NEWS — HOT STORIES 2
Profits under pressure as demand lags capacity
Ian Taylor
Margins on mainstream holidays are under pressure as demand has failed to keep up with increased capacity this summer. But leading agents and
operators dampened expectations of a significant pick-up in sales following England’s World Cup exit. Deloitte head of travel Graham
Pickett told an Abta conference last week that capacity is up by as much as 5% this summer but “demand is slightly down”. Sunvil chairman Noel Josephides, who chairs Abta, said: “There is gross overcapacity. Everybody has moved in – British Airways, Norwegian, Monarch, Tui – and margins are going to be affected. Everyone has to sell cheaply. “It’s classic travel industry
behaviour. You have one good year, everyone piles in, then you rush around trying to fill the capacity. We’re back to the prices of five-six years ago – £89, £99 for bookings in four to five days.” Josephides insisted: “Forget the
weather, forget the World Cup – they are excuses. It is simply too much capacity.”
Advantage Travel Partnership managing director Julia Lo Bue- Said agreed, saying: “Overcapacity is really affecting the family market. We’ve seen late offers that we would not usually expect.” Yet she added: “The top-end
market continues to flourish.” Leading agents were more upbeat. Hays Travel managing director John Hays said: “April was flat but May was fantastic.” He reported Hays retail up 8% in passengers and 12% in sales value in June and said: “I definitely don’t share the concern about price.” Miles Morgan Travel managing director Miles Morgan said: “We traded well through May and June and we’ve seen no impact since [England’s exit] last Thursday. “Does capacity ever match demand? Someone always sees an opportunity.” Pickett told Travel Weekly: “Prices
are softening. If the weather carries on as it is, with capacity as it is, there could be some issues.” ❯ Analysis, page 12
3
Joanna Kolatsis: ‘Fares will rise’
Air fares tipped to rise by £5 after Thomson rebuff
Ian Taylor
Air fares will rise as a result of the latest court rulings on payouts to passengers for delays, with charter prices likely to increase by more than scheduled services. One senior industry figure suggested fares could rise by as much as £5. The Court of Appeal ruled last week in favour of a claim against Thomson Airways by passenger James Dawson, who sought compensation for a delay on a flight almost six years earlier. A county court had awarded Dawson £975. Thomson appealed, arguing the Montreal Convention – the international agreement covering carriers’ liability for injuries and lost baggage – imposes a two-year limit on claims. The ruling was the second on passenger rights and EC Regulation 261 this month. The Court of Appeal had earlier judged against
Jet2.com, ruling that a technical fault that caused a delay could not be classed as an “extraordinary circumstance”. Lawyer Joanna Kolatsis of Hill Dickinson warned:
“It is inevitable air fares will rise as the costs of handling these claims increase. There is simply no other way for airlines to recover the costs. Ryanair implemented a Regulation 261 levy on tickets and, while
unpopular at first, it has gathered growing sympathy among airlines.” Almost 1% of UK flights are delayed by more than three hours and
fall within Regulation 261. A senior industry source said: “Charter delays of more than three hours are more than double the rate of scheduled carriers’ and a significant proportion are technical. If everybody made a claim it would add £5-plus per passenger.” A CAA spokesman said: “It’s difficult to estimate what this might cost passengers. It’s up to each airline.” ❯ Joanna Kolatsis comment, back page
26 June 2014 —
travelweekly.co.uk • 5
“There is gross
overcapacity.
Everyone has to sell cheaply”
PICTURE: ISTOCK
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