Scottish government ‘vindicated’ over Prestwick airport

Scottish government 'vindicated' over Prestwick airportThe Scottish government has been vindicated in its decision to take over Prestwick airport, according to a minister.

The comments came in response to a public spending watchdog report which said plans to sell the airport back to the private sector are viable but it could take “some years” to be achieved.

The airport was acquired for just £1 from owners Infratil in late 2013 amid fears it could close. Ministers have so far committed to provide £25.2 million in loan funding to the airport.

Audit Scotland said it could take almost a decade before Prestwick would be able to start repaying the money, the BBC reported.

The watchdog said that while the business case for the deal was based on “optimistic” passenger numbers, the government could still “reasonably expect a positive return” on the cash being loaned.

Ministers want to return the airport – which had been running at a loss – to profitability before selling it back to the private sector. Falling passenger numbers and a decline in cargo business meant it had been operating at a loss for a number of years.

The government has so far provided the airport with £9 million of loan funding and has committed to a further £16.2 million to the end of March next year, if required.

Audit Scotland said latest estimates had put the required total funding up to 2021-22 at £39.6 million.

The report said: “The Scottish government’s long-term aim is to sell Glasgow Prestwick airport back to the private sector once the airport is viable.

“Owing to the uncertainties around the future development opportunities, the Scottish government has not yet set a timetable for this.

“It is important that its plans for the airport include regular consideration of its ongoing financial viability and a well-defined exit strategy covering a variety of possible scenarios.

“The Scottish government recognises that the long-term opportunities could take some years to take effect if they are realised.”

Responding to the report, infrastructure secretary Keith Brown told the BBC: “Closure of Prestwick airport would have been devastating for Ayrshire and the action taken by the Scottish government has safeguarded 3,200 jobs and secured a vital infrastructure asset that contributes more than £61 million annually to the Scottish economy.

“Audit Scotland’s report vindicates the action taken by the Scottish government – it shows we made the right decision to step in and confirms that we followed the correct purchase process in a tight timescale, identifying and considering the risks before moving forward with the acquisition.

“The report confirms that the Scottish government is highly likely to generate a return on this investment that is higher than the interest rate that we are currently charging the airport.”

Sourced from Travel Weekly


Thomas Cook plays down airline sell-off talk

Thomas Cook plays down airline sell-off talkThomas Cook Group has played down speculation that it is seeking to sell its airline business as part of a cost-saving plan.

However, Europe’s second largest travel group may consider joint ventures to improve the performance of its aircraft fleet.

The company was responding to a Sunday Times report which claimed that Cook had sounded out a number of potential buyers over the last few months including rival carriers and private equity investors.

No deal has yet been reached and no talks are currently under way, the newspaper said.

The company was quoted as saying it was pleased with the development of its airline operations.

“We see it as an important part of our business and a support of our profitable growth strategy. Of course, we are always open for opportunities,” it said.

Cook said it would consider linking up with other airlines, according to the report.

One possibility is a tie-up with its rival Monarch, which was rescued last autumn by investment firm Greybull Capital the newspaper suggested. Monarch’s previous management is understood to have studied plans to combine the two but the idea was shelved.

Other private equity players were reportedly exploring how to consolidate tour operators’ air fleets to make savings in the face of competition from low-cost online ventures and budget airlines.

Cook said earlier this month that it remained on course to grow this year despite tough trading conditions in Europe.

A Cook spokesman told the Times: “We are very pleased with the development of our airlines and the integration our four airlines have achieved so far. We have also invested in the refurbishment of the cabins of our long-haul fleet and we have added long-haul aircraft to our Condor fleet in Germany and the UK.”

While emphasising the airline’s importance to the group, it said: “Of course we are always open for opportunities which might include partnering with other partners or airlines.”

Sourced from Travel Weekly

Egypt specialists say bookings unaffected by terrorist incidents

Egypt specialists say bookings unaffected by terrorist incidentsImage via Shutterstock

Operators to Egypt reported bookings had not been affected by terrorist attacks in neighbouring Libya.

David Wiles, managing director of Discover Egypt, which operates to historic areas including Luxor, said a lack of airlift to the city had had more of an impact on visitor numbers than safety concerns.

“I don’t think the incidents will necessarily have an impact as people who think that way wouldn’t have visited before anyway, and those who understand the situation will continue to travel there,” he said.

“It’s the way of the world. People will stop travelling to Paris and Denmark, for example, if they think that way.”

He pointed out that the Foreign and Commonwealth Office advises against all but essential travel to the region to the north of Sharm 
El Sheikh, but people continue to travel to the resort.

“There is no advice against travelling to Luxor or Cairo, which haven’t been affected, and we explain that to anyone who contacts us with concerns,” he said.

Wiles said bookings are “nowhere near where they were five years ago” but are up year on year for January.

“We’ve had a lot of enquiries and people are surprised to hear that flights are fully booked to Luxor because of a lack of capacity.”

He said tourists can still access sights such as the Valley of the Kings and Luxor Temple via Cairo.

Pru Goudie, general manager of On The Go Tours, said that recent security issues only impacted travel to the Mediterranean coast, a “considerable distance” from the main sights of Cairo and Luxor.

John Boulding, managing director of Insight Vacations, said the operator was “obviously following the advice of the FCO”, adding: “Our bookings are growing once again, albeit from a small base, and we are very pleased with the overall situation.”

Sourced from Travel Weekly

Opinion: The country is united – all for one on APD

Opinion: The country is united – all for one on APDDevolving Air Passenger Duty to Scotland is fine if reductions in the tax are mirrored elsewhere, otherwise it’s unfair, says Tim Alderslade of the Airport Operators Association  and voters agree

With the general election less than three months away, the Airports Operators Association (AOA) has today published polling data from marginal seats on the issue of devolving Air Passenger Duty (APD) to Scotland.

This polling, conducted by ComRes, shows there is clear public support for matching any APD reduction north of the border with an immediate similar level of reduction everywhere in the UK.

Politicians seeking to respond to public opinion should take note.

As a sector, UK aviation welcomed the recent Government reforms of APD. Abolishing Bands C and D for the longest flights and axing APD on children under 16 by next year will undoubtedly deliver a much-needed boost to outbound and inbound tourism, and make the UK a more attractive destination for business travel.

Airports and airlines across the country will do everything they can to ensure passengers are aware of these changes, at home and overseas.

However, even with these reforms the UK still levies far and away the highest rates of APD in the world – double those of its nearest challenger, Germany, and the APD take is scheduled to increase in future years.

The Government itself estimates that by 2017-18 total revenues will reach an eye-watering £3.8 billion. To put this into context, in 2006-07 APD raised less than £1 billion for the Treasury.

The AOA and A Fair Tax on Flying, the industry coalition we campaign with on APD, believe a fundamental change in thinking is needed.

The fact that such a change is set to take place in Scotland, care of the Smith Commission’s proposal to devolve responsibility for APD to the Scottish Government, shows just what is possible.

The Commission’s recommendation – accepted by all the main UK political parties – would result in APD rates north of the border coming down by 50%, with the intention to abolish APD altogether eventually.

Draft legislation granting the necessary powers has been published and is due to be taken through the House of Commons by the next UK Government, to become law by next year.

Today’s polling data, reported in Travel Weekly, shows the aviation sector has the UK public on its side when it says all parts of the UK should benefit from the same cut in APD which Scotland is due to get.

The vast majority of voters polled in marginal constituencies – where the general election will be decided – believe APD rates should be consistent across the UK (78%), and more than half strongly agree with this statement.

A similar proportion agreed that if passengers in Scotland were to pay a lower rate of APD, this would be unfair to passengers in the rest of the UK (75%).

Around two thirds of voters of all main parties think the UK Government should commit to match a reduction in APD should the Scottish Government halve current rates (68%), with 40% strongly agreeing.

Airports and airlines need to be able to plan for the future with certainty. The former develop infrastructure for future passenger numbers years in advance. The latter set out their route schedules many months in advance.

The UK Government and politicians of all political hues should take heed of these polling results.

The results mirror growing concerns that allowing one part of the UK to levy substantially reduced rates of APD would not only be unfair to our sector and to passengers, but could also distort the market in terms of where airlines decide to fly to and from.

All those in the aviation and tourism sector should call for the main political parties to set out their thinking ahead of the UK general election, and to publish plans on how they intend to ensure no airport or passenger is disadvantaged by the devolution of APD.

With public opinion clearly supporting the idea that an APD cut in Scotland should be matched immediately by a cut everywhere in the UK and with a general election due now is the time press the case.

Sourced from Travel Weekly

Thomas Cook streamlines management structure

Thomas Cook’s chief executive Peter Fankhauser has streamlined the company’s management structure as it looks to improve the “execution” of its strategy.

Peter Fankhauser, chief operating officer, Thomas Cook

Fankhauser, who took over as Cook boss from Harriet Green in November, has created a smaller top management team to “take the decisions”.

This four-strong executive committee includes Fankhauser, chief financial officer Michael Healy, chief airlines and hotels officer Christoph Debus, and chief corporate officer Craig Stoehr.

Fankhauser said that Green previously had more than 20 people reporting directly to her and this structure needed to be streamlined.

He added that this did not mean that he had “cleared out people” in his first three months as chief executive, although he has removed the role of chief operating officer – a position Fankhauser held before his promotion.

Fankhauser has admitted that the company is relying on the “robust” strength of its UK division to meet profit expectations for the current financial year which runs to the end of September.

He said that the UK business was helping to offset a downturn in sales in Germany and the Nordic regions. Although sales have picked up in recent weeks.

The UK division made its highest underlying profit margin of 3.7% since 2009 during the last 12 months, which compares with a margin of 2.3% for the corresponding period in 2013-14.

But the UK still made an operating loss of £62 million in the quarter to December 31, 2014 – although this was a £7 million improvement on last year’s quarterly loss of £69 million.

Fankhauser expects this momentum in the UK to be maintained by stronger demand for long-haul holidays helped by the decision by the government to axe Air Passenger Duty for children under 12 for flights from May 1.

He added that the relaunch of Cook’s premium brand, Signature, in the UK had already seen sales increase by 20% for this summer compared with last year.

“We are seeing increasing demand for long-haul holidays as we are improving our offer in the market which is driven by our inhouse airline,” said Fankhauser.

“Customers will also have the advantage of the cutting of APD for kids – this will give us a tailwind because a family with two children will have to pay £140 less tax for their holidays.”

Fankhauser said the three key strategies for Cook would be: improving the quality of holidays through more differentiated or exclusive resorts (such as its Sentido and Smartline brands), selling through all channels, and “running the business as efficiently as we can”.

Cook made an operating loss of £73 million for the quarter compared to a deficit of £122 million for the same period in 2014. Revenue was up by 1.6% to £1.52 billion on a “like for like” basis but was down by 8.3% overall year-on-year.

Analysts are expecting Cook to make an underlying profit of £375 million before interest and tax in 2015, compared with a profit of £323 million last year.

Sourced from TTG Digital

Opinion: Do air passengers really benefit from delay compensation?

Opinion: Do air passengers really benefit from delay compensation?Industry public affairs consultant Andy Cooper takes issue with the ‘delay compensation’ culture generated by EC rules and the companies which profit from it

I was peripherally involved in the process that led to the implementation of EU Regulation 261/2004, which changed the compensation limits for denied boarding, as well as introducing a new right for compensation for cancelled flights, and a right to be looked after in the event of a flight delay.

Representing the interests of large tour operators at that time, I was not unhappy with the regulation – tour operators and their charter airlines didn’t cancel flights and rarely if ever intentionally overbooked passengers.

Furthermore, tour operators had long felt it appropriate to look after their customers in the event of a flight delay, and the new proposals did not really go any further than the levels of care we were already offering.

That comfort disappeared in 2009 when the European Court of Justice (ECJ) decided to extend the law and made it obligatory to offer compensation at the same levels to delayed passengers as to those whose flights had been cancelled.

This became a concern because the levels of compensation were set so as to be “effective, proportionate and dissuasive” – i.e. intended to dissuade the airline from acting in the way it had done so.

That is reasonable when the action – cancelling a flight or denying boarding to someone because you have chosen to overbook the flight is within your own control, and thus avoidable – but begins to look like a harsh penalty when the action is generally outside your control.

The courts have since 2009 looked to extend the rights to compensation for delayed passengers, and make it more difficult for airlines to avoid making payment, partly on the basis of wanting to give a consumer benefit, and partly on the grounds of simplicity – if it is too difficult for consumers to make a claim, they will not do so, and thus lose a right.

Whilst this is superficially attractive, in that delayed passengers potentially now get significant compensation, it comes at a cost.

Ultimately, someone has to pay that compensation and since profit margins are wafer thin in the aviation sector it almost certainly comes from increased fares charged to every passenger.

To put some numbers in this, Iata predicts that 2015 will be one of the most successful years ever for the airline industry.

However, it also predicts that European airlines will make on average $4.27 per passenger profit, which at today’s exchange rates is about £2.75.

When you realise that compensation levels per passenger are set at €250 (£185), €400 (£295) or €600 (£445) depending on the length of a flight, you begin to see a slight imbalance between compensation payable and both the profit and the seat cost for flights on European airlines.

As compensation rights have been extended, a mini industry has developed of claims management companies and lawyers specialising in “helping” customers make claims for flight delays.

There is a remarkable level of consistency in the fees charged by the numerous claims businesses offering this support. They typically charge 27% of the value of the claim for their assistance, sometimes with admin fees and other costs on top.

For me, one of the more unsatisfactory decisions from the courts has been that even though the aviation industry never expected to pay compensation for flight delays – and the legislators (both European Parliament and European Council of Ministers) never intended that compensation should be payable as they made clear in submissions to the ECJ – the courts have applied the right to compensation retrospectively.

As a result, as a delayed passenger even if your flight delay was up to six years ago and you were appropriately looked after, you can still seek compensation for that delay.

Much of the work of the claims industry is encouraging customers to bring these older claims, as they recognise this provides a good source of income. Flight delays happen for many reasons, but generally no airline chooses to delay passengers as any delay, irrespective of compensation rights, comes at a cost.

The airline has additional crewing costs, operational costs and other costs arising from the delay. Some delays can be said to be within the control of the airline, but most are not directly within its control.

The aviation industry is heavily regulated and levels of maintenance of aircraft are much higher than, say, cars, buses or trains.

We would all agree this is a good thing, as the last thing any passenger would want is their aircraft going wrong mid-flight. This means aircraft often get delayed as a result of technical and other issues which need to be fixed before an aircraft departs.

The airline doesn’t want to delay the flight, but equally is not going to risk flying an unsafe aircraft. The CAA monitors flight punctuality at the 10 largest airports in the UK. The historical data shows the numbers of delays are quite small.

There were over 1.4 million flights from these airports in 2012 and just over 8,000 or 0.58% were delayed by more than three hours. The numbers were similar in 2013.
The number of passengers affected by those three-plus hour delays was slightly over one million in each year.

Some of these passengers will not be able to claim as the delay was obviously outside the airline’s control, for reasons like heavy snowfall at airports, storms, or even volcano eruptions.

A further number would be unable to claim because they were on a flight with a non-EU carrier flying into Europe from outside the EU.

But this still leaves a massive number affected by delays – I calculate 600,000-650,000 passengers each year. If every one of those passengers claimed compensation, the cost to the airline industry would be massive.

Bearing in mind that the claims industry charges a 27% fee to assist in claims, it’s easy to see how much money is simply disappearing from the aviation industry into the pockets of the claims companies.

On the basis that the profit margins of the airline industry are small, ultimately the only way the compensation costs can be recovered is by increasing the fares charged to all passengers.

So the next time you think you have paid a lot for your flight in Europe (and to be fair we still have some of the cheapest fares in the world) bear in mind that part of your fare is going towards the cost of the Bentley or Mercedes sitting on the driveway of the owners of the claims companies who are making their profits from the airline industry.

If compensation is payable at all for flight delays, it needs to be proportionate to the price paid for the journey, not some arbitrary sum set at a level to punish the airline.

Whilst the regulation is being reviewed, I’m not holding my breath that we’re going to see that proportionality introduced.

Sourced from Travel Weekly

Thomas Cook reports ‘robust’ UK trading in first quarter

Thomas Cook reports 'robust' UK trading in first quarterThomas Cook cut first quarter winter losses by 42% to £73 million.

Europe’s second largest travel group saw losses reduced by £53 million against the same period a year earlier.

Like-for-like revenue was up by 1.6%, or £24 million, to £1,519 million. Cook reported “robust trading” in the UK, with a significant increase in bookings for both winter and summer.

Overall trading was described as being in line with expectations with the current winter progamme 85% sold – broadly in line with last year.

The summer 2015 programme is 41% sold, a 3% improvement on this time last year, with UK bookings 5% higher with prices 1% lower.

The UK business continued to show improved profitability, with an increase in like-for-like earnings (EBIT) of £7 million in the three months to December 31. This was down to an enhanced product offering including a high proportion of concept hotels and long haul destinations combined with cost cuts.

Bookings via the main UK website rose by 24% for December alone, and by 10% for the quarter.

However, the removal of other low-margin hotel only business has led group web penetration to remain at 38% over the last 12 months.

The UK margin improved to 3.7% over the last 12 months from 2.3%, reflecting the impact of operational improvements including cost out initiatives and better product, Cook said.

The company said trading conditions in Continental Europe and parts of Northern Europe have been tougher than the UK, although there has been a “significant improvement” in recent weeks.

Turkey and the Canary Islands continue to be the most popular destinations, volumes to Egypt are improving, and the USA is growing strongly driven by new routes.

Airlines Germany was described as performing well, especially in the long haul segment, “with the impact of strong competition evident in the short and medium haul market”.

Chief executive Peter Fankhauser, who took over from Harriet Green last autumn,  said: “Our performance in the quarter demonstrates the strong progress we continue to make in transforming Thomas Cook.

“We are particularly pleased with the performance of our UK business, which is now achieving its highest underlying EBIT margin since 2009, while at a group level we have nearly halved our first quarter operating loss.

“Although it’s early days, our strategy for profitable growth through new products and winter sun is delivering results.

“The trading environment in many of our markets continues to be tough, but we believe the measures we are taking to improve our businesses will continue to strengthen our competitive position.

“Our strategy remains to generate sustainable profitable growth by providing differentiated and exclusive holidays while driving efficiencies in production and distribution, underpinned by digital excellence.

“I am confident that our focus on rigorous implementation will continue to drive significant improvements in the group’s performance.”

Sourced from Travel Weekly