Industry seems to be recovering from Brexit uncertainty and the fall-out from Thomas Cook, says Ian Taylor
The January peak-bookings period in the UK appears to have started well if not spectacularly despite the tensions between the US and Iran.
Another war in the Middle East would obviously be a catastrophe.
The tragic loss of the Ukraine International Airlines flight over Iran on January 8 heightened the sense of crisis amid reports the aircraft was downed by a missile.
If that proves to be the case, we can only hope it leads to a lessening of tension and general stepping back from confrontation.
Short of war, the UK industry seems set to continue along the path to recovery from the endless period of uncertainty over Brexit and the fall-out from Thomas Cook’s failure last autumn.
Certainly, that is what industry figures were reporting this week, with a consensus emerging that trading so far in 2020 appears up on 2019.
UK number two Jet2 demonstrated its confidence in the market and its model this week by announcing the addition of half a million seats to Greece for summer 2020.
Its airline will operate more than 220 flights a week to Greece in the summer peak.
What impact this has on the pricing and performance of other operators to Greece is another matter, but it’s a competitive market and there are clearly opportunities following the demise of Thomas Cook.
Months of tough trading
It is worth recalling just how difficult a year the UK outbound sector had in 2019 amid uncertainty about the terms of Britain’s departure from the EU and significant overcapacity in the short-haul market.
The summer 2019 market saw months of tough trading before something of a reprieve in late spring and summer, only for Thomas Cook’s failure in September to pose a whole different set of problems.
Yet the trade went into January 2019 in a strong position with summer 2019 bookings up 9% year on year and revenue growth in double figures.
This was despite a 20% plunge in bookings in the second half of December 2018 following a Sunday Times front page warning: “Don’t go on holiday after March 29”.
The end of March was at that point when Britain was to leave the EU.
It was a pattern to be repeated. By January’s end, summer 2019 bookings were just 4% up year on year, as Brexit concerns amplified by media reports had a demonstrable effect.
When airline association Iata warned flights could be cancelled in the event of a no-deal Brexit it produced a spate of headlines warning: “No deal threat to 5m tickets”.
And when the UK government warned travellers to check passports were sufficiently up to date for EU travel, a national newspaper reported: “Passport chaos: 3.5m could be INVALID”.
David Hope, senior client director at industry analyst GfK, noted at the time: “The market dropped off a cliff.”
The difficulty was highlighted by Britanny Ferries’ chief executive Christophe Mathieu, who told an Abta Brexit briefing in March: “We can’t offer reassurance when people book. We’re unable to give answers other than ‘We hope to minimise disruption’.”
By late March, summer 2019 bookings were running 7%-10% down year on year each week and season-to-date bookings were barely up on the previous year.
The inevitable Brexit delay appeared to have no immediate impact. In early April, Hope reported: “Things are not getting better. Everything is down.”
By late April, season-to-date bookings for the summer had turned negative.
Impact on cash flow
Discounting halted the decline and pushed summer 2019 bookings in May up 1% year on year at the price of a 1% drop in revenue.
June brought a turnaround as monthly bookings rose 7% on 2018 and season-to-date revenue returned to 2% up year on year.
By mid-July, GfK could report “nine consecutive weeks of passenger growth” largely driven by all-inclusive bookings.
Hope noted: “The industry has had to price extremely competitively. The tough trading environment has had a significant impact on cash flow.”
How significant was yet to be revealed as Thomas Cook struggled to bring in cash.
By the end of August season-to-date bookings had recovered to 2% up year on year and revenues 3% up. That represented not only quite a turnaround but a strong performance in the circumstances.
After all, 2018 had been a record year for UK outbound travel, with 47 million holiday departures according to the UK Office for National Statistics and GfK reporting summer 2018 bookings up 5% year on year.
Thomas Cook’s descent into liquidation on September 23 scuppered year-on-year comparisons and made assessing the overall state of the market more challenging.
For now, anecdotal evidence must suffice. Yet there is enough of that thus far to support the view of Kelly Cookes, leisure director at the Advantage Travel Partnership and former head of the Thomas Cook-owned Freedom Travel Group.
Cookes told Travel Weekly this week: “We went into the peaks hesitatingly – the landscape has changed significantly – but it seems relatively buoyant.”
Let’s hope that continues.
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