Travel in 2022 – how Russia is reshaping the world’s travel industry

Russians were the most visible travellers heading to Thailand post February 1, 2022, when the Thailand Pass Test & Go option was rebooted. Even with its 2 days of pre-booked SHA+ quarantine and PCR tests, along with US$50,000 Covid insurance (which has since been reduced to $20,000), the Russian travelers were delighted to jump on a plane and take the long trip to the much warmer Land of Smiles.

That situation has now radically changed and the world is reverberating to the full impact of Russia’s aggression and the invasion of Ukraine.

Now there’s a mere trickle of daily flights between Russia and either Suvarnabhumi or Phuket in Thailand. Whilst much of the rest of the world have said ’nyet’ to the arrival of any planes from Russia, Thailand is still allowing them to arrive. But even if the planes are still coming (albeit in vastly reduced numbers), the pressure of world sanctions, bans and the plunge of the Russian Ruble has already made the decision for any potential Russian travelers.

Now, the latest data from ForwardKeys, shows that the Russian invasion of Ukraine, now into its 9th day, has prompted an instant spike in flight cancellations to and from Russia, worldwide. On the day after the first tanks rolled into Ukraine, every booking that was made for travel to Russia was outweighed by six cancellations of existing bookings.

Russians escaping their bleak winter and heading to sunnier destinations were suddenly cancelling their trips. The cancellation rates between February 24 – 26 were Cyprus (300%), Egypt (234%), Turkey (153%), the UK (153%), Armenia (200%), and Maldives (165%).

Bookings for March, April and May were already reaching 32% of the pre-Covid levels of travel for outbound Russians. They were heading to Mexico, Seychelles, Eygpt and Maldives. And Thailand.

The outlook for Q3 this year was looking even stronger.

All that Russian travel enthusiasm has now collapsed and, given the harsh economic weapons thrown at Vladimir Putin, his banks, his ‘friends’ and his citizens, any recovery will be a long, long way down the track. Even if there was a swift and unexpected reversal of the Ukraine situation, Russia has already been dealt a fatal economic blow – in just one week the country been turned into a pariah state and much of the rest of the world seems happy to punish the entire country for Putin’s violence.

For countries like the Seychelles, Maldives and Cyprus, Russian arrivals represented a high percentage of their international arrivals. In Thailand that was about 8% of the total tourist mix. And, whilst the Chinese are still in China for at least the rest of this year, the loss of the Russian travel market probably represented an even higher percentage of tourists that won’t be coming to Thailand in 2022.

Sourse - The Thaiger

According to ForwardKeys, before Russia invaded Ukraine, the top twenty destinations most booked by Russian travelers in March, April and May were…. Number one, Turkey, then the UAE, the Maldives, Thailand, Greece, Egypt, Cyprus, Armenia, Seychelles, Sri Lanka, Hungary, Bulgaria, Mexico, Spain, Azerbaijan, USA, UK, Qatar, Italy and Uzbekistan.

The world travel industry will be further hit by rising airfares (due to the sharp surge in oil prices), cancellations of routes (across Eastern Europe), a higher resistance to international travel (for perceived safety reasons) and a lingering instability in world politics.

While the Thailand Pass is still seen by many potential travelers as a significant barrier to their choice of Thailand as their next travel destination, and the Russian and Chinese traveler-tap turned off, Thailand’s immediate travel future looks bleak. And this follows nearly 2 years of border closures, false restarts, over-hyped TAT arrival projections and the former Thai tourism workforce heading home to find other work.

The loss of the Russian travelers underscores a critical need for the Thai government to quickly modify the Thailand Pass, or scrap it completely. With so many other factors now making international travel difficult, Thailand will have to rethink their short to medium term tourism strategies to retain its share of the international travel market.

Of course there is no comparison of the humanitarian tragedy underway inside the borders of Ukraine at this time, but Russia’s aggression will likely have much more long-term, and far-reaching, effects than the clear and present danger it poses on the Ukranian nation right now.

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Global aviation in acute crisis

“…by the end of May 2020 most airlines in the world will be bankrupt.”

Global aviation has been battered and commercial scheduled air traffic remains mostly grounded as countries enforce their lockdowns and travel restrictions. There are few signs that the end is in sight. For the largest of carriers like IAG (British Airways), United, American Airlines, Emirates Lufthansa and many more all have been forced to seek help from their governments (see summary below).

The vital travel and tourism industry – which has often be the driver to a country’s economic recovery following past crises, is keen to see international air travel resume ASAP. The business of tourism which generates 10.3 percent of global GNP is anxious to restart travel.

A post-corona airline industry is going to look very different. Those that survive will have evolved into smaller leaner and debt laden businesses and probably bailed out by governments. Some aviation analysts are predicting that Covid-19 will leave the industry decimated and by the end of May 2020 most airlines in the world will be bankrupt. CAPA analysts have also reported the same, most of the world’s airlines could be bankrupt by the end of May if the situation does not turn around quickly.

One potential solution they propose would be to rescind national ownership rules and allow the industry to merge into global brands.

The post-corona chaos offers a rare opportunity to reset the building blocks of a global airline industry.

Emerging from the crisis will be like entering a battlefield littered with casualties. The field is open for lawmakers and financial markets to make their own demands on an industry that already has a long list – wish lists of ways they should treat customers better, reduce their carbon footprint and adopt more sustainable business practices.

As the impact of the corona virus slashes through our world, many airlines have already been driven into technical bankruptcy. We see cash reserves are running down quickly as fleets are grounded. Forward bookings far outweigh cancellations and each time there is a new government recommendation it is to discourage flying and travel.

“The new normal has not yet arrived at the airport.”

The International Air Transport Association most recent prediction is that European airlines will see demand drop by 55 percent in 2020 compared to 2019 and potential revenue losses will total $89 billion. The association revised its loss prediction of $76 billion made in March as the impact of the corona virus global pandemic on the airline industry continues to hit unprecedented levels.

There has been a 90% drop in regional demand in the last several weeks and IATA has cited the introduction of travel restrictions around the world limiting movement only to essential travel and repatriation of citizens to their home countries as having “a greater impact than previously expected.”

A significant number of European airlines have suspended passenger operations with two of the region’s largest carriers, easyJet and Ryanair, not expecting flights to operate until June.

Airlines will be hoping for corporate travel to bounce back quickly, business travellers probably pay four to five times the average fare on a typical flight – having them quickly back on airplanes is vitally important.

Even if the economy begins to recover in the third quarter of this year, as many economists predict, corona virus fears could lead to a slow recovery as travel struggles to regain its pre-crisis levels.

It could take months for an airline to come back to life. Also if second waves of the disease go around the world and possible hot-spot flare up these may reduce passenger confidence to travel. And while essential maintenance is still happening daily on parked planes, they will all need to be brought back into flying condition before being put back into service.

Demand is drying up in ways that are completely unprecedented. The new normal has not yet arrived at the airport.

The crisis list…

✈️ The US government agreed a $61 billion bailout for the US airline industry as the corona virus pandemic brings travel to a virtual standstill. The grants to major airlines including American, Delta, Southwest, JetBlue and United will probably come with strings attached.

On the 14 April 2020 the International Air Transport Association released updated analysis showing that the Covid-19 crisis will see airline passenger revenues drop by $314 billion in 2020, a 55% decline compared to 2019.

Earlier, on the 24 March IATA had estimated $252 billion in lost revenues (-44% vs. 2019) in a scenario with severe travel restrictions lasting three months. The updated figures reflect a significant deepening of the crisis since then, and reflect:

1- Severe domestic restrictions lasting three months

2- Some restrictions on international travel extending beyond the initial three months

3- Worldwide severe impact, including Africa and Latin America (which had a small presence of the disease and were expected to be less impacted in the March analysis).

Full-year passenger demand (domestic and international) is expected to be down 48% compared to 2019.

✈️ Virgin Australia went into voluntary administration on April 21 due to crippling debts exacerbated by the corona virus lockdowns. At least 10,000 jobs would be at stake if the airline folds. Virgin is carrying about AUS$5 billion (US$ 3.2 billion) in debt and had sought federal help to keep operating but the Morrison government rejected a $1.4 billion bailout.

✈️ Thai Airways similarly to Virgin Australia is seeking a US$1.8 billion restructuring loan from the government. The loan is unpopular as many believe that in its existing state it is doomed to fail. Trust of its management and directors has reached new lows with the Thai PM Prayut Chan-o-cha and the public. Thai Airways must submit a rehabilitation plan by the end of the month if it wants the government to consider a rescue package. Transport Minister Saksayam Chidchob set the deadline amid this rising public sentiment against a state-backed loan.

✈️ IAG (British Airways’ parent company) the group announced in March moves to protect capital and reduce costs.

“We have seen a substantial decline in bookings across our airlines and global network over the past few weeks and we expect demand to remain weak until well into the summer,” CEO Walsh said. “We are therefore making significant reductions to our flying schedules. We will continue to monitor demand levels and we have the flexibility to make further cuts if necessary. We are also taking actions to reduce operating expenses and improve cash flow at each of our airlines. IAG is resilient with a strong balance sheet and substantial cash liquidity.”

Capacity for April and May will be cut by at least 75% compared to the same period in 2019. The group will also ground surplus aircraft, reduce and defer capital spending, cut non-essential and non-cyber related IT spend, and discretionary spending. The company also plans to reduce labour costs by freezing recruitment, implementing voluntary leave options, temporarily suspending employment contracts, and reducing working hours.

✈️ Air Mauritius goes into Voluntary Administration.

✈️ South African Airways Bankrupt. On 5 December 2019, the Government of South Africa announced that SAA would enter into bankruptcy protection, as the airline has not turned a profit since 2011 and ran out of money.

✈️ Finnair returns 12 planes and lays off 2,400 people.

✈️ YOU grounds 22 planes and fires 4,100 people.

✈️ Ryanair grounds 113 planes and gets rid of 900 pilots for the moment, 450 more in the coming months.

✈️ Norwegian completely stops its long-haul activity!!! The 787s are returned to the lessors.

✈️ SAS returns 14 planes and fires 520 pilots… The Scandinavian states are studying a plan to liquidate Norwegian and SAS to rebuild a new company from their ashes.

✈️ IAG (British Airways) grounds 34 planes. Everyone over 58 to retire.

✈️ Ethiad cancels 18 orders for A350, grounds 10 A380 and 10 Boeing 787. Lays off 720 staff.

✈️ Emirates grounds 38 A380s and cancels all orders for the Boeing 777x (150 aircraft, the largest order for this type). They “invite” all employees over 56 to retire

✈️ Wizzair returns 32 A320s and lays off 1,200 people, including 200 pilots, another wave of 430 layoffs planned in the coming months. Remaining employees will see their wages reduced by 30%.

✈️ IAG (Iberia) grounds 56 planes.

✈️ Luxair reduces its fleet by 50% (and associated redundancies)

✈️ CSA abolishes its long-haul sector and keeps only 5 medium-haul aircraft.

✈️ Eurowings goes into Bankruptcy

✈️ Brussels Airline reduces its fleet by 50% (and associated redundancies).

✈️ Lufthansa, the German federal government agreed on a €9 billion ($9.74billion) rescue package and plans to ground 72 aircraft.

✈️ Air France KLM Chief Executive Ben Smith said that voluntary redundancies would be part of the airline’s initial cost-cutting plans, and that costs at its ‘HOP’ arm were not viable as things stood. In an interview just hours after Air France KLM secured 7 billion euros ($7.6 billion) in French government aid, he also said that it could take two years, or possibly “even a bit longer,” before things returned to normal in the aviation and airline industry.

Global aviation in acute crisis | Source - News by The Thaiger

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An onslaught of tourists is stressing out Thailand

Back in early June, a small pilot whale gained global attention after it ingested plastic bags and packaging, and then died in southern Thailand. It wasn’t a good look for the nation’s tourism industry.

A month later, Thailand’s Tourism Minister Weerasak Kowsurat holds up a picture frame containing pieces of an instant-noodle packet recovered from the stomach of the whale. For him, it’s emblematic of the environmental and other stresses of a record tourism boom that could see 40 million foreign arrivals -- equivalent to over half the nation’s population -- in 2019.

"Tourism can create, and at the same time, tourism can disrupt," said Weerasak, 52, in an interview in his office in the Thai capital. "Congestion is no good for anyone, including the hosts and the guests."

A surge in Chinese holidaymakers has stoked the growth in the tourism sector, which now accounts for roughly 20 percent of Southeast Asia’s second-largest economy.

Managing the inflow is proving challenging, underlined by a tragedy last week that put the spotlight on safety standards after more than 40 Chinese tourists died when a boat sank off the coast of Phuket.

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 The disaster hasn’t had a significant impact on Chinese enthusiasm for holidays in Thailand but the government has to be proactive to prevent a wider fallout, said Thongyoo Suphavittayakorn, a spokesperson for the Association of Thai Travel Agents.

Many of the overseas travelers head to Bangkok, beach hot-spots like Phuket or the popular northern city of Chiang Mai, straining local resources.

Asked if Thailand is now coming close to its tourism capacity, Weerasak said: "Oh yeah."

The minister is looking to promote visits to less-traveled spots inside the country to tackle congestion in popular destinations as well as addressing national income disparities. Yet that throws up a new challenge: How to preserve the character of local communities and heritage sites such as the ancient ruins of Ayutthaya that might have to absorb a wave of foreign visitors.

Weerasak said he’s seeking to "encourage domestic and international travelers to be very responsible, not only to the culture but also to the environment."

Consider the case of Maya Bay on Phi Phi Island, which was made famous by the year 2000 movie The Beach starring Leonardo DiCaprio. The bay has been closed down by authorities for four months to give the island time to recover from environmental degradation, such as coral damage from boat anchors and trash on beaches, caused by constant tourist traffic.

"The increased influx of tourism is already having very visible impacts on the Thai seas and coasts," Eike Schoenig, director and chief resident scientist at marine environmentalist group COREsea, said in an email. "Few countries have good track records managing mass tourism."

The Thai tourism minister is planning to install a reservation-only system to control the number of visitors to the bay. Boats will be forced to dock at the back of the bay, so that there will only be a single entry point for tourists.

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WHERE TO BOOKING YOUR NEXT TRIP

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 Thailand’s military government is also considering imposing a travel insurance system to prevent tourists arriving without any protection and ending up as a burden on the state if they get into trouble, he said.

Despite the difficulties, tourism is going to remain a critical engine for Thailand, where economic growth is accelerating but lags behind some neighboring countries. Government data shows revenue from foreign tourists is projected at well over $60 billion next year, and that spending remains focused mainly on major cities.

The country is pushing ahead with investment to expand airports as passenger traffic climbs. State-run Airports of Thailand plans to pour billions of dollars into boosting capacity in Bangkok as well as the tourist-heavy spots of Phuket and Chiang Mai.

Countries such as France and Italy that get heavy tourist traffic manage to disperse visitors, said Weerasak.

"That is the pattern we want to see," he said. "The numbers keep increasing. It all depends on how you manage them."

Source - TheJakataPost