Destination Singapore; what’s wrong?

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Destination Singapore; what’s wrong?

An excerpt from our monthly Travel Business Analyst newsletter.

 

Singapore’s DMO, the Singapore Tourism Board, appears to be like those politicians in power – denying what is obvious to almost everyone else. The danger is that until there is recognition that something is wrong, less will be done to try to correct it.

 

That visitor arrivals in 2015 grew only 0.9% is bad enough, but visitor spend fell more, 6.8%. We extrapolate those, to find that spend-per-visitor fell 7.6% to US$1072 (at US$1 to S$1.35), but because length-of-stay fell 2.4%, spend PVPD (per-visitor-per-day) fell less, by 5.3% to US$297.

 

The DMO notes that leisure arrivals grew 2%, “attesting to Singapore’s on-going appeal as a vibrant leisure destination”.

 A 2% growth does that? We estimate AsPac’s total outbound travel grew 9% in 2015, so Singapore’s +2% might indicate to us that ‘Singapore’s appeal as a leisure destination fades’.

 

Also like politicians, the DMO ignores what it does not like, or cannot explain. For instance, the DMO was proud of the US$15mn it spent on promoting Singapore’s celebration of 50 years as an independent country in 2015.

 

As we noted at the time: ‘National pride has resulted in marketers thinking there is a sizeable number of non-Singaporeans that want to celebrate Singapore’s birthday by visiting it.’ Judging by the 2015 visitor numbers, we were right. And the fact that the DMO says nothing supports that sentiment.

 

(Unfortunately, we need to add that our comments are related to the travel business implications of Singapore’s birthday, and not to the actual celebration which, of course, was wholly justified.)

 

The question, then, is what is not working?

 

For us, Singapore has: a big recent growth in (good) new visitor products (including one, the Marina Bay Sands, that we put in the motivational-iconic category alongside Angkor Wat, Shwedagon Pagoda, etc); acceptable stability in exchange rates; no serious visitor-threatening negative incidents; sizeable government support for destination promotion and for those companies involved in visitor promotion; a near-world-No1 local airline; a surfeit of no-frills-airlines based in town; the world’s best airport; and reasonable visitor product prices.

 

We see a number of problems to solve, and we hope the DMO does as well. Most obvious, and shocking, is that three of the top-5 market sources fell in 2015 – Indonesia, Malaysia, Australia. Interestingly, the DMO does not break out market differences in visitor spend, and so it is not easy to determine if there are some markets that need more attention than others.

 

Additional comments:

-AAGR (annual average growth rate). This decade, AAGR has been almost 5%, well above 2015 growth. And thus for most of our selected markets, AAGR is above 2015 results – not a good sign. Above in 2015 compared with AAGR were China, Germany, India, Korea, UK, US.

 

-Share. China has doubled its share since 2000, which is the reason AsPac’s share has grown, thus pushing Americas down from 6% to 4%, and Europe from 15% to 11%. But before dismissing those non-AsPac markets, note that all four in our list grew faster in 2015 than their AAGR.

 

-Singapore-v-TotalMarket. Japan still bad, and that fall was slightly worse than the overall Japan outbound total, -4.1%. But the 22% growth for China was better – we estimate total China outbound was around +18%. For Korea, the STB needs to work harder – total outbound Korea was +20%. Likewise for India – we estimate total India outbound was +13% – and for the US +7%. (We do not have outbound travel data or estimates for all markets shown.)

 

 

 

The Fox

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

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Alitalia to buy into Air Malta?

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

WYSK – What You Should Know.

Alitalia to buy into Air Malta?

An excerpt from our monthly Travel Business Analyst newsletter.

 

-Alitalia (AL) and Air Malta (AM) have signed an agreement where AL may buy 49% of AM. (Apparently; no photos, no date, no place, no announced signatories.)

-51% of AL is owned by CAI. Biggest shareholders in CAI-ergo-AL are Intesa Sanpaolo, a bank, 21%; Poste Italiane 19%; Uni Credit, a (troubled) bank 13%. Other notables: Benetton 7%; Pirelli (now China owned) 3%. Air France-KLM bought 25% but after staying out of various capital injections for AL, their share is now down to 7%. The other 49% is owned by Abu Dhabi’s state-owned airline, Etihad. Almost 100% of AM is owned by the Malta state.

Some comments:

 

Enthusiasm.

-Usually, when an announcement is made about one company buying another, if friendly, all involved are full of praise for everything. New head of AL, Cramer Ball, seemed a bit churlish saying, in effect, ‘we will look at the books and then decide if we will go ahead’. Does this mean that the buying announcement came sooner than expected (was it about to be leaked?), or does AL need to think about the reaction of the European Commission, or something else?

 

-AM’s statement, via the state’s minister (of ‘tourism’) responsible for AM was similarly downbeat. Both AL and AM have been losing money for a long time, but both say they will make profits in 2017; there are no clear indications that this will happen.

 

 

Efficiency.

Malta said there would be no job losses at AM. Ok, he didn’t put a time on it (so they could fire people in 2017), but that is one of the major problems at AM – too many staff and too many on easy terms/too-high pay. The same problem, ironically, as at AL. As we once said about AL, if the CEO cannot fire half the staff, and re-motivate those left (or maybe fire 100% and rehire 50%?), then it will be hard to ever make consistent profits. (To make short-term profits in most companies is easy.)

 

 

European Commission.

We see no problem with this. However, Italy has run rings around the EC on state bailouts for AL, so the EC may be awkward. There is a precedent of the EC being awkward. It once stopped Ryanair buying Aer Lingus because it said Ireland needs competing airlines. It ignored the fact that in the European Union, there is competition everywhere.

 

 

Help.

-How can AL help AM? And/or what does AL bring? We are lost. We can see no advantage to AM. Malta’s minister talks of linking into the networks of AL and Etihad. That is good for whom – Malta residents travelling out? Visitors? There are already so many options for travellers at good prices. And particularly as far as Etihad is concerned; it has a vibrant local (Gulf) competitor in Emirates, which is 3-times its size.

 

-What does AM bring to AL? Not much. AM is not a profitable airline (and its business prospects are threatened-maybe-destroyed by no-frills-airlines such as Easyjet, Ryanair, Vueling moving onto AM’s routes, and more). Traffic feed? Surely AM’s home market is too small? Connections? But to where – AM does not have an extensive network, and nothing on Malta’s geographical position as a point on the way to North Africa , although at present this is a moribund area for air traffic development.

 

 

Money

-Buying price; we believe AM might be worth US$500mn, so US$250mn for 50%. Coincidentally, that is close to the amount that AL lost in 2015.

 

-Where would the money coming from? AL and AM are both losing money. Alitalia says it will return to profitability in 2017. Good luck; not only is a target and therefore not a certainty, but it will not be easy in any case.

 

 

Etihad

-Okay, this is where the actual cash will come from* (ie from the gullible ruler of Abu Dhabi, Etihad’s owner). But why does it want AM? Again, we can see no strong positive, although the same could be said about Etihad’s other investments in Europe, in Air Serbia, Darwin (from Switzerland, despite that name) and, before, Aer Lingus.

 

-Would AM be turned into an Etihad Regional airline? If that is the case , will AM turn into a feeder airline for EU routes with bases outside Malta? That cannot be done with Air Serbia, which is non-EU. It could with Darwin, but Switzerland has proposed some law changes that could end unrestricted flights Switzerland-EU.

 

 

*Etihad owns 49% of AL (a share limited to under-50% to ensure that it does not run into problems with the European Commission; 50% and more would mean Alitalia is not a European Union airline). And AL would own 49% of AM. It could take a bigger share , near 100%, and AM would still not lose its EU status.

 

 

 

The Fox

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

 

Shouting some shocks: Virgin, Fly Be, Wizz.

FOX ON FRIDAY

 

WYSK – What You Should Know.

Shouting some shocks: Virgin, Fly Be, Wizz.

An excerpt from our monthly Travel Business Analyst newsletter.

 

Virgin on trouble

It wasn’t supposed to be like this.

 

Figures I have seen on Virgin Atlantic (the airline does not publish them) indicate all is not going well. OK, they are bad.

 

For all-year 2015 I have a 3% fall in seat sales to 5.8mn following a particularly-bad December – -14%.

 

But this year has started worse. I have Q1 seat sales at -7%. The 1.1mn total that represents compares with 1.2mn sold in 2015, and the peak of 1.3mn in 2014 – which was a 4% growth on 2013.

 

I am not saying VA is not long for this world. (Ed: that’s an improvement as you said they would collapse within two years after they were established – 30 years ago.)

 

But will owners Branson and Delta clash? Branson was able to deal easily with his previous supporter, Singapore Airlines, but Delta may be harder to fool.

 

 

Fly Be, or not-to-be?

But if you are looking for doom in the UK, then look at Fly Be. True, its seat sales were +1% in Q1 (ie better than VA’s -7%), but its seat factor was a disastrous 66%. I reckon the airline needs at least 14pts more than that.

 

I propose that FB management (that’s Fly Be, not Mr Zuckerberg) campaign strongly for Brexit. If the UK makes the wrong decision and quits the EU, FB can take over some of the many UK-EU routes that Ryanair will likely be forced to abandon.

 

 

Wizzing ahead

Ready for another? Wizz – Hungary-based but think East Europe – is on track to overtake (sorry, wiz past) Air Berlin in 2017.

 

Poor Air Berlin. It is tumbling faster – -7% YTD, -8% latest month. And that change would follow on from the ignominy of being overtaken this Q1 by Nano-Norway’s Norwegian.

 

 

 

The Fox

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

TinT (= Truth in Travel); world travel spend.

Tint Rides Again!

TinT (= Truth in Travel); world travel spend.

An excerpt from our monthly Travel Business Analyst newsletter.

 

WTO heading: Exports from international tourism rise 4% in 2015

Our heading: Slowing growth in visitor spend, per-visitor-spend falls.

 

The WTO (World Tourism Organization) tells us:

[] That visitor spend in 2015 grew 3.6%, “in line with the 4.4%” growth in visitor arrivals. At these levels (billions and trillions), a percentage-point difference is huge; does WTO not know, or does not want to trouble us?

[] That the visitor business grew faster than world trade, raising its share of exports to 7% +1pt. That is a big increase, but we presume it is primarily related to the fall in the value of oil. Trade grew 2.8% in 2015.

More:

[] In 2015 visitor arrivals 1184mn +4.4%. Spend therefore calculates to US$1217.91 per visitor (SPV). In 2014 VAs 1134mn, meaning SPV was US$1227.42, so in 2015 SPV fell 0.8%. That may not look much, but it is a fall and therefore requires some professional comment from WTO. We are left with the impression that the WTO wants to release just good news, not market news.

[] Top source markets are actually counted by totalling spend of visitors in destinations – which is not quite the same, but which is not explained by WTO in any case. By WTO’s methodology, top are China, US. The WTO report indicates the UK is third, but actually Germany is still 3rd; see below.

[] What WTO terms “spending by Chinese travellers” is actually “spending by visitors from China or by Chinese nationals” (depending on methodology in the receiving destination). The figure was US$292bn +25%. WTO then mixes the measures by giving the China outbound travel total – which was 128mn +10%. To match the spend methodology, WTO should have added up all arrivals from China in the destinations. We are consistently surprised that the WTO continues to use these misleading definitions and figures; we presume it knows, but finds the necessary explanation too cumbersome.

[] After China in spend is the US US$120bn +9%, with 73mn +8% outbound travellers (we have government figures showing 73.5m +7.7%). Germany spend US$76bn (a fall, but WTO does not further clarify, or give the numerical total – because only Eurostat collects them, and its 2015 data is not due until June).

[] After top-3, UK spend US$63bn +8%, with 65mn +9% outbound travellers (we have government figures 65.7mn +11.7%). No further details given for France US$38bn, Russia US$35bn, Korea US$25bn.

[] WTO gives no information or comment on two collapsed markets, Brazil, Russia.

WYSKs – Alitalia, Ryanair.

FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

 

WYSKs – Alitalia, Ryanair.

WYSK – What You Should Know.

 

Alitalia! TinT Rides Again!

TinT (Truth in Travel): Analysing Alitalia’s 2015 results.

 

Alitalia’s heading:

‘On track for profitability by 2017; reports strong 2015 performance.’

Ours:

‘Alitalia revenue and traffic fall again; can it make 2017 profitability target?’

 

You wouldn’t know from Alitalia’s public announcements, but 2015 seemed to be another year of operational weakening. ‘Seemed’ because the company does not publish all the data every year.

 

We normally look at seat sales, and when we look at finance, at revenue and operating profit (not net, which can be more easily manipulated). So:

-Alitalia’s peak year for seat sales seems to have been 2011, with 24.6mn. The company does not reveal growth in 2015 (and did not report 2014 data) – just the figure. That was 22.1mn, thus a 10.2% fall against 2011 – an average annual 2.6% fall.

-Revenue. We have US$3.99bn (at US$1 to €0.90) for 2012 – no full-year since then. In 2015 US$3.68bn -7.8%, an average annual 2.7% fall.

-Operating profit. No data.

-Our manipulations. In 2012 Alitalia’s revenue was US$165 per seat sold (say, flight-segment). In 2015 it was better, US$167, a 1.2% growth, so 0.4% average annual growth.

-Other. It provides other data, but without comparative information, most are essentially worthless. Such as US$262mn from ‘codeshare revenue’. Of course Alitalia indicates that this is good, but with no comparative or other data, how can we know? Its load factor (not further defined, but we have assumed RTK over ATK, not RPK over ASK) looks worryingly low, at 76.2%. We would have thought it needs at least 10-points higher. That said, it is actually an improvement on the latest data we have, for 2006, of 65.7%!

 

 

 

Ryanair overtakes Europe’s top-3 airline groups

The IAG* group pushed the AFG* group into No3 place this Q1 among FSAs*. The three are now a similar size – LHG* sold 800k more seats (+4% to 22.3mn), IAG 3600k +10% 20.4mn, AFG 900k +5% 19.9mn.

 

But there is a big shadow over them all, in the shape of a B737. In this Q1, all those giant multi-airline groups were actually smaller than a single airline – Ryanair of course. Ryan has been the largest NFA* in Europe by far for a few years (Easyjet was about the same size until 2001), and became the largest airline of all types 10 years later.

 

In Q1 2015, Ryan was bigger than IAG, but smaller than AFG and LHG. But this Q1, Ryan sold 4900k more seats, growing 27% to 23.4mn!

 

*Notes: AFG = primarily Air France, Hop, KLM, Transavia. FSA = full-service-airline. IAG = International Consolidated Airlines Group (sic) – primarily Aer Lingus, British, Iberia, Vueling. LHG = primarily Austrian, Eurowings, Lufthansa, Swiss. NFA = no-frills-airline.

 

 

 

The Fox

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