Covid-19 Impact on the Travel Industry 07/05/20

COVID-19 IMPACT ON THE TRAVEL INDUSTRY

7 MAY 2020

Contents

·       Downsizing

·       Transport Select Committee

·       IATA

·       Economy

·       Corona corridors

·       The Next Big Consumer Issue: Balance due dates

·       Business Travel

·       Consumer sentiment

·       …And Finally

DOWNSIZING

Coinciding with the Prime Minister’s announcement that plans for easing lockdown measures will be outlined on Sunday and begin on Monday, businesses are preparing for a return to work, but for the travel industry, reports Travel Weekly, recovery will result in a smaller industry.

-       Not only is Virgin Atlantic planning to cut staffing levels by a third, but it will leave Gatwick and cut 15% of its retail outlets. Virgin Holidays will also rebrand to Virgin Atlantic Holidays.  

-       Travelopia are consolidating Hayes & Jarvis and Austravel. Neither brands will be  distributed through the trade and the Austravel brand will disappear.

Cruise

Separately, cruise company Norwegian Cruiseline Holdings announced that it had now secured essential additional funding from investors to ensure that it can weather the pandemic.

Princess Cruises has extended its global operational pause from 30 June "through to the end of the 2020 summer season", forcing wide-ranging cancellations to many of its programmes.

TRANSPORT SELECT COMMITTEE

On Wednesday 6 May Parliament’s Transport Select Committee called witnesses to outline issues  Covid-19 is having on the transport sector.  Witnesses included the following:

ABTA

ABTA’s Chief Executive Mark Tanzer summarised the refund issue for the Transport Select Committee.

He used the opportunity

-       To appeal to the Government to relax the time limit on refunds for cancelled holidays or step in to finance the payments before “a lot of travel companies fail”.

-       To call on the Civil Aviation Authority (CAA) to state publicly that refund credit notes for Atol bookings are financially protected.

Travel Weekly reported that Mark Tanzer told MPs: “One of the things making it very difficult for tour operators to refund customers is that the money hasn’t come back to them from the airlines.”

In the first days of the shutdown, Tanzer said: “We saw all sorts of behaviour from companies. Some said ‘We’re not issuing a refund’. Some issued a partial refund. Some issued vouchers.

“ABTA stepped into that to give some order. We recognised our members have to give a refund but we also recognised companies are at risk of failing.

“We issued guidance on the issue of refund credit notes that have an expiry date and are financially protected so customers will still get their money back if a company fails. That was to try to give some confidence.”

He said: “The majority of these bookings are covered by ATOL. We had many conversations with the Civil Aviation Authority [CAA] early on and arrived at the conclusion that the refund credit notes are protected by Atol. We want the CAA to come out and say that.”

Tanzer insisted: “We never said refunds are not due because they are. The right to a cash refund is still there. Travellers should talk to their travel company, if they want a refund, about when a refund can be paid.

But he warned: “Our estimate of the prepayments [owed] is ￡4.5 billion. These numbers are not small. It will knock over a lot of travel companies.”

In addition, Tanzer, according to ABTA Magazine, said that the Government could aid travel agents and tour operators by:  

·       Reviewing future furloughing rules, enabling travel businesses to have a degree of flexibility and allowing either a part-time return to work or some tasks to be undertaken without the loss of all salary support

·       Work with the ABI and insurers to ensure adequate travel insurance cover will be available to customers when FCO travel restrictions start to be lifted.

Heathrow

The Guardian reported that John Holland-Kaye, the Heathrow chief executive, repeated his call to MPs to lead on a common international standard for health screening in aviation as this is ‘crucial to restoring confidence and encouraging people to return to flying’.

He said: “This standard is key to minimising transmission of Covid-19 across borders.” Heathrow will be trialling technology at Heathrow including thermal cameras to carry out temperature checks on passengers; ultraviolet lighting to sanitise security trays and contact-free security screening equipment to reduce person-to-person contact.

In other comments the BBC reported that Holland-Kaye accused the UK Government of not understanding the strategic role that aviation plays in the economy and as an example, the boss of Charles de Gaulle airport in Paris had spoken to the French transport secretary every day of the crisis, whereas Holland-Kaye had not spoke to Grant Shapps once during the pandemic crisis.

Airlines UK

Travel Weekly reports that Airlines UK chief executive Tim Alderslade said: “Airlines don’t support social distancing. The viability of routes would be compromised and it would not work through the whole airport experience.

“It would also be impossible to apply on the journey to and from the airport, for example on the tube. We don’t think social distancing is going to work.”

Airlines UK represents carriers including easyJet and British Airways.

Alderslade added: “We have concerns about a 14-day quarantine [of arrivals].”

He suggested: “The evidence from IATA is that there is a relatively low risk [of being infected with Covid-19 on a flight].

“We’re suggesting a graded system, from low touch to severe, with airlines having to comply with local jurisdictions. Level one could involve visible cleaning and hygiene measures, up to level three where all passengers wear masks, there is no circulation in the cabin and no on-board service.”

IATA backs face masks on flights, but not social distancing

Travel Weekly reports that the airline association IATA has called for all air passengers and crew to wear face masks but has condemned calls for social distancing on flights, warning it would result in 50% higher prices.

IATA said it supports face coverings for passengers and masks for crew while on board aircraft “as a critical part” of temporary biosecurity measures when people return to the air.

But in a statement the association said it does not support mandating social distancing measures “that would leave middle seats empty”.

ECONOMY

Bank of England

The BBC reports that The Bank of England, in a ‘plausible economic scenario’  has predicted  that the coronavirus pandemic will cause the economy to shrink 14% for the whole tyear, based on the lockdown being relaxed in June and phased out by September.

The scenarios saw the economic impact also "dramatically reducing jobs and incomes in the UK" – with unemployment up to 9%.

Policymakers voted unanimously to keep interest rates at a record low of 0.1%.

However, the Monetary Policy Committee (MPC) that sets interest rates was split on whether to inject more stimulus into the economy.

The Bank's scenario showed the UK economy plunging into its first recession in more than a decade. The economy shrinks by 3% in the first quarter of 2020, followed by an unprecedented 25% decline in the three months to June.

This would push the UK into a technical recession, defined as two consecutive quarters of economic decline.

For the year as a whole, the economy is expected to contract by 14%. This would be the biggest annual decline on record, according to Office for National Statistics (ONS) data dating back to 1949.

It would also be the sharpest annual contraction since 1706, according to reconstructed Bank of England data stretching back to the 18th Century.

While UK growth is expected to rebound in 2021 to 15%, the size of the economy is not expected to get back to its pre-virus peak until the middle of next year.

However, the Bank expects no lasting damage from the pandemic, with the economy, employment and earnings gradually returning to pre-virus growth rates.

European Commission’s Spring Forecast

GTP Travel Pages reports that the European Commission’s Spring 2020 Economic Forecast released on Wednesday predicted that the euro area as a whole will contract by 7.7%.

Greece’s economy is expected to contract by 9.7 percent this year – the highest out of all EU countries – and its unemployment rate may reach 19.9 percent from 17.3 percent in 2019. However, the Commission says a rebound should be expected in 2021.

“Economic activity in Greece, Italy, Spain, Croatia, and to a lesser extent France are forecast to contract the most,” said Paolo Gentiloni, European Commissioner for the Economy, during a press conference.

On Greece, the forecast shows that the impact of the crisis is expected to be large due to the importance of the hospitality sector in the country and the high share of micro enterprises, which are particularly vulnerable.

IAG: a meaningful return to service in July at the earliest

IAG, parent company of British Airways, Aer Lingus, Vueling and Iberia reported its first quarter on Thursday morning, says The Independent and unsurprisingly said that whilst January and February, the airlines operated normally, traffic collapsed in March due to the pandemic and said the second quarter would be worse than the first. While IAG’s airlines are running some skeleton services, Willie Walsh, CEO, who will now retire in September, revealed that “a meaningful return to service” will not happen before July at the earliest. The actual date will depend on the easing of lockdowns and travel restrictions around the world.

After reports of a crowded Aer Lingus flight earlier this week, Mr Walsh said: “We will adapt our operating procedures to ensure our customers and our people are properly protected in this new environment.

“We are working with the various regulatory bodies and are confident that changes in regulations will enable a safe and organised return to service.

“The industry will adapt to new requirements in the same way that it has adapted to developments in security requirements in the past.

“However, we do not expect passenger demand to recover to the level of 2019 before 2023 at the earliest.

Gatwick gets watchdog approval to add 50,000 flights on new runway

Amongst some grim news for Gatwick – with Virgin Atlantic and BA both saying that they will stop flying from the airport, The Times has reported that the CAA has ruled that Gatwick’s plan to use its existing standby runway — which is only used in emergencies when the main runway is closed —  into full operation will not require changes to the airspace around Gatwick.

Gatwick is expected to submit detailed proposals for 50,000 extra flights a year as part of its recovery from the crisis posed by the coronavirus.

Corona Corridors: Common Travel Zones  

Much has been reported in recent days on ‘Corona corridors’ – with The Times summarising the situation:

Tui, the German travel conglomerate, has said that it has been invited by governments in Greece, Spain, Bulgaria, Cyprus and Austria to help in drawing up plans for a wave of post-lockdown tourism. A number of countries that have their Covid-19 outbreaks under control are also contemplating whether to open their borders to one another, including “corona corridors” around the Baltic and Adriatic seas.

One of these potential clusters includes Greece, Bulgaria, Cyprus and Israel; another involves the Czech Republic, Slovakia and Croatia.

Until recently Germany, by far the Continent’s richest source of tourists, had been reluctant to discuss lifting its blanket edict against overseas travel. Angela Merkel said last week that foreign holidays were not “on the agenda”.

Yesterday, however, Thomas Bareiss, the tourism commissioner, said that Germany was in negotiations with its neighbours, including France, Austria, Belgium and Poland. “[These are the] destinations that can be reached by car,” he told Der Tagesspiegel. “But I wouldn’t yet write off other regions of Europe, such as the Balearics or the Greek islands. If there are scarcely any new infections there and the healthcare system is functioning, one could also contemplate a summer holiday there.”

Brussels is expected to publish the first EU-wide guidelines for coronavirus-era tourism next Wednesday. In the meantime several states have taken matters into their own hands.

Greece is talking to four other countries with low rates of infection about setting up a travel corridor from Vienna to Tel Aviv, possibly as soon as next month. Austria has approached Germany with an offer of a bilateral deal.

Arancha González Laya, Spain’s foreign minister, has said that visitors would be welcome back to his country as soon as it is safe. Tui suggested that the Balearic and Canary islands could reopen sooner than the mainland as they had been spared the worst of the pandemic. However, the tourism ministry in Madrid said the timing would depend on “how the pandemic develops” in Spain and beyond.

Tom Jenkins, chief executive of ETOA, said there was “enormous pent-up demand” for travel and “lots of spare capacity” but warned that a patchwork revival of tourism could cause serious problems for the industry.

“There are real concerns that there will be irregular and disjointed relaxations, causing confusion as to what and where is safe,” he said. “There is also a substantial cost in reopening and in shutting down.

“If there is a rolling cycle of opening followed by closure followed by another opening, there will be mayhem both among consumers and businesses.”

Australia and New Zealand are working on a plan to create a common travel zone and South Korea said last month that it has agreed with China to begin allowing some business travel between them.

BALANCE DUE DATES: THE NEXT BIG CONSUMER ISSUE

Both The Daily Telegraph and Travel Weekly outline the next major consumer issue looming in the travel sector, namely that of due dates for balance payments on summer holidays.

January and February were record months for booking summer holidays and balances are generally required by operators eight to 12 weeks prior to departure. Travel agents are calling for balance due dates from suppliers to be pushed closer to departure.

Some suppliers have altered booking conditions but bigger operators’ terms remain largely unchanged.

Tui offers a balance due date of four weeks before departure for holidays booked after March 16 but requires balance payments at 12 weeks for all other holidays.

The Telegraph says: ‘The numbers involved are huge. Tui, Britain’s biggest tour operator, has had to process about 900,000 refunds or re-bookings for cancellations in March and April - including the Easter peak. But it has sold between two and three million holidays for departures during July and August.  

Nick Trend says consumers face a dilemma – if they don’t pay the balance, they face losing the deposit, if they do pay, they may be paying for a holiday that they may not feel they can afford anymore, they feel nervous of taking, or which could be cancelled.

-       Greece is hoping to welcome tourists from 1 July, subject to protocols

-       The Balearic Islands believes holidays will restart in August with 25% of capacity

Trend said: “the idea of millions of us crowding into airports, packing onto flights and heading for the teeming beaches and buzzing bars and restaurants of the Med in just a few weeks’ time seems completely detached from reality.”

The Telegraph puts together a timeline of the summer season ‘in jeopardy:’

·       Sunday 10 May - latest update on lockdown restrictions and travel advice from UK government

·       June 1 - EasyJet holidays scheduled to restart

·       June 11 - All TUI holidays cancelled until this date

·       June 17 - Jet2 offering holidays after this date

·       June 30 - Current furlough scheme ends - meaning operators and agents face huge salary costs

·       July 23 - Proposed date to end French lockdown

·       July 25 - Start of the peak school holiday season

·       July 31 - Deadline for tour operators to pay cash refunds under the Protected Credit Voucher scheme set up by Abta

·       July 31 - BA allowing all bookings for flights departing before this date to be rebooked or replaced with a voucher.

·       Unspecified date - CMA promises legal action against operators who are refusing to make cash refunds for cancelled holidays.

BUSINESS TRAVEL

BTA Five Point Plan

TTG reports that the Business Travel Association (BTA) has unveiled a five-point plan to reignite the business travel sector. Clive Wratten, CEO, says business travel has a critical part to play in the economy’s recovery and is worth ￡220 billion annually to the UK GDP. In a letter to the Government, the BTA calls for the following:

-       Exclude "essential business travel" from the Foreign Office’s worldwide advisory against all non-essential travel;

-       Don’t implement the mandatory 14-day quarantine at one or both ends of a journey;

-       Encourage the insurance sector to ensure they offer adequate cover in the post-coronavirus world.

-       The Government needs to work on a set of globally consistent guidelines on social distancing, the use of masks and other hygiene measures.

-       Insurance policies to cover corporate travellers: “The market needs to have new policies readily and easily available.”

Wratten also highlighted the need for airlines, airports, train companies, car rental firms, hotels and other accommodation providers “to demonstrate beyond reasonable doubt the steps they are taking to ensure cleanliness and social distancing”.

He argued: “This could be overseen by travel associations such as the BTA with a recognisable marque provided to those who meet the criteria.”

Advantage Travel: 86% will travel abroad

According to research reported by Travel Weekly  and carried out through the Advantage Travel Partnerships agency network from 19 April – 3 May, results from a poll of 4,228 people found:

-       86 per cent of consumers are willing to travel abroad despite the presence of Covid-19

-       Those aged under 30 are at least twice as likely as any other age group to increase their holiday budget for the next 12-months

-       Four out of five (80%) were still hoping to travel this year if restrictions are lifted

-       79% of over 70s and 55% of those aged 18-30 would use a travel agent

-       Spain topped the list of destinations respondents said they were planning to travel to next, followed by Greece, Turkey and Portugal. Mexico and Florida were the most favoured long-haul destinations.

-       Less than a fifth of respondents said they would be considering a domestic holiday.

-       Less than 20% of respondents said they had cancelled their travel plans for the rest of 2020.

Comparethemarket.com: 9% looking at a European beach holiday

The Guardian, Express and The Mailonline report that research from Comparethemarket.com has found that latest customer research finds that only 6% of Britons are considering a long-haul holiday this winter and only 9% are looking at booking a European beach holiday for this summer or autumn, “most likely due to a combination of strained household budgets and a wariness over travelling overseas.” 

…And Finally

The sofa singalong you’ve all been waiting for

Celebrate the 75th anniversary of Liberation Day for Guernsey and the Channel Islands this Saturday, 9 May at 3 pm. Join an online, international singing group who will all learn and sing three war-time songs one of which is very special to the Islands of Guernsey, its people and history.  Sign up at:  https://www.visitguernsey.com/sofa-sing-along