A senior South African travel consultant recently sent this letter (edited) to South African weekly travel industry newspaper TNW (Travel News Weekly). The letter is interesting because it exposes a huge gap – travel agents are required to offer their clients support 24/7, but equivalent support from airlines is hard to come by…“A client phoned from Spain on a Saturday morning in October. The airline said her ticket hadn’t been changed by the ticketing airline. So I tried to get hold of the ticketing airline in South Africa they only work from Mon to Fri and have no after hours number. I even tried to call our ‘rep,’ who continued to ‘kill’ the phone call (three times later she let her phone go to message).  I then tried the ticketing airline’s website, which gave me a number which is only available from Mon - Fri. NO AFTER HOURS NUMBER!!  I then tried to get a number in Spain - they too only work Mon – Fri. Then a UK number which just gave toll free numbers for clients phoning from the UK !  Finally I found a number for people phoning from outside the UK and I got someone to help me – (after some time it was confirmed that the booking was correct, e-ticket was re-issued and the VMPD had been processed by the ticketing airline).”This was a lucky traveller, as the booking had been done through a travel agent who had access to all these numbers, was prepared to follow through to the end, and ascertain that the change that the airline couldn’t see, had indeed been made. But what about travellers who book direct?

The apparent ease of booking seats and packages online is seductively simple, and can be done in the comfort of your office or study.  But while airlines may want to circumvent agents and get more and more online direct bookings for all sorts of cost-saving reasons, they now face the reality and cost of replicating the services which good travel agents offer – a 24-hour contact number with consultants who CAN help (in many languages). This is a space travel agents should exploit in their advertising and promotions – a big part of their value proposition is, they are contactable and on call 24/7 at a time when airlines are cancelling flights left, right and centre to save costs.The fact is, if a consumer books direct, when things go wrong he’s on his own.  Take a country like Bulgaria. Try to contact the SAA office in Bulgaria using the contact number on the SAA website – it gets you through to an office in Istanbul where, in halting English, they tell you they’ve never heard of SAA.  The British Airways “customer care” line in Bulgaria is only open weekdays during office hours – sorry for you if you’re stuck on a Friday night. How about being stuck in Khartoum for a weekend? If you go via bmi, don’t try the local number on the bmi website – it just gets you a doleful bleating (Sudanese out-of-order signal).   United has a number in the US at the full international phone rate. The first thing they want you to know is that you will be charged a $25 fee if you book through an agent – but they’ll waive it if you book over the phone with them. And this number is for use by travel agents too!In a recent TNW e-ticket revalidation guide, only 13 of 45 airlines could furnish a 24-hour sales support telephone number for agents.  Some, like Etihad’s, are a pleasure - a 24-hr call centre in Manila (price of a local call), call answered by an English speaker after only a four minute hold. But overall, it seems agents are more determined to support passengers than airlines themselves, if the country information on airlines’ websites is anything to go by.Airlines want to disintermediate the relationship between airline and passenger, but they will not be able to succeed until they put proper, structured 24/7 support for their customers in place. One bad experience will frighten off the bravest passenger.    

Online travel agencies and booking websites which use meta-search engines known as ‘web-crawlers’, ‘spiders’ or ‘screen-scrapers’, to pull data from a wide variety of airlines’ websites and show them in a comparative display, could soon find themselves unable to continue doing business as airlines clamp down. In the EU, low-cost carrier Ryanair has instituted legal proceedings against several websites, among them bravofly.com, requiring them to immediately cease displaying fares they have ‘screenscraped’ from Ryanair’s website. This follows Ryanair’s success in bringing an injunction against German operator V-tours preventing it from screenscraping Ryanair’s website.

On August 11, it introduced procedures to cancel all bookings made on these engines. Ryanair says the sites are levying ‘unjustified’ handling charges. Ryanair says passengers who book via some of these sites are not provided with the airline’s accurate terms and conditions, and the sites do not provide passengers with up to date flight information or updates regarding changes to the flight. 

A serious concern for any airline being ‘web-crawled’ is the amount of bandwidth consumed by the crawler, causing slowing down of its site along with a sharp increase in traffic between the airline site and the gdss (and gdss are now rumbling about remuneration for this activity). This naturally causes delays in direct consumers’ access to the airline website. 

In 2008, with its unprecedented fuel shocks, there’s not much money to be made in selling air tickets (especially for LCCs), and it’s the retail offers displayed on airline websites, including hotel rooms and rental cars, which spin the money. Perhaps understandably, airlines would rather enjoy the benefits themselves, rather than furnish a third party with an opportunity to attract high volumes of traffic to which they can then display their own retail offers.

Bravofly.com says Ryanair’s attitude reflects its tendency to take legal recourse against websites which offer price comparisons along with ticket purchases. “This clearly demonstrates that Ryanair aims to prevent travellers from having access to precise information about the best prices,” a bravofly.com statement said. Now that Ryanair is forcing passengers back to its own site to rebook sometimes at higher prices, the future for these screenscraper sites looks bleak. Other airlines will follow – the current airline environment, especially among low cost carriers, depends on owning the customer and all of his/her spend on the trip.

Read more on this at http://www.jabbertags.com/popular/screenscraping

The impact the fuel crisis could have on SA in the long term should not be underestimated. It could be the last straw for airlines flying to SA, a long-haul destination already known to be a costly environment for foreign airlines. During the oil crisis airlines are daily making ever deeper cuts into costs, slashing back labour bills and pruning ‘less profitable’ routes, (and longhaul routes fall into this bracket), in an effort to weather the current ‘perfect storm’ of crazy oil prices and global economic instability. Even for some of the major players, it’s now more a question of staying airborne long enough to be around to enjoy the return to better times. The writing is on the wall for others, it’s a matter of “when” not “if” - those who can’t react fast enough will fall off the map.

A study of 40 US airlines conducted by Airline Forecasts and the Business Travel Coalition, published Friday June 13, says the oil price is bringing the US commercial aviation industry towards catastrophe.

The study concludes that if oil prices stay “anywhere near” $130 a barrel, all major legacy carriers in the US will be forced into debt default by the early months of 2009. This means some large and small airlines will enter bankruptcy, and some liquidation. But, the study warns, the danger is that the US industry could collapse under the weight of the fuel price while it’s still making the journey to becoming a smaller version of itself.

The study says just to cover the increase in fuel cost since the end of 2007, US airlines will have to up their fares by 20%.  But, it warns, this price increase will not be attainable with the capacity which will remain in the market even after planned capacity cuts – (American Airlines says it will cut domestic capacity by up to 12%, United Airlines will cut by up to 18% and US Airways says it will excise 17%).

Oil at $130 a barrel will increase US carriers’ costs by $30bn in a year, while these carriers would gain by only $4 billion from a 20% fare increase. Nonetheless, US airlines are rushing, helter skelter, to find additional revenue in fare increases, fuel surcharges and fees.

What if oil goes to and stays around US$200 a barrel (as some predict it will)? Capacity will come down by 35%, the average domestic passenger fare will increase by 41% and more than 144 000 jobs will be lost, according to the study.

The study argues that a weakened airline industry is a direct threat to the well-being of the US economy, leaving a “hole” in the vital transport grid, and calls on the US government to formulate a new energy policy.

Source: The Business Travel Coalition  See the full report at http://tinyurl.com/6qhh99   

New oil-price realities (having hit US$135 per barrel, 170% more than 14 months ago), are painting an unexplored and unimagined landscape, not only for the airline industry, but for a global economy designed around an uninterrupted supply of oil at under US$50 per barrel.

Internet publication, USA Today, says airline analysts are now warning that only extreme fare increases and dramatic cutbacks in flights will allow the airline industry to cover its 2008 fuel bill (it’s now 44% up over 2007, and accounts for 40-50% of the airline industry’s costs).

JP Morgan airline analyst, Jamie Baker says by next May, capacity in seats in the US will be reduced by 20% if carriers respond appropriately for their continued survival – that is, by the dramatic slashing of capacity. The effect of this action will be like shutting down a whole carrier the size of American Airlines, the world’s biggest, (around 4 000 flights per day).

That alone will sharply increase prices on the available seats. The airlines will be calling the shots to the passengers – in the new ‘ take it or leave it’ environment, there will be fewer, fuller flights in higher density configurations to all points, fewer non-stop flights, fewer choices and longer connecting times.  “You can’t underestimate the spike in fuel prices and how it is fundamentally changing the industry,” says Delta Air Lines ceo Richard Anderson – he says ticket prices will have to rise 15-20%  to cover fuel costs alone.

The nett result is that holidays including flights could be out of the reach of those who last year could afford them. Fares to some popular US summer destinations have already increased by 18%. Smaller cities served by smaller regional jets (50 seats and under) could see dramatically less capacity – some say with oil at $135 a barrel, it might not be worthwhile to fly these jets at all, even with 100% loads. Tourism, including resorts, hotels, cruise lines and conferencing, which have been building their offerings on the basis of good historic airlift, could suffer enormous setbacks.

And while airline mergers (like that between Delta and Northwest) will help to maintain airlift to the centres which most need them, the merged entities will have to cut away all unprofitable flights and so capacity will fall as they push up the average price per seat to get the maximum revenue per litre of fuel burned. Nine airlines, mostly smaller ones, (the latest casualty being all-business class transatlantic carrier, Silverjet) have fallen into bankruptcy in the past seven weeks and the industry is now so fragile, virtually anyone could be next.

Oil’s trajectory to US$135 per barrel has been driven by unrelenting demand in developing economies like China and India, political instability in oil-producing countries and investor speculation. Some blame speculation as the worst culprit in creating these new highs.

Globally, airlines are businesses with wafer-thin margins right now. They might have been enjoying an upswing, but it is a short one, and a downswing is approaching next year. The International Air Transport Association (Iata) has already revised its profit predictions for the industry’s current year three times, due to fuel prices and credit markets hardening up. Airlines are battling fuel prices of around $100 a barrel, antagonism by the green lobby, the credit squeeze, global volatility.

In SA, the industry also has other battles to wage – two state-owned airlines with which private airlines have to compete, forex problems, energy problems, rising interest rates and SA’s own political instabilities which could seriously influence both investment and inbound tourism.

Originally intended to encourage repeat buying and loyalty from business travellers, frequent flyer programmes (started by American Airlines in 1981) have become another economy, especially in the US, where most citizens belong to at least one. But from these roots in rewards for loyalty, frequent flyer programmes have evolved into vehicles for discontent from passengers who don’t understand the convoluted economics of the airline business.

As flying has become cheaper and more commonplace, and people wealthier and more willing to fly, loyalty miles have become a second currency among all travel sectors and commuters. And, of course, it’s not just about getting miles for flying anymore - airline miles are frequently garnered by consumer activity in completely unrelated sectors (like banking).

Enormous numbers of miles are being engendered (some industry commentators say 14m ‘free’ tickets are engendered annually), and this number is set to explode. The natural consequence of too many units of currency in circulation is inflation, leading to loss of value in the currency. And the airline (the treasury) will respond to inflation with devaluation.

As airlines feel the crunch, what should frequent flyer programme members expect? Members of schemes should be aware that the currency of loyalty miles is infinitely manipulable and it comes with a complex and sometimes opaque set of rules about privileges and redemption, (this is what causes a lot of confusion and resentment among consumers).

Availability of miles seats at peak times is a big conflict point among consumers because they don’t realise that the very seats they want to buy with their miles are inside a very complex airline yield-management system which “knows’ it can sell them at a good profit.  

Airlines in the US (and Australia, and these will inevitably be followed by the rest of the world) are cutting back on miles earned at the one end of the chain, some of them are halving the validity period of the miles, some are increasing the miles-cost of privileges at the other end of the chain. In some programmes, certain classes of bookings incur only half the usual miles, while on others, fees must be paid for certain activities in the programme.

In the present climate of possible mergers in the US and EU, travellers and travel managers and consultants should also be aware that a merger or acquisition presents a window of opportunity for dilution of value, as the programmes themselves merge and become new entities.