25 MAY 2009

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Article from BTNews 25 MAY 2009

COMMENT: The Cruise Review + British Airways

The annual review of the UK cruising scene by the PSA (Passenger Shipping Association) was published last week.  In itself it is an extremely well-produced and comprehensive document and whilst for the most part very upbeat it paints a less so picture as regards the air travel market.  It has always been expected that with the ever expanding aspiration for Brits to take holidays on the water the airlines would benefit substantially.  This was not the case in 2008.

The review shows that last year there was an 11% increase in cruise passengers to 1.47m, the third successive year of double digit growth.  In 2008 23% more passengers chose to start their holiday from a UK port compared with the previous year which means that four out of every ten cruises booked departed from a British harbour.  One in every 12 foreign package holidays booked in the UK is now a cruise.  In 1999 this figure was just one in every 26.

PSA says that in spite of the poor economic situation and the cutback by TUI and Thomas Cook at the lower end of the market the 2009 figure will see growth.  This is largely brought on by the introduction of new capacity and the increase in the number of ships operating out of UK ports.  MSC, the innovative Italian line and relatively new to the British market, says its UK business is up 80%.  For the short Northern Europe season it has set up shop at Dover.

In 2010 RCCL (Royal Caribbean) will join P & O and its sister company Cunard with year round operations from the UK.  The downside for clients is that two days are needed in order to make more tepid climes, particularly in the winter.  The cruise companies (and in particular the ports of Dover and Southampton) really do show the airports up when it comes to boarding.  Off loading and parking is a pleasure, check-in quick and efficient, and security professional.  And don’t forget it is natural if departing from a home port that people take a lot more luggage than if they are travelling by air.

MSC UK Managing Director Giulio Libutti says that in difficult times cruising represents exceptional value.  Speaking exclusively to AERBT he said: “Its inclusive nature with meals, accommodation, entertainment and of course multiple destinations mean it is great value.”  The PSA review shows that last year a third of all cruises cost less than UKP1,000 and that prices will be even better value in 2009.

So where do we go from here?  Ten new cruise ships will be launched this year, with another 29 on order through to 2012.  Four out of every ten cruises booked started from a UK port – a share expected to increase in 2010 with the arrival of three new ships based in Southampton and one summer deployment becoming year-round.

The airlines operating out of the UK need to re-think their marketing strategy with the cruise companies.  Meeting people on ships in far flung places one is always surprised to learn that the passengers have chosen premium flight accommodation, even if it means a lesser cabin on board ship. 

Getting to and from the port in a certain style is clearly part of the experience. 

Dubai is working hard to attract custom to its cruise terminal with Costa established and Royal Caribbean also getting into the act.  Sydney has always been a great cruise port and here the market is expanding.  South America is another growing area with the season extended more and more.  Argentineans and Brazilians are finding cruising to their taste and soon will want to travel further afield.  Both Hong Kong and Singapore are after business.  All these are great high yield long haul destinations.

But if you are an airline marketing executive don’t think it will happen easily.  The shipping companies are now planning their 2012 itineraries (and also have the London Olympics in mind).  Ships, unlike aircraft, move around the world slowly.  But there’s money to be made in the air. www.the-psa.co.uk

 

EXTRA COMMENT:  The British Airways results

As a business travel publication it would be remiss of us not to comment on the British Airways results for the year ended 31 March 2009.  Frankly they are horrendous and a cause for serious worry.  Gone are the days when BA was the “World’s Favourite Airline” driven forward by the charismatic Lord King.  The pilot in charge now, Willie Walsh, takes a much lower profile, a business school approach rather than the market place.  Question and answer sessions are not one of his strong points.

Forget some of the comments from uninformed sources.  You cannot compare BA with easyJet or Virgin Atlantic (who incidentally will announce their own figures on Tuesday).  Both were created from scratch with a specific market in mind.  One is short haul within Europe with no expensive night stops for aircraft or crew, and the other a long haul prestige operation initially benefitting on the taste for transatlantic holidays largely spawned by Freddie Laker.

Neither airline is saddled with the outdated works practices nor inefficiency built into a business that has been around since 1946 (if you include BEA and BOAC).

It is interesting to compare BA with its two European rivals Air France-KLM and Lufthansa.  British Airways has a major advantage.  It is called Heathrow, still the world’s busiest international airport.  Paris may get the number one spot as the global centre for tourism, drawing in the low yield leisure traffic but its business throughput is minimal.  Likewise Amsterdam.  And Frankfurt is the opposite extreme.  Yes for front end passengers but certainly inbound not the most attractive of holiday destinations.

So where does British Airways go from here?  New planes are on order to replace the aging Jumbo fleet and for the future two-thirds of its Heathrow traffic will be from the expensive and in some ways questionable T5.  Do you split the airline and go back to the old BEA/BOAC formula?  Martin Broughton, the BA chairman, has now stepped down from his position at the CBI.  Should he be more hands on as John King and Colin Marshall were in the past?

On the micro management side much more attention must be given to the quality of the product, something the old hierarchy were very keen on.  Typically complaints seem to be endless regarding the gate arrangements on landing. 

BA needs to be more aggressive across a wider marketing spectrum.  Black cabs fine.  Others have been doing it for years.  And why just the new terminal?  What about the Far Eastern traffic at T3?  Does the word “experimentally” mean that it will be dropped if there is no real increase in business?  London hosts the Olympics in 2012 with BA as a prime supporter.  The next three years should be used to attract visitors in seeing the preparations as they develop.  Coupled to what London has already it is a wonderful package.  Bring in the passengers now and not just offer scarce seats to VIPs over the six weeks of the actual games.

Some would argue that British Airways is the last industrial dinosaur of the pre-Maggie age.  Somehow that needs to change.  Just like the miners’ strike of 25 years ago action might initially hurt but it has to be done.

Rather like Parliament, British Airways, our national flag carrier, stands at a vital crossroads.  And as with Westminster progress is the name of the game.

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