2017 – a Year of Uncertainty

What will 2017 bring for British travellers, tour operators and airlines? Roger Bray – views expressed are his own and not those of the BGTW – sets out some of the key issues.

Ski holidays – prices set to rise

Rarely have the travel industry and its customers faced the New Year amid such uncertainty. The vacuous mantra that Brexit means Brexit affords no clues. The only certainty is that the slide in the exchange value of sterling since the referendum will mean higher foreign holiday prices – and that rising inflation may do some of the same for the cost of holidaying in the UK.

These increases will take time to feed through. Most –though not all – tour operators had bought all or some of the currencies they need to pay hoteliers and other overseas suppliers in the short term on the forward markets, before the £ plunged. But sooner or later they need to repeat the exercise. One major tour operator, which consistently hedges in this way, has already indicated that the price of ski and snowboard packages for the 2017-18 season will be 5 – 6% higher than this winter’s. Another operator is reported to be imposing surcharges on this season’s holidays.

Whatever the policy of tour firms, all travellers will take an immediate hit when they get to their resorts. In mid-December last year the £ was trading at around €1.37. At the same point this winter it was buying about €1.19 – a drop of approximately 13%. The impact of a weaker £ will also affect airfares, mainly because aviation fuel is paid for in US dollars, but the effect is unlikely to be dramatic. Fuel has represented an average 19% of airline operating costs worldwide in 2016 – and that average is pushed up by airlines still flying older, less efficient aircraft. I reckon fares from Britain should rise by no more than 2%. These calculations, of course, are based on current exchange rates. Any convincing signal that we’re heading for a long transitional period, a very soft Brexit – or even no meaningful Brexit at all – could see sterling bouncing back.

But it’s not just exchange rates that are causing uncertainly. There is a clutch of other awkward questions. Will the UK still be part of the EU single skies agreement, which enables airlines to operate anywhere in the 28 member states? UK based carriers are either planning or in the process of setting up separate companies based in the EU in order to get around this problem.

If free movement of people is curtailed, what will be the impact on airlines highly dependent on traffic in migrant workers to and from Britain? Will it lead to the axing of routes and a smaller choice of central and eastern European destinations?

Will UK passengers continue to benefit from Brussels rules requiring airlines to compensate them for delays, cancellations and overbooking? Will the British Government transfer those rules directly into domestic law, or will it seek to tweak them? And either way, how long will it take?

What will happen to the European Health Insurance Card (EHIC), which guarantees UK citizens get whatever free treatment those of the country they are visiting get? Prefect it isn’t, but it removes a lot of anxiety for anyone needing emergency care. It’s now vulnerable – and without it private travel insurance premiums are sure to rise.

What will be the impact on financial protection rules for travellers? Brussels has just issued a directive updating them. The directive is now out for consultation but the deadline for enacting it as British law will fall before any date for leaving the EU. One of its rules is that travellers should be safeguarded against the collapse of a travel company under the system in the country where that company is based – rather than the place where the holiday is sold. UK consumer protection experts don’t much like that idea. It could mean holidaymakers having to wrestle with getting their money back in Spain, for example. Will the Government simply make it law and address any problems later? This is one area where Brits might actually benefit from Brexit. But only if the Government takes heed – and it’s not likely to be a priority.

What will happen to the Britain’s membership of the European Aviation Safety Agency? This organisation is currently planning, for example, new crew mental health rules designed to prevent a recurrence of last year’s Germanwings tragedy, in which the co-pilot, alone on the flight deck of and Airbus A320, was found to have set in motion a fatal descent into the Alps. Its proposal is that flight crew should undergo mandatory psychological assessments before taking up the job – with drug and alcohol testing after that. One expert view is that we will continue to be bound by its rules but that we will no longer participate in its deliberations. Given the UK’s accumulated wealth of air safety expertise that would be seen by many as a retrograde step.

And finally there remains the shadow of terrorism, which has caused severe damage to tourism in Egypt, Turkey and Tunisia. Will Egypt satisfy the UK authorities that security has been tightened effectively enough to allow British holidaymakers to fly to Sharm el Sheikh again? Will tourism to Turkey recover sufficiently to relieve the temptation of hoteliers in popular west European resorts to profit from increased prices?

Happy New Year everyone.

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