Lotus Coronavirus Update (03.04)

STATISTICS

ForwardKeys analysis

This week, 30 March – 5 April, ForwardKeys reports that international airline seat capacity fell to just 23% of what it was in the first week of April last year. Just 10 million seats were still in service, compared with 44.2 million a year ago.

Looking back over the first quarter of the year, airline seat capacity is 9.4% down compared with Q1, 2019. 482 million seats were in service in Q1 2020, compared with 532 million in Q1 2019.

At the start of January, capacity was slightly up on last year. However, it started to fall during the last week of January, when the Chinese government announced restrictions on outbound travel. From then until the middle of March, air capacity fell substantially; at which point it fell precipitously to the end of the month.

Eurocontrol air traffic figures released

The Times reports today that the number of flights in and out of the UK fell by 37.4% in March, compared to a year earlier. Italy recorded a drop of 65.9%; Austria 49.1%. The figures show that scheduled flights are continuing to arrive at Heathrow as the UK maintains more international air links than most other European nations, although the airport will reduce its operations to a single runway from Monday and will stay open for a small number of scheduled passengers and cargo.

IATA airlines will lose £200 billion this year

Figures from IATA this week suggest that airlines will lose an estimated £200 billion this year.

GOVERNMENT

Government support for small businesses has been received by local authorities but TMCs not eligible

TTG reports that local authorities across the UK have received more than half of the £22 billion the government promised to support small businesses such as travel agents. The Treasury made it clear the money “must reach businesses as quickly as possible”.

It comes after the Treasury said cash grants of up to £25,000 were starting to be paid into some businesses’ bank accounts.

Meanwhile, all businesses in the retail, hospitality and leisure sectors, including travel agents, with a rateable value of less than £51,000 are eligible for business rates “holiday”.

The grants and rates relief come in addition to the government’s job retention and self-employed income support schemes.

TTG polled 100 readers this week and found 33% of respondents were encouraged by the measures but were awaiting confirmation or clarity of what they were entitled to.

However, a further third (35%) said the measures were not applicable and the government must look at introducing additional support.

Business Travel News Europe reported that the Business Travel Association (BTA) has claimed the business rates holiday is not available to TMCs and has called on the chancellor to change the rules to allow companies to access support.

Chancellor orders more help for businesses

Travel Weekly reported that further action to support firms affected by the coronavirus crisis is being taken by chancellor Rishi Sunak.

More than £90 million of loans to nearly 1,000 small and medium sized firms have been approved under the government’s Coronavirus Business Interruption Loan Scheme (CBILS) since its launch last week.

A government-backed scheme to provide financing to larger companies, has also provided almost £1.9 billion to firms with a further £1.6 billion has been committed.

The CBILS is being extended so that “all viable small businesses” affected by Covid-19 – not just those unable to secure regular commercial financing – will now be eligible should they need finance to keep operating during the pandemic, according to HM Treasury.

The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals.

The government pledge to continue to cover the first 12 months of interest and fees.

The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million.

Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced later this month.

CHINA

Foreign Travel Ban

Newsweek has reported that China has announced a travel ban on all foreign nationals, including those holding a work visa or residence permit, last week.

Foreigners with diplomatic, service, courtesy or C visas will reportedly not be affected by the policy, as well as those travelling to China for economic, trade, scientific, technological or humanitarian reasons. The Ministry said: “The suspension is a temporary measure that China is compelled to take in light of the outbreak situation and the practices of other countries.”

Chinese Factories Find New Life but Outlook Darkens for Jobs in Europe

The FT has reported this week that Chinese manufacturing unexpectedly recovered from a record low in February, but the European picture darkened amidst attempts to slow the coronavirus and today the FT reports that service sector activity crashed in Europe in March.

INDUSTRY UPDATES

BA Furloughs 80% staff

The Unite union, representing BA staff, said that it had reached an agreement for BA to furlough 36,000 staff, which includes cabin crew, ground staff, engineers and those working at its head office near Heathrow.

BA will introduce a “modified version” of the government’s Job Retention Scheme, so that workers will be furloughed on 80% of pay but with no cap on earnings.

There will be no redundancies or unpaid temporary lay-offs during this period and the redundancy process that had already begun has been halted.

The Times highlights how governments in other countries have been quicker to dispense state loans to airlines than the UK, which Airlines UK said put UK carriers at a competitive disadvantage.

Accor close over 3,000 hotels

Travel Weekly reports that more than two thirds of Accor’s 5,000 hotels are expected to be closed within weeks due to the deepening impact of the global coronavirus lockdown.

The firm’s asset-light transformation means that it has a strong balance sheet with more than €2.5 billion in cash and a revolving €1.2 billion credit facility.

The company said in a trading update: “While much uncertainty remains on the duration of this crisis, the group expects a severe impact on its 2020 performance but remains bullish on the long-term perspective of the hospitality industry, for Accor, its employees, its owners and shareholders.”

NYC & Company launches digital showcase

Breaking Travel News reports that NYC & Company has begun highlighting ways to experience the iconic cultural scene of the city virtually, for those who may be seeking an escape in light of the current global Covid-19 situation.

The experiences range from educational programmes to critically-acclaimed independent films; orchestral arrangements; inspired choreography; theatre; visual arts; and digitised museum exhibitions to virtual neighbourhood tours.

Nearly half of major insurers pull travel insurance products from sale during coronavirus crisis

Which? has reported that a significant number of the UK’s major insurers have pulled out of the travel insurance market.

Which?’s researchers found that 31 insurers, including well-known insurers such as Aviva, LV= and Direct Line, have temporarily suspended the sale of travel insurance to new customers as a result of the pandemic. A further 13, including Axa, Saga and Staysure, have changed aspects of their policies making them more restrictive.

Update from The Travel Corporation

Brett Tollman, chief executive of The Travel Corporation, speaking to Travel Weekly said that he believes consumers will emerge from the coronavirus crisis with a more appreciative approach to travel. The Travel Corporation employs 10,000 people across a range of brands, which in the UK include Insight Vacations and Luxury Gold, Trafalgar and Costsaver, Uniworld Luxury River Cruises, Contiki and Red Carnation Hotels.

Tollman says about a third of customers with forward bookings have cancelled and asked for a refund; about a third have postponed their holiday to a later date; and another third are waiting to see what happens before cancelling or postponing.

“We are trying to issue as many credit notes as possible. We still want people to travel – just later in the year or next year,” he says.

Viking commits to expansion

Travel Weekly reports that Viking is extending its reach on rivers in North America with its first custom-built vessel despite the current shutdown of operations due to coronavirus.

The company is to deploy new ship Viking Mississippi from August 2022 between New Orleans and St Paul.

The 386-passenger ship is being purpose-built for the Mississippi with five decks including a plunge pool.

Saga provides trade update

In a trading statement issued on Thursday 2 April, the CEO Euan Sutherland said that while the firm’s travel business had been “significantly impacted” by the Covid-19 pandemic, the group had “acted quickly” to ensure the health and wellbeing of customers and staff.

“We have significant available liquidity and can consider a range of further mitigating actions across the group,” said Sutherland. “Saga is a strong brand with loyal customers, and where we offer really differentiated products, underpinned by excellent service, our businesses do well and have the potential to do better.

Saga said while customer demand for future departures “remains positive” across both its cruise and tour operations, “there remains considerable uncertainty as to when travel services will resume”. “It is likely the period of travel suspension will continue beyond May,” said the group in its trading update.

“Saga is ready to start sailing as soon as the travel advice changes," said Sutherland. "Today, we have outlined some prudent planning scenarios to investors – they are not a prediction as to when travel will resume.” These scenarios include cancelling all travel departures over the next six months and a resulting slow recovery.

Advantage Holidays sees interest for winter 2020/21

TTG reports that in Advantage’s daily update to members on 31 March, head of Advantage Holidays Lee Ainsworth said the Covid-19 lockdown is contributing to pent-up demand for trips.

“I have seen an interesting little trend,” said Ainsworth. “We are starting to see bookings come through for winter 2020 into 2021.

“This is encouraging, it just goes to show that customers are still thinking ahead for travel, although at the moment that may be relatively low numbers for everyone.”

Insights from industry veterans

Travel Weekly’s interview with industry veterans Will Waggott, Chris Photi and Jeanette Linfoot provided a number of useful insights:

1. Trust accounts will emerge as preferred method of financial security

Chris Photi partner at White Hart Associates said that trust accounts – which hold consumers’ money until they complete their travel - are likely to emerge from the coronavirus pandemic as a preferred method for offering customers financial security. Firms that operate trusts like Trailfinders, On The Beach and Travel Counsellors are “trumpeting” them, but they are not currently used by either the CAA/ATOL or ABTA.

2. Use furlough time to upskill ready for the bounce-back

Former Saga head of tour operations Jeanette Linfoot said staff being laid off must use the time to prepare for business returning. Travel industry employees who find themselves furloughed should use this time to hone their skills ready for the bounce back.

3. Government loans won’t save zombie businesses

The emergency government loan scheme will save many businesses but the pandemic will kill off “zombie” firms that are not profitable.

Will Waggott, former Thomas Cook, Tui and Airtours boss said: “These loans aren’t free. If you are making losses all you are doing is financing those losses and you are still going to have to pay the load back.”

4. Government decision on package travel regulations may not go in travel industry’s favour

With many firms waiting on a crucial decision over whether package travel regulations will be relaxed on offering refunds, Chris Photi warned that the discussions with the government may not go in its favour.

“A lot of the other EU member states tweaked the PTR [Package Travel Regulation] legislation over two and a half weeks ago. Unfortunately, our government has prevaricated.

“They have been receiving a lot of lobbying from ABTA and the CAA, I believe the Department for Transport is thinking this is a desirable thing for the travel industry.

“But it appears that BEIS [Department for Business] has a dilemma in that they think it’s going to be detrimental to consumers when they need money in these difficult times.

“But really, there are a lot of travel business with their lives hanging by a thread and it’s been exacerbated by the airline position.

“They have the support of 38 MPS and it does appear they have the support of the European Commission.” He and Photi continued that they believed that the Government thinks that airlines are more important to the infrastructure of the country.

Waggott said having to pay refunds will mean firms run out of cash very quickly.

TRENDS

Consumers put brands on notice over coronavirus behaviour: Show up and do your part, but don’t act alone

PR Week has reported on a special edition of the Edelman Trust Barometer which finds that consumers have warned brands that their actions during the pandemic will have an impact on future purchasing behaviour.

• Consumers are demanding that brands act and communicate differently during the COVID-19 crisis, with nearly two-thirds (65 per cent) saying how brands respond to the pandemic will have a ‘huge impact’ on their likelihood to buy their products.
• One in three respondents said they had already stopped using a brand that was not acting appropriately in response to the public health crisis, a figure that rose to 76 per cent of consumers in Brazil, and 60 per cent in India.
• Ninety per cent wanted brands to partner government and relief agencies to address the crisis.
• Consumers demand companies to protect the wellbeing and financial security of their employees, even if it means suffering big financial losses. Fifty-two per cent of respondents said brands ‘must’ do this to earn or keep their trust, while a further 38 per cent said they ‘hoped’ brands would do this.
• 89 per cent of consumers said brands should shift to producing products that help people meet the new challenges presented by the virus, and/or offer free or lower-priced products to health workers or other high-risk individuals.

Changes to travel after lockdown

Phocuswire today runs a comment piece by Avi Meir, the co-founder and CEO of TravelPerk, who is anticipating that travel will be very different after this pandemic. He predicts that:

1. Tests at the border: Queues at immigration

Asian countries who have got on top of their own outbreaks are now sending foreigners into quarantine. Even when lockdowns in Europe are over and we start to travel again, countries will test at the border.

2. You’ll need more than a passport

Some countries will not even take the chance of testing at the border - especially if you’re coming from an outbreak hotspot. Entrance will be refused unless you have a certificate of immunity due to the fact that you’ve recovered from an infection or because you’ve been vaccinated (once there are vaccines available). Wristbands with barcodes like those in the movie Contagion are a very real prospect.

3. Travel seasons will change

An influential paper from Imperial College London speculates that governments will need to turn lockdown measures on and off in order to keep demands on healthcare systems at a manageable level. This means there will be windows of opportunity to travel that last only weeks or even days. Even with airlines desperate to get airborne again, seats will be limited, and we could see dramatic increases in pricing during those windows.

4. Recovery will be uneven

There are numerous factors influencing this pandemic. Strictness and timing of lockdown measures, robustness of healthcare systems, the weather, luck and other factors are all at work - meaning some countries and regions will recover first. We will see corridors of recovery open back up one by one.

5. You’ll pack differently

As we’re being directed to wash our hands, and the only way to do that when on the move is with hand sanitizer, we may well see the relaxing of liquid carry-on restrictions as travellers want to take more than 100 millilitres, especially on long-haul flights.

A lot more people will travel with masks. In the same way that companies like Away have made luxury, fashionable travel baggage, we will most likely see “desirable” travel masks worn by Instagram influencers.

6. Insurance

Travel insurance against disease outbreaks and for travel flexibility will become more popular.

7. Don’t travel when you’re sick

Social stigma will mean people won’t want to travel with a cold.

8. Train travel will become more popular

Domestic travel will recover first and trains with windows that open and are environmentally friendly.

9. Airlines will promote their clean air filtering systems