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British Mensa Travel Special Interest Group |
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Have you ever wondered "How did we get here?" Well, now's your chance to find out on travel issues. In his regular column for VISA, SIGSec Barry Needoff has followed industry developments since 1995. We present below a selection of extracts from his column, with the issue and date reference at the start in each case. Channel
Tunnel opens (issue 16, April 1995) Channel Tunnel opens (issue 16, April 1995) The end of 1994 saw the most significant travel and transport development affecting this country and the mainland of Europe for many years....the opening of the Channel Tunnel. Not only does it have significant implications for this country's railway network (you never know, we might even have to start investing in it to keep up with our neighbours) but it will also mean severe competition on the world's busiest international air route. London to Paris has for so long been a route where the airlines have been able to keep prices artificially high, the arrival of Eurostar's direct through rail services will compete in terms of time for city-centre to city-centre traffic and has the potential to start competition in terms of fares. All that is needed is for the capacity and frequency of the rail service to be increased to something like its full capacity. A fare war between the airlines and Eurostar might, at last, mean the beginning of real fare competition amongst the airlines on other busy, short-haul routes... Back
to top of page History has a habit of repeating itself in the most unlikely ways. I recently heard Sir Freddie Laker being interviewed on BBC Radio 4's Today programme. Sir Freddie. himself no stranger to aviation history, was talking about his plans to relaunch his transatlantic flight service from the UK to Florida. The new Laker airway is due to start operations in early 1996, offering a `high quality' service between Fort Lauderdale in Florida and Glasgow, Manchester and Gatwick according to Airline Business. Laker dismissed suggestions that his new venture ran the risk of falling victim to competition from the major players, because he felt the airline world had changed since the days of state-owned airline cartels which put his Skytrain out of business in 1982. As a private sector company, he thought that British Airways and their shareholders would not nowadays allow the kind of predatory activity - then government-funded - he had suffered last time round. Sir Freddie is surely being ingenuous. All companies have to have regard for their bottom line profits and we can easily see how private sector airlines behaved in tlie liberalised market of the USA...the big fish either undercut the smaller oncs mercilessly or took them over, so forcing their smaller competitors out of the market. Good luck, Sir Freddie - but keep your eyes open! Just because their financing is now free of governmental influence doesn't mean to say that BA - or any other carrier - won't try the same old tricks again! Back
to top of page Last year, we commented in VISA about the trend towards vertical integration, where tour operators such as Thomson and Airtours were using their wholly-owned travel agency chains (Lunn Poly and Going Places respectively) to what was felt to be unfair advantage against other tour operators and independent travel agents. According to The Observer (25 August 1996), the largest tour operators are now achieving this by providing incentives in the form of increased commission levels and cash bonuses to outlets of the agency chains they own, to promote their products. The links between the tour operator and the travel agency are not made obvious to the customer who, over the years, had become accustomed to a ‘neutral’, unbiased service from their travel agent. This puts the smaller tour operators, who do not have associations with chains of travel agencies, and the independent travel agencies themselves at a competitive disadvantage. The Office of Fair Trading is now investigating these practices; a report is due in the next few weeks. There may well be a referral of the larger operators to the Monopolies and Mergers Commission. Given that the ‘big two’ are said to dominate over 50% of the package holiday market, it will be interesting to see if the OFT or the MMC recommend any changes to the structure of the retail travel business and its ties with tour operating companies. Back
to top of page The British package holiday business is now a mature one; for over a generation. people have been buying commoditised, mass-produced holidays, marketed by increasingly sophisticated companies using state-of the-art advertising and sales techniques. Growth in the industry has been followed by growth in its regulation, by voluntary codes of practice developed by the trade, by statutory body or by Government. There are signs of a more interventionist attitude from Govemment now, with a suggestion from Nigel Griffiths, the Minister for Consumer Affairs, that they have set up a working group to consider appointing an Ombudsman to oversee the travel industry. A range of consumer protection measures has sprung up too, usually following some financial failure or scandal which has hit the headlines and left thousands (well, hundreds, perhaps) of hapless holidaymakers stranded on some foreign shore, or even worse, at Gatwick Airport. Speaking at ABTA's recent Convention, Mr Griffiths said "In the 90s, the consumer is far more aware of his rights, but some consumers invent rights they don't have." And yet....and yet the industry still doesn't deliver the standardised, reliable product the consumer has come to demand. Trudie Lazarus' article in this issue details failings by a reputable and experienced company. Smaller, independent companies are not infallible. My own experience has shown they can be equally inept in marketing their products and handling the consequences of failure. The last bastion of defence of the unscrupulous tour operator ("It was the hotel / local rep. / coach company / restaurant / airline, Your Honour....nothing to do with us, honest.") has now fallen to recent legislation (The Package Travel, Package Holidays and Package Tours Regulations, 1992). which makes tour operators or organisers liable for the failings of any of the services provided within the package arrangements they sell. Holidays are supposed to be enjoyable, relaxing interludes in the crowded and hectic routine of working life. They're not just the two weeks on a foreign shore, but the anticipation and the reminiscences of the holiday itself. By definition, they usually take place in countries where things are done differently. This is, however, no excuse for cutting corners or poor standards. If things do go wrong, ty to have the matter fixed there and then - don’t let it fester and ruin your holiday. Raise the issue immediately with the tour operator’s local representative and get a written report. Take photographs if these will substantiate your comments. Get the views (and names and addresses if possible) of other people who could confirm your views on what has gone wrong. Raise the matter as soon as you return home, with your travel agent and the tour company, be consistent in your approach and reasonable in your expectations. Finally, if the worst does come to the worst, and you feel you are not getting anywhere with your complaint, consider legal action. An arbitration hearing in the Small Claims Court should be your very last resort, after you have tried to reach an amicable solution, but is an option you could select without complication or great expense. Back
to top of page Last issue, we commented on the news that British Airways were about to launch a direct sell, low cost ‘no frills’ airline, “Go”. By now, we should be seeing the first of their routes in operation from Stansted to Copenhagen, Milan and Rome. The ‘real’ low-cost airlines aren’t taking this lying down. Suspecting that BA are subsidising Go over the leasing costs of their aircraft, Easyjet are taking BA to court and Debonair have complained to the European Commission in Brussels, alleging unfair trading. Away wins, as the Pools Panel would say, I think. Travel insurance (issue 31, winter 1998) True to their word, the new Government have tried to end the unwelcome practice of travel agents making holiday discounts dependent on customers buying their over-priced travel insurance. It doesn’t seem to have worked, since the travel trade are reportedly offering the insurance free with their higher priced holidays or offering it at a discount with their cheaper deals. Either way, the net effect is that the customer is still tied into the agent’s insurance deal and ends up paying pretty much the same as before. Back to the drawing board? Back
to top of page VISA 23 commented on the start-up airlines which were beginning to make their presence felt in Europe as a result of the gradual de-regulation of civil aviation. A follow-up article in Spring 1998 on the arrival of low-cost carrier 'Go' ended with the prediction that within 3 years, the existing UK-based start-up airlines would have been forced out of business. This is now well on its way: AB Airlines and Debonair both ceased flying in the last few months. EasyJet and Ryanair continue, with ever more varied destinations and incredibly low fares. Go, of course, goes on, backed up by BA to the tune of £20m, according to The Independent. A new name has also appeared: "Buzz". Strictly speaking this isn't a new airline, merely a re-branding of some of the routes offered by KLM UK, who used to be Air UK. The format is much the same as Go - book directly by phone or internet, cheapest fares ('Done deals') are not flexible, 'Open Deals' are more expensive and may be modified. All the trimmings - business lounge access, meals etc. - are stripped out of the basic fare and can be bought by those who want them. Flights begin in January; phone 0870 240 7070 or see their website www.buzzaway.com for details. With another major airline re-engineering its product to move into the low-cost market, the pressure must now surely be on the remaining "start-up" carriers. Enjoy them while you can. Are
'all inclusives' a good idea? (issue 36, spring 2000) The age of the train? (issue 39, winter 2000) Writing my first column as SIGSec in April 1995, I reflected on the recent opening of the Channel Tunnel. "Not only does it have significant implications for this country's railway network (who knows - we might even have to start investing in it to keep up with our neighbours)..." It's difficult to imagine how badly wrong the UK rail industry has gone in the last five years and how misplaced my optimism. Regarding our 'neighbours', we now have French companies investing in the UK rail industry by buying Train Operating Company franchises in south and southeast England. Perversely, CGEA, who own Connex Trains, have performed so spectacularly badly that they have become the first Train Operating Company to have a franchise terminated. It's not difficult to understand why they lost their franchise - as a regular user of their services I find it easy to point to dirty, overcrowded and late trains, unpredictable cancellations, dishevelled and demoralised staff, rolling stock that looks as if it has been rescued from a scrap heap. And this was before we found the infrastructure - station buildings, signalling equipment and the track itself, for which Connex bear no direct responsibility - collapsing after years of under-investment and neglect bordering on the criminal. Derailments and collisions, with multiple loss of life, are now all-too-regular occurrences. Whilst Connex may be exacting some kind of revenge on les anglais for Agincourt and Waterloo (the battle, that is), the picture is little better elsewhere. Was it any better under the much-maligned British Rail? Is there a danger of harking back to a golden age which never really existed? Is the current system merely a victim of its own success, stretched to the limit by a huge increase in demand brought about by the upswing in economic activity? I don't think so. In the Metropolis of this advanced, wealthy country - one of the largest, most populous cities on the planet - we see notices in the Underground exhorting us not to use various of their stations. Escalators are an early 20th Century invention, and yet as we approach a new Millennium (or, pace Neil, it approaches us!) we find it still takes London Underground six months to repair ones which repeatedly fail. Stations - and even whole stretches of line - are regularly closed to perform emergency maintenance or because it is simply unsafe for them to remain open. Why visit London Transport's Museum when you can travel to work in it? Resources are clearly there to perform maintenance. How is it that in a couple of weekends in Autumn, Railtrack can suddenly mobilise the resources to replace miles of track which could, it seems, not have been done before? Modern rolling stock sits idle and unused in sidings because of indecision on routing Eurostar services north of London. Although work is under way in Kent, five years after the Channel Tunnel opened, there is still no clear route for its Rail Link into London. After several catastrophes around London there is still no decision on automated train protection systems, a situation which would be unthinkable in civil aviation. No problems with investment in ticketing and revenue protection, though. And fares continue to increase by stealth. Against a background of widely-advertised cheap deals ("subject to availability"), 'walk-on' passengers are penalised with ever-higher standard fares. Rail privatisation was botched, hurried through by a government bent on ideology, focussed on destroying a state-run monopoly and creating instant riches for a select few. It may be argued that private railway operators can be as successful as private airlines, but let's not forget that airlines operate in a tightly regulated and controlled environment, where safety is the overall consideration. Safety does not seem to be very high in the list of priorities for Railtrack or the Train Operating Companies, despite the lip-service they pay to it. Are safety, efficiency and profit compatible? Should Railtrack be taken back into public ownership? Can the reduction in the number of Train Operating Company franchises improve standards? Will the government's current plans to privatise the Air Traffic Control system merely re-run this debacle, with ever more disastrous consequences? There must
be solutions which enable our railways to operate as safely and as successfully
as airlines, whilst catering for a public service obligation through taxpayers'
subsidy. Sadly, they elude the present government as much as they did
the last. 911 - an update (issue 44, winter 2001) A shorter gap than usual between issues of VISA allows us to update you with some of the latest airline news....for the most part it's not, I'm afraid, very happy reading. As we saw in our previous article, the effects vary by market sector within the airline industry. The national airlines, 'low-cost' carriers and the UK charter airlines were all affected in different ways. According to the BBC's website, "The turmoil in the industry prompted the European Commission to break its own trade guidelines and permit limited state aid for carriers. In September the US agreed a $15bn aid package for its airlines." The intricate links between flag carriers, in the form of marketing agreements and especially cross-shareholdings have brutally exposed the structural weaknesses in the industry. Amongst the national carriers, the worst-affected are:- Air Afrique - run by a consortium of central- and west-African governments, this airline has ceased activities and is being bought up by Air France. Aer Lingus - suffering from a dramatic fall in its transatlantic market and under threat from RyanAir (qv) on short haul routes, the Irish flag carrier has cut fares, reduced its operations and dismissed over 2,000 staff. Funding is being sought from the EU, not without protest from RyanAir. Sabena, the Belgian national carrier, has ceased activities. Some of its short haul operations are being continued by its subsidiary, DAT. Swissair's holding company SAir Group, a major shareholder of Sabena, is being sued by the Belgian carrier to the tune of $2bn for reneging on a loan. Swissair's parent holding company, SAir Group, is now in receivership, and arrangements are being made for a new, slimmed down airline to be formed around Crossair, another SAir Group company. It is thought that the Swissair fleet will be reduced to about two thirds of its present size and many of its long-haul routes will be closed down. Canada 3000, Canada's second largest airline, has ceased operations. In America, AMR, American Airlines' parent company, and United Airlines have both shed 20 000 jobs, Delta 13 000, Continental Airlines 12 000, US Airways 11 000, Northwest Airlines 10 000 ... all these matched by reductions of around 20% in the respective airlines' schedules. Closer to home, BMI British Midland is cutting 600 jobs and grounding eight of its aircraft for the winter. Gill Airways, which used to fly between Newcastle and Belfast, has ceased trading. British Airways - again, heavily dependent on transatlantic traffic - is likely to reduce its staff by 7 000 and are implementing pay cuts and schedule reductions. The charter carriers are following the fortunes of their parent tour-operating companies and have generally slimmed down, reducing their staff and releasing aircraft from their fleets or simply parking them, so reducing their Winter 2001 and Summer 2002 flying programmes. Air 2000 - owned by the First Choice Group - reduced its staff numbers by around 700; Airtours announced 1 600 redundancies across the tour operating group which includes the airline. Both these companies, jmc and Thomson Travel, owners of Britannia Airways, have scaled back their operations for 2002. Conversely, the low-cost carriers continue to thrive - for the present at least. Easyjet have applied for slots to increase their existing services and begin new routes; a Gatwick - Barcelona service starts in February. Go have begun operations from Bristol to various European cities to complement their Stansted services, and are also offering flights between Glasgow, Edinburgh, Dublin and Belfast. RyanAir are offering 300 000 'free' flights (only airport taxes are payable) for flights in December and January. If confidence
returns to the leisure travel market, 2002 may see some interesting developments
as the low-cost carriers are now better positioned to take advantage of
an upturn in demand. The dramatic - and possibly over-hasty - reaction
of the vertically-integrated tour operators and their house airlines may
put them at risk of not being able to offer sufficient capacity to meet
demand next Summer. Their holiday packages may sell at firmer prices with
less discounting, but with such reduced volume, at what cost to their
profits? What's in a name? (issue 46, summer 2002) The current vogue for changing corporate identities has found its way into the UK travel industry, reflecting growing globalisation and perhaps the need to freshen up stale brand images and perhaps even staler products. (Would that the same were true of Consignia!) Those well-known, tried and trusted tour operators Thomsons, Airtours, First Choice and jmc are all undergoing re-sprays and makeovers. The Thomson brands, now owned by the major German tour operator Preussag, will be marketed under the TUI identity. This includes their house airline, where the Britannia symbol is already disappearing from aircraft tailfins to make way for the TUI logo. The other German presence in the high street is Thomas Cook, whose parent company is Germany’s second-largest tour operator. Having invested heavily in the jmc brand image across aircraft and brochures - guess what - this will soon be replaced by another respray bringing out a blue-and-gold Thomas Cook brand identity. Airtours is now emerging as “MyTravel” across its tour operating brands, its airline and “Going Places” travel agencies. Confused? It’s hardly surprising. Whilst the First Choice group, and their house airline Air 2000 indulge in a respray without a change of brand name, these ‘vertically-integrated’ tour operator / travel agency / charter airline groups are having identity crises, new names or not. (Continued opposite.../) In the aftermath of last September, we commented in VISA 43 on the differing fates of the three different kinds of passenger airline in the UK, distinguishing between scheduled airlines (British Airways etc.), the “low-cost” carriers (easyJet, RyanAir etc.) and the charter airlines. The major airlines are still reeling, the “low cost” carriers continue to thrive, and, as predicted, the charter carriers’ fortunes continue to be linked to those of their parents. What is becoming apparent is that the charter carriers are chasing the game being played - and increasingly won - by the “low cost” carriers. Notice how they are beginning to promote themselves with with ‘.com’ suffixes? Some of the shorter flights are being remodelled to compete with the product offered by the “low cost” carriers. Gone are the “free” tray meals...on these flights, the charter airlines charge for the in-flight snack. (It would be a brave person who suggests the holiday price is any lower for this!) Press and radio adverts suggest that you can book a cheap flight online from a charter carrier on terms comparable to those offered by the “low cost” airlines. You can ... but the product is vastly different. True, Air 2000 (or Britannia, MyTravel etc.) will fly you from more UK airports to the Med than RyanAir - but they may only have one flight a week, against two or three a day from a “low cost” airline. These airlines will happily sell flights originating at either end of the route; the charter carriers find this hard to deliver. Web-booking and “ticketless” travel business processes mean very real cost savings for the “low cost” carriers - charter airlines are ill-equipped for this. The number of charter airline seats sold through this channel is restricted, too. One of RyanAir’s aircraft will seat 200 passengers and pretty much all the seats will have been sold to individuals over the net. Air 2000’s flights are largely dedicated to servicing the needs of the First Choice tour operating group and perhaps 75% of the seats will be contracted to them, leaving perhaps 50 seats per flight for individual sale. The move away from core businesses and back again is a cyclical one in British industry, no different for tour operating, even where the tour operators aren’t necessarily British. In the short term, the charter airlines’ delusions of competing with “low cost” carriers - or, more laughably, with scheduled airline operations - are not where their strengths lie. The business models of “low cost” and charter airlines are markedly different and it will only be a matter of time before the charter carriers and their parent companies realise the truth in this, and revert to their core business, which is providing holidaymakers with week or fortnight-long holiday flights. We started by saying that the tour operators’ products were perhaps now rather stale. A whole generation - nearly two - has grown up with the idea that you can have a fortnight on the Med for not much more than staying at home...the package holiday is now an entrenched consumer good, albeit now in a new wrapping. Whilst the tour operators experiment with ‘deconstructing’ their products - airline meals, transfers, representatives’ services, even accommodation are all becoming optional extras rather than components of their inclusive products, these holidays are still sold in very large volumes despite the highly competitive offerings now available. There are perhaps two possible explanations for this - either the British travelling public at large is still not ready to venture abroad independently, or the package holiday is still, after all these years, surprisingly good value. What do you think? CAA, ATOL and No Frills (issue 56A, June 2004) The UK Civil Aviation Authority (CAA) recently outlined plans to extend the “Air Travel Organisers’ Licensing” (ATOL) scheme, to cover advance payments for direct bookings to airlines, whether booked as part of a package tour or not. The CAA based this decision on the increasing number of un-bonded air holidays being sold, as holidaymakers make up their own packages, buying the components directly, often including seats booked on “no-frills” airlines. UK consumer credit legislation only protects purchases of over £100, ruling out protection for many seat-only deals. The inference seems to be that when booking on low fare airlines, you are more at risk in making your own arrangements without the protection of a financial bond. But the issue has been made more urgent by the recent failure of UK regional airline “duo”, with hundreds of passengers stranded abroad and others with advance bookings left without recourse. The “no frills” airlines claim that the new measure is discriminatory – a charge of say £5 per passenger applied to their fares will be much more visible than the same figure applied to tickets on “full service” airlines. The latters’ response, typified by BA, was that the CAA were trying to fix a problem that wasn’t there. (That was before duo’s collapse.) As well as the question of how this arrangement is to be funded and what the cost will be, the proposals also seem to be missing answers to questions of scope. The CAA’s proposed new scheme would apply where “the sale is made in the UK and the outbound flight originated in the UK”. With many sales made over the internet, it will be interesting to see how the first of these criteria can be decided upon. Would duo’s foreign-based internet customers have enjoyed protection if this new CAA scheme had been in place in time? We recently saw the failure of two of Europe’s longest-established, state-run, full service airlines – Sabena and Swissair. Would the CAA’s extended ATOL have protected UK customers who had booked seats on these full service but foreign airlines? Furthermore, as we can see with RyanAir’s operations from UK airports, any EU based airline can nowadays operate flights from any EU country. Would sales on UK-originating flights on this Irish airline also be covered by the new scheme? Two cheers,
then, for the CAA. They seem to be taking a more active stance and offering
protection where it is increasingly needed. But, aside from the cost,
detailed questions of scope remain to be resolved with this proposal. |