The Whole Travel Industry Needs Sorting Out Now

eskbanker

It's a bloodbath in the industry just now - On The Beach are routinely (and rightly) slated on this board for their dismal customer service but announced their financial results yesterday, in which they reported pre-tax losses of £34.1m for the six months to 31 March 2020 (versus £11.9m profit in the equivalent 2019 period).  Those figures only encompass the very beginning of the crisis so it doesn't take a rocket scientist to realise that the losses in the next reporting period will be substantially worse.

As I say, I'm not trying to defend such companies but it really shouldn't be a surprise that a company losing money hand over fist may not be able and willing to throw people and money at dealing with vast quantities of customer issues.  Each affected customer naturally has the right to shrug their shoulders and say 'not my problem', while reiterating their legal rights, but sometimes it doesn't do any harm to see the bigger picture, and hence Martin Lewis's comments quoted in an earlier post.

It's an easy and cheap shot to point to CEO salaries but perhaps worth noting OTB's response:

The Group’s CEO is forgoing his salary and the remainder of the Board have voluntarily agreed to a 20% reduction in salary and fees. This is alongside no bonuses being awarded across the Group in the current financial year.

Thrugelmir

eskbanker said:

As I say, I'm not trying to defend such companies but it really shouldn't be a surprise that a company losing money hand over fist may not be able and willing to throw people and money at dealing with vast quantities of customer issues. 

Directors have legal and personal responsibilities as to how they conduct their roles. Despite what people might like to happen, simply can never happen. 

Nebulous2

bagand96 said:

Nebulous2 said:

It has taken this episode for me to realise that the whole travel industry is run on other people’s money. The argument about jobs being lost is a false one, as the barriers to entry are so low that new companies would simply spring up to replace them. I paid my cancelled flights in full in October, I usually pay my first payment on my French or Spanish ferry crossings in December for the following August / September.

Barriers to entry are probably very low to open something like an online travel agent.  But it's very different for something like an airline, where the investments are huge, it's very hard to just "spring up" an airline, far more fail than become good, and the industry is brutal (5 years ago is something had told me Monarch, Thomas Cook and flybe would all be history, I'd have thought they'd had a few too many).

Nebulous2 said:

If I buy a car, I pay a modest deposit 4 or 5 weeks ahead and the rest on delivery. If the car industry can fund the manufacture and sales for a massive industry themselves, then travel should do the same. 

The thing with a car is that the cost of that car is (within reason, and a few %) pretty fixed.  Yes you can negotiate and shop around but every model of car has a price.  Travel, in particular the transport element (flights and ferrys etc) is very dynamic.  A flight to Malaga can cost £25.99.  But it could also cost £259.99.  You pay up front to fix the price at which you are booking.  The car market would operate very differently if the price of a new Ford Fiesta was anything from £6000 to £60,000 depending on when and where it was purchased.

I'm not trying to pick apart your arguments, there's some valid points. There's no easy fix to the current issues in the travel industry though.  It's clear some companies simply don't have the cashflow in the business.  This is especially true  for online travel agents who usually have to pass money straight on to airlines, and make a tiny % commission.  Without money back from said airlines, they won't have the money to refund.  These problems are exasperated by the fact that the airlines and travel agents simply don't have the Customer Service resource to deal with enquiries and refunds in a timely manner.  Any business will set up a customer service department to deal with enquiries from a % of customers.  The problem now in the travel industry is every single customer over a 4 month period needs or wants to get in touch.  I doubt any industry would be able to handle it very well.

Thanks. I’m not hugely familiar with the airline industry, but the problems I’ve seen seem to be a level of indebtedness combined with a financial shock, such as a big rise in fuel prices tipping things over the edge. I’ve done a bit of reading about Virgin Australia and they appeared to have high debt levels and a lack of investment. An airline going bust affects considerably less than the sum of its parts however. By that I mean, the airline goes and shareholders and lenders lose out, but the planes, pilots, landing slots, aircrew etc all still exist and will continue to be available and used. The problem now is a lack of customers, mainly because they aren’t allowed to fly because of government action. 

eskbanker

Nebulous2 said:
An airline going bust affects considerably less than the sum of its parts however. By that I mean, the airline goes and shareholders and lenders lose out, but the planes, pilots, landing slots, aircrew etc all still exist and will continue to be available and used.

Not sure I get where you're going with the 'less than sum of parts' - it may be true that there are some assets with a residual value, such as planes (if owned rather than leased, and not mortgaged too heavily) and landing slots (only relevant at airports like Heathrow where demand massively outstrips supply), so these can be sold off by liquidators, but just ask the employees (and customers) of Thomas Cook Airlines, FlyBe and Monarch if they agree that it was just shareholders and lenders who lost out.

In the context of this thread, if (or perhaps when) one of the airlines goes under, it would have a significant ripple effect across the whole sector as tour operators, travel agents, accommodation providers, insurance companies, ATOL, CAA, etc, all have to pick up the pieces, make alternative arrangements and compensate customers, most of whom would experience plenty of inconvenience as well as the financial impact.

ratechaser

I'm afraid to say that this is a bit of a 'Ryanair' or maybe even a 'battery chicken' or 'Primark clothing' argument. 

People want cheap <insert product or service here>. They don't want to be bothered with the detail of how <product or service> actually gets to be so cheap (other than whining about legroom or hand baggage restrictions, but still they come anyway because, hey, it's cheap). They figure out someone else is making sure it's all alright and above board. There's even a code of conduct and a modern slavery statement on the website, so it must be ok, right?

Then the world falls apart and it's suddenly not ok any more. Cue hand wringing, wailing and gnashing of teeth. Plus there must be someone to blame, yes? Always someone to blame.

Perhaps what's needed here is a little more awareness of how things operate and recognition of the risks that come from a market/price driven economy...

Thrugelmir

Nebulous2 said:

bagand96 said:

Nebulous2 said:

It has taken this episode for me to realise that the whole travel industry is run on other people’s money. The argument about jobs being lost is a false one, as the barriers to entry are so low that new companies would simply spring up to replace them. I paid my cancelled flights in full in October, I usually pay my first payment on my French or Spanish ferry crossings in December for the following August / September.

Barriers to entry are probably very low to open something like an online travel agent.  But it's very different for something like an airline, where the investments are huge, it's very hard to just "spring up" an airline, far more fail than become good, and the industry is brutal (5 years ago is something had told me Monarch, Thomas Cook and flybe would all be history, I'd have thought they'd had a few too many).

Nebulous2 said:

If I buy a car, I pay a modest deposit 4 or 5 weeks ahead and the rest on delivery. If the car industry can fund the manufacture and sales for a massive industry themselves, then travel should do the same. 

The thing with a car is that the cost of that car is (within reason, and a few %) pretty fixed.  Yes you can negotiate and shop around but every model of car has a price.  Travel, in particular the transport element (flights and ferrys etc) is very dynamic.  A flight to Malaga can cost £25.99.  But it could also cost £259.99.  You pay up front to fix the price at which you are booking.  The car market would operate very differently if the price of a new Ford Fiesta was anything from £6000 to £60,000 depending on when and where it was purchased.

I'm not trying to pick apart your arguments, there's some valid points. There's no easy fix to the current issues in the travel industry though.  It's clear some companies simply don't have the cashflow in the business.  This is especially true  for online travel agents who usually have to pass money straight on to airlines, and make a tiny % commission.  Without money back from said airlines, they won't have the money to refund.  These problems are exasperated by the fact that the airlines and travel agents simply don't have the Customer Service resource to deal with enquiries and refunds in a timely manner.  Any business will set up a customer service department to deal with enquiries from a % of customers.  The problem now in the travel industry is every single customer over a 4 month period needs or wants to get in touch.  I doubt any industry would be able to handle it very well.

The problem now is a lack of customers, mainly because they aren’t allowed to fly because of government action. 

Has to be somewhere to fly to. Many destinations remain closed. Reduced capacity on planes will result in higher costs on long haul flights.