The Cyprus Hotel Association (Pasyxe), the biggest group of hotel owners and operators on the island, fears that the ongoing worldwide economic crisis and the soaring fuel prices will have a serious impact on the global airline industry, and subsequently on tourist arrivals in Cyprus.
Pasyxe has recruited industry experts to analyse the situation, saying that the continuing crisis could hurt the island’s tourist industry as well, as the impact will be hardest felt in the global airline industry.
“By our estimates, the impact on airline companies – and subsequently on the expensive fairs – will be felt in the September-October period,” the Pasyxe study said.
The hoteliers’ association believes that this could have aftershocks in the industry with a wave of bankruptcies and closures expected in the U.S. and European airline sectors. The healthier airlines will proceed with consolidation and mergers, while keeping a watchful eye on costs and savings.
Budget airlines are the first to feel the pinch of rising fuel prices with Ryanair issuing a profit warning on Monday. The budget carrier was a major loser with a 22% slump after posting a sharp decline in quarterly net profit and warning on full-year earnings. EasyJet dived 10%, British Airways fell 5.7%, Air France-KLM lost 2.8% and Lufthansa fell 4.1%.
easyJet to slash 12% of flights, Paphos-Gatwick unaffected
Low cost easyJet plans to cut its winter capacity by up to 12% at certain airports as it struggles to deal with falling profits and the high cost of oil.
The airline said pre-tax profits for the year would be in the region of GBP 110-120 mln, down from 201.9 mln last year. Oil price inflation had increased the company's fuel bill by GBP 185 mln for the full year. In its third quarter trading update the company said: "Overall, capacity growth for the Winter 2008 to 2009 has been reduced and is currently planned to be in the region of 4% to 6%.
Flying at less profitable times has been thinned and easyJet will reallocate capacity from weaker performing bases. At Stansted, capacity will be reduced by 12% this winter."
The Gatwick-Paphos flights, substituting the GB Airways schedule that easyJet bought out last year, seems to be unaffected, for now.
EasyJet's decision to trim costs by cutting capacity follows similar moves by British Airways and Ryanair with both airlines saying last week they planned to reduce the number of planes they were flying.
British Airways said it would cut flights by up to 5%, while Ryanair said it would reduce weekly flights from its Dublin base by 12%. BA also warned it was unlikely to make any profit next year due to the high cost of oil.
Although the load factor was down marginally, revenue increased 32% to GBP 641 mln, partially due to the strong Euro, which makes up a significant proportion of the airline's passenger revenues.
With introduction of further revenue generating measures such as the increase in luggage charge to GBP 5 per bag in March, easyJet said it expected second half total revenue per seat to show mid-teens growth.
However the company said it could make further cuts to its schedule if the economic climate deteriorated. "EasyJet may make further adjustments both to eliminate unprofitable flying and to seize any opportunities that may arise as capacity exits the market," the airline said.
The company said just 28% of its fuel requirements were hedged for 2009.
IACA dismayed at higher airport charges in Cyprus
The International Air Carrier Association (IACA) has expressed its dismay at a further 9% increase in airport charges at Larnaca and Paphos airports for 2009, 4% above the average yearly rate of inflation for Cyprus. This increase comes on top of a 77% increase in charges last year by Hermes, the management company for the two airports. Hermes announced the new increases in a letter to all airlines last week.
Brussels-based IACA, which represents 39 airlines and 30% of the airline market share in Cyprus (50% at Paphos airport), has repeatedly challenged the recent increases in airport charges warning that they are putting extreme pressure on leisure airlines serving the country and make Cyprus uncompetitive when compared with other Mediterranean leisure-based airports. Today Cyprus is already up to 150% more expensive than other similar airports in the Mediterranean region and this additional increase will make this percentage even greater, IACA said.
At a time when inbound tourism, especially from the UK, is declining, as well the effect of the strong Euro and global credit crunch on the travelling public, IACA is surprised that Cypriot authorities are not taking more steps to attract more visitors to the country.
“These further increases send a wrong signal to airlines and their passengers that Cyprus is serious about encouraging tourism to Cyprus,” said Luc Geens, Manager Ground Operations, IACA.
“Our airlines need more incentives to come to Cyprus not further charges. There is no justification for an increase in airport charges at a time when tourism is suffering and ground handling services at Larnaca and Paphos airports are more chaotic than ever.”
“I’m disappointed that directly after our meeting with Minister Nicolaides and Minister Paschalides in early July, our members received a further above-inflation increase in airport charges. I call upon both ministers and Hermes to reconsider the 2009 increases urgently”.
