THE HEATHROW DEBATE - WHAT'S THE ANSWER?

We posted a news story on our LinkedIn page yesterday about business travellers wanting another runway at Heathrow Airport. Richard Charman, research manager at HRG, posted a reply. See below. Food for thought, isn't it? We'd love to hear what you think - @btshowlondon or Business Travel Show group on LinkedIn. 

If you look at the IoD's own member research - it shows a significant regional split on where expansion should be focused. Having read numerous submissions my gut feeling is that Gatwick may be given an additional runway, Manchester Airport will get an additional runway, Birmingham Airport will have a significantly expanded runway by the end of 2014, Boris Island or similar will be promoted as a long term alternative to Heathrow, by the Government, whilst expansion at a number of other airports will also be permitted. It is already happening at Llydd Airport.  Personally, I would like Heathrow Airport expanded to accommodate two more runways but, I do not see how the Government can get that through Parliament or the courts because of the environmental impact. The promotion of one additional runway might be acceptable - but some argue that is only an interim not, a long-term solution. The likely outcome of the Davis Commission exercise is an attempt to direct development to a number of airports around the country to try and encourage balanced airport expansion because this implies balanced economic development - such simplistic logic ignores failed attempts to get airlines to use Stansted which is currently a white elephant used many by low cost airlines. Such a scenario could do a great deal of harm to UK earnings from aviation and encourage expansion at airports outside the UK. We are already suffering significant political and economic damage as a result of the imposition of Air Passenger Duty which should be abolished or as a minimum reduced significantly.

By Richard Charman

DEAR PATRICK MCLOUGHLIN, PLEASE PUT PARTY POLITICS TO ONE SIDE FOR THE SAKE OF UK PLC

In the first cabinet reshuffle since the Coalition Government took power, anti-third runway Transport Secretary Justine Greening has been ousted and Patrick McLoughlin has taken her place. Not much is known about Mr McLoughlin transport-wise, apart from the fact he has a fear of flying and he represents the most landlocked constituency in the UK.

 

No doubt, airport expansion, and the issue of a third runway at Heathrow in particular, will be top of his agenda this morning. Speaking on behalf of the business travel industry – if I may – I urge Mr McLoughlin to use this opportunity to put party politics to one side, to not succumb to the NIMBYs (not in my backyards) who will fight against expansion at whichever airport affects them most, and to focus solely on what’s good for UK PLC.

As the Government continues to dither and decisions are delayed, cities like Amsterdam, Frankfurt and Paris – all with world-class, well-connected hubs – continue to attract global corporations and the UK continues to slide down the scale as a centre of global commerce. 

Our lack of airport capacity is also preventing us from introducing new routes to the BRIC countries, which is essential to fuel economic growth long term.

In my opinion, that means putting a plan in place to create a long term transport strategy that will support the UK as a centre for business and fuel its economy over the next 20-30 years. And in the short-medium term look to airports such as Gatwick, Luton and Stansted to ease the capacity issues at Heathrow that everyone is getting so blindsided by.

As event director of the Business Travel Show, I’d like to extend an invitation to Mr McLoughlin to address the business travel industry at our event in London next February where he will meet a very eager audience keen to question him about the issues affecting our business including airport expansion, APD, green taxes, and high speed rail and franchises.

David Chapple, event director Business Travel Show, david@businesstravelshow.com

VIRGIN TAKES OFF AT HOME

Richard Branson and Virgin have somewhat hijacked the news over the last two weeks, haven’t they?

It started with Virgin being outbid by FirstGroup for the West Coast Mainline franchise that it has been running for the last 12 years. You can read our blog post with the details of FirstGroup’s bid here. Branson, it was reported, was livid, issuing an aggressive statement questioning the Government’s decision and FirstGroup’s competence almost immediately. This was followed by the announcement of an appeal and the launch of an online petition, which garnered 150,000 signatures. Branson even offered to run the service on a not-for-profit basis if the Government agreed to postpone the contract signing for two months.

Yesterday (28 August 2012) it was reported that Virgin had its lawyers working over the Bank Holiday weekend and is now planning a last minute legal challenge to prevent the Government from signing the contract, which is due to happen tomorrow and, which, according to the Transport Secretary Justine Keeling, is going ahead.

It’s all very gung-ho for the transport industry and I’m genuinely looking forward to the outcome. But what I find really interesting is the surprise announcement – released in the midst of this melee -that Virgin is proposing a three-times-daily airline service from London Heathrow to Manchester from next March.

When it was announced, many assumed Branson was simply throwing his toys out of the pram having lost West Coast Mainline. But I doubt this very much. I think the domestic airline has been part of the Virgin plan for some time and the timing of the announcement was merely coincidental.

The airline lost £80.2m last year. It has also lost its code share deal with BMI following BMI’s acquisition by IAG and its alignment with BA, which means it’s lost a significant chunk of its feeder routes, so something had to be done. And that something, it would seem, is the launch of a UK domestic network.

My question is: “Does this signal more of a strategic change in direction for Virgin Altantic, or will the IAG competition trustees charged with reallocating the BMI Heathrow slots see it as nothing more than smoke and mirrors to make them look like more of a credible option for those slots?”

The trustees will award these slots from summer 2013 and the decision will be made in the next couple of months, which also makes me think twice about the timing of the announcement.

Whatever the reason, though, the move by Virgin is potentially good news for the corporate travel buyer, as the likes of Virgin and BA start competing on value, service and price leading to increased frequencies and flight options, as well as better value for money.

David Chapple is event director of the Business Travel Show – you can challenge him on Twitter @btshowlondon or at david@businesstravelshow.com  

TRAVEL BUYERS HAVE TO BE TRAINED NEGOTIATORS TOO

I was at an ITM meeting last week and one of the topics that came up was air fares or, more specifically, how buyers can and need to negotiate their way around them. We discussed how, before business travel buyers even attempt to start negotiations with airlines, they have to dig deeper to find out what makes up that fare. Some airlines, for instance, include ancillary fees and fuel surcharges in the fare. Others don’t.

Travel managers have to know what the ancillary fees are (seat allocation, baggage allowance, and so on) so they can unravel the real cost of the ticket. Only then, are they in a position to start negotiating with the airlines. And negotiate they must given that, at around half of the total travel budget, air represents the largest spending category in nearly all travel programmes.

CWT – the UK’s largest travel management company – understands this and agrees. This week, the company announced its new report, Mastering the Maze: a Practical Guide to Air and Ground Savings, which takes travel managers on a tour of savings opportunities in 20 different areas, including negotiating fuel surcharges and ancillary fees. Well worth downloading.

Being transparent when it comes to real cost and added costs is a win win situation between buyers and suppliers – it encourages loyalty among buyers and, by staying loyal, buyers will be better placed to achieve a volume discount. What’s not to like?

Posted by David Chapple, event director of the Business Travel Show. You can get in touch at david@businesstravelshow.com or on Twitter @btshowlondon

HOW DID WE FORGET ABOUT GATWICK?

There has been pretty much one topic on everyone’s lips in the industry this week and that is the argument for a third runway at Heathrow Airport. Why? Because the UK government is due to unveil a consultation document on its new airports strategy in the next few weeks. Note: the consultation document isn’t about Heathrow and its third runway. In fact, expansion at Heathrow isn’t even included as one of the options on the table. And yet, it would appear, all roads (or should that be runways) keep leading back to Heathrow.

There’s no doubting that Heathrow is a problem that needs fixing. It’s currently operating at a perilous 99 per cent capacity. Some have suggested introducing mixed mode flying (ie using its two runways for inbound and outbound flights) to increase this capacity by 15 per cent and another 10 million passengers per year.

But, in my opinion, Heathrow is a bit of red herring in this whole debate. We need to stop talking about it and get back to the real issue: how is aviation going to grow over the next 20, 30 years and how are we going to build an infrastructure fit for purpose to continue supporting the growth of UK Plc?

In the short term, the answer is not Heathrow. Or Marsden. Or Boris Island. Let’s open our eyes and look to other airports in the South East, airports with capacity: Luton, Stansted, Gatwick.

Gatwick, for one, is currently operating at around 80 per cent capacity on its single runway. It’s projected to grow to 40 million passengers by 2020 with that one runway (it’s currently at just under 34 million). It’s connected to London for business better than any other airport, with train links to Victoria, London Bridge, City Link and Kings Cross. And it’s currently investing around £20 million per month into new passenger facilities as part of a six year £1.2 billion programme due for completion around 2014/2015. This investment and infrastructure make Gatwick a great option for business travellers.

But I’m not here to champion Gatwick over Heathrow, or Stansted over Boris Island. I’m here to champion common sense and to say let’s park Heathrow for now and start thinking long term for the good of this industry. 

Posted by David Chapple - talk to him on Twitter @btshowlondon or david@businesstravelshow.com 

TRAVELLERS GO OUT OF THEIR WAY (LITERALLY) TO AVOID APD

Thanks to a recent report from Sainsbury's Finance claiming that families are planning to avoid or reduce APD by taking more staycations and long-haul flights from other European countries, APD is back in the news again.

Not that it’s been out of the news much (try Google-ing it). Since it was introduced in 1994 to combat the lack of VAT on fuel, APD has been the subject of many an angry rant from leisure and business travel journalists, who fight back with renewed vigour each time an additional price hike is announced.

And who can blame them? What started out as an extra £10 per passenger per long-haul economy flight from the UK peaks at an incredible £125 come 2016. The Government defends APD tooth and nail, claiming it’s a valid eco-tax. But they would, wouldn’t they? It accounts for £2.6bn in additional revenue to the treasury.

My question is whether APD is about to back fire on the Government as savvy business travellers get wise and fly short haul out of the UK using Charles de Gaulle, Schiphol or Frankfurt as their long haul hubs. This would certainly reduce the APD coffers in the short term and damage the UK economy in the long term.

If APD really is a green tax as the Government claims, maybe they need to look at ways to incentivise airlines to be more environmentally friendly rather than penalising the passengers who – just possibly – think they’re already paying enough taxes as it is.

Posted by David Chapple - talk to him on Twitter @btshowlondon

UNBUNDLING DEMYSTIFIED

Unbundling was a dirty word that first reared its head in the travel market a few years ago and the public’s disdain toward suppliers offering unbundled prices peaked when Ryanair suggested it was planning to ‘charge a pound to spend a penny’. It’s since become part and parcel of how we buy travel and, when the game is played well, travellers and travel managers can use unbundling to their advantage, paying for only what they need and saving money as a result. 

In the trade, unbundling is more commonly referred to as ancillary fees. And though we may be more used to their existence, controlling, navigating and tracking them can still be a mystifying experience for many travel managers. According to recent research by the GBTA just 21 percent (21%) of travel managers are tracking ancillary fees while those fees account for over eight per cent of total travel spend.

Believing that ancillary fees have a significant impact on travel budgets and policies and, with better insight into how these fees work, travel managers can make more informed choices, the GBTA has now released the ‘2012 Ancillary Fee Handbook, Who Charges What, When & Where’.

The study categorizes virtually all the ancillary fees that business travellers can incur through airline, hotel and car rental travel. It also provides a rating system that evaluates each fee on three essential characteristics:

1. How common it is for a business traveller to incur the fee?
2. How transparent it is to travellers and planners?
3. How easy it is for travel managers to track the fee once it has been incurred?

You can download it here: http://hub.gbta.org/resources2/view/profile/id/21535. Travel managers across the globe can now breathe a collected sigh of relief. 

Posted by Daniela Reck - daniela.reck@centaur.co.uk 

TRAVELLERS PREFER TO TRAVEL OUT OF POLICY. NO SURPRISE THERE, THEN.

I’ve just finished reading a news story in the LA Times based on a survey by Concur Technologies. The survey found that business travellers believe the success of their trips is inversely proportional to the number of travel restrictions laid down by their employers.

Business travellers on trips with strict travel policies score them as 73 per cent successful in achieving all of their goals; when travellers are given only guidelines and recommendations, the score rises to 76 per cent; and when an employee travels with no policy at all, that score jumps another three per cent.

Surveys like this are undoubtedly useful and interesting, particularly for HR and senior management, even though I’m not 100 per cent sure you could call the results surprising. I mean, wouldn’t we all prefer to choose our own flights and hotels when travelling on business? I know I would.

But they must also be downright frustrating for travel departments, managers and bookers who put so much effort into creating travel policy, securing management buy in and support, and enforcing that policy to ensure they are getting the best for their business. 

Posted by David Chapple - david@businesstravelshow.com 

ARE BUSINESS TRAVELLERS PREPARED FOR THE OLYMPIC GAMES?

From my window, I can see the WaterTower in east London, which is likely to become home to an arsenal of surface to air missiles during the 2012 Olympic games. It really brought home a) how close the games are now – less than three months away, and the sheer disruption the Games will cause for business travellers.

Throughout June, July and August, London will be awash with tourists thanks to the Olympics, Paralympics and Diamond Jubilee. This influx of people will be filling up hotel rooms, serviced apartments, tube trains and taxis to bursting point, which is great for the London economy, but not so wonderful for the business traveller.

Stanley Slaughter wrote about the likely disruption in ABTNrecently, highlighting that hotel prices are up 7.6% year on year (according to consultants PKF) and booking rates up by more than 5% due to our summer of fun and London’s recent poll topping of the best cities in the world. What this means is that those rooms needed for last minute trips are going to be hard to find and, if they can be found, come with a premium price tag. But, he claims, it is transport that is likely to prove the more crucial problem: both getting into London and getting around it.

From a local’s point of view, the reminders from Transport for London to consider alternative routes to work – or better still – working from home, are omnipresent and more than a little annoying. So I do worry how the business traveller will cope, with their lack of local knowledge and reliance on local service providers. One solution could be to avoid London altogether, which means the sun could be about to shine very brightly on video conference providers this summer.

Posted by Daniela Reck - daniela.reck@centaur.co.uk  

IS THE DREAMLINER THE KING OF GREEN?

In February 2008, we were lucky enough to unveil the Dreamliner to business travel buyers at the Business Travel Show in London. Four years on and it has finally taken to the skies, as reported recently on BBC Breakfast. The impact it will have on the business traveller has been widely reported, but I’m more interested in what the launch means to the business travel buyer, particularly on an environmental level.

The Dreamliner is often compared to the Airbus A380, simply because they are the two most recent long-haul launches. But while Airbus has focused on increasing capacity to reduce environmental impact by creating the lowest fuel-burn-per-seat ratio, Boeing has achieved its environmental credentials in an entirely different way altogether.

Boeing has created a medium sized plane with two engine platforms (Airbus has four) and engineers have also used the highest carbon composite to date resulting in a plan that’s 20 per cent lighter and, as a result, 20 per cent more fuel efficient than existing planes of the same size.

With 821 orders for Boeing compared to 236 for the Airbus, the market seems to be voting for the Dreamliner, but it will be interesting to see how the travel buyers vote. But comparisons aside, the fact that both airlines are now entering the design process with ‘green’ at the top of the agenda, is surely a good move for everyone. 

Posted by David Chapple 

True value comes from honesty and transparency

A recent report by Ideaworks and Amadeus of 47 airlines worldwide reported an increase in ancillary revenue of 96 per cent on 2008 to €15 billion. Let me write that again - €15 billion. That’s a lot of money. It’s a good thing for the airlines because ancillary charging is viewed as a financial necessity, especially following the economic downturn. But it worries me what airline passengers may think as their opinions of ancillary charging – or unbundling as it’s also known – have been well documented in recent years.

Why they feel so negatively towards unbundling is interesting because, on the face of it, unbundling is a good thing for passengers too. It allows them to customise their journeys and pay for only the things they want. Be clever, and unmanaged travellers can even save money thanks to unbundling. Sadly, unbundling doesn’t currently have the same appeal for managed business travel as GDS technology doesn’t give buyers access to unbundling options.

So if it’s not price, and it’s not the increase in choice, what is it that passengers find so distasteful? Well, in my opinion, it’s our very natural fear of being taken for fools, of being cheated and ripped off. When unbundling first launched through the budget airlines, it was almost instantly referred to in the media as ‘hidden costs’ or ‘hidden charges’ and the press took it upon themselves to take up the mantle of consumer champion fighting for a cause most of us were unaware even existed.

It’s this word ‘hidden’ that’s key. Hide things from people – or just as bad, make claims that don’t stand up - and you cause a consumer revolution. I’m not talking about just airlines here. This goes for every industry, from hotels and holidays, to entertainment and exhibition organisers. Customers aren’t stupid and it’s suicidal of any business to treat them as such. Be transparent and honest and customers will feel they are being treated fairly, even if the end price, product and service are the same. And happy customers will, of course, reward you with loyalty, fairness and word of mouth recommendations in return.

Posted by David Chapple, event director, Business Travel & Meetings Show