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.

Cooks and TUI Threaten UK Government

Thomas Cook's head - Manny, Fontenla-Novoa speaking prior to the meeting between Transport Supremo Geoff Hoon and TUI - threatened that they could force the government's hand by reducing the amount of ATOL bonded travel. In what would seem to be an initially high handed threat - it may prove hollow in the end and he is only playing to the peanut gallery on this one.

What is the issue? Cooks and TUI want a flat rate fee but charged to the customer for ATOL coverage. At the moment they are paying less than GBP1 and they like it that way. Their costs under the current discussed proposals could rise by GBP5 million approx each.

Asked how the big two could force action, Fontenla-Novoa said they must keep it on the agenda of consumers and “chip away” at airline opposition to a universal protection scheme.

If you put this in context they are already dramatically reducing their ATOL business next year because of its lack of profitability. Now that the big 4 are a Monolithic 2 - they can try and throw their weight around.

I doubt this will be more than a PR exercise for them both. But in the end - there should be some form of coverage even if its a mandatory insurance policy paid for by the consumer.

Cheers

UK Immigration Stats exposed using duff data

Under the file usually marked "What were they thinking" comes this one.

A UK parliamentary select committee was convened to look at various complaints from local government authorities about the number of newly minted immigrants using resources in the UK regions. The central government of "New" Labour led by the dour Gordon Brown steadfastly refused to admit that the UK had an immigration problem stemming from the expansion of the EU in 2004 onwards.

Turns out those overstretched local authorities were actually right.

So it comes from the way in which estimates are calculated at the Central Government level. So guess what they are using to estimate population?

Well its that good old report that indicates SO WELL (NOT) the true travel patterns of people the IPS - International Passenger Survey. The latter by the way still hasn't figured out that over 50 million Europeans user Ryanair and that countless others (it would appear) use other low cost carriers to get into the UK.

The select committee was not amused!

Existing methods of estimating migration and population figures are not "fit for purpose" say MPs. The International Passenger Survey, designed to provide data for tourism, now plays a central role in migration estimates, the committee of MPs said.
They said it was "not fit for this purpose" and methods of measuring movement in the UK "unsatisfactory".

The committee said new surveys were needed. The Lib Dems said ministers had "totally lost track" of the population. (Understatement of the year!) And of course given the influx of people coming in on LCCs they are not even counting tourism properly.

In its Counting the Population report, the Commons Treasury Committee accepted that the UK was in a period of "significant population change" which made it harder to estimate numbers of people in each area. But it said population estimates were "central to every national system of official statistics", used to estimate funding for local government, the NHS and other public services. Getting them right was therefore "a matter of social responsibility" the report said.

For many years I have held the position that the IPS does not reflect true travel patterns and is a flawed metric. I am glad someone else thinks so!

Cheers

Timothy