British Airways’ Open Skies. ‘People are getting paid to do this…’

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FOXTROTS

 

 

 

 

 

 

 

 

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

Foxtrots – leading the industry in a dance.

 

 

2008 June 21

British Airways’ Open Skies. ‘People are getting paid to do this…’

 

 

 

 

 

 

I am still respectful of authority, despite all the growing and continuing evidence against it.

 

 

 

 

 

 

 

So with the airline Open Skies, sic (I am obliged to add the ‘sic’ because surely no-one would name an airline so?). I assumed that British Airways, of which OS is a subsidiary, knew what it was doing. But when I started to think (admittedly, not a frequent occurrence), I noted:

 

 

 

 

 

 

-BA has started two other airlines in recent years, DBA and Go. After floundering, both were sold for a song (well, €1, which might be worth a bit less).

 

 

 

 

 

 

-OS is part-starting its flights (Paris-New York) by contracting flights to another airline, L’Avion (sic). Who starts a new airline with flights operated by another airline?

 

 

 

 

 

 

-L’Avion? Eh? My French is good enough to translate this as The Aircraft? Does that sound like a good name for an airline? However, I suppose there is at least that link with Open Skies (sic), which also doesn’t sound like an airline.

 

 

 

 

 

 

-And they are in good company; well, were. Eos went bust a short time ago. I thought Eos was a new Greek wine and was determined to try it. I now understand it was an airline…pity, because it is a good name for a wine.

 

 

 

 

 

 

 

Back to Open Skies, sic. I have now learned about OS’s cabin configuration – three classes, with only 82 seats, in a B757.

 

 

 

 

 

 

 

At the top will be ‘Biz’ (sic; that word again), presumably because BA thinks ‘Biz’ is hip; ah well.

 

 

 

 

 

 

 

Then there is ‘Prem+’ (sic; sorry). Wait a minute…I presume Prem is a (hip?) abbreviation for ‘Premium’…but my thesaurus puts ‘premium’ as ‘top’, ‘finest’, ‘first class’. But people at BA – who are getting paid to do this – have decided that it is time for a change. And so Premium gets knocked down a rung. So shouldn’t it be ‘Prem-’ rather than ‘Prem+’?

 

 

 

 

 

 

 

After Prem (sic; which, remember, is after Biz, sic) is economy class. No ‘sic’ needed, surprisingly, because the OS economy class is called ‘economy’. Surely that’s a trick? Not ‘Eco’ – too green? Not ‘Cat’ – for cattle? I suggest ‘Simple’, no, ‘Plain’ – which might at least leave a hint that Open Skies, sic, and L’Avion, sic, are airlines…

 

 

The Fox

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Football. Loser is winner?

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FOXTROTS

 

 

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

Foxtrots – leading the industry in a dance.

 

 

2008 June 17

Football. Loser is winner?

One apparently-serious study estimated there would be one million additional visitors in Switzerland this year, for the Euro-2008 (E8), a Europe-wide soccer competition. I think this is hugely wrong – by at least 500k visitors, if not 750k.

 

But it leads me to make a number of observations.

[] I have a semi-serious theory – which I’ve named Big Event Blues – suggesting that momentous international events actually reduce visitor arrival totals. Although these big events may attract international visitors, many ‘normal’ travellers (such as business travellers and even holidaymakers) will stay away from that destination just before, during, and just after the event. They assume that there will be too much disruption to normal movement in the destination. In general, they are right – not only is movement curtailed, but many prices are higher.

[] Based on above, how many ‘non-soccer visitors’ did not visit during this period? Switzerland counts around 8mn arrivals at hotels-and-similar in a year, which averages 22,000 daily, certainly more at this time of the year, the start of the peak summer season, so about 500,000 for the period of E8. We estimate 4% did not visit, so 20,000.

[] How many of those 20,000 would travel somewhere else this year rather than Switzerland (so a visitor lost to Switzerland), and how many merely postpone their trip until E8 is over? This has got to be a guess, but 10% of those, so 2000?

[] Note then, those 2000 would probably be a gain for other destinations. In other words, as a reward for not hosting E8, other destinations receive 2000 visitors.

[] Another factor is increased outbound travel by local residents. Understandably fearful of the damage soccer supporters usually do in host locations, as well as other general disruption, some residents might choose this time to leave town. Again then, that would be growth for other destinations for not hosting E8. I cannot reasonably think how many, but just to produce a figure for argument’s sake, 2000?

[] Plus, soccer competitions are risky ventures for host countries/cities – extra police, damage, violence, court cases, and so on. I have also added here the travel business element – they are not much good for that either.

 

Which begs the question, why do destinations bid to host this and similar (soccer) events? Surely the winners are the destinations that do not host the events?

[] Which all moves me to something outside my expertise – the soccer game itself. I have seen a few games, and I have some observations:

-The start of soccer ‘hooliganism’ starts on the pitch. In every match there is at least one case of apparently-unprovoked violence – elbow in the head, fist in the back, boot on the knee, and so on.

-It seems that every encounter (but let’s be generous and say 25%) is a foul to some degree – pushing, pulling, jostling. I do realise this is a game of encounters, but I am talking about one player trying to prevent the other player from doing his ‘job’, but in a foul manner.

-Again, it seems in most encounters, the skill required when you lose the ball to your opponent, is to fall on the ground clutching one part of your body, screaming, and asking for the referee to punish the ‘winner’ of the encounter. This is obviously better if you have been fouled (with above-mentioned elbow etc) as it adds legitimacy to your claim.

-I spend most of my time wondering whether it was really a foul, whether he is really hurt, rather than watching the game.

-Then the supporters (whose stamina to whistle nonstop during the 90 minutes of the game is impressive) go and do the same in the host town. Why are they called hooligans and the players are heroes?

-Yet these soccer games are so popular around the world. Why?

 

The Fox

Playing politics. New York visitor targets.

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FOXTROTS

 

 

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

Foxtrots – leading the industry in a dance.

 

 

2008 June 06

 

Playing politics. New York visitor targets.

 

Last year NYC & Company (the official marketing and tourism organisation for New York City) announced that Michael Bloomberg, mayor of the city, wanted to attract 50mn total visitors annually by 2015.

 

At that time, I reported that this would require what seemed an easy-to-achieve annual average growth of 1.4%. In other words NYCC and/or Bloomberg were assuming the public was rather dumb when it comes to mathematics.

 

But now it seems that NYCC or someone else has done the maths as well, because it has issued a new announcement saying Bloomberg is “accelerating” his target. And the city now plans to reach 15mn visitors in 2012. It says arrivals have been better than anticipated – 47mn in 2007, which would have meant a 7% increase.

 

Well, if NYCC is very poor in maths, someone seems good at playing politics with the figures. Because even this new target requires an average annual growth of only 1.2%.

 

Surely this is not a lead-in for a later announcement that NYCC, Bloomberg, and everyone, is doing such a wonderful job that the target has been brought forward yet again?

 

So I think I will spoil the fun and say that if New York does not count 50mn visitors this year, B & NYCC are doing a bad job.

 

The Fox

Alitalia. Down 26%!

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FOXTROTS

 

 

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

Foxtrots – leading the industry in a dance.

 

 

2008 June 05

 

Alitalia. Down 26%!

 

I assumed Alitalia would start to lose customers after unions stopped its planned purchase by Air France-KLM. It is simple really. Even if you like the airline, if there is a reasonable alternative (price, schedule, etc), many would take it.

 

This was because unions and some staff were acting as though passengers were privileged to fly with them. And not that staff were privileged to have passengers fly with them.

 

So there have been frequent little strikes, more flights delayed than usual, and the staff were no longer happy to serve their customers.

 

Management no longer runs the airline. That has been left to the unions and staff. And they are not doing a good job.

 

Passengers have voted with their bums. January seats filled fell 6%, February 7%, and March 12%. But I was not quite ready for the shock with April data – a decline of 26%!

 

On that basis, not only is Iberia bigger (Air France, British Airways, and Lufthansa have always been bigger), but KLM and SAS overtook Alitalia in the past two years.

 

And now has Turkish. More; on current statistical trends, little Swiss will be bigger than the airline of its mighty Italian neighbour before this year is out!

 

In normal circumstances, Alitalia would be shut down in the next few days. It will not have enough cash to buy fuel for its planes, food for its passengers, salaries for its staff, and so on. Most suppliers of goods and services will demand cash from Alitalia, and it will not have the money to pay. And so there will be a continuing downward spiral.

 

The unions do not care. The staff do not seem to be bothered either. Presumably both believe that in the end, the government will bail them out.

 

And it probably will, even if it ‘cannot’ under competition rules of the European Union. The government will evoke emergency measures, and fund the continuing operation. In the meantime, it will help a buyer foolish enough to still want to buy Alitalia – either with money or with some sort of support agreement. Again, the fact that this would be illegal under EU rules will not matter.

 

But what happens then? The unions will not get nicer or become more sensible. They will assume that the state has backed their blocking actions once, and so can be counted on to do the same in the future.

 

Meanwhile, passengers will probably continue to stay away, ergo traffic will continue to fall. Until it reaches a core level – half its size in 2007? After that, it can start to build again.

 

I cannot see the government ‘doing-a-sabena’ and letting it shut down.

 

The Fox

Emirates’ hotel operation. Misguided.

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FOXTROTS

 

 

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

Foxtrots – leading the industry in a dance.

 

 

2008 June 03

Emirates’ hotel operation. Misguided.

There are a few hotel companies in the United Arab Emirates that use the ‘Emirates’ name in some way. One is Emirates International, which owns part of the Versace hotel in Australia and the one being built in Dubai.

 

But the one to watch is the hotel subsidiary of Dubai’s Emirates airline – Emirates Hotels & Resorts (EH&R). However, unlike the widely-admired airline, EH&R has a muddled business, muddled business plan, muddled marketing, and muddled operations.

 

In its home-base Dubai, for instance, EH&R operates the 400-room Harbour hotel, a block of serviced apartments, and a top-end resort. The resort is part of what it now calls Sanctuary Resorts. Confusion already; is EH&R just the owning company, then, and the sort-of brand name for some of its hotels ‘Sanctuary’. But ‘Sanctuary’ is not used as a brand name, so should we think of it as a business description?

 

The resort division comprises just that Al Maha resort in Dubai, which opened in 1999. If the airline opens a few new routes each year, and now has about 80, no other resorts have opened in the intervening near-10 years, although some are being built.

 

Running the resort division is Tony Williams, whose previous experience was with a luxury safari resort in Botswana. Long an admirer of Aman Resorts, that is the level he targets for the EH&R resorts. (Coincidentally, when Adrian Zecha was separated from Aman Resorts, the name he used for its substitute company was Maha Resorts.)

 

Two other resort locations have been identified. The second Sanctuary resort, in Australia, is already a few years late. Some documentation says it is due to open this year, although some now note 2009. The other is a newly-announced property in the Seychelles.

 

The Australia resort is in Wolgan Valley, New South Wales, 2-hours’ drive northwest of Sydney near Lithgow. Plans show 40 units, developed on only 1% of the land (some reports say 2%). Other reports say because the area is a valley, the conservation efforts will actually be protecting around 40,000ha. And also that it has about 4000ha of land (some reports say 2000ha).

 

The resort needs that large area of land for livestock conservation. EH&R plans to introduce animals into the area. Although ironically it is first killing some of the wild animals already there – so that the new ones can survive.

 

One example of bad marketing is that in most literature, EH&R does not say where Wolgan Valley is (ie, no mention of New South Wales or Sydney), apart from saying that the valley is in the Great Dividing Range and has views of the Blue Mountains. More than a few potential guests might need more guidance. I, for instance, did not know, but I had an idea and so knew how to start my search; many others will find it harder to get to that starting point.

 

A company that is well-known with an established client list – such as Aman and Banyan – might get away with this, although that is not a given, but not a new company.

 

EH&R’s Seychelles project is a different concept from Dubai and Australia, and more like a standard coastline resort. It will comprise a 270-room hotel, plus 40 villas and 15 overwater bungalows. The Cap Ternay Resort, due to open in 2010, is on its own island in 45ha of protected nature reserve, with 400m of private beach.

 

Conservation (‘sanctuary’) here will be related to marine life – a new expertise for Williams and EH&R. And will guests at Wolgan be potential guests for the Seychelles hotel? Probably not.

 

Williams says EH&R is looking for other projects, but that expansion is an airline-lead strategy. That is hard to follow. You need to look hard to find a link between the airline’s customer needs and EH&R – apart from that city hotel in Dubai and perhaps Seychelles starting 2010.

 

If I was developing hotels for the Emirates airline, it would seem to make more sense to add city hotels – in London, New York, and Sydney for a start. But Wolgan Valley?

 

It is therefore difficult to imagine a growth pattern for this accommodation division of an airline with a far-flung route network.

 

Finally, the airline is proud of its profits record. But its EH&R division must be a heavy financial burden. EH&R says the 40-unit Al Maha will pay itself back after 12 years, which would mean 2011. Williams says Wolgan Valley payback will be shorter. That looks hard. 40 rooms, at 80% occupancy, might bring in US$12mn revenue per year. But development costs must be high, and Williams says EH&R’s investment in hotels is almost US$1bn.

 

The Fox