I HAVE to say June continues to sell well, although it still looks a little shaky towards the end but, compared to last June, it has been a dream.
We needed a passable June in order to make up for May where we couldn’t sell anything no matter what the price.
For us it was Corfu that was the real problem and the lack of sales were clearly caused by our clients being worried about the knock-on effect of the Balkans war.
However, many others suffered across the board and, one of the main reasons for the excess capacity, is being put down to the lengthened seasons we are being forced to fly.
As the vertically integrated companies have tightened their grip on the market and have taken more and more flying in-house, so they have forced the independent sector to extend the summer season by another four weeks – two extra weeks in May and two in October.
Some destinations can take the extra weeks as they traditionally run long seasons but, to many others, the extension amounts to commercial suicide if you do not own your own airline.
In the old days we were able to layer flying much more than we are able to now. Over the last two to three years we have been forced, through lack of choice, to fly more weeks yet the seat price has just carried on rising. The airlines have, so far, refused to accept a lower seat rate for the extra weeks.
To the vertically integrated, the longer season enables their in-house airline to improve their slot use – ensuring that this precious commodity is not taken away – and aid their total aircraft utilisation.
So, when the vertically integrated operator sells at, say £89 in May, it is probably contributing £30 or £40 towards the marginal costs of flying the in-house airline’s aircraft. After all, it’s all one pocket.
However, the independent operator who may well have the majority of seats on the aircraft is still remitting the full seat rate to the vertically integrated company’s in-house airline, so subsidising the in-house airline’s flying. But, when the independent is being forced to sell at £89 because of overcapacity, it is suffering an enormous loss because it is already paying more than this amount for the seat on the aircraft. So, whatever way you look at it, we independents are putting money in the pockets of our competitors to help them put us out of business.
On the other side of the coin, the retail chains of the vertically integrated companies are forcing more and more commission from the independent tour operators. This forces the independent to put up prices or lower margins.
To add insult to injury, the linked retail chain obviously does its best to sell the distressed May and June capacity of its in-house operator first, so catching the independent operator in a perfect pincer movement.
There is a danger that, in the same way as the large food chains are destroying their farming suppliers, the retail travel chains and their linked independent travel agents’ consortia will also ruin the independent tour operators that supply them. I have never been wrong in what I have had to say about the dangers of the power of the vertically integrated. What I describe above will come to pass.