Necessity is the mother of invention, they say, and the pandemic has indeed seen carmakers repurpose themselves as ventilator manufacturers and fashion houses make hand sanitiser gel. Now Covid-19 is converting would-be tourists into financial speculators. You may not have thought of yourself as one if you recently considered booking a European holiday. In fact, you are.
Airlines have been busy lavishing cut-price deals to try to get customers to think beyond a damp staycation. EasyJet is touting 1m seats from the UK to Europe for less than £30. Yet, as you know intuitively, this is not really a holiday bargain that will whisk you to a beach in southern Europe this summer.
For the airlines, it is a no-interest unsecured loan — and, as of mid-May, they had received about $35bn of them. For customers, meanwhile, it is an option on the possibility that they might visit the Algarve. Or maybe not. There are so many risks involved. Will people be allowed or want to travel if there is a second wave of infections? Will they have to self-quarantine on return, as per the UK’s latest bizarre rule, which could kill off its £22bn-a-year aviation industry? Does that cheap ticket have any real value, anyway? In short, using market jargon, is there a real chance that your holiday option will be in the money come August?
A positive answer would not only help ensure the viability of air travel. It could aid the post-Covid-19 economies of countries such as Spain, where tourism is worth almost $200bn a year, some 13 per cent of economic output.
Airlines have tacitly recognised the risks involved. Many have bent over backwards to make their terms and conditions more flexible to keep ticket purchases coming. That is also why they are pushing vouchers in lieu of refunds if flights are cancelled. They need the cash. American Airlines, for example, has been burning through $70m a day.
Yet many would-be buyers remain distrustful. In part, that is because they still think of themselves as holidaymakers, and view vouchers as dodgy cash substitutes sprayed about by desperate companies on the edge. They also know the hassle it can take to claim back spent cash that they are legally entitled to.
Better, instead, for us all to view these vouchers as a small-scale financial investment in our holidaying future. If that shift happened, it could make a real difference to the entire leisure business and its customers. But airlines also need to go further in changing their own mindset. To keep customer cash coming, they should unwind further the risks that passengers take on when they buy a ticket now. Those that have received state aid, such as Lufthansa, which has benefited from a €9bn state bailout, owe it to taxpayers. (And those that have not, such as Ryanair, which prides itself on its innovative spirit, owe it to themselves.)
Waiving administrative rebooking costs if the ticket is rescheduled 14 days before departure, or offering vouchers at par value for flights or refunds if they’re cancelled, is not enough. All this does is turn a flight ticket into a high-risk futures contract, as passengers may have to pay more for future flights and make up the difference.
What passengers want are guarantees prices offered for flights today will be maintained if they need to rebook or flights are cancelled. Such guarantees could attract significant cash flow to airlines in their most desperate hour.
Clever airlines would look seriously at adapting their terms and conditions in that direction. They could even introduce new offers, such as discount certificates. These are being offered by other leisure businesses, especially restaurants, to allow loyal customers to buy a cut price meal today that they can redeem tomorrow. A similar scheme by airlines is the least that passengers are entitled to as they become de facto investors in these businesses.
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