Cyprus First-time Tourist

The first ever Papal visit to Cyprus takes place from 4-6 June bringing hopefully some high profile positive publicity to the island, whose tourism arrivals fell by nearly 11% in 2009. 2010 had started brightly with a 5.6% increase in tourist arrivals in the first quarter but the ‘ash cloud’ caused a sharp reverse in April when arrivals fell by a disastrous 23% with the UK market seeing almost a 26% decline. Only the much smaller but growing Russian market saw a significant April increase.

Pope Benedict XVI’s visit is not without controversy as only 2% of the Republic’s population is Roman Catholic – most are Greek Orthodox. The invitation to visit came from Archbishop Chrysostomos11 – leader of Cyprus’s 800,000 Orthodox Christians although some other Orthodox leaders have condemned the visit.

This is a critical time for the island as once again talks between the North and South have reopened as of 26^th May under UN auspices at the Good Offices in the UN Protected Area (ex Nicosia Airport). UN Secretary General Ban Ki-moon welcomed the resumption of talks between the Greek Cypriot and Turkish Cypriot leaders and urged them to ‘be guided by the spirit of give-and-take in their negotiations’. http://www.uncyprustalks.org/nqcontent.cfm?a_id=2466

The Pope will celebrate Mass at Holy Cross Church www.lpj.org/index.php?option=com_content&view=article&id=467:a-la-rencontre-des-paroisses-de-chypre-leglise-de-la-sainte-croix-a-nicosie&catid=68:nouvelles&Itemid=85&lang=en at Paphos Gate in the UN Buffer Zone on 5^th June and will stay at the adjacent Franciscan convent which is also the Apostolic Nunciature – it is surrounded by the Turkish side of the Buffer Zone or ‘Green Line’ on three sides.

Is there a link from Ireland in all this? Ironically yes. The Nicosia Green Line is in UN Sector 2 in Cyprus which is currently the responsibility of a Territorial Army Signal Regiment from Belfast which is working alongside the Garda Siochana! They are responsible for Papal security while in the UN zone.

TTC has a long standing connection with Cyprus having worked on the Annan Peace Plan Tourism Impact, the National Tourism Strategy Review, the Free Famagusta (Ayia Napa / Protaras) Regional Tourism Strategy and issues related to air access to the island.

Ian Henderson has just returned from visiting the Buffer Zone.

Journey back to black still turbulent

Europe’s top 3 network airlines reported combined losses of over €2 billion this week. Hot on the heels of Air France-KLM reporting an operating loss of €1.285 billion (€3.5 million a day) for year ended March 31, 2010 almost double the loss a year earlier, BA this morning announced a record pre-tax loss of £531 million (approx. €610 million). These results do not take into account the impact of closures in April due to volcanic ash or in the case of BA losses as a result of cabin crew strikes in recent weeks.

Air France-KLM’s revenues for the year declined by 15% to €20.994 billion, while unit costs rose 4.9% or only 1% after stripping out currency fluctuations and fuel prices. Following the loss of traffic, particularly in the front of the plane, due to the global economic recession, the company said revenue trends were positive in both premium and economy cabins in the fourth quarter. The Franco-Dutch airline group scrapped its dividend after a year dominated by the global financial crisis and last June's Atlantic jet disaster.

BA’s pre-tax losses of £531 million, compared to a loss of £401 million a year earlier, came despite £1 billion in costs being stripped out comprising a £597 million reduction in fuel costs and a £390 million reduction in non-fuel costs. This shows the depth of the impact of the recession on BA’s traffic and revenue - passenger revenue for the year was down 10.9% to £7 billion, while yields fell 8%, despite signs of an upturn in the second half of the year. The carrier cut passenger capacity by almost 5%. Cargo revenues were down 18%, reflecting the fall-off in global trade and over capacity. BA reduced the payroll by just under 3,800 jobs within the year – more than 6,000 jobs have been cut at BA since September 2008.

BA as a long haul global carrier has been heavily dependent on high yield premium passenger traffic in first and business class – a strategy it continues to vigorously pursue with new upgraded fit-out and segment specific services such as the all premium London City-JFK service and its ‘OpenSkies’ Paris to New York & Washington DC services. There are positive signs that premium business travel is recovering although still far below its peak of a few years ago. According to IATA, demand for global premium travel finally returned to year on year growth in December 2009 some three months behind a pick up in general global economic activity. It was the first such increase in 18 months.

Lufthansa has reported a widening net loss of €298 million for the first three months of the year due to higher costs for fuel, strikes and bad weather, compared with a year-earlier loss of €267 million, even though revenue rose to €5.8 billion from €5 billion. The first-time consolidation of unprofitable Austrian Airlines and bmi helped Lufthansa increase first-quarter revenue but weighed on the company's operating profitability. The airline group had an operating loss of €330 million against a loss of €44 million in the equivalent January to March period in 2009.

A common thread in the statements from each airline is the need for continued cost reduction to achieve a restructuring of the business model for a global network carrier. This will be achieved by further cost reductions including increased productivity and headcount reductions; holding capacity or the number of seats on offer to better match demand to achieve higher load factor and yields; reducing short haul route flying. BA faces particular challenges with pending cabin crew strikes and the merger with Iberia. Lufthansa struggles with integrating and turning around its recent purchases – Austrian Airlines and bmi.

Irish carriers and services will not escape the impact of the difficulties of Europe’s largest airlines. In the short term fares can be expected to continue to creep up and we will be flying on fuller planes. The airline landscape will continue to change with most likely greater consolidation and an even more difficult time for smaller national carriers as competition with the ‘big boys’ increases.

Irish Tourism under a Cloud

Before April 15 few had ever conceived that Ireland could be closed to all air traffic due to ash clouds from an unheard of, and unpronounceable, volcano under the Eyjafjallajokull glacier in Iceland. Yet we are now all too familiar with the havoc it has visited on the travelling public, the airlines, airports and tourism industry across Europe.

The cost of the 5 day shutdown of most of Northern Europe in mid April is estimated by IATA to have resulted in 100,000 cancelled flights and a loss of airline revenue of at least €1.3 billion, not counting the cost of putting up stranded passengers and crews.

The cost to Irish carriers has been put at €40 million for Ryanair, €20 million for Aer Lingus and up to €5 million for CityJet. In addition, Dublin Airport Authority (DAA) reckon it lost €8 million, while the Irish Aviation Authority (IAA) estimates a loss of €4 million. These estimates do not include the impact of the most recent restriction on May 16/17, which grounded 1,000 flights.

The bad news is “there are no signs of the eruption slowing down yet", according to Magnus Tumi Gudmundsson of the University of Iceland,. However the good news overnight is an announcement from the British aviation authorities of the creation of a new flying zone with Irish officials and aircraft manufacturers to limit the disruption caused by ash emitted by the volcano.

The new "Time Limited Zone" coming into force today will allow airlines to fly through areas of medium ash density that were previously off limits. Hopefully, this will mean a lessening of the grounding of flights despite the lingering ash clouds overhead.

The grounding of flights with the declaration of blanket no fly zones has come in for severe criticism from airlines, pilots representative bodies, travel businesses and others, who argue that airlines continue to operate in other parts of the world despite volcanic eruptions within the safety tolerances prescribed by the manufacturers. BA’s Willie Walsh has perhaps been most outspoken in calling the closures of European airspace as a "gross over-reaction to a very minor risk." The experience of the past few weeks seems to have forced the authorities and scientists to refine and improve on their models for predicting the location and density of ash clouds and has brought about a better modus operandi between airlines, supported by engine and airframe manufacturers, and the air traffic authorities.

Tourism Prospects D-ashed?

While we may be faced with disruption, hopefully on a lesser scale, should the volcano remain active over the coming months, what does it all mean for Irish tourism?

There is no doubt that visitor arrivals have already been affected. 2010 had not got off to a good start, with arrivals down on the previous year in each of the first 3 months. With fewer visitors arriving in April and the likelihood of lower passengers numbers in May, the prospect of achieving growth in 2010, an already challenging, if not over optimistic, target set by Tourism Ireland, must be becoming less of reality.

While there is no definitive evidence of the impacts, other than fewer arrivals by air, in part compensated for by an increase in ferry passengers, anecdotal reports would suggest that the primary threat to the season ahead is that of uncertainty. Tourism industry sources report a marked slowing down in the level of new bookings, understandably as consumers hold off making a decision waiting to see how likely it is that they will be able to fly.

The Customer Care Charter, announced by Minister Mary Hannifin last week and signed up to by over 600 accommodation providers, will somewhat help ease consumer concerns.

The new norm for 2010 appears to be business, leisure and VFR travellers either deferring travel or at least holding off making bookings until closer to the date of travel. So an even later booking pattern is expected to emerge.

Ferry companies should continue to see a rise in demand as travellers make alternative travel plans. ‘It’s an ill wind....’ the exposure of increasing numbers of passengers to the modern day ferry experience should expand the market for surface travel at least over the short to medium term.

The consumer protection offered by the package holiday should give a boost to tour operators, removing as it does some of the concerns about being stranded.

However, despite some positives and market share shifts, the situation is serious as the continuing threat of disruption undermines consumer confidence at a time of an already depressed demand for travel. The cost to the airlines is significant and will see several carriers already struggling, slip deeper into the red, an outcome which see airfares rise and will accelerate the consolidation within the European airline sector, with some casualties along the way.

The fall off in visitors and the loss of revenue will severely challenge a range of transport, hospitality and tourism business with many already in survival mode due to the recession. The outcome could see some business failures and more redundancies across the sector.

However, the tourism industry has proved itself in the past to be resilient and capable of speedy recovery. The sector has weathered setbacks, including foot & mouth, 9/11, and disruptions due to strikes. While the anticipated growth recovery in visitor numbers is unlikely to be achieved this year, the recovery is only postponed. On a positive note the outflow of cash spent by Irish residents travelling abroad will be slowed with the distinct possibility that some of those euros will be spent on domestic travel to the benefit of the industry and the exchequer.

Ferry Good!

Journalists have been making merry with references to ash clouds having silver linings as ICG reported a 10.4% increase in pax numbers from January to end April. The airspace closure alone brought about a 49% increase in foot and coach passengers. Forward bookings on Irish Ferries were reported to have improved considerably due to the uncertainty over the ash cloud and its ongoing effects on air travel. It is expected that Stena and P&O will report similar experiences.

A New Beginning

Welcome to TTC's new blogspot!
Very soon we will posting interesting information and thoughts on tourism and transport from around the world but with a special focus on the island of Ireland.