Speaker 1: Michael Houston, chief market analyst c MC Market's UK been
Speaker 1: in the business well in excess of thirty years now,
Speaker 1: so getting a bit along in the tooth. I suppose
Speaker 1: I don't really have the inclination to want to go
Speaker 1: abroad at the moment, given the images on TV of
Speaker 1: lost luggage, disruptions to travel plans, the delays. You know,
Speaker 1: who needs that if you want to leave the country.
Speaker 1: You want to leave the country. You know, it's sort
Speaker 1: of either recharge your batteries or be prepared to do
Speaker 1: a business meeting, none of which is what is happening
Speaker 1: in airports is conducive to that mindset. I'm David Merritt
Speaker 1: here in the London studio. This is in the City
Speaker 1: Bloomberg's podcast, connecting you to the stories at the heart
Speaker 1: of the city of them. As I sit traps in
Speaker 1: our London office with the forty degree heat outside and
Speaker 1: what is one of the hottest days ever in Britain,
Speaker 1: with transport grinding to a halt, tales of piled up
Speaker 1: luggage at airports, strikes on the railways, We've been thinking
Speaker 1: about how the golden age of business travel is there
Speaker 1: ever coming back? My co host Franci Lacwise actually on
Speaker 1: location in Rome as we speak. Francine, Hello, hey, Dave,
Speaker 1: ye here covering the political crisis in Rome. I have
Speaker 1: to acknowledge that your intrepid reporter, who usually loves traveling
Speaker 1: for work, is now actually dreading going to the airport
Speaker 1: because I'm told I need to be there five hours,
Speaker 1: five hours in advance to make sure I don't miss
Speaker 1: any flights. And every time the Italian government collapses, which
Speaker 1: is quite regularly, of course, now you've got to be there, right,
Speaker 1: It's only choice. Exactly in this time, Dave, So, I
Speaker 1: was in the Guri on the north of between my
Speaker 1: hometown on holiday, and I was like, right, I have
Speaker 1: to go back to London because I have no makeup,
Speaker 1: I had no TV clothes, I was holiday. But then
Speaker 1: I actually decided to just go directly to Rome on
Speaker 1: the train because I just knew how difficult it would
Speaker 1: have been at the airport otherwise. So seven and a
Speaker 1: half hours, seven and a half hours on an Italian train,
Speaker 1: no air conditioning was working. You know, it wasn't that fun.
Speaker 1: It's a complete mess. The question is is it enough
Speaker 1: of a mess for business people to lose interest in Travel.
Speaker 1: We'll put that question to Martin Ferguson at American Express
Speaker 1: Global Business Travel and to understand what is happening and
Speaker 1: how it all went wrong. Francine spoke to Paul Charles.
Speaker 1: He's the chief executive officer of the PC Agency, which
Speaker 1: which provides travel insight and policy advice to governments and
Speaker 1: global travel brands, and he's also the former director of
Speaker 1: Communications of Virgin Atlantic. Paul, thank you so much for
Speaker 1: joining us. Can you just reassure me this is a nightmare.
Speaker 1: It's not just me. Difficult to get anywhere, luggage doesn't arrive,
Speaker 1: there are not enough customs people. You're right. All over
Speaker 1: the world people are being affected. It's not just a
Speaker 1: UK issue at Europe issue, but even in places like
Speaker 1: Canada there are major issues. And essentially the aviation industry
Speaker 1: in the travel industry more widely has been struggling to
Speaker 1: get out of the pandemic, to get out of this
Speaker 1: mode of lockdown for the last two years, and people's
Speaker 1: lives have been changed. And there are quite a few people,
Speaker 1: sadly who are laid off from the industry during the
Speaker 1: pandemic and they don't want to go back into the industry.
Speaker 1: And work in jobs where they feel they're not paid enough,
Speaker 1: perhaps as a baggage handler or cabin crew or security processor.
Speaker 1: And as a result, the industry easily has twenty gaps
Speaker 1: in his workforce globally, and therefore you've got all this
Speaker 1: consumer demand to travel. Everybody is desperate to go and
Speaker 1: see friends and family again. But the airlines and airports
Speaker 1: can't deliver the service that we have bought because of
Speaker 1: those staff shortages. So that's the issue. Do you have
Speaker 1: any sympathy for airlines and do you have any sympathy
Speaker 1: for airports or is this a hundre percent self inflicted?
Speaker 1: I have huge sympathy for airlines and airport do you,
Speaker 1: especially as I used to work for one of them.
Speaker 1: I imagine yourself as the boss, the CEO of an
Speaker 1: airline or an airport. You have had to face constantly
Speaker 1: changing government restrictions all over the world. You've had traffic
Speaker 1: light systems, travel corridors, and you've had two years of
Speaker 1: that changing. So imagine trying to plan your business. It's
Speaker 1: impossible to plan. That's what you're paid for as a
Speaker 1: chief executive. You are, but you're paid also to manage
Speaker 1: a business during a predictable environment, and governments around the
Speaker 1: world and partly obviously because of the pandemic has forced
Speaker 1: on them a totally unpredictable and uncertain situation. And the
Speaker 1: thing about airlines, because of the safety conscious nature of
Speaker 1: that industry, you can't just make a decision overnight ready
Speaker 1: for tomorrow. It takes time to implement that decisions because
Speaker 1: pol of would have security checks, So if you're a
Speaker 1: baggage handler, you need to be checked for how long
Speaker 1: does it take for actually to get on boarded? So
Speaker 1: traditionally it would have taken four weeks to get a
Speaker 1: security past, and of course everybody working in an airport
Speaker 1: or in an airline needs a security past, but now
Speaker 1: it's been taking upwards of ten weeks, and that slower
Speaker 1: processing time has meant that people could not be on
Speaker 1: board a quickly to help fill those gaps that the
Speaker 1: industry has. And if you think about it, many countries
Speaker 1: have only just recently come online. They've they've only just
Speaker 1: seen their border restrictions removed in the last few weeks.
Speaker 1: Then it takes three or four months to get new
Speaker 1: people in. But part of why were they laid off
Speaker 1: in the first place, I mean, I have. I've just
Speaker 1: come back from a horrific trips, so let me tell
Speaker 1: you my sympathy is like zero zero zero two. If
Speaker 1: you know that it's difficult to recruit, if you know
Speaker 1: that it's difficult to get security clear ends, why do
Speaker 1: you lay off people in the middle of a pandemic?
Speaker 1: Or you lay them off because the governments are giving
Speaker 1: you no indication that things are going to improve, And
Speaker 1: without that line of communication certainty, why would you have
Speaker 1: that cost You're under pressure to reduce your costs to
Speaker 1: save your airline or your airport which is losing millions
Speaker 1: and millions of pounds. But in the UK they were
Speaker 1: follow programs. There were, but they only lasted until September
Speaker 1: last year, and of course then the Omicron variant came
Speaker 1: along and everybody locked down again, but there was no
Speaker 1: extension of the furlough scheme. So as an airline, why
Speaker 1: would you be employing lots of people knowing that the
Speaker 1: government was again locking down your industry with no end
Speaker 1: in sight. And so a lot of it's down to
Speaker 1: government communication with airlines and airports, and it didn't enable
Speaker 1: bosses to put in place there their management structures properly
Speaker 1: and of course they lost lots of talent. Lots of
Speaker 1: senior talent disappeared as well. So not only are you
Speaker 1: where they're some of retired. They've gone to sectors that
Speaker 1: paid more money, like Amazon with golden handshakes of at
Speaker 1: least a thousand dollars in many cases at lower levels.
Speaker 1: They've seen the light in other sectors and and perhaps
Speaker 1: people because they were locked down for so long, they've
Speaker 1: had time to think about what they appreciate in life
Speaker 1: and where they want to work. So a PARSTI what
Speaker 1: happens now? Is there anything that you know that airlines
Speaker 1: can do to recruit, for example, baggage handlers faster, and
Speaker 1: when do we get back to something more normal? Well,
Speaker 1: the first thing is that it's been a terrible situation
Speaker 1: for so many thousands of people, and it can't go on.
Speaker 1: Something's got to change, as you say, because there's been
Speaker 1: enormous emotional and financial stress for so many individuals, couples
Speaker 1: and families traveling and all the knock on effects that
Speaker 1: go with that. So the airlines have got to change.
Speaker 1: The way things can change is for government to speed
Speaker 1: up the security processing so that more people can come
Speaker 1: into the industry. Faster for airlines and airports to raise
Speaker 1: wage rates, and of course during a high inflation period
Speaker 1: they're under pressure to do that any way in order
Speaker 1: to avoid strike action by so much of the workforce.
Speaker 1: But they're going to have to pay more. They're gonna
Speaker 1: have to reset the level of wages. And then thirdly,
Speaker 1: it needs governments to help the industry. I think and
Speaker 1: showcase how attractive it is because it is a great industry.
Speaker 1: You do get to travel in many cases, you get
Speaker 1: to meet lots of different types of people during the
Speaker 1: day job. And I think it needs governments to talk
Speaker 1: up the industry more. Is there an air report that's
Speaker 1: west in the class at the moment or do the
Speaker 1: problems kind of move around? Well in the UK the
Speaker 1: worst he throw and get a work in London, they
Speaker 1: are there. Two worth affected Stands has done a lot
Speaker 1: better in terms of cancelations and cues. It has been
Speaker 1: a lot better in managing the flow. That's also because
Speaker 1: it has more shorthaul flights and not long haul flights,
Speaker 1: and that's making a difference. Of course, in terms of
Speaker 1: passenger processing the short haul flights, there's often less luggage
Speaker 1: to process than there is for a long haul flight.
Speaker 1: So that's why those airports are doing well, and places
Speaker 1: like Leads Bradford have done really well and so so
Speaker 1: there's regionally. Pots have actually coped pretty well. Manchester hasn't.
Speaker 1: They've had a change of chairman as a result and
Speaker 1: they're now getting a bit better. But it's gonna be
Speaker 1: a tougher summer for everybody. You can expect to be
Speaker 1: in delays and cueues this summer simply because there are
Speaker 1: so many people traveling. What why is it so tough
Speaker 1: for he throwing Getwick. Heathrow is meant to be best
Speaker 1: in class. It certainly was, I think during the pandemic.
Speaker 1: Obviously it led to a decline in investment. They had
Speaker 1: less revenue coming into they haven't invested in the baggage
Speaker 1: systems as much as they needed to. They've had a
Speaker 1: lot of I T issues, they've lost a lot of staff,
Speaker 1: and when you put all of these things together, it's
Speaker 1: no wonder that it's been difficult to run an airport.
Speaker 1: It goes back also to COVID. There's another wave of
Speaker 1: COVID going through where people are calling in sick at
Speaker 1: the last minute, and when that happens, you simply find
Speaker 1: that your your people down. You can't run the operation
Speaker 1: as smoothly are you catching? How many flights are you
Speaker 1: catching this summer? So I just heard from British Airways
Speaker 1: that my flight been canceled for our family holiday. So
Speaker 1: as you can imagine, um, even the experts get caught
Speaker 1: out and I've had to rebook on another carrier pretty quickly.
Speaker 1: But bear in mind the capacity is not back to
Speaker 1: where it was pre pandemic. Overall, flight capacities still only
Speaker 1: of what it was, and so there are fewer flights
Speaker 1: generally that you can book onto if your own has
Speaker 1: been canceled. It's a real challenge for a lot of people.
Speaker 1: As the French would say, bunch, thank you. You know,
Speaker 1: me and my wife we go to Scotland three or
Speaker 1: four times a year and we used to fly with
Speaker 1: easy Check from Gatwick Airport. You know, I cannot be bothered.
Speaker 1: I get in the car and I drive and I
Speaker 1: break it up over two days. So we drive halfway
Speaker 1: from Manchester, stay in the Premier in overnight and then
Speaker 1: drive the rest of the way and you know what,
Speaker 1: it's so much more relaxing. So we just heard Francine
Speaker 1: speaking to Paul Charles for an explanation of why there
Speaker 1: are so many scenes of chaotic travel across the news.
Speaker 1: But now let's discuss what this means to business travel
Speaker 1: moving forward. I'm Rebecca Chestsworth and the senior exety strategists
Speaker 1: at spider Ets, which is part of State Streets Global Advisors.
Speaker 1: I have been working in markets for quite a long
Speaker 1: period of time, but it's this way. I remember the
Speaker 1: good old days of the when budgets were very high
Speaker 1: in the champagne was blowing. For me, business travel was
Speaker 1: quite different because my role was different. So uh. When
Speaker 1: I first started, I worked just in u text Is
Speaker 1: as an analyst and then as a fund manager, and
Speaker 1: then most of my clients were UK based, so the
Speaker 1: travel was shorter, but there were always a few hotels, restaurants, shops,
Speaker 1: production facilities that needed to be seen on the continent
Speaker 1: or in America, and when one flew, it was always
Speaker 1: in style. Joining me now is Martin Ferguson is the
Speaker 1: vice president of Communications and Public Affairs and American Express
Speaker 1: Global Business Travel. There are a travel management company that
Speaker 1: also provides consulting services. Welcome Martin too in the city.
Speaker 1: Thanks for how immediately so Martin a lot of the
Speaker 1: workers in the city that we speak to have got
Speaker 1: the same complaints. Just getting around the place is not
Speaker 1: as easy as it was. It's not just the cus airports,
Speaker 1: and we've seen the footage of that, of course on
Speaker 1: the news, but also we've got rail strikes, we've got
Speaker 1: traffic jams are getting worse. There's a real sense that,
Speaker 1: you know, the glory days of the jet setting city
Speaker 1: worker are gone forever. Do you agree, first of all,
Speaker 1: that nor one likes disruption, what un certainty? And I
Speaker 1: think it's fair to see that maybe a few people,
Speaker 1: whether their business travelers or whether people who are going
Speaker 1: on hard they decided to avoid the airport and avoid
Speaker 1: flights and maybe not go on the train. And that's fine,
Speaker 1: But I honestly think that's quite a small number, um,
Speaker 1: because I think more generally, UM, this situation is very
Speaker 1: unusual time that we find ourselves in has really not
Speaker 1: put people off travel at all. In fact that I
Speaker 1: think travel is back in a really, really big way.
Speaker 1: It's just a difficult time because you know, it's like
Speaker 1: kin a perfect storm of post pandemic challenges. But you know,
Speaker 1: most people realize that this is a shot to medium
Speaker 1: term challenge and that we are going to get through it.
Speaker 1: So do you think therefore the the demand for the
Speaker 1: kind of the more premium and that's where the growth
Speaker 1: were held up because people need the flexible tickets, don't
Speaker 1: they They need to know that it's going to be
Speaker 1: changeable the last minute. They need to know they're gonna
Speaker 1: there's gonna be a certain level of comfort that it's
Speaker 1: going to actually all go smoothly to achieve the ends
Speaker 1: of the of their trip. So business travel, which is
Speaker 1: something like three quotas of airlines pre pandemic profits but
Speaker 1: only about twelve of the seats, do you see that
Speaker 1: demand holding up even in a difficult economic situation that
Speaker 1: we found us out saying my companies are going to
Speaker 1: have to cut costs. It's true to see that. You know,
Speaker 1: airlines for the most part, make most of their money
Speaker 1: and sell few the fewest number of seats to business travelers.
Speaker 1: And I think that's why, you know, business travelers are
Speaker 1: obviously not immune from the situation at the moment. But
Speaker 1: let's just see, if you're an airline and you're looking
Speaker 1: at the network and the frequency of the flights and
Speaker 1: the numbers you're you're less likely to to pull or
Speaker 1: cancel the profitable business route than you are let's say
Speaker 1: a less frequent leisure route. I think that just makes
Speaker 1: makes business sense. And then, of course you take into
Speaker 1: account that business travelers will book closer to the day
Speaker 1: of departure. So while airlines are making great efforts to
Speaker 1: cancel flights when they have to away in advance, it
Speaker 1: means it's less likely that the business traveler gets affected.
Speaker 1: Of course, that's not for all. Business travelers are still
Speaker 1: going to be a tremendous amount of of of of
Speaker 1: last minute pain, both in terms of flights being canceled
Speaker 1: and at the airport and long cuise and so forth.
Speaker 1: You know, people have changed careers, haven't they. They've left
Speaker 1: the industry. Um, it's not going to be overnight to
Speaker 1: get them back. How long do you see this period
Speaker 1: of chaos of staff shortages, last thing? When can things
Speaker 1: get more back to normal? Is it the end of
Speaker 1: the year, is it into three? I think it would
Speaker 1: be foolish of me to try and make that kind
Speaker 1: of prediction. In what I can tell use that there's
Speaker 1: a tremendous amount of their front and investment we made
Speaker 1: across the travel industry. Everybody is working as fast and
Speaker 1: as hard as they can to to get to where
Speaker 1: they need to be. But remember business travels are very
Speaker 1: large and resilience sector and it's historically grown at or
Speaker 1: above g d p U. And look, this period of
Speaker 1: disruption is more acute than any other, but there have
Speaker 1: been previous disruptions that have caused problem. So the aftermath
Speaker 1: of September eleven on the global financial crisis in two
Speaker 1: thousand and eight. In both situations, you know, there was
Speaker 1: a period of view challenge and difficulty before a sustained
Speaker 1: period of growth once things had realigned. So I fully
Speaker 1: expect us to to get back to the industry, to
Speaker 1: get back to that level. Hi, my name is Kidju
Speaker 1: because I'm head of foreign exchange strategy at the Journal
Speaker 1: in London. I would have said, actually a few months ago,
Speaker 1: you know, I'm not sure I ever want to travel
Speaker 1: this distent because my my relationship with business travels certainly
Speaker 1: deteriorated up nine eleven when when security started to get
Speaker 1: so much more difficult. But going out and meeting other
Speaker 1: people in different cities, different countries, um, it's just fun.
Speaker 1: It's what they wanted. It's it strikes me as it's
Speaker 1: at least as important for business now as it evil was.
Speaker 1: How has the purpose of business travel changed as we
Speaker 1: emerge from from the pandemic. But I think there is
Speaker 1: going to be a fundamental shift related to part of
Speaker 1: what business travel addresses, and that's supporting the development and
Speaker 1: growth of company culture. And just let me explain what
Speaker 1: I mean by that. For many companies, not all, but
Speaker 1: for many companies that the office was the center of
Speaker 1: culture because almost everybody was there. It might be Monday
Speaker 1: to Friday, it might be ninetel five. That's kind of
Speaker 1: been blown out the water now for many companies, again
Speaker 1: not all. Some companies have got everybody back, but for
Speaker 1: many companies are now having to embrace a more hybrid
Speaker 1: workforce or even in many cases and almost entirely virtual workforce.
Speaker 1: That that's something that brings with it its own challenges.
Speaker 1: I mean, on one hand, that provides tremendous flexibility for
Speaker 1: your your staff, but on the other hand, they're not
Speaker 1: really having those interactions that they used to have together
Speaker 1: when they were all in the office. So companies now
Speaker 1: need to be really thoughtful about how they can bring
Speaker 1: together their their dispersed workforces, how they can gather them
Speaker 1: in ways that develop bonds, that create culture and and
Speaker 1: make that kind of employee experience far more valuable, which
Speaker 1: should in turn that I have loyalty and keep people
Speaker 1: with your business for longer. So I think this is
Speaker 1: actually one of the most important changes that we've seen
Speaker 1: in the business travel sector. And just to give you
Speaker 1: an example, you know, there was a there was an
Speaker 1: idea during the pandemic that you know, business travel volumes
Speaker 1: would dropped to of pre pandemic levels and never recover
Speaker 1: beyond that, and that no one would ever travel for
Speaker 1: an internal meeting again because we've got video conference and technology.
Speaker 1: I mean, we obviously thought that was shortsighted and nonsensical
Speaker 1: at that time, but maybe what we didn't expect was
Speaker 1: that in this kind of first year have been back
Speaker 1: out traveling again. Internal travel has grown faster than any
Speaker 1: other type of travel, and that's because companies are trying
Speaker 1: to get their people back together again. You know, people
Speaker 1: have gone a long time without seeing their colleagues, without
Speaker 1: maybe even meeting colleagues for the first time. And what's
Speaker 1: really interesting is you've kind of got this release of
Speaker 1: human energy that's been built up while people have been
Speaker 1: working on plans and ideas in their kitchens and their
Speaker 1: living rooms, in their home offices, and now they only
Speaker 1: ta get back together to put these plans into action.
Speaker 1: It's actually a really extraordinary to watch. Well. I've traveled.
Speaker 1: I've done a type of fine trips this year, and
Speaker 1: for me, that's great. It's great to be back on
Speaker 1: the road. The travel is not as easy, but I
Speaker 1: actually think that act of meeting your clients, being in
Speaker 1: the same room, really understanding what their problems are and
Speaker 1: how you can help them, is really worth that extra
Speaker 1: effort and that incan you have to go through now.
Speaker 1: Transport Secretary Grant Shops did recently say after meeting with
Speaker 1: industry aviation industry leaders. I think the quote was that
Speaker 1: there was poor planning and overbooked flights they cannot service
Speaker 1: and kind of pointing the finger from Grant Shops at
Speaker 1: the industry and airlines and saying it was their fault
Speaker 1: and they should have seen this coming. I mean, that's
Speaker 1: just nonsense. No matter what would you look at it,
Speaker 1: finger pointing in this situation has no value. M sure
Speaker 1: that there, as I said, the airlines and all the
Speaker 1: companies associated with with air travel could have made better
Speaker 1: decisions about how deep they cut their workforces. But how
Speaker 1: were they to know. I mean, shops stopped or the
Speaker 1: government stopped the support for the travel industry with the
Speaker 1: furlough scheme in September, and then there was six months
Speaker 1: until restrictions were lifted to when there was no idea
Speaker 1: of what demand would look like, there was no meaningful income. Um,
Speaker 1: you know, they're co between the rock and a hard place.
Speaker 1: Of course, it's easy to say that we could have
Speaker 1: done this, and we could have done that. My company
Speaker 1: is no ex section, but that's not the reality. So
Speaker 1: for Shafts to say that this is entirely at the
Speaker 1: door of the airlines and the airports is just it's
Speaker 1: just not facing up to reality. The government has a
Speaker 1: fair share of responsibility to take for a lot of
Speaker 1: the oils in the travel sect at the moment. Yeah,
Speaker 1: and of course we don't know who's going to be
Speaker 1: the prime minister. Of course after the summer. That's still
Speaker 1: very much up in the area. But what would you
Speaker 1: like to see the government doing and prioritizing in the
Speaker 1: coming years. There are a number of different topics that
Speaker 1: I could bring up. Expansion that he throw expansion of
Speaker 1: regional airports, more investment in the railways, and these are
Speaker 1: all important, but again there needs to be better, more
Speaker 1: frequent and the more meaningful dialogue between the government and
Speaker 1: the travel industry. And from my perspective, particularly the business
Speaker 1: travels sector, it's it's not existed hitherto. It's kind of
Speaker 1: improved a little bit over the pandemic, but there has
Speaker 1: to be much better interaction and decision making and policy
Speaker 1: making to support the UK as a as an international
Speaker 1: trading nation. I mean, there's just no question about that
Speaker 1: in my mind. And that's something for whoever is the
Speaker 1: Transport secretary from the Auto Well, this is about international trade,
Speaker 1: it's about tax, it's about the treasury. Look that this
Speaker 1: is that this is a should be a government priority. Um,
Speaker 1: you know, but but the thing is this is all
Speaker 1: meaningless if the right conversations don't take place with the
Speaker 1: right people. And you know, well, we will continue to
Speaker 1: work hard to force those relationships and too to provide
Speaker 1: the data and the insight that government needs to make
Speaker 1: decisions that are going to be beneficial to the UK
Speaker 1: business community in the city. Um, but you know we can't.
Speaker 1: We need to move beyond lip service. We need to
Speaker 1: move beyond you know half our meetings with you know,
Speaker 1: select committeed to heare people and the appg s who
Speaker 1: you get together and it's just a talking shop. We
Speaker 1: need it, We need more action. Thank you so much
Speaker 1: Martin for talking to in the City My Pleasure Live.
Speaker 1: I'm David Merritt and that's it for this week's episode
Speaker 1: of In the City. We will be back next week
Speaker 1: in the meantime. If you like the show, please rate
Speaker 1: it and check out the Bloomberg UK website for more
Speaker 1: news and views. Special thanks this week to Paul Charles, Martin, Ferguson,
Speaker 1: Michael Houston, Rebecca Chatsworth and kitchus. This episode was produced
Speaker 1: by Summer Sadi and Elena Gnatra.