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18.10.2019 – 14:24

Global Communication Experts

GCE news mail: German market news week 42

German market news week 42

Dear all,

Please find hereby the weekly market news:

Market News:

- Thomas Cook bankruptcy depresses mood: Every third travel agency believes 
  that demand will fall within the next months, according to the current fvw 
  Sales Climate Index. In any case, the Cook bankruptcy seems to shake the 
  confidence of the sales force. At the beginning of October, the mood in the 
  sales department has clearly deteriorated. Above all, expectations for the 
  future are causing travel agencies stomachaches. 38% believe that demand will 
  fall in the coming six months, 46% even fear that this will have a negative 
  impact on their earnings. Just 13% expect to earn more in the future. That 
  might be one of the effects of the Thomas Cook bankruptcy, even if the selling
  climate index of Dr. Fried + Partner, which measures the estimations of the 
  travel agencies to the situation in the selling and to their future 
  expectations on a monthly basis, did not explicitly ask about the TO's 
  insolvency. But the survey period in the first two weeks of October lies 
  exactly in the phase in which the consequences of the insolvency became 
  apparent every hour. It is now clear that tourism and travel agencies are 
  facing one of the biggest upheavals the industry has experienced in recent 
  years. At first glance, travel agencies - apart from the Cook agencies 
  directly affected - could take a stand: Customers will want to continue 
  traveling and will spread again among tour operators. Distribution would then 
  only be affected secondarily. But travel agencies now have to master 
  additional tasks, e.g. informing and rebooking customers. In addition, there 
  is uncertainty about the commissions which are to be paid on Cook sales. For 
  the travel agencies surveyed for the Sales Climate Index, the situation does 
  not look well. The number of those who currently sell poorly has risen from 15
  to 25%. For almost 40%, sales have even fallen in the past two to three 
  months. However, this phenomenon also occurred in October a year ago. 
- Ticket tax to become even more expensive: As part of its climate package, the
  federal government also wants to raise the air traffic tax, as latest reports 
  of fvw say. In the Cabinet's draft passed today, the rates will rise even more
  than initially planned. According to the German press agency dpa, the tax for 
  domestic and EU flights will rise by 5.65 euros to 13.01 euros per ticket when
  departing from a German airport. For routes up to 6000 kilometers, an increase
  of 9.96 euros to 33.01 euros is planned. For further long-haul routes, 59.43 
  euros per ticket are to be due in future. As a result of the higher ticket 
  taxes, the Ministry of Finance expects additional revenue of 740 million euros
  per year. 

Tour Operator News:

- Thomas Cook travel agencies seek new sales partnerships: Fvw reports that 
  many of Thomas Cook's more than 1,200 partner travel agencies in Germany are 
  looking for new sales networks to recover from lost bookings and missing 
  commissions, and 700 of them have already gained a new owner. The insolvent 
  German tour operator's 127 owned travel agencies (79 Thomas Cook-branded 
  outlets and 48 "Neckermann Urlaubswelt" agencies) are still trading and are 
  selling holidays of other tour operators and other travel products. But they 
  represent only a tiny fraction of Cook's overall German sales network. Thomas 
  Cook Germany sold holidays through about 9,500 travel agencies, and many of 
  these have not been paid commissions for sales since August. In total, Cook, 
  with turnover of 3.8 billion euros in 2018, owes about 40 million euros in 
  commissions, according to fvw calculations. But agents are unlikely to get 
  these payments following the insolvency. The situation is even worse for more 
  than 1,200 travel agencies that cooperated closely with Germany's former 
  number two tour operator and now face an uncertain future. The "Thomas Cook 
  Partner Group" network had 1,226 travel agency partners in 2018, according to 
  the fvw Travel Sales Dossier 2019. Apart from Cook's own travel agencies, this
  included about 370 franchises in the Holiday Land network and more than 700 
  Neckermann Reisen "cooperation partners" bundled in the Alpha Reisebüropartner
  joint venture. However, the future for these 700 Alpha partners now seems 
  clear. Joint venture partner RT-Reisen has moved quickly to snap Thomas Cook's
  50% stake in Alpha Reisebüropartner to gain full ownership of the cooperation 
  network. The two groups had each owned 50% of this network since 2003. The 
  future is less clear for the 370 Holiday Land franchises that were much more 
  dependent on Cook. The insolvent tour operator is estimated to have made up 
  about half of their sales on average. Other franchise networks such as TUI 
  Reisecenter, Derpart (DER Touristik), TVG (50% owned by FTI), Reiseland (RTK) 
  and Schmetterling are already actively trying to persuade Holiday Land 
  franchisees to switch to a new organization. But various Holiday Land travel 
  agents told fvw they have no official information whether the insolvency of 
  Thomas Cook Germany means their franchise contracts are now legally invalid or
  not, or whether they are entitled to cancel their franchise contracts and sign
  up with rival networks. In the latest move, more than 100 Holiday Land 
  franchises met in Duisburg this week to discuss their prospects. 
- Tour Vital cancels all trips: According to fvw, the insolvent tour operator 
  Tour Vital cancels all trips. The measure is taken in consultation with the 
  insolvency administrator and the insolvency insurer. Tour Vital was taken over
  by a financial investor only a year ago, but recently had to declare its 
  insolvency. Like Thomas Cook, Zurich is the customer money protection 
  provider. The tour operator's website says: "We are currently assuming that 
  the insured liability sum of EUR 110,000,000 - within the framework set by the
  legislator - may not be sufficient to satisfy all claims." The retrieval of 
  all travelers, however, is said to be assured. 

Aviation News:

- Condor is confident for summer 2020 as Brussels approves 380 million loan:
  According to a press release issued by Condor, Thomas Cook's German airline 
  has won EU approval for a vital 380 million loan for the forthcoming weak 
  winter season and claims to have summer 2020 "signed and sealed". The European
  Commission this week approved the six-month bridging loan worth a total of 380
  million euros from the German Federal Government and the Hessian State 
  Government to enable the airline to cover operating costs in the traditionally
  loss-making winter season. The airline's management will now draw up a 
  restructuring plan for a future without insolvent owner Thomas Cook and 
  continue intense talks with potential investors. The long-serving Condor chief
  Ralf Teckentrup emphasized that the airline plays an important "systematic" 
  role in the German leisure flights market. Teckentrup underlined that 
  customers and tour operator partners have stayed loyal to the airline 
  following the insolvency of its parent company. "Our customers and business 
  partners are booking additional contingents so that the current booking 
  situation even surpasses our expectations. We are already in advanced 
  discussions with all tour operators for a good and successful booking level 
  for summer 2020." Condor's sales & marketing director Paul Schwaiger confirmed
  in an interview with fvw that the airline is very pleased with current and 
  future booking levels, even though it is lacking the former volumes of Thomas 
  Cook Germany, which has cancelled all holidays until the end of this year. 
  These bookings represented about 20% of its passenger volumes. Schwaiger 
  rejected claims that Condor has been offering cheap deals to win new 
  passengers, claiming this was a long-planned sales campaign for the low 
  season. Looking ahead to next summer, the experienced sales executive said: 
  "In theory, we already have summer 2020 signed and sealed, even if not every 
  contract has been formally signed yet. Our offers will be just as large as 
  this year. In terms of routes, we will make a few adjustments, for example to 
  Cyprus where we expect higher demand. That also applies to long-haul routes 
  where we can imagine a few new things." 
- Lufthansa to operate according to plan on Sunday, despite Ufo strike threat:
  According to Reise vor 9, Lufthansa's goal is to uphold its flight schedule on
  Sunday. A strike announced by the Flight Attendants' Union Ufo are said to be 
  illegal. Ufo had called upon its members to go on a token strike this Sunday 
  from 6 to 11 a.m. in Frankfurt and Munich. Lufthansa currently does not 
  recognize Ufo as a negotiating partner. "Both the trade union status of the 
  Ufo as well as the power of representation of the Ufo board remain unclear," 
  said a spokesperson. "Against this background, strike calls and strikes are, 
  in our view, illegal and negotiations with Ufo are still not possible." Ufo, 
  on the other hand, sees things differently and accuses Lufthansa of wanting to
  oust the Flight Attendants' Union and replace it with Verdi as the approved 
  collective bargaining partner. 
- Etihad and Air Arabia establish new low-cost carrier: According to 
  Aerotelegraph, the Sharjah-based Air Arabia announced plans for a new airline 
  called Air Arabia Abu Dhabi in cooperation with Etihad Airways. "Etihad and 
  Air Arabia will form an independent joint venture that will operate as a 
  low-cost passenger carrier with the Abu Dhabi International Airport as its 
  hub," Air Arabia declared. The new airline will complement the services of 
  Etihad Airways from Abu Dhabi and serve the growing low-cost travel segment in
  the region. Etihad Chief Executive Tony Douglas said tourism would play an 
  important role in the vision of the future economic growth of Abu Dhabi and 
  the Emirates. 
- Ryanair closes base at Hamburg Airport: According to fvw, Europe's largest 
  low-cost airline gives up its base at Hamburg Airport in winter. The base with
  two planes stationed there will be closed on 8th January 2020. This was 
  announced by Hamburg Airport. Ryanair justified this move in general with 
  below-average revenues. According to Ryanair, the company has checked its 
  flight schedule for lower-yield connections. The company did not say on 
  Wednesday whether other airports in Germany will be affected. The fact that 
  the airline will not receive new planes as planned contributes to the flight 
  schedule restrictions. After two crashes, the latest version of the Ryanair 
  standard jet Boeing B-737max is still waiting for re-certification by the 
  flight supervisory authorities in the USA and Europe. The dissolution of the 
  base does not mean that there will be no more flights to Hamburg. According to
  the airport operator, seven routes will be cancelled for the summer timetable 
  2020, of which only two have been offered by Ryanair alone so far. Ryanair 
  will continue to serve 14 other destinations from Hamburg this summer with 
  planes stationed at other airports. The airline had already announced that it 
  would reduce the number of routes served from Hamburg by 3 to 17 for the 
  winter flight schedule, which begins at the end of October. 

Cruise News:

- Cruise prices are dropping: High sales growth, falling average prices - this 
  is how the economic situation in the German cruise industry could currently be
  described, reports fvw. To be more precise: according to estimates by the 
  international industry association Clia, capacity grew by 15% this year, 
  thanks to Aida and TUI Cruises alone, each of which increased by around 20%. 
  These additional cabins have certainly found their customers and driven cruise
  turnover in travel agencies up overall. But above all they had to be delivered
  to customers by volume providers with significant price concessions and a host
  of special offers. So far, this phenomenon has rather been a "perceived" 
  perception in sales. In any case, the shipping companies are not commenting on
  questions of price development, or only behind closed doors. But now the 
  technology service provider Travel Agency Technologies & Services (Tats), 
  which has been using its Ibiza accounting system for years to present the 
  development of sales based on invoiced sales in the so-called travel agency 
  mirror, has analyzed cruise sales more closely exclusively for fvw. And comes 
  to this conclusion: In the first eight months of 2019, sales in the overall 
  market rose by 8.4% and the number of bookings by 9%. In contrast, the average
  travel price fell by 0.5%. At first glance, this does not sound dramatic. But 
  the industry is used to other things. When CLIA was still allowed to quote 
  sales figures for the German market, the development of average prices was 
  regularly positive. In 2014 they rose by 2.5%, in 2015 by 3% and in 2016 by 
  6%, and that despite increasing capacities. According to expert estimates, 
  around 80% of cruise turnover is attributable to the volume brands, i.e. Aida,
  TUI Cruises, MSC and Co. The number of bookings (plus 13.2%) clearly exceeds 
  the growth in turnover (plus 9.3%). At the same time, average travel prices 
  fell by 1.2%. This means that the small segment of luxury and expedition ships
  ensures that the overall market price remains relatively stable. Hapag-Lloyd 
  Cruises, for example, now achieves an average price of 640 euros per person 
  per day across the entire fleet.  Above all, Aida is pressured to sell Nova is
  causing prices to fall. But the ship is fully booked and the economies of 
  scale are so high that the Rostock-based company still earns good money even 
  with lower prices. Generally, the pressure on capacity is growing. This is 
  also shown by the figures of the Aida parent company Carnival. The world 
  market leader will increase capacity by 6.3% in the next two years. For the 
  fourth quarter of 2019, however, Carnival forecasts a price decline of 2 to 
  3%, and expects prices for the first half of 2020 to remain below 2018.  

Best regards and enjoy your weekend,

your GCE Team

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