Travel. The world changed this week.

FOXTROTS

 

 

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning. 

Foxtrots – leading the industry in a dance.

 

 

2008 July 05

Travel. The world changed this week.

Two significant matters happened this past week.

 

1. The fuel surcharge on a Europe-Australia flight has just about reached US$1000.

2. Charter flights China-Taiwan started this weekend.

 

Europe-Australia

This level of fuel surcharge does not affect traffic on just these routes, of course. Other longhaul routes will be affected – and longhaul more than shorthaul because the amount of the fuel charge is so much larger.

 

But firstly Europe-Australia.

 

That fuel surcharge will weaken discretionary travel over those routes. A visible number of would-be travellers will surely say that “we do not need to go now; let’s wait and see if the surcharge falls”. Imagine what that will do to the travel destinations that get many of their visitors from longhaul markets.

 

The marginal destinations (Fiji, Tahiti) may be decimated. But seriously threatened also will be Australia and New Zealand.

 

Both Australia and New Zealand get around 35% of their visitors from longhaul markets. On the assumption that one-third of that is discretionary, it seems reasonable to say that those destinations will lose 10% of their visitors over the next 12 months – if there is no change in those other macro factors.

 

Some will be diverted from markets closer – so the traveller from Singapore will not go to Europe this year because the fuel surcharge is so high, but will consider Australasia.

 

And some will just sit at home.

 

The World Tourism Organisation says early 2008 figures show a 5% increase, 1% above longterm trend. That seems hard to believe (although I am not questioning the data, just wondering if there are any qualifications to that raw figure), but as the year goes on, surely that will fall?

 

For Australasia, I reckon a 5% fall this year because the slowdown will take some time to kick in.

 

Apart from the destinations, think what this will do to the airlines themselves. Even with such a chunky fuel surcharge, they are still struggling. Qantas takes delivery next month of its first A380. That looks like it is just the wrong time, but actually, it may help save the airline. Even if the original plan was to augment frequencies, this may (should?) change, and Qantas should replace two B747 flights with one A380.

 

There is another threat, to those in-the-middle airlines like Emirates, Etihad, and Qatar. Their businessplan was based on attracting longhaul travellers. If that market segment is under threat, then surely the potential of those airlines must fall?

 

Etihad has just reported 41% growth in first-half seat sales, so it seems all is well there. But watch that space.

 

(China-Taiwan comments after the weekend.)

 

The Fox