Boeing Frontiers
September 2003
Volume 02, Issue 05
Top Stories Inside Quick Takes Site Tools
Around the World

A Package Deal


Top: A Britannia Airways
Boeing 737-800 takes off.
Britannia uses the 737-800
for service handled by its
Scandinavian arm, Britannia
Airways AB.
For five decades, northern Europeans have participated in an annual ritual unknown in most other parts of the world: the selection of the family's package holiday.

They have thumbed through colorful catalogs that advertise vacation packages and are filled with photos of inviting beaches and seashore hotels. Then they have chosen a destination for a fortnight's getaway.

Planning the family vacation has been that simple. No new tires for the car, no roadmaps, no picnic supplies to buy. Families just sign up for a package holiday, and the tour operators take care of everything else—round-trip flights, transport to and from hotels, resort hotel stay complete with meals, and even day tours to local sights—all for an affordable price.

Despite the growth of do-it-yourself travel planning via the Internet, holiday package tour, or charter, carriers, which use Boeing airplanes for most of their flights, say they're seeing signs of recovery from the recent worldwide slowdown in leisure travel. Today, charter airlines account for about 13 percent of all commercial aviation traffic in Europe. Seventy percent of those flights are on Boeing airplanes. Boeing jets carry about 63 million European charter passengers 315 million miles (506 million kilometers) each year.

A Package DealThat gives Boeing a major role in a modern ritual of European families.

"Package holidays became the standard in Europe, and for years poring over the tour operators' catalogs was a family tradition," said Helga Griesbeck, director of Regional Marketing for Boeing Commercial Airplanes European Sales, who grew up in Germany.

Griesbeck said the popularity of the package holiday or "inclusive tour" in Europe began in the post-World War II years when economies began to rebound and people could afford a vacation. Griesbeck said she believes package holidays flourished in the region because northern Europeans have "lots of vacation time—four to six weeks in most countries, good incomes and a big need for sunshine because of the dark, cold winters."

As part of organizing package tours, tour operators would charter airplanes, book hotel rooms at Mediterranean sunshine destinations, and arrange for ground transportation. The catalogs they printed to advertise the tours were made available at local travel agencies or mailed to potential travelers.

Charter airlines such as Euravia (the forerunner of Britannia) in the United Kingdom and Hapag-Lloyd Flug in Germany formed and grew to meet the demands of the tour operators. And then they grew some more. In 2001, the leisure airlines in Europe carried 48.8 million passengers.

As European tour operators prospered, they began to purchase hotels at holiday destinations and to set up destination companies that could handle the needs of guests during their trips.

"When the tour operators became larger, they purchased businesses that would make them full-service travel firms. They bought the travel agencies that sold their tour packages, buses to transport guests from airports to hotels, tour boats and even the charter airlines that carried vacationers," Griesbeck said. "In later years, they added Web-based reservation systems to the mix."

Destinations became more diversified, too, with tour packages offered to the Caribbean, Africa, India, Asia, the United States and the Pacific.

In the late 1990s, a wave of mergers washed over the industry, thanks in large part to the formation of the European Union, which brought about a single aviation market. Indeed, Griesbeck said, by 2001, there were six big leisure groups that controlled 80 percent of the business and only a dozen or so independent ones.

The largest of the six is Hanover, Germany-based TUI, which manages six airlines: Hapag-Lloyd (Germany), Corsair (France), Neos (Italy), White Eagle (Poland), and Britannia (United Kingdom), which has a subsidiary that serves Scandinavia. The other big leisure groups are Thomas Cook and REWE, both based in Germany; My Travel and First Choice Holidays, both based in the United Kingdom; and KUONI, a Swiss company. All of the megacompanies own and manage at least one airline. Some of the independent tour operators operate their own airlines while others charter planes.

Despite these successes, Griesbeck said the leisure groups have seen their customer base erode in the last two years primarily because of terrorism-related travel concerns, war, competition from low-fare airlines, weak economies and the ease of booking your own transportation and hotel on the Internet.

"Tourism flourishes in a peaceful environment," Griesbeck explained. "Acts of terrorism break the booking pattern. People become fearful, so they take fewer vacation trips or avoid countries where acts of terrorism occur. When they do book, they often book late."

She said the September 2001 terrorist attacks in the United States had an immediate impact on European leisure travel. The April 2002 bombing in Tunisia affected bookings for North African Mediterranean holidays, and the October 2002 Bali nightclub bombing affected bookings for holidays to faraway exotic destinations. The 2003 Iraq war also had an effect on travel from Europe to eastern Mediterranean countries like Turkey and Egypt.

The successes of European low-fare airlines such as Ryanair and easyJet have provided the leisure groups almost as big a challenge. No-frills carriers offer such ultra-cheap tickets that travelers are switching their loyalties. The low-fare carriers are targeting routes to popular holiday destinations once served only by charter airlines.

Tour operators are reacting to this new competition by adding tour packages to new routes not served by low-fare airlines, offering promotional fares, selling airplane seats that are not part of a package, and especially by forming their own low-fare subsidiaries.

In Germany, TUI now has Hapag-Lloyd Express, whose Boeing 737s are painted to look like yellow taxis, and Germania has added Germania Flug, a low-fare arm. In the United Kingdom, My Travel began My Travel Lite. Netherlands carrier Transavia has a low-fare called Basiq Air and Air Finland operates Flying Finn.

In the last couple of years, tour operators have faced tough challenges and have either recorded losses or have barely broken even. Even though the Iraq war is over, the economy in most European countries remains weak, so passenger traffic has not shown improvement.

But in the last few months, the tide has begun to turn. In mid-June, TUI reported "much better booking figures" in the United Kingdom and some improvement overall in Western Europe.

"I'm convinced that the positive trends observed in the past few weeks will continue," said Michael Frenzel, chief executive officer of TUI.

First Choice Holidays in mid-June reported a strong recovery in booking levels across all businesses since the beginning of May. "Overall, UK bookings since the beginning of May have been 15 percent ahead of last year, with bookings over the past three weeks 26 percent ahead," said Peter Long, First Choice chief executive.


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