Taylor on Travel

Happy New Year to all and best wishes for 2008 – the economic indicators suggest we may rather need the latter.

The collapse of Maxjet on Christmas Eve, following the failure of Travelscope, bodes ill. Both had sought and failed to find emergency funding thanks to the deepening credit squeeze. Particular problems will have led the companies to that point, but many firms have difficulties. A recession exposes these and a squeeze on credit means there is nothing to carry a company through a crisis.

More firms will follow. No one knows how deep the downturn will go, but one industry analyst has already described the outlook as horrendous. The pages of the Financial Times, a paper not given to hyperbole, present a picture of unrelieved gloom.

Bravura comments about Brits being determined to travel contain a strong element of truth and may maintain spirits. They won’t hide the fact that any firm going into the recession with cash-flow problems, too much debt, too much capacity, too-heavy commitments or too great a concentration on a single area will be in trouble. Others may just be unlucky.

Media warnings of widespread strike disruption to passengers in January proved utterly wrong, with both the action by BAA staff over pensions and Virgin Atlantic cabin crew over pay called off.

The outcomes were predictable despite the headlines forecasting travel misery. Strike votes in the UK typically lead to last-minute talks to settle disputes, at least at the moment. Only about one in eight ballots in favour of a strike actually lead to a walk out, as Travel Weekly pointed out before Christmas. That may change if Gordon Brown’s public sector pay freeze goes the way of previous Government curbs on pay rises, since these almost always lead to industrial action eventually.

However, the two disputes ended the same way for very different reasons. Resolution of the BAA dispute involved the airport operator giving way, while at Virgin Atlantic the union bowed to Richard Branson.

BAA workers were in a strong position challenging an employer that is battered in the media, unpopular with its customers and the subject of an inquiry by the Competition Commission. At the same time BAA remains hugely profitable and, whatever contingency plans it came up with, a strike by firefighters would have paralysed its airports. So it conceded and the unions have succeeded in doing what few other UK workforces have managed in recent years and resisted the closure of a final-salary pension scheme.

The Virgin Atlantic settlement is entirely different. The crew have won nothing. It’s hard to know what impact a strike would have had, but similar action by BA cabin crew has proved effective. Branson’s letter to crew suggesting they get another job may have cracked the resolve of some. Yet it is worth noting the crew rejected Virgin’s pay offer despite this being recommended by union officials. They must have been fed up to do that and are unlikely to feel good about the outcome, leaving a residue of bitterness not usually associated with the airline.