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May 2002 issue

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BA repositions itself

Travel Update

The UK government is investing UK£19 million (US$27 million) in one of the country's largest-ever tourism campaigns to draw visitors back to the UK. The country's tourism industry is also investing additional money and resources into the campaign, which will run in the USA, Canada, France, Germany, Belgium, the Netherlands and Ireland. Last year, 23.4 million tourists visited the country, a drop of 14 per cent on the previous year's figure.

Virgin Atlantic announced in February that it is increasing some air services in response to an increase in demand for air travel on certain routes since September 11. Additional services include a service from Shanghai, China to London in the UK from July to October. KLM has also seen passenger volume recover, and has increased services from the Netherlands to the Middle East and Beijing, China.

The Irish government has rejected a request by low-cost carrier Ryanair to build a new terminal at Dublin Airport. However, it has approved the building of a new terminal for all low-cost airlines, which is to be operated by Aer Rianta, the state's airport authority. The terminal is expected to be completed in time for the 2003 summer season.

About 2,000 police officers are to be employed on China's domestic airlines from this summer to strengthen security provisions. 'Aviation security has become very important for the development of international aviation and the security of this country,' said Liu Jianfeng, Director of the Civil Aviation Administration. Recruits will study English, security knowledge and martial arts, according to the China Daily.

Gulf Air has announced a new code-share agreement with Qantas in Australia. Under the new deal, Gulf Air is to stop flying to Sydney and Melbourne, offering a code-share service with Qantas from Singapore instead. The company said the move would enable it to sell into other Australian cities from its Middle Eastern hubs.

State-owned Greek airline, Olympic Airways, is struggling for survival, and the Greek government has announced an emergency restructuring plan in an effort to save it. The latest rescue efforts follow the collapse of a bid by a group of investors for 51 per cent of the airline.

Meanwhile, the Malaysian government is reported to be planning to sell off the international arm of Malaysian Airlines to tackle its UK£2 billion (US$2.8 billion) debt. Several airlines, including Swiss and Qantas, are reported to have held talks about a strategic alliance.

Qantas has terminated its services to India, citing business pressure since September 11 and efficient network management. The five-times-weekly service from Sydney to Mumbai, via Singapore, ended in March.

Finnair has launched a daily code-share service with Qantas between Sydney and Helsinki in Finland. According to Helen Blake at Finnair, the service will provide the fastest daily link from Australia into northern Europe and the Nordic countries.

In a significant turnaround of policy, British Airways (BA) is cutting 5,800 jobs and repositioning itself to be able to compete with the range of low-cost carriers in Europe.

Previously focusing on the business sector, BA will now become a 'simpler, leaner, more focused airline', announced the carrier's Chief Executive, Rod Eddington. BA will introduce a new pricing structure, offering lower fares, greater flexibility and more choice. Full changes will be revealed in the summer.

'We will not become a no-frills airline nor will we launch one,' said Eddington. 'We will compete profitably and intelligently alongside [low-cost carriers] by adopting what they do well - online bookings, high aircraft utilisation and pricing simplicity. We'll mix it with what we do well, [which is] providing a great network with frequent flights from convenient airports, as well as delivering world-class customer service.'

Eddington explained that BA has been downsizing its capacity since summer 1999 by cutting its fleet and 'reducing exposure to unprofitable transfer markets'. By summer 2003, fleet capacity will have been cut by 21 per cent, while the 5,800 job losses - most of which are hoped to be voluntary - together with the 7,200 job losses announced last September, will see an overall reduction in staff numbers of 23 per cent since August 2001.

The revamp for BA is the result of a review of its business operations. Five long-haul and five short-haul routes are to be cut, although at the time of going to press, no details had been revealed. Travel agent payments will also drop further, and from June, the cheapest BA fares will be available on the Internet.


Final attempts to save Ansett fail

Despite attempts by the airline's administrators and support from the public, Australian carrier, Ansett, folded in March when the Tesna consortium, backed by two Australian businessmen, pulled out of a rescue deal.

Administrators had been operating a no-frills domestic carrier, Ansett Mark II, in the hope of attracting investors (see Language Travel Magazine, January 2002, page 10). However, the Tesna consortium cited a lack of government support for its proposals and merger talks with Virgin Blue also broke down.

Australia's two main surviving domestic carriers, Virgin Blue and Qantas, have vowed to keep fares competitive, although some analysts predicted a duopoly in the marketplace would lead to price hikes. At the time of going to press, competition regulators said they saw no reason to consider capping ticket prices. Two regional airlines that were formerly Ansett-owned, Hazelton and Kendell, continue to fly.


Korean Air back on track

Air France and Delta Air Lines are reinstating their code-share agreement with SkyTeam alliance partner Korean Air, following the reinstatement of the Asian carrier to the highest safety category by the US Federal Aviation Administration. From May 1, code-share flights with Delta will operate from key US cities to Narita in Japan and Seoul in Korea, with onwards Korean services to Pusan. Air France is already operating a code-share service from Paris to Seoul, Korea.

'Korean Air will [soon] be fully integrated into the SkyTeam network that centres on powerful hubs,' said Patrick Bianquis, Air France's Alliance President. 'Atlanta [is] the world's largest airport, Paris Charles de Gaulle is Europe's leading hub and Seoul-Inchon has the greatest potential among Asian hubs.' Seoul Inchon is about two hours travel from Beijing and Tokyo, with more than 40 major cities within a four-hour flight journey.