Travel Booking Agents; should we be worried?
In the wake of the Thomas Cook (TC) financial crash, what is the outlook for remaining Travel Booking Agents? Is it now possible to book your trip with confidence, without the worry of getting stuck abroad having to fork out extra cash before you can get home? It helps to know the economic health of any travel company before you decide to book with them. Plus how to get adequate financial cover for your trip. This article covers both of these.
Major Names
Most of the major names in the world of travel booking agents are suffering financial losses to some degree at the moment. But to what extent and what does the future hold for them? In the UK over the past year we are tending to be more cautious about booking holidays. Different factors going on in the world are influencing the travel industry as a whole.
Factors affecting the Travel Industry overall
The High Street travel booking agent suffered a blow in recent years due to the trend to book holidays online. Some Millennials have never seen the inside of a high street travel agency. In fact whatever our age we are enjoying making our travel plans online. And what’s not to love when it’s easy and fun to do so in the comfort of your own home over a cup of tea or glass of something!?
Heatwave and Brexit Uncertainty
2018 saw one of the hottest summers on record in the UK and some of us regretted booking to go abroad. Whether or not climate change is to blame for that great summer, our booking behaviour certainly changed as a result. Many of us played the waiting game this year to see if another heatwave was to materialise. Perhaps a staycation would be a better idea, saving us travel time and perhaps money. The uncertainty over Brexit is also taking it’s toll in the same way it is affecting the UK housing market. After all we were led to believe we were exiting Europe on March 31st and this caused travel uncertainties amongst some of us. The weak pound isn’t exactly an incentive to jet off either. Consequently, bookings are down in the first part of the year in the majority of travel booking agents. Both high street and online travel booking agents are suffering. Rising fuel costs are hitting airlines across the board and this too is affecting company profits.
So What exactly caused the death of Thomas Cook?
All Travel companies are subject to these problems though. So why did Thomas Cook (TC) ultimately meet it’s death? A Spiralling debt problem that was neither addressed or properly managed was a major concern. Their financial woes began as early as 2007. It was around then that we started to prefer book our trips online. Thomas Cook failed to modernise and keep up with the latest trends. They did offer an online section but we were opting for more useable website interfaces and for online travel companies using budget airlines.
Mergers and acquisitions with unprofitable companies
A Channel 5 transmission entitled ‘Thomas Cook: The rise and fall of Britain’s Oldest Travel Agent’ aired first on 6/10/2019. This was a programme that gave an insight to Thomas Cook’s demise. There were contributions from TC staff as well as respected names in the travel industry such as Simon Calder. The script of the television programme leads us to believe that poor business decisions attributed heavily to Thomas Cooks’s downfall. TC went on an acquisition spree especially between 2009 and 2011 and took on companies such as MyTravel and Cooperative Travel that didn’t bring anything to the table. They were effectively deadwood. Additional TC high street stores were being opened left right and centre with massive overheads. In 2011 TC almost collapsed for the first time. But back then they managed to survived.
Terror Attacks
The Terror attacks across the world also affected TC badly. Tunisia played a major part in Thomas Cook brochures and the brutal attacks on the beach in Sousse on June 26th 2015 had a detrimental effect on the company. Also in 2015 Metrojet flight 9268 (Russian airline Kogalymavia) took off from Sharm El Sheikh with a bomb on board. All passengers and crew were killed. Sharm el Sheikh, a resort in Egypt, was also a firm favourite with TC customers. These terror attacks were doing nothing to help business. In fact, all around the world we were starting to feel a little uneasy about travel.
Nail in the Coffin
When Thomas Cook’s debt got so much out of control this year, no-one felt able to help salvage them. Peter Fankhause, TC’s Chief Executive Officer blamed their financial crisis on events that had been materialising way before he took over in 2015. He may well have a case. But it doesn’t hide the fact that the company fat cats rewarded themselves in millions in bonuses without delivering results.
Fat Cats
It is true that Thomas Cook suffered a greatly as a result of the Summer 2018 heatwave. In the same way the entire travel industry did. TC attributed losses of £88 million to it. The channel 5 programme aired on Sunday reported TC as being labelled ‘an analogue company in a digital age’. Another label it reported being attached to them: ‘Thomas Cook was a company with Victorian values set up by a Baptist Missionary and killed off by fat cats’.
Respect
Respect is due to the airlines and the UK government who stepped in to rescue stranded passengers. Respect mainly to the loyal staff, especially in Manchester where entire families gave their lives to their employer. And the best of luck to you with finding new, loyal employers.
LATEST NEWS 09/10/19: HAYS TRAVEL EXPANSION. 555 THOMAS COOK STORES BEING BOUGHT SAVING 2500 TC JOBS.
Tui
So what are our options now that the 178 year old travel company Thomas Cook has gone? Tui is the largest remaining UK high street travel booking agent and offers holidays departing from Northern Ireland as well as from the UK. You can travel to Europe, Africa, Asia and North America with them. Tui also act as an agent and sell a small percentage of holidays on behalf of other companies. It did in fact sell on behalf of Thomas Cook when it was alive.
Tui Background
Tui was previously the UK package holiday company ‘Thomson Holidays’. In September 2007 it merged with First Choice Holidays PLC to become Tui Travel, a subsidiary of the larger Anglo-German Tui AG group. Tui is the German abbreviation of the words Touristik Union International. The AG part of the name abbreviates the German word ‘Aktiengesellschaft’ meaning ‘joint stock company’.
German Parent Group
The German parent group Tui AG was founded in Berlin in 1923 and is a multi-national tourist company; the world’s largest in fact. It consists of travel agencies and retail stores where you can book package holidays, hotels, flights and cruises.
Tui Finances
The UK arm of Tui is not without financial worries. In the first half of 2019 bookings were down by 3%. Stock Market shares fell by 20% in the same period, although they recovered by 8% immediately following Thomas Cook’s insolvency. Tui’s losses can be blamed on behaviour patterns mentioned in the third and fourth paragraphs of this article.
Grounding of 15 of Tui’s Fleet
But Tui have an additional problem that contributed to their financial losses. The compulsory grounding of all of their Boeing 737 max 8 aircrafts. This is the same model which was involved in the Indonesian Lion Air crash flight 610 which killed 189 people in October 2018. And the model was also involved in the Ethiopian flight 312 flight in March this year.
Replacement Aircrafts
A customer Advisor at a UK Tui store last week informed me that Tui’s aircrafts were an upgraded version of the Boeing 737 max 8 aircraft model with superior features. This hasn’t helped their problem though of having to ground 15 of their 50 strong fleet and forking out for new models.
Optimistic
Fritz Joussen, Tui’s chief CEO remains optimistic for a positive, solid 2019. He realistically acknowledges that the company does have problems. Also acknowledged is that a real worry exists as to whether Tui UK will have access to EU airspace post-Brexit. Tui, like Boris though is endeavouring to get ‘a deal’ and are developing strategies in case of a hard Brexit.
Market Prognosis
Richard Hunter, the head of markets at ‘Interactive Investor’ reinforces these same sentiments. He believes Tui will come out the other side of their troublesome patch mainly due to their diverse product. “Their Marella Cruise product sells particularly well as does their high end ‘experiences’ product”. Nordic countries and the Canaries are fairing less well with Tui. Read more about Tui’s finances with The Independent
Jet2.com
Jet2.com is the branding name for the flights section of one of the most flourishing online travel booking agents at present. Often this company is referred to simply as Jet2. There is also Jet2holidays.com which deals with their package tours. The flight arm of Jet2 is the third largest UK airline in terms of passengers carried. Jet2 holidays is UK’s second leading travel business in terms of market share.
Jet2 Company Background
Jet2’s Parent Company/owner is the Dart Group PLC. They spotted a gap in the market for a demand for more flights in Northern part of the UK. Hence the birth of Jet2com in 2002 at their base headquarters at Leeds-Bradford airport in 2002. Jet2holidays it’s sister company arrived 5 years later in 2007. Today, their headquarters remains at Leeds but other bases exist around the country. These are mainly in the Northern half of the UK and there’s a London base at Stanstead. To serve the package tour traveller, Jet2 also have bases in the popular resorts of Alicante and Palma de Mallorca, Spain
Jet2 Company’s Mission
Philip Meeson, a former pilot is the companies executive chairman. He leads Jet2 in their mission to offer quality at affordable prices. Also they are eager to overtake Tui in becoming the UK’s leading travel business. Jet2 look after their staff too. Since the introduction of their profit share scheme, they have handed out £9.5 million to 11,000 staff.
Growth and Turbulance
So how are Jet2 doing financially? Very well thank-you! For the financial period March 31st-March 31st 2019, passengers carried on their flights rose from 10.4million to 12.8 million. Holiday makers going on Jet2’s package trips rose from 2.5 to 3.2 million in the same period . And Jet2’s overall revenue was up 34% to £2.96 billion. Jet2 has seemingly turned a corner after a turbulent 2017. In the summer of that year a 737 had to make 2 emergency landings in 2 weeks. The aircraft model didn’t need to be taken out of service after extensive safety checks. It wasn’t however the best of years for them. Read more about Jet2’s finances and outlook with Travel Weekly
Rewards
Jet2 was rewarded with several accolades in 2018 including being named ‘best airline’ at the Trip Advisor Travellers’ awards. It received Which magazine travel brand of the year award in the same year. Let’s hope the company doesn’t fall off it’s throne after the reported price hikes in the immediate aftermath of Thomas Cook’s insolvency.
Investment
Jet2 continues to invest in it’s 100 strong aircraft fleet with the recent introduction of 34 brand new 737-800 Next Generation planes. All in all the future doesn’t look too bad for Jet2.com. See more about them or book with them at the Jet2 website
British Airways
British Airways (BA) and Iberia Airlines merged in January 2011 forming International consolidated Airlines Group (IAG). Both companies still have separate websites and you can book with either to find the best price across their destinations.
Financial Outlook
Sales in 2018 were buoyant and British airways continue to make profits now. Much of BA’s profits come from corporate business class sales on long haul flights. But these profits have been dented by the exact same circumstances that are affecting the travel industry across the board. On 10/09/19 The Mirror Group reported a fall of profits of £60 million during the first three months of 2019.
BA Staff Discontent
Plus BA have problems of their own in terms of staff discontent. BA will also be counting the cost of the September strikes which will heavily affect profits in the final quarter of 2019. The BBC reported it could cost the airline 40 million for each of the days in this strike. The two day walk-out by pilots on 09-10/09/2019 could not be averted in spite of pilots being offered an 11 .9% pay increase over the next two years. Another walk-out was planned and then called off but not before all passenger flights were cancelled.
Pilots Being Blamed
For the pilots and other staff at BA their dis-satisfaction goes way beyond just the matter of a pay increase. There are several other more deep-rooted issues. It is rumoured that pilots are being blamed in general by the company for the financial losses. Considering BA pilots agreed to take a pay cut back in 2009 to help their employers, it seems a little harsh. Willie Walsh, the companies CEO gave up a month’s wages too back then.
Shareholders Gain
A feeling prevails amongst staff that British Airways is being run with the primary aim of boosting shareholders returns. The unions’ attempts to promote profit sharing across the company and it’s staff are falling on deaf ears. Airline companies in the United States including American Airlines are realising the advantages of profit sharing schemes to reward staff.
Cost Cutting
And perhaps the final straw for staff at BA is that a dedicated cost cutter (Alex Cruz) is now finding ways to save British Airways money. Not a bad thing usually in times of financial uncertainty but when the staff and customers who already feel let down will feel the effects, perhaps not so good either.
Plans to Save money
The kind of plans BA have to save money in the long run include downgrading the quality of hotels for pilots and cabin crew. Removing free coffee for customers on flights from the menu. Charging frequent flyers to change seats and cramming more seats into business class is also on the agenda. Cutting back on staff at airport check-in desks spelling longer queuing times will also damage the companies reputation. This is simply adding insult to injury after the data breach which affected 380,000 BA customers in 2018. There has been little re-assurance to say it won’t happen again. Read more at The Guardian about BA company unrest and about BA Finances at The Mirror Group
Easyjet
On September 23rd immediately following the Thomas Cook financial crash, the Easyjet (EZY) share price rose 6.2% to £11.23. Like other travel companies though, their profits have been affected by the current economical turbulence. EZY profits in the first half of this year were down by £275 million compared with £1.8 million in the same period in 2018. Revenue per seat fell by 7.4% in the same period. Revenue per seat is regarded in the travel industry as one of the most reliable indicators of profits and losses in a company. EZY have blamed losses also on drone disruption at London Gatwick during the Christmas getaway 2018. A slight further decrease in overall profits is expected in the latter half of 2019.
Customer Retention
According to Easyjet’s CEO (Chief Executive Officer) Johan Lundgren they will be scaling back on capacity growth to offset losses. Their mission is to carry on delivering value for money, great customer service including promptness of arrivals and departures.
Ryanair
Michael O’Leary’s Dublin’s based airline has suffered fairly hefty losses. To the year end March 31st 2019 Profits after tax dropped 29% (€1.02 billion in monetary terms). It’s experiencing the same problems as many other companies and is unable to predict any great turn around.
Don’t Stop Moving
Most of the Travel Companies mentioned here are unable to claim bright and rosy futures until Brexit is resolved. Also losses have to be recovered and downward trends need to start turning upwards again before Travel Companies can become really optimistic. Meanwhile, should all this doom and gloom stop us travelling? Hell no! Who could survive without a regular fix of seeing new places and a shot of sunshine vitamin D?
Useful Advice
The simplest way to be sure of repatriation in the case of your airline and/or accommodation supplier going bust while you are away is to book a package holiday. But some of us prefer to tailor make our trip by picking components from different online travel websites. It can be time consuming trawling the net for all the different elements but is also very satisfying and fun to act as your own travel agent!
Trip Protection
As long as you know the facts, you can book your holiday with confidence any way you choose to. Just be aware of your legal rights.
Travel Insurance which covers repatriation for all parts of holiday should the worse happen. You are looking for ”scheduled airline insurance’ inclusion in any travel insurance you take out. Be careful when choosing an insurance provider as not many offer this protection.
Get ATOL and ABTA protection and/or use the correct type of bank card to pay for your trip components depending how much they cost.
Take a look at my Trip Payment Protection Blog to find out more about all of these. It is an entire subject on it’s own so entitled to it’s own blog!
Let Common Sense Prevail
The best advice is use your discretion, read up (and between the lines) on the travel booking agent you are planning to book with. Also keep an eye on breaking news on TV and of course here at Travel Radar! It’s a good idea to check out financial markets regularly too to see how the travel company’s stocks and shares are doing. While you have to pay to use The Financial Times online (www.ft.com); The Guardian, Independent, and the Mirror Group often provide useful and free information (donation optional). And don’t forget to cover yourself with travel insurance, an ATOL certificate or both.
