IN BRIEF: December 2019/January 2020

SOUTH Africa ups and downs

Mirroring the theme of this month’s travelBulletin cover story, it’s been a very mixed few weeks for South Africa. There would have been jubilation among the country’s tourism industry at the announcement of the relaxation of the requirement for anyone travelling with children to have original copies of birth certificates. Initially introduced in 2015 to combat child trafficking, the measure required families wanting to visit the country to provide full, unabridged birth certificates showing the names of both parents — and in the case of one parent travelling alone with their children, a signed affidavit from the other parent showing their consent was required.

Understandably, many families wanting to travel to South Africa found it all too difficult and chose alternative destinations for their holidays, and the impact on the country’s tourism sector has been significant — not to mention the travails of airline staff forced to deny boarding to holidaymakers without the required documentation. The waiver applies to citizens of all countries who are able to visit South Africa without a visa — but is still in place for South African families.

Unfortunately the sweetness of that moment was rapidly dissipated by a walkout by South African Airways staff. The industrial action grounded the carrier, including its flights from Perth to Johannesburg, with officials warning that the future of the airline is at stake. SAA has lost more than $2 billion over the last 13 years. Workers, who do not wish to bear the burden of what they say is years of mismanagement, have rejected a 5.9% pay offer, and unrest appears likely to continue as the South African government attempts to rein in its underwriting of the airline’s ongoing losses.

QF drops Beijing – again

QANTAS last month announced it would cease flying to Beijing in March 2020, saying the route from Sydney was not commercially viable due to excess market capacity and weak demand for premium seats. It’s the third time Qantas has attempted a direct service to the Chinese capital, having first operated Beijing flights between 1984 and 1987, and then again between 2006 and 2009.

Announcing the latest suspension of the route, which has been operating this time since 2017, Qantas International CEO Tino La Spina cited a 20% overall increase in competitor capacity between Beijing and Australia — in contrast to broader international capacity out of Australia, which is declining. Moreover, La Spina said there were a range of options for Qantas customers to travel to Beijing and other parts of China, through partnerships with Cathay Pacific, Cathay Dragon and China Eastern. Jetstar’s airlines based in Asia also operate to nine Chinese destinations.

Helloworld ups forecast

Helloworld Travel appeared to buck the industry trend last month, with a trading update highlighting record TTV for the three months to 30 September, and “strong growth in our Australian retail network performance of 7.0% on a ticketed basis”. CEO Andrew Burnes said the business was tracking according to forecasts, despite some softening in inbound demand. “Our trans-Tasman corporate, wholesale and retail businesses are going very well and not subject to exposure to other source markets,” he said, announcing a profit upgrade with expectations of $86 million to $90 million for the 2019/20 financial year.

The month also saw Helloworld in the political headlines once again, with Victoria Police confirming they were probing claims that an employee of the company illegally accessed data which was behind allegations that Finance Minister Mathias Cormann had received free flights. Two former Helloworld staff were apparently interviewed by officers, with a police spokesperson saying “the fraud and extortion squad is currently investigating allegations an employee accessed unauthorised data from a private company”.

AA adds new NZ routes

The freshly finalised joint business agreement between Qantas and American Airlines bore some of its first fruits last month, when AA announced a significant expansion of capacity between the USA and New Zealand. In October 2020 AA will commence a seasonal non-stop service from Los Angeles to Christchurch, making it the only carrier to fly from the USA to the South Island of New Zealand.

AA also announced a new direct flight to Auckland from Dallas Fort Worth, which provides new one-stop connections to NZ from more than 70 cities across the USA.

The new AA routes complement QF’s previously announced Brisbane-Chicago and Brisbane-San Francisco services, with both airlines to codeshare on each other’s new and existing routes — as well as rolling out improved frequent flyer benefits.

Scandinavian scramble

The collapse of Tempo and Bentours — and revelations of just how profitable the businesses were despite being placed into administration — has seen players from across the industry rush to fill the breach. In the last month or so new Nordic and Scandinavian operations have been launched by Adventure World Travel, 50 Degrees North, Entire Travel Group and Helloworld, all tapping the expertise of a number of former Bentours and Tempo staffers.

Helloworld will launch a comprehensive Scandinavia, Nordic and Polar product range under the Viva brand, while Entire Travel Group has taken the opportunity to establish its first interstate office, with a Melbourne operation to be overseen by marketing director Greg McCallum.

Some ex Bentours workers appear to have had their pick of roles, with at least three having been appointed to work at one of the new operations, before being poached by another.

FC warns of slowing

Flight Centre MD Graham Turner issued a sombre warning during the company’s Annual General Meeting last month, highlighting internal analysis which showed overall travel industry growth had ground to a screaming halt in July and August. Turner said based on Australian outbound data, travel’s growth rate had slowed to less than 1%, compared to a 7% compound annual figure over the last 10 years.

He noted that soft results reported by the broader Australian retail sector also highlighted the “challenging trading cycle,” expressing Flight Centre’s determination to ensure its leisure business was robust enough to weather cyclic storms and structural shifts. Despite strong growth in Flight Centre’s overall TTV, this was predominantly being fuelled by its corporate operations, and Turner said first half profits could be down as much as $50 million on the previous corresponding period.

During his presentation, the Flight Centre MD highlighted a focus on emerging businesses within the company’s portfolio, including the Travel Partners home-based independent contractor model; online sales through BYOjet, Aunt Betty and flightcentre.com.au; and the recent full acquisition of Ignite Travel Group. However the scale of these businesses meant they were “not yet significant contributors to group profits,” Turner noted, with first quarter online leisure sales doubling to more than $250 million — a tiny proportion of the company’s overall TTV during the period which was more than $5 billion.

Other factors affecting the Flight Centre bottom line included a new Enterprise Bargaining Agreement which resulted in higher wage costs.

 

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