Friday, 2 December 2011
Trouble in the UK travel business
Every sector in the UK's travel business has suffered since 2008,
Airlines are now operating on margins of 0.7% and unusual factors in addition to general economic woes have contributed.
These include high oil prices, disasters like the earthquakes in New Zealand and Turkey, political unrest in the Arab world and a general sense of fear.
Travelers have reacted by having holidays closer to home; short city breaks rather than the normal fortnight holiday and the search for value. This is why some low cost carriers like Ryan Air and Easy Jet are bucking the trend. Others like BMI are being consolidated into the International Airline Group (the owners of BA and Iberia) who value its Heathrow slots. Further away, Air Seychelles are abandoning many of its international routes and India's Kingfisher has huge debt problems.
Travel Agents have been closing down at an unprecedented rate and losing business to online and price comparison sites where deals are popular.
These online sites like E bookers have created the expectation of low and attractive deals, which inevitably damage the tour operators business.
Thomas Cook decided to delay release of its full year results with catastrophic effects on its share price.
They said: "We intend to seek agreement from the banks to adjustments that will improve our resilience if trading conditions remain difficult".
And they will.
Relying on the banks may be necessary, but remember the old adage: Bankers lend you an umbrella when it's sunny, but want it back when it's raining.