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The younger generation may not know, but at the end of the last century you made your travel booking direct with your provider by telephone, with a travel agency, or went into a shop. British Airways, and they were typical, were located with a store by Piccadilly Circus in London, and at a number of capital cities around the globe the UK’s Business Travel News reports.
Generally speaking you supplied your contact with a cheque which took several days to be cleared. It went either direct to the service provider or the International Air Transport Association (IATA) clearing house.
The clearing house exists to this day as the Billing and Settlement Plan (BSP). With an annual turnover of around $248.8bn it is huge but only 44% of the $561bn airline passenger revenues. It was said 20 years ago that 80% of the airline revenue went through IATA.
Today, particularly with the airlines, many travellers book direct, business people more often via a TMC (travel management company) or a local specialist. How quickly this reaches the carriers is not known. What is the retention period? BSP is still a vital part of the airline revenue system used by around 430 businesses which includes many non-IATA companies.
With a different style of revenue income the net outcome is that airlines can easily build up cash mountains – with Ryanair $4.3bn, IAG (not an airline) $6.6bn and typically Delta in the US holding $3.4bn. Flybe finished up with money in the bank, even, it can be argued, after profligate spending by the management. Air UK likewise.
The bottom line, in terms of paper profitability, is of course the same, but clearly having the funds available before the real business is done (passengers flown) must be good news.
So what happens next?
In truth nobody knows. The cash mountains will disappear. Worldwide transport is (correctly) claiming future poverty and demanding help from the public purse. With aviation the numbers are big.
Air France has secured a €7bn loan via the French government and the Netherlands has made noises in support, but no hard cash. Why not one announcement for the two airlines? The partnership was always one of convenience rather than love. Perhaps Air France could do a deal with IAG to swap the Dutch carrier for Iberia, or is that wishful thinking? BA and KLM were always natural bedfellows.
Norwegian is in real crisis and may be finally near the end. Lufthansa says it is speaking to the governments concerned with the Group. “The Management Board is confident that the talks will lead to a successful conclusion,” it said in a statement. But it would say that!
On the aircraft front the last A340s are about to be withdrawn from airline service closely followed by the 747, although it remains to be seen if Lufthansa and Korean Air keep flying in passenger form the Dash 8 version.
Boeing was clever with developing a cargo version, which is still in production. Not so Airbus with the A380, rather like Concorde, of great popularity but doomed although a few will be flown for many years. Whether some kind of economical freighter can be developed from grounded airframes remains to seen. Older aircraft will be prematurely discarded, the MAX eventually got into service.
In terms of passenger bookings for the summer holidays these do not look like happening, with a massive loss of revenue. There will be a short-term rush once border constraints are reduced and some flights will resume. Nothing to look forward to in the dark months. The winter is always financially bad for airlines.
With British Airways and Cityflyer, crew are on furlough. The situation at easyJet is that aside from a few management pilots required for CAA competency purposes there is no assistance from company at all to top up salary. HMRC is very strict insisting that if on furlough the employee is not allowed to work. So basically no one is in the office.
Once the airlines start to recall the training captains how will they work the simulators. They are less than 2m apart inside. How will the French easyJet pilots get to Milan for their sims if there are no flights?
Who will remain? Which airlines will be around in two years’ time, and which airports will be open?
We can only plan for 2021 and live in hope. www.btnews.co.uk
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