How I See The World Changing, and what it means to the travel business.

 

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

How I See The World Changing, and what it means to the travel business.

Forget Big Data. There are three Big Things that will change the world. And 4th, the beneficiary, among others, could be the travel business – although there is unfortunately a big caveat, see below.

 

Big Thing 1. Additive manufacturing/3D Printing. Means that steadily factories will no longer be needed. We will print nearly everything at home on our printer – even our home and even our printer!

 

Big Thing 2. Home farms. We will be able to grow food, via solar-powered LEDs, indoors. Initially, that might need big places, such as abandoned factories (BT 1), but eventually plant turnaround-time will be fast enough that a room, or ex-garage, will be enough for each of us to grow most of what we need. End of farms (but we might need farms for animals for a short time longer).

 

Big Thing 3. MOOCs, massive open online courses. End of universities, yes even Cambridge, Harvard, Oxford, although that might take 20 years and they may stay in some reduced form.

 

One Big Beneficiary – the travel business!

 

Because all those out-of-work factory workers, farmers, professors, will need to do something. So they will go out – even if it is only within 100km.

 

What I have not yet decided is whether that finished economic activity will also cause business travel to collapse. Why fly to China to sign a new shoe-manufacturing contract if people are printing their shoes at home?

 

Broadly, business travel is 30% of all travel. Knock that down to 5%? With international arrivals currently at 1bn, that would mean 750mn. I reckon all that new leisure travel would initially produce only 50mn more international arrivals (but more domestic).

 

That’s 800mn, a 20% loss. Quite hard for many in the business because even if business travel is only 30% of arrivals, it might be closer to 50% of revenue. However (yes, this goes on and on), it costs more to ‘service’ a business traveller, so back to 40% of profits?

 

OK, that’s enough of fiddling figures for one day………

 

 

The Fox

Remember, I’ll be famous after I’m dead.

 

Etihad; another Swissair?

 

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Etihad; another Swissair?

Is Abu Dhabi-based Etihad Airways heading the Swiss way?

 

Management at the now-defunct Swissair presumed that because they ran their airline so well, they could obviously run other airlines in the same way. So they bought a few underperforming airlines, but could not change them enough, and they caused the airline group to collapse. That was 2001.

 

(Etihad’s rival Dubai-based Emirates tried it once also, with Sri Lankan Airlines, and retired hurt in 2008 after 10 years of fruitless investment.)

 

Etihad has just announced plans to buy 49% of Alitalia (once 25% owned by Air France, whose shareholding was cut to 7% after deciding not to participate in a recapitalisation – for the simple reason that it has no money, and certainly not to throw after a loser).

 

Etihad likes losers. That might be good business if it could turn its motley collection of airlines around. As Swissair found, that is easier planned than done – although there are some signs of improvement, see below.

 

But because not all report traffic data, or not on a timely basis, it is difficult to be sure. Of its airlines:

 

-Aer Lingus, Ireland; 3% owned. Seat sales currently +2%; in 2013 they were -1%.

–Air Berlin 29%. Flat; -5%.

-Air Serbia (was JAT); 49%. +66%; no earlier data.

-Air Seychelles 40%. Growing well in 2013, +44%; still strong this year, but slower, +38%.

-Alitalia, 49%. Has stopped reporting over the past 2/3 years. Started again at start of this year (traffic was falling, about -1%), but has now stopped again. The last full-year figures we have, for 2011, showed +6% – although its seat-sales total was still below what it was selling in 2005. Etihad may be more active about getting traffic growth than AF has been.

-Etihad Regional, Switzerland (was Darwin [sic]), 33%. No data, but known to be ‘troubled’ before Etihad helped out.

-Jet Airways, India; 24%. +4%; -2%.

-Virgin Australia 21%. +5%; flat.

 

Etihad’s head, James Hogan, an Australian, has never explained a clear strategy behind this – apart from obvious first-stage interline links, although not all of these make sense for market, traffic, or geographical reasons.

 

At present, then, there is a danger that the operating executives of the Etihad group will see the parent as a convenient cash machine backed by the enormously-wealthy Abu Dhabi. And Etihad/Hogan will be slow to cut back or get out when it is clear that their strategy is not producing profits.

 

 

The Fox

Remember, I’ll be famous after I’m dead.

 

Far East Hospitality, Resorts World, others.

 

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Far East Hospitality, Resorts World, others.

News Briefs:

 

—PhoCusWright estimates the total Asia Pacific travel business will increase 7.7% annually over 2012-5 to reach US$407bn.

 

 

—Dubai-based Emirates expects to sell 70mn seats in 2020; it is now selling about 40mn annually.

 

It says this will make it the world’s largest airline in international seat sales. In fact, Ryanair already counts 80mn – but Emirates management might think Ryanair is a UK airline, so not have counted its UK routes. Ryanair is Irish.

 

 

—Far East Hospitality.

-Travelodge – which was once a big brand in Australasia (and still is in the UK, although ownership there is different) – has licensed use of its brand to Toga, which FEH partly owns. It has also said it is ready to discuss expansion into Asia with FEH/Toga.

-There is expected to be a change in the overall corporate name Far East Hospitality this year. We expect it will be one of its current brands, Rendezvous or Travelodge, although we think it should be a new one.

-Plans to introduce a loyalty program, possibly this year.

 

 

—GBTA (Global Business Travel Association) has updated its forecast on China’s spend on business travel (BT), expecting it to overtake the US to become the leading BT market by 2017. Its 14% annual average growth rate 2012-7 would take it to US$375bn.

Fast China growth is expected, but GBTA also expects India’s BT to grow almost as fast (13% annual average growth rate to 2017) – despite the current sluggishness in that market.

 

 

—No-frills-airlines:

-Air Asia X says North Asia will represent 50% of its business by 2014.

-To get around 7th freedom restrictions in Asean, AA has applied to fly Kuala Lumpur-Singapore-Yangon, with traffic rights allowed on the KUL-SIN and SIN-RGN sectors. Others might do that.

 

 

—Resorts World in Singapore gets 4mn annual visitors (mainly overseas visitors) through its Universal Studios (US) attraction and 2.5mn through its aquarium and water park (mainly local).

60% of revenue is through ticket sales. But it gets more ancillary revenue from visitors to the aquarium that from visitors to US. For example, when it has a higher Indonesian share, average revenue from food goes up from US$4 to US$5 per person.

 

 

—The Singapore Cruise Centre says that over the past two years, the number of cruise passengers from China has grown and is now about 40% of Asia Pacific’s total.

 

Excerpts from our monthly Travel Business Analyst newsletter.

 

 

 

The Fox

Remember, I’ll be famous after I’m dead.

 

Dream On: Air Malta; Dreamjet.

 

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Dream On: Air Malta; Dreamjet.

My list is long – of telling airlines what they need to do to be successful. (Note I did not say this is a success list, although I have got a lot right – see About Us on the Travel Business Analyst website, www.travelbusinessanalyst.com.)

 

Onward then, and upward.

 

Air Malta.

At the risk of making a Maltese cross, I will add my observations and advice on what Air Malta needs to do. As a small airline, surrounded by no-frills-airlines in the free-access European Union, it is hard to make profits.

-One strategy could be for Air Malta to link up with a bigger airline. The disadvantage is that the bigger partner would likely decide many of the operational patterns.

-Another is for Air Malta to become a no-frills-airline, such as Aer Lingus. Not the hybrid way – Air Berlin.

-Another option is to become like a mini-Emirates. Just as Dubai is an inter-regional hub, so then Malta could become an intra-regional hub. So flights Lyon-Cairo, Manchester-Tripoli, Barcelona-Amman, Dusseldorf-Marrakech. All via Malta on Air Malta. Start slowly and build up.

 

 

Dreamjet.

France-based Dreamjet has applied for approval to launch all-business class B757-200 flights Paris-New York Newark this month. Backers include a founder of L’Avion (sic), which was sold to British Airways and merged into BA’s own start-up Open Skies (sic).

 

LA was never a success, and OS is still a failure.

 

We cannot see Dreamjet succeeding either. Even its launch date is wrong. Business-class traffic falls off in July and almost vanishes in August, particularly on the Atlantic. A start-up in June would run straight into the low season. That’s three months of big losses; not a smart way to plan a business.

 

 

 

The Fox

Remember, I’ll be famous after I’m dead.

 

Trottings: Malta.

 

TROTTINGS = Trip Jottings

The Fox Trots: Travel Stories from The Fox.

 

Trottings: Malta.

Air.

I guess it had to happen – Air Malta, an airline that does not serve coffee or any hot drink on a flight at least one hour long; this one was 90 minutes, from Marseille. I told the crew this was my first such experience. They then said they could serve me coffee if I would accept it in a ‘crew cup’ – polystyrene instead of plastic.

 

The point is, if they have hot drinks available, why not serve them?

 

Seat factors on my flights were 70-80%. Not enough at the low fares that competitor Ryanair is forcing AM to offer.

 

Homestay.

I found an impressive, delightful B&B, www.selmunettmalta.com in Malta. It is almost a dis-service to call this B&B. It is a stylishly-furnished residential annexe in the grounds of an impressive villa, with a homely welcome from a charming host.

 

Only two rooms on offer, and rates reasonable (around €105/night even in peak-season August, for double, at least 4 nights).

 

Hosts are Maria and Roger Strickland.

 

 

Treasure.

A different way to discover Malta, through a treasure hunt guidebook (Malta Treasure Hunts), www.maltatreasurehunts.com, produced by my friend Terence Mirabelli.

 

By default, the book shows the surprising range of culture – best described as ‘Mediterranean’ as it covers so much – for such a small place. Good book, nice place.

 

 

 

The Fox

Remember, I’ll be famous after I’m dead.

 

Air Nostrum, VoB, Qantas.

 

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Air Nostrum, VoB, Qantas.

Air Nostrum; the future was good.

Seabury, a consultancy, has congratulated Air Nostrum on its successful turnaround to profitability. Well, not quite – “successful implementation of the financial and operational turnaround strategy”.

 

The aim is for breakeven this year and profits in 2015. I would have thought it best to wait until the turnaround happens. Is Seabury worried AN might not be around to celebrate?

 

I should add my advice. AN, a regional airline in Spain operating some flights for Iberia. Either AN becomes a division of Iberia (now unlikely because Iberia’s owner, IAG (with British) has recently bought Vueling – which is a regional airline in Spain operating some flights for Iberia.

 

Sorry, but if Seabury did not propose that, then it should have proposed a shutdown. AN will not get a profit until Spain/Europe returns to strong economic growth, which probably means at least five years. AN might as well shut down – but pay me consultancy fees for giving good advice before.

 

I also hope Seabury proposed a name change. I had always assumed Air Nostrum was a treatment for blocked noses.

 

 

VoB; my idea.

Indonesia’s DMO is now using trade-term I coined – VoB, for Visa-on-Board, to fit with VoA, visa-on-arrival. The VoB service has been available on Garuda flights to Indonesia from Australia and Japan, and has now been started on flights from Shanghai.

 

 

Qantas; more trouble.

Some sets of figures indicate not all is going well at Qantas. YTD seat sales at the group are just ahead – 0.5%. But on international services of Jetstar (from Australia) they were down 9% (and -16% in April!).

 

Recap. What I call Jetstar International was, to me, the way forward for all bigger airline groups – British, Lufthansa, Singapore, etc. (But possibly not for US airlines, and the Gulf trio – Emirates, Etihad, Qatar – where markets are currently different.)

 

The idea is that, for the Qantas group, Qantas would be the FSA*, Jetstar International the LCA*, and the other Jetstars (domestic, Asia, Japan, etc) would be NFAs*.

 

In my businessplan, JI would have a different name, not Jetstar – partly because it does not offer the same service standards as the NFA Jetstars.

 

Where the Qantas FSA cannot afford to operate routes or an extra flight on an existing route (for whatever reasons, including, of course, a market that did not want to pay Qantas FSA fares), then lower-cost JI would do it for the group.

 

At the Singapore Airlines Group, for example, its FSA is Singapore Airlines, its LCA should be Silk Air, its NFA Tiger. Unfortunately, for SAG, it has not made Silk an LCA but an FSA in disguise. This structure will fail.

 

But back to Qantas.

 

The group is not, as far as I can determine, following my plan. If it was, JI seat sales would be growing strongly (Qantas’s international routes might be falling, but that might be a profitable happening).

 

When will Qantas owners see that things are not going to get better? I think that before 2014 is out, CEO Alan Joyce will be out, or his outing will be announced. After all, he did come to head the group through the NFA Jetstar. I always thought that was a poor learning curve to run the big Qantas group. Will I be proved right?

 

-*FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

-*LCA = low-cost-airline. (Not a no-frills-airline; see next.) An FSA but with lower operating costs (cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for instance), fewer fare types, which may have first and business cabins, and which allows bookings through travel agencies etc. Usually similar to the parent airline, but a different name, and competition against parent airline allowed.)

-*NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: market freedom in terms of routes and aircraft choice; single aircraft type; where relevant, competition against parent airline allowed; fares that are extremely low when booked at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no service frills; single economy-class cabin; no seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

The Fox

Remember, I’ll be famous after I’m dead.