Department of Transportation (DOT) as it issued its final approval of the joint venture this week. The granting of anti-trust immunity also covers Iberia, Finnair and Royal Jordanian, all members of the oneworld® Alliance.

In a press release, British Airways Chief Executive Willie Walsh stated: "We're pleased that the DOT and EU have worked together to ensure that there is consistency in the number of slots that the three airlines have to give up to our competitors to use on services from Heathrow to the U.S. We made the pragmatic decision to give up these slot pairs so that we can start operating the joint business as soon as possible." Iberia's Chairman Antonio Vazquez added: "A new kind of collaboration among our three airlines will lead to better service levels for our customers. This means that our customers will have more destinations to choose from around the world, better scheduled travel times, better connections, and more competitive fares."
Do you agree?

One more step to marital bliss for the United Airlines and Continental Airlies – The EU gives them its unconditional blessing.

United Airlines (NASDAQ: UAUA) and Continental Airlines (NYSE: CAL) received unconditional clearance from the European Commission on the airlines’ proposed merger. The Commission noted its investigation found the proposed transaction would not raise any specific concerns in Europe or the trans-Atlantic.
Like every groom to be, UAL Corporation chairman, president and CEO, Glenn Tilton says “we are pleased to have received this clearance from the European Union, a significant market for our combined new company, and we continue to work cooperatively with the U.S Department of Justice toward an expeditious completion of our merger, which will benefit our customers, our people, our shareholders and the communities we serve,” how sweet.
Jeff Smisek, Continental’s chairman, president and CEO had to assure everyone that he was not tagging along for the ride; he says “approval from the European Commission is another important step toward completing our merger with United. The combination of United and Continental brings together the two most complementary networks of any U.S. carriers, with minimal domestic and no international route overlaps. Together we will offer customers unparalleled global access.”
The companies announced their plans for an all-stock merger of equals in May and expect the transaction to close in the fourth quarter of 2010…bless them. As passengers, we are definitely looking forward to seeing all the promised benefits.

The Game is up for Budget Airlines

Airline companies in Europe and North America have been getting away with offering one price and charging a different one for quite some time. As budget airlines continue to get away with it in Europe, the American government has decided to react.
I always knew that budget airline will have their ‘comeuppance’ when I tried to board Ryanair for the first time and had to race to find myself a seat and discovered that despite my best efforts, I was still not the first person in the aircraft. How did the other get there before me? The emergence of budget airlines seemed to have been a blessing from heaven. It meant that traveling to sunny destinations did not have to cost half a year’s savings and more money could be spent on accommodation and food. However, now when we have become used to such rates, traveling with budget airlines has become a nuisance because of annoying ways of arguing at airports and haggling over cash. We continue to have the beginnings of our holidays ruined in Europe through arguing about extra charges, now the American government has decided to call an end to such deception.
In the aftermath of a report by the Government Accountability Office, whereby it was discovered that airlines made $1.3 billion in the first quarter of 2010 just on luggage and other extra charges, the government has demanded that airlines display the real price of tickets. Ancillary fees have grown by less than 1%, as the profit is in the add-ons. Passengers say that they would not mind tickets being more expensive if they could save the stress at the airport worrying if they have to fork out for fuel surcharges and other details such as forgetting to fill in passport details. Fuel surcharges and taxes must now be included in all advertised prices of tickets.
The line is drawn whereby certain services are unavoidable. Passengers do not have a problem with paying extra for window seats, tea and coffee, oversize luggage or an extra pillow. These are luxury items. However, is it moral to charge people for things they cannot avoid? The American government wants to ban charges for checking in, fuel and booking online. Do you think that the British Government will be brave enough to follow suit?

Thrifty days ahead for Business Travellers

An Orbitz for Business survey claims that although the amount of people going on business trips and the amount of trips themselves are increasing, the trend nowadays is to spend less. It appears that the global trend is growing and the style of business travel is changing a lot.
So what is the trend now?
It used to be the case that business travellers were the ‘darlings’ of travel service providers; throwing around money that was not theirs and always going for the most expensive options merely to maintain a desired image. According to the survey, gone are the days when cruising in economy class with a suit and tie were not a business traveller thing. Today, it appears that they will even throw in a wave for cash back incentive from their employer. Tougher schedules have led to business people returning earlier than before from trips and the economic climate has led to companies saving every cent they can, sometimes even offering their employees a financial incentive to do this.
The Orbitz survey of 850 travellers revealed a lot about the changes in the habits of business people. 70% claimed that saving money was at the forefront of their interests and most of these people claimed that they were financially motivated to do so. If the employee saves and the company saves, then the hotels and restaurants clearly lose out. Business travel has increased since 2008 yet with the new trends and behavioural patterns, it means very little to service providers.
Apart from cutting back on hotel stays and flight tickets, many business people have been using their own cars to get about. This is a huge saver and companies were clearly getting tired of paying hire fees and insurance. Another important factor is that business people tend to book their own trips nowadays; in fact 91% claimed that this was the case. This means that they are directly responsible for saving money, which is reflected in their behaviour.

Friday, 2 July 2010

Taking holidays is a human right

"As Commissioner for Transport I successfully defended passengers’ rights. The next step is to safeguard their right to be tourists." Antonio Tajani
In his opening address at the European Tourism Stakeholders’ Conference in Madrid, Antonio Tajani, Vice-President of the European Commission with responsibility for industry and entrepreneurship declared taking holidays as a right. He said that as the person responsible for Europe’s policies in this economic sector, it is his firm belief that the way in which we spend our holidays is an excellent indicator of our quality of life. He insisted that unrivalled tourism resources must become fully accessible to those for whom travelling is difficult: the elderly and persons with reduced mobility. The sector’s operators are aware that ensuring (and facilitating) travel and holidays for tens of millions of persons with reduced mobility nowadays represents a challenge within a challenge.
In addition to accessibility, attention must also be paid to young persons and families at a disadvantage who – for various reasons – also face difficulties in exercising their full right to tourism.
It quite clear that tourism plays a key role in promoting development and social and economic integration in rural, outlying or slow-growing regions but one not underestimate the extent to which tourism – developed sustainably – provides local economies with a lasting source of income and stable employment while enabling them to safeguard and capitalise on landscape, cultural, historical and environmental resources.
Challenges facing tourism now and later
• the capacity of tourism businesses to innovate and adopt new technologies;
• the difficulties in access to funding;
• the pressures to guarantee sustainable yet competitive development;
• climate change;
• and, finally, increasing international competition.
• stimulating competitiveness and innovation in the tourism industry in the European Union;
• promoting sustainable and responsible tourism in the EU and in the emerging and developing countries;
• reinforcing the image and profile of Europe as a set of sustainable and high-quality destinations among European and third-country citizens;
• finally, integrating tourism into the financial policies and instruments of the EU.
Examples to be used:
1 - Stimulating competitiveness and innovation in the tourism industry in the EU
Improvement of the socio-economic knowledge base of tourism and of the related activities, in particular by means of studies, surveys and statistics to be produced in close cooperation with international organisations such as the World Tourism Organisation (WTO) and the Organisation for Economic Cooperation and Development (OECD).
2- Promoting sustainable and responsible tourism in the EU and in the emerging and developing countries
Recognition and guaranteed respect for the “five pillars” of the sustainability of European tourism:
• economic,
• social,
• territorial,
• environmental
• and cultural sustainability.
3- Consolidating the image of Europe as a set of sustainable and high-quality destinations among European and third-country citizens
Enhance the image and perception of Europe as a set of sustainable and high-quality tourist destinations.
4 – Integrating tourism into EU policies and financial instruments
Integration of the interests of the European tourism industry into the other Community policies.
Key areas for development
• cultural tourism,
• wine and food tourism,
• religious and monastery tourism,
• sporting tourism,
• conference tourism,
• eco-tourism,
• health tourism, particularly spa tourism.
He ended his speech by quoting St Augustine, in his capacity as a great philosopher referring to the topic of “travel” “The world is a book and those who do not travel read only a page”.

Saturday, 22 May 2010

Is British Airways the General Motors of British aviation?

British Airways has recorded a substantial loss, has been over-ruled by the Appeal Court and is facing a series of three strikes lasting five days each starting from 24th May through to June. There has been a lot of “to-ing and fro-ing” from the Courts throughout BA’s negotiations with the union. In over-ruling the latest ban on strike, the Lord Chief Justice Lord Judge said “it seems curious that BA should use a law introduced to protect union members from irresponsible and undemocratic actions by union leaders to circumvent the democratic wishes of the workers.”
So, what next for BA?
Joseph Lampel, Professor of Strategy at Cass Business School, London, gives his reaction to the announcement of £531m of losses for the year to the end of March:
"I am not surprised by today's announcement of huge losses by BA, but it is likely that the underlying company assets may be strong enough to withstand the company going into insolvency. At this point, and into the near future, It's all about confidence - BA's investors and customers must believe it is possible for Willie Walsh to turn the company around.
"He has to make a lot of unpopular and difficult strategic changes because, if he doesn't, BA will have no future. You only have to look at the likes of Sabena, Swissair, Alitalia and other national airlines that became effectively insolvent for the same reason: high costs and inflexible labour practices.
"Willie Walsh must tackle the underlying cost factor in order for BA to survive. The company has been hit hard by the economic situation, and other cyclical factors, but this potentially reversible. The question is: Can BA survive until this comes to pass?
"There is an unfortunate resemblance between British Airways and General Motors. GM dominated the American car industry, just as BA dominates British aviation. GM made several "comebacks" only to be pulled down by high costs, truculent unions, and consumer disaffection, when economic conditions took its sales below survival volume. The response of the US government to this perfect storm was to bail out GM. BA faces a similar combination of adverse factors. Will creditors continue to fund the company in the light of recent losses? As in the US, this may become political issues, now that some of the large creditors are owned or partly owned by the government."

Wednesday, 31 March 2010

EU and US Open Skies now a reality

Negotiators from both ends of the Atlantic have now struck a deal make permanent the 2007 open skies deal that expands the liberalization of the skies across the EU and U.S. - a pact once thought to be threatened over ownership rules.
Talks over the next phase of the three-year-old open skies agreement between the United States and the European Union were expected to be contentious primarily because of the reluctance by the U.S. to relax foreign ownership rules. Prior to the latest round of talks, Europeans had warned that the entire agreement could unravel if progress were not made on this particular issue. It appears that progress has been made, but one can hardly call it a promise by the U.S. to liberalize its airline ownership policy. Because changing such laws requires an act of Congress, U.S. negotiators could only commit to working toward some reform without giving a specific timeframe. Some airlines are disappointed that this latest agreement does not go far enough in this regard. The EU allows 49.9% foreign ownership of its airlines; the U.S. only permits 25%. What is new is that, under the new agreement, European carriers will be able to attract U.S. government business and U.S. airlines will be able to expand on their access to EU markets.

The current EU-U.S. opens skies agreement permits any carrier from the U.S. to fly to any EU city and beyond. EU carriers are allowed similar access to any U.S. city but do not have rights to operate between U.S. cities. The new accord promises future action by both parties to balance the access to each other's' markets and to cooperate on environmental and regulatory issues. One such issue is night curfews at EU airports that often restrict the operations of cargo carriers such as FedEx. If the EU lifts some of these restrictions, the U.S. is willing to allow EU carriers the rights to fly from the U.S. to third countries in the future.

In essence the two sides have agreed to make permanent the 2007 open skies deal as they work toward greater cooperation on various issues such as security, safety and ease of travel. EU and U.S. regulators have to approve these measures independently before anything becomes official. Though both sides touted the progress made, the International Air Transport Association (IATA) thought the agreement could have done more. "The agreement was not a step backwards, but it did not move us forward," claimed IATA director general, Giovanni Bisignani. – a pact once thought to be threatened over ownership rules. To paraphrase a famous quote attributed to Mark Twain, reports of the death of open skies have been greatly exaggerated.

Source: IAPA

Wednesday, 3 March 2010

The Executive Traveller Economist

Why we should worry about travel services and fees as we slowly emerge from the recession.
Travellers have to pay attention to what airlines are offering before they book their flights. Those were the days when airlines will move heaven and earth to ensure that you enjoy your flight with them. Once debts start straying into the economic growth of airlines, economic growth tends to slump and then airlines start finding ways to charge for almost anything.
There is something particularly compelling about charging for almost everything that services providers like hotels and airlines put at our disposal as soon as supply exceeds demand because of high debt and recession so much so that so that they likely consequences is shrewdness on the part of the traveller.
Competition is only indirectly relevant. The question is how responsive an airline or hotel’s customers are to price – this is to say their own price elasticity of demand. The thing is when elasticity if low, airlines can increase prices without losing many customers. Naturally, this affects the price they charge and one explanation for elastic demand and low prices is that customers could easily shift to another airline.
Is it any wonder therefore that American Airlines has decided to charge fees for blankets and pillows? According to IAPA, the airline passengers association, American Airlines will begin charging for pillows and blankets in economy class – US$8 to be exact. It appears that the airline business has gone fees crazy. You never know what next they will be charging fees for. American isn't the first to charge for creature comforts such as blankets and pillows, and it won't be the last. The airline will continue to offer them for free in first and business class, and on long international flights in all classes. In the U.S., JetBlue, US Airways and now American charge for pillows and blankets. As with their policy of not charging for the first two checked bags, Southwest Airlines has taken the opposite approach. They've gotten rid of all pillows and blankets. The airline says it's not to cut costs, but for health reasons – I suppose that is a clever way of explaining the economics.
Perhaps it is about time we carried our own pillows and dressed appropriately. Cabin air temperatures can vary between 18ºC - 29ºC (65ºF and 85ºF) and the low end of that range can leave some passengers feeling too cold for comfort.
American Airlines is also keeping it simple by only accepting credit and debit cards on board for payment of items like duty free and alcoholic beverages. American Airlines flight attendants carry onboard secure handheld devices to ensure your payments with credit and debit cards are recorded safely. A receipt for any in-flight purchases will be available on request. Most major credit and debit cards are accepted. American Eagle and American Connection flights will however, continue to accept cash only for payment.