Seismic Shift in UK Airlines

Several events in the UK have come together to change the way that the airline product is bought and sold in the market. Thomson has announced that effective November 1st it is cutting commission on flight only sales to 0.1% from the old standard 10%. It is thus just retaining the ability to pay commissions. At the same time it is ending is ATOL bonding of the flight only product.

"This decision has not been taken lightly but in making the amendment, we recognise the flight only landscape has altered greatly in recent years and Thomson Airways is competing with both traditional charter airlines and also other scheduled carriers," said the airline.

The challenge to the ATOL bonding was a battle the CAA who manages the scheme for the UK Government apparently lost a few weeks ago in the UK High Court. The now landmark case the CAA brought against Travel Republic (the UK Supreme Court refused to hear the appeal on July 29th), has effectively ended the traditional Tour Operator coverage for Flight Only sales. The longer term effect is that the charter seat only business is dead and replaced by a more normalized approach to the sale of flights. The distinction has been moot for a long time anyway. The former seat only carriers such as Thomson, Monarch and Thomas Cook with their respective airline brands are now free to compete directly with the LCCs and conventional airlines.

What is not clear is how the non-carrier seat only operators like KISS will be able to operate. That remains unclear.

The long term impact will be that these airlines will now operate a hybrid model but will look much more like a true LCC operator. In turn this will open up competition in the market which will be good for the consumer.

So the storied history of the seat operator market in the UK is no more.

An interesting side note is that this will be welcomed by the US companies such as Expedia who have been sniffing around the tour operators and remaining VTO players in both the UK and Germany. ATOL bonding and their airline operations have always made them nervous.

Finally this will put pressure on the UK government and the CAA for the whole bonding coverage. In light of other activities it may just be time for Her Majesty's Government to get out of the insurance business and return to regulatory activities.

Cheers







With thanks to widebodies.nl for the picture.

Ryanair Wins Screen Scraping Round

Seems like a Ryanair day today. More good news for them. TUI has agreed to stop using a screen scrape tool to obtain FR inventory access and sell FR product. TUI UK had already lost an initial injunction issued several years ago but finally agreed 2 weeks ago to cease and desist.

Thomas Cook UK now receives the full attention of FR's legal beagles. FR claims that TC is charging a "Fuel Surcharge" of 40 pounds to take onto each FR booking. Thus obfuscating the price. (The fact that almost every seller is doing this may have escaped their notice!).

I will restate my position on this issue. Ryanair and any other airline if they make their policies clear and unequivocal, can prevent people from screen scraping. This indeed is on the terms and conditions. This is not a question of good versus bad, rather what is legally right. So I disagree with Multicom's John Howell on this subject.

Here is the statement on their T&Cs.

"3. Permitted use. You are not permitted to use this website other than for the following, private, non-commercial purposes: (i) viewing this website; (ii) making bookings; (iii) reviewing/changing bookings; (iv) checking arrival/departure information; (v) performing online check-in; (vi) transferring to other websites through links provided on this website; and (vii) making use of other facilities that may be provided on the website. Use of this website for any purpose other than the aforementioned private, non-commercial purposes is prohibited. In particular, use of any automated system or software to extract data from this website for display on any other website (“screen scraping”) is prohibited. In addition, the website may not be used without Ryanair’s prior written consent for providing on a commercial basis details of Ryanair flights to others, offering Ryanair’s services for sale to others, purchasing of Ryanair’s services for resale to others, or the like,."

You can download it from here:

http://www.ryanair.com/site/conditions/copywrite/copywrite_notice.pdf

Oh yes - and Chaps (and Chapesses) in Dublin there is a typo in the paragraph. Not that I am the paragon of spelling and punctuation virtue (thank you Professor Addison).

Cheers

Germany: Milder Downturn vs Full Recession

The German market seems to be holding up better than many others. While the UK languishes in a deep economic doom and gloom climate and Brits contemplate going back to Holiday Camps such s Butlins, the German market seems to be resilient and holding firm if down a little.

There are several reasons. So the Professor took a look at the market to see if he could understand why.

Germany is not as much of a property owning market as is say the UK and USA. With over 1/3rd of the population now living alone - one of the highest in the world - the concentration of these live alones seems to be concentrated as one might expect in the cities. However the characteristics are not similar across all sectors of the country. There is the prosperous older north and the swinging south up coming. Interestingly because Germany does not have the same concentration of population in any single geography there remains a strong tie to the region in which people were born. The migration to the cities is not concentrated as it is say in the UK towards the south east.

Because of these characteristics we believe the German market for travel will remain robust and stable for quite some time. Unless something dire happens in the coming months, the German economic engine - while perhaps not the huge driver of growth that it once was - will still however purr along nicely. This should mean good news for LH and the big 2 tour operators. In the short term Air Berlin should benefit with its focus on the German regions.

Cheers

Consolidation Comes Slowly To Germany

While LH continues its aggressive expansionism with a long list of acquisitions and mergers, the creation of a strong second force has struggled. Should there be 2 players or 3?

Effectively there can really only be 2. So there if there is to be 3 if would not be efficient. However some still hold on to the belief that 3 is possible in that scenario LH's GermanWings LCC would be required to join forces with another player.

One of those doors just shut. Air Berlin will take over TUIFly's scheduled operations. This has remained a separate legal entity for some time and represents the HLX.com (bright yellow taxi) product. As some background, the TUI Group in Germany owns nearly 50 aircraft, which makes it the third-largest German fleet after Lufthansa and Air Berlin, carrying more than 12.5 million passengers per annum. TUIFly Charter operations will remain separate. TUIFly's other businesses such as the former FirstChoice airlines, Britannia Airways, Corsair etc remain under TUIFly's charter operations and are unaffected by this move.

The Germans Are Coming - Lock Up Your Beer

From the file called bizarre attempts at world domination. Lufthansa seems to be hell bent on putting its foot down as many places as possible. For now I think your daughters are safe.

At the risk of upsetting my German friends - the speed with which LH seems to be moving is almost frightening. The parallels of the 20th century are striking. Not content to acknowledge its bidding for Austrian, today LH is seen in talks with the parent of Brussels Airlines (what was once Belgium's national airline SABENA for whom this blog is so named) as reported by Bloomberg.

But not content with its international expansionist aspirations which seem to be insatiable (AirOne tie up, JetBlue investment and Swiss now a part of the group) at home it is making a play to mop up its domestic footprint.

It is buying out the rest of German Wings that it doesn't own and now this comes out:

Lufthansa said earlier today that it's in talks about a possible merger of its Germanwings discount affiliate with travel operator TUI AG's low-cost carrier TUIfly Germany and the Condor charter airline owned by TUI's largest competitor, Thomas Cook Group Plc. Lufthansa holds almost 25 percent of Condor.

Excuse me Sr Tajani (current EU Commissioner for Transportation) - are you paying attention or are you so consumed with rescuing your national airline that you don't care about the consolidation that is occurring.

Germany - a Duopoly no longer, but not quite

The long awaited deal between Condor and Air Berlin has finally foundered on the rocks of the German competition authority. But in true German fashion (remember these are the guys who actually fined one company for LOWERING prices), the result is a strengthening of Lufthansa's hand.

A new third force company comprising GermanWings/Eurowings and TUI's air assets will emerge as an independent LCC group. Clearly not totally independent but independent in spirit anyway.

Frankly this still makes me scratch my head and wonder if Germany as a nation would ever pass the US RICO act.

Cheers

Timothy

TUI rebrands airlines (again)

So now Thomsonfly Ne Britania is now to be called Thomson Airways. And First Choice Airways (ne Air 2000) is to be also called the same. PHEW! I thought we would be lumbered with that really silly ThomsonFly common branding thingie name.

So lets wait before we take pictures until they start re-naming their ships such as the SS Lunn Poly ;-)

Consolidation - European Style LH+TUI combine LCCs

TUI's TUIFly aka Hapag Express bright yellow taxi planes, and Lufthansa's German Wings (Yellow Tails and we don't mean fish) have agreed to merge to present a potent force to counter the growing strength of Air Berlin's conglomerate.

This is likely to see some realignment of routes and probably a cut back at CGN airport whose locals have been enjoying some really good fares lately.

It is unlikely that LH would allow the name TUI on the new venture so the likely surviving name is German Wings. Although I really thought the HEX planes were a great idea.

Net result - LH gets MUCH bigger. Don't forget they have a small stakeholding in the other guys at TC through the merging of TC's airline operations with Condor - LH's former charter susidiary. Almost overnight - OK in a year... the German market has consolidated from 4 players into 2. Once again the big yellow of LH casts a huge shadow over the whole market. Peace is restored and life goes on. Of course there will be a lot of work for those people who negotiate pilot seniority lists.

I always say Germany Inc. would never pass the USA's RICO act.

Cheers

Timothy

The big keep getting bigger - EU Giants In Travel

The big keep getting bigger.

The sea change that occurred over the last 18 months in Europe in distribution is now starting to bear fruit. The two powerhouses of TUI and Thomas Cook (daughter company of the old Karstadt Quelle) have now been admitted to the UK’s FTSE (Footsie) 100 top shares. (This is the UK equivalent of the Dow Jones index). This may seem to be a big achievement but in reality it simply acknowledges that the world’s second largest commercial market after financial services is Travel. Further it acknowledges that the concentration of the distribution system into fewer hands is a global trend. Congrats to both companies. Let the battle commence. At December 12th close, Thomas Cook Group had the 96th largest market capitalization of UK listed companies; TUI Travel was 88th.