18.10.2019 – 14:24
GCE news mail: German market news week 42
German market news week 42
Please find hereby the weekly 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.
- 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 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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