Issues Facing The Hospitality Industry Commerce Essay

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The purpose of this project was to analyse a current issue that has affected the current hospitality industry drastically. In the recent scenario, natural disaster has been seen to put a major impact on major hospitality industry .The main purpose of the task was to choose a situation of unavoidable circumstances, which could be either terrorism or natural calamity, that organisations have faced recently,and provide a solution of the situation recently faced.

Scope: While investigating the current scenario, it was important to focus on the operation and functions of the company and how these operations got affected due this particular circumstsnces

Method: The method used in this task ,was through information gathered ,mainly from the secondary sources such as business magazines and articles and some old news papers.Secondary sources came out to be very helpful in gathering the customer reviews and staff reviews who were affected by these circumstances

Limitation: As every project work has some limitation. As an author ,it would be imperative to mention the limitation of this task .The main limitation of the task was relying only on the secondary sources of the information as primary sources were meant to be more confidential by the company.I would consider this as a limitation as it is a belief that secondary sources always have some differences with the primary one.

European fuel cost of jet marked degree of difference to ICE-traded gas oil contract went down to $ 0.50 on Thursday and $ 48 a metric ton on Friday . But forecasters said the enduring price effect would be least once flights recommence;most of the airline purchase is done through long-standing contracts.

European gas, oil, gas electricity production is unexpected to be affected. Some small flights to and from oil rigs in the Norwegian Sea have resumed; the effect on solar power plants is unlikely to be greater than the impact from any other passing cloud, while wind power industry sources said cold volcanic dust on wind turbines should not cause any problems.

HEALTH IMPACT

World Health Organization warned the ash could create problems for them ,who have breathing difficulties, though it did not still had assessed this sort of specific eruption.

An respiratory disease Scottish expert said to Reuters that the less poisonous ash falling on Britain was unlikely to do much harm as a very high exposure would be needed to have much effect on people.

CLIMATE, AGRICULTURAL IMPACT

Scientists say the outburst does not appear to have created enough dust / gas to change the climate or impact farming, and should have no result on global warming tendency. A larger outbreak from the Katla volcano may be a distinct matter.

(Editing by Andrew Torchia)

Near about 17,000 planes were expected to be canceled on Friday, with airdomes clogged across much of subcontinent.

Shares in airlines fell between 2 to 4 percent. Ryanair said it may cancel planes to and from north European countries till GMT 1200 on Monday.

The interruption is costing air industry in excess of $200 million a day,

Fraport AG, that operates Germany's major airport in Frankfurt, states its primary estimate was for the dust ash to incur it between 2.5 to 3 million euros a day.

Iceland's position means the flare-up could prompt broader disturbances to international aeroplanes.

"Iceland falls in the right on one of the crucial routes between usa and the Europe and as per meteorological circumstances it might also affect aeroplanes from Europe to Asia, thats why there are 2 big global flows which might be affected by this," as said by John Strickland, who is director of consultancy of air transport( JLS Consulting).

"There could be still disturbances to other planes or might have to go for more indirect routes, which increases costs and maybe even require flights to land as it would not be possible to go through direct route."

ALTERNATIVE TRANSPORT

Eurostar, thatr runs from London to other European continent, said railways were running at full capacity and it may lay extra trains if required.

A taxi company of london Addison Lee said it took requests for travels to European cities Paris, Milan, Zurich and Salzburg in Austria.

AIR CARGO

Grounded flight cargoes had to halt delivery of stuffs such as microchips, vegetation and mails. Europe's major express delivery dfirm Deutsche said it had to switch to roadways wherever it was possible.

Clicking to sea cargoes would be an alternative for longer deliveries, though not for lesslife items such as flowers, but ship forecasters said it would probably take more days before companies started booking again by marine.

Pharmaceutical equipment in particular are frequently transported by airwaya, but specialist forecasters said there were plenty stocks , therefore there should be no bigger shortages for that time.

ENERGY

JBC Energy's replica for Europe jet fuel utilization puts daily expenditure at 1.17 million barrels in a day, so presuming an approximate 80 percent of Europe's aerodromes were close for 48 hours, the interruption would have cut 1.87 mn barrels in demand

"Some demands may just vanish and those who have to fly will ultimately fly, but there will certainly be some planes that just don't take place," as said by JBC Energy fuel forecaster David Wech.

European jet fuel price spot differentials to the ICE-traded gas oil contract fell to $48 a metric ton on Friday from $50.50 on Thursday. But analysts said the long-term price impact would be minimal once flights resumed; much airline buying is done through long-term contracts.

European oil, gas and electricity production is not expected to suffer. Some helicopter flights to and from oil rigs in the Norwegian Sea have resumed; the effect on solar power plants is unlikely to be greater than the impact from any other passing cloud, while wind power industry sources said cold volcanic dust on wind turbines should not cause any problems.

INSURANCE IMPACT

Airlines are believed to have less recourse to insurance companies. Most of the airlines are nor insured next to cancellations nor commerce trouble at aerodromes.

Munich Re said it might offer cessation insurance to air companies if essential. "Till now there hasn't been any demand in market, as said by a spokeswoman. "perhaps that will change at this time."

CLIMATE, AGRICULTURAL IMPACT

Scientists say the eruption does not seem to have produced enough dust or gas to alter the climate or impact agriculture, and should have no effect on global warming trends. A larger eruption from the Katla volcano might be a different matter.

Iceland volcano Ash cloud: airline passengers face further misery

 

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The cloud has caused massive disruption to European airspace. Photo: AP

Iceland volcano Ash cloud: airline passengers face further misery

 

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Passengers face further disruption as airlines struggled to change flight plans. Photo: AFP/GETTY

Iceland volcano Ash cloud: airline passengers face further misery

 

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They receieved good news, however, after the High Court outlawed further strikes by BA workers. Photo: AP

Iceland volcano Ash cloud: airline passengers face further misery

 

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The airline has been hit by the wave of industrial action. Photo: PA

By Andrew Hough, David Millward and Caroline Gammell 8:15AM BST 18 May 2010

postponements were still expected at aerodromes throughout the country in spite of a last minute slab being placed on manufacturing action intended by BA crew strike and an repair of aviation "no flying" regulations to decrease future airline closures caused by Iceland's Eyjafjoell eruptions.

Official staffs admitted disruption would possibly carry on for the majority of the week.

Airlines were struggling alotg to return timetable to normal after cloud of thick ash gist over the continent, shutting major aerodomes and making more than 1,000 planes to be negated .

Airlines, that have incurred millions of money due to the ash alertness, criticised Monday's shutting of airports and criticise the replica used to forecast the spread of the volcanic dust as "obsolete and out of place".

Executives act in response with rage to what they disagree were unnecessary limitations introduced by over watchful security watchdogs.

British Airways CEO Willie Walsh directed the disapproval, labelling limitations as "a gross over response to a very slight risk".

Experts told that the volcano, which lasted month resulted most of Europe's aerodomes to be close down for one week, has released massive quantity of ash dust, which can block jet engines, as it began to explode one month ago and cautioned that there was no finish to this in sight.

Last month's eruption strained many countries in north Europe to close their aerodomes, making in excess of 100,000 flights to land and an approximate 10 million explorer globally.

The (IATA), the international airline industry branch forecasted that last month's closurewas - Europe's major since 2nd World War - cost transporters in excess of £1.1 billion.

The latest outbreak strained London's airports to close for 6 hours on Monday, leading to lots of postponements and score of aeroplanes in the incorrect place.

Near about 200 flights were abandon at Heathrow, 88 in Gatwick and 40 in Liverpool airport. And also 50,000 passengers were stranded.

aerodrome official cautioned travellers it may take time for aeroplanes to clear the log jam of postponed flights and recommended them to get in touch with their airlines before leaving for the airport.

After a day of confusion, passengers afterwards received a twofold dose of positive news after the Court banned the back-to-back agitation by cabin crew of BA while the Civil Aviation Authority (CAA) distorted its criterion for allowing aircraft to take off.

The court decision came very late for BA to re-establish its full flying timetable at Heathrow, that had been interrupted earlier in the day by the ash dust.

in spite of the High Court ban, British Airways confessed that planes will still be affected for the whole of the week

The airline industry has been anxiously trying to restore the 80 small haul and 30 lengthy haul planes from Heathrow which faced curtailments had the strike went further ahead.

One spokesman for the airline industry told half of small-haul and 40 % of lengthy-haul services from London's may be affected as it was too late to restore a overall service.

He told that its function, however, was thought to return to usual by the end of week .

The verdict was a enormous relief for the industry which told the court that as it had planned for five-days strikes ,it would have costed the airline industry£138 million.

Union representing BA crew, prepared to plea against the ban which stopped strike action planned by 1000 of members in the acidic row over employment , staffing and pay levels.

The ruling came as the CAA proclaimed that it had formed a new " limited time zone" to allow specific aircraft to go through a bigger density of dust than previously allowed.

The change, that came into effect at noontime on Tuesday, would not only have an effect on Flyby initially, but other airline industry are believed to follow.

Once producer and airline companies have offered a joint "safety case" which gives a proof that they can go through the dust ash without harm, they will be permitted to fly.

"As a consequence of this alter, there are no forecasted limits on UK air in the instant prospect," said Richard Deakin, the CEO of Nats, the traffic control company.

The CAA blamed the Met Office for the newest close down.

"The Met Office replica was forecasting ash which wasn't there when the check flights were done," a spokesman from CAA said

"We have enquired the Met Office as to why their forecasted model showed a thing that was not consequently backed up."

The Met Office backed up its computer system, insisting it was assisted by imagery of satellite, observation, laser checks of the ash in the environment and other proof from test planes.

It said the dust was over South East but not in the levels that ground aircraft

"The amount of ash is uncertain on an hourly base. The circumstances is very runny," a spokesman said to the Daily Mail.

In Iceland in the meantime, there have been no signal of the volcano ending.

Experts told that the Eyjafjoell flare-up, which started on April 14, have sharped up thrice , with the newest surge of movement coming Friday in april.

"from the starting of the outbreak, they predicted that 250 million cubic metres of tephra (ash and other fragmental material) has been formed," as said by Iceland geophysicist Magnus Tumi Gudmundsson.

The civil protection of Iceland agency told that the ash cloud was travelling to the north and wasn't expected to drift to Europe in coming two days

http://www.telegraph.co.uk/travel/travelnews/7735248/Iceland-volcano-ash-cloud-airline-passengers-face-further-misery.html

Case study

ASH CLOUD EFFECT

A case study on ash clouds affecting the airline industry

By Steve Rothwell and Sabine Pirone ( April 16, 2010, 10:52 AM EDT)

On April 16 (Bloomberg) -- British Airways and Virgin Atlantic Airways Ltd. and cargoes that depend on lengthy -haul business tour for earnings would be worst-hit by the close down in air travel affected by the outbreak of the Icelandic volcano.

Airline companies may incurr $1 billion loss ,if ash cloud keeps the European airports closed the weekend, the central for Asia Pacific company said. British Airways, which earns daily revenue of near about about 24 million pounds ($37 million), halted all planes today as U.K. aerodrome was confined until 1 a.m. tomorrow least.

"Airline industry will have to incur their major losses in the trans- Atlantic business-passenger group," Ashley Steel, Global Chair for Transport and Infrastructure at KPMG, said in a cconference . "For airline like BA, every day as their plane being being grounded will likely to incur millions of money. The effect on economy-class sales is likely to be weakened because persons will be changing their bookings and ultimately still fly."

The ash cloud from the Iceland's Eyjafjallajökull volcanoes roofed parts of Britain, Germany, Norway, Ireland, Sweden, Finland, Belgium, Netherlands Russia this morning and afeterwards glided over France, Poland Czech Republic. It's estimate to reach Switzerland, Austria and Hungary by midnight, according to U.K. Meterological Official data. 6 million passengers could have been affected if closures extended to April 18..

Business Trips

British Airways, which is the No. 1 transporter in the market of north Atlantic including planes between London to New York, was prone to undergo loss most from the interruption because of its dependence on traveller making trips of business that cannot be rescheduled.

U.K's tob . billionaire Richard Branson's Virgin Atlantic, which is the largest long-haul competitor to British Airways at Heathrow Airport, would have also lost revenue that would have been doubtful to be recover,As said by KPMG's Steel . Coachclass travellers and all those flying with the discount air buses on vacation or may be to visit friends , family were more likely to rearrange their journeys, she said.

British Airways and the Virgin Atlantic said it will be very early to provide an approximation for the cost of the interruption.

They said "We aren't giving any direction on the cost incurred at this moment," BA'S spokeswoman Cathy West told in a phonic interview. "We have got no clue when it is going to finish yet."

The Virgin spokeswoman Anna Knowles told the Crawley,which is an England- based company,that virgin is concentrating on getting process up the operation and the running and that it'is "impossible" to put figure on loss till now.

'Never Return'

" lots of BA and the Virgin passenger goes for top cabins and these people are travelling on totally -refundable tickets," said Steel. "Most of the money will not return to them as passengers will just not go for rebooking the berths."

The closedown could also "tilt the balance" for unbeneficial SAS AB, the curret owner of Scandinavian Airlines, were one of the first flights to scrap planes as the cloud swept over Norway, Sweden , Denmark, as Steel said. competitor Nordic carrier Finn air told that the languishness is incurring it 2 million euros ($2.7 million) in a day. The carrier had to cancelle 435 flights so far, and affected 54,000 traveller.

SAS plans to approximate volcano-related expenses by April 19, Sture Stoelen, head of investor relations, told by telephone.

"It's complex," Stoelen said. "We're losing revenue but also saving on operating costs, but then there are other costs for hotels and so on."

The ash cloud has interrupted flying just like European carriers moved to hectic and more well-paid summer schedules, said Yan Derocles,who is an analyst at Oddo Securities Paris.     "This is the most busiest time for airline industry, specially on North Atlantic direction," . Derocles said that "the leading names" will be losing 40 million to 60 million euros in a day.

'Physical Damage'

Airlineindustry insurance strategy won't normally pay out unless there's a damage to the equipment,as said Alexandra Lewis,who is a spokeswoman for London-based Benfield branch of Aon Corp.,which is the world's biggest insurance broker.

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"Insurers cover business interruption only if physical damage is the reason for it," said Richard Manson, a spokesman for the industrial insurance unit of Munich-based Allianz SE, Europe's biggest insurer. "So we don't expect insurance claims from customers including airlines and airports."

The shutdown is likely to cost airlines about 0.25 percent of their annual revenue per day, according to Joe Gill, an analyst at Bloxham securities in Dublin who covers companies including Ryanair Holdings Plc and EasyJet Plc, Europe's two largest discount carriers.

Airlines will be able to claw back some money by seeking to increase yields -- a measure of ticket prices -- as demand surges in the immediate aftermath of the airport closures. The biggest costs will be for rebooking and refunding passengers, he said, with revenue losses partially offset by fuel savings.

Airlines will lose a collective $2.8 billion in 2010 after an estimated $9.4 billion cumulative loss last year, the International Air Transport Association predicted last month.

--With assistance from Robert Fenner in Melbourne, Oliver Suess in Munich and Kevin Crowley in London. Editors: Chris Jasper, Kenneth Wong.

To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net; Sabine Pirone in London at spirone@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net

Company overview

COMPANY OVERVIEW

British Airways is one of the world's leading scheduled premium international airlines. The company

primarily operates in Europe and the US. The company is headquartered in Harmondsworth, the

UK and employed 41,494 people.

The company recorded revenues of £7,994 million ($12,761.1 million) during the financial year ended

March 2010 (FY2010), a decrease of 11.1% compared to FY2009.The operating loss of the company

was £231 million ($368.8 million) during FY2010, as compared to the operating loss of £220 million

($351.2 million) in FY2009. The net profit was £182 million ($290.5 million) in FY2010, as compared

to the net loss of £1,360 million ($2,171 million) in FY2009.

Brief history

History

The origin of British Airways runs parallel to the history of civil aviation industry in the world. On August 25, 1919, British Airways forerunner company - Aircraft Transport and Travel (AT&T) - launched the world's first daily international scheduled air service, between London and Paris. On March 31, 1924, Britain's four airlines - Instone, Handley Page Transport, Daimler Airways and British Air Marine Navigation - merged to form Imperial Airways Limited. Around this time, a number of smaller UK air transport companies had started their operations. These merged in 1935, to form the original privately-owned British Airways Ltd.

In November 1939, British Government nationalized Imperial Airways and British Airways, to give rise to the inception of the British Overseas Airways Corporation (BOAC). After Second World War, BOAC continued to operate long-haul services, while continental European and domestic flights were flown by a new airline, British European Airways Corporation (BEA). In 1972, BOAC and BEA were combined under the newly formed hiBritish Airways Board. Subsequently, the separate airlines were merged to form British Airways, in 1974.

Privatization

With a view to convert British Airways into a private profit making airline, Sir John King (late Lord King) assumed the position of its chairperson, in 1981. He appointed Colin Marshall as the CEO of the airline. The strenuous efforts of the King and the CEO made the giant loss making airline into one of the most profitable air carriers in the world. Subsequently, the airline claimed itself as 'The World's Favorite Airline', at the time when other large airlines struggled to establish their position in the civil aviation industry. The airline's image was changed under the guidance of the King. This led to the privatization of British Airways, in 1987.

Fleet And Destination

British Airways has a modern fleet with an average age of 9.7 years. Its fleet consists of as many as 228 aircrafts, which includes Airbus A319, Airbus A320-200, Airbus A321-200, Boeing 737-400, Boeing 747-400, Boeing 757-200, Boeing 767-300ER, Boeing 777-200 and Boeing 777-200ER. Presently, British Airways, flies to 6 domestic destinations and 143 international destinations in 69 countries, in six continents across the world. In India, British Airways flies to Delhi, Mumbai, Chennai, Bangalore and Hyderabad.

http://www.iloveindia.com/airlines-in-india/international/british-airways.html

effect of ash cloud on British airways(based on the guardian report)

British Airways today said the chaos caused by the flight ban across much of Europe is costing it between £15m and £20m a day and that it would be seeking compensation from the EU and the UK government.

Tour operator Tui Travel estimated its costs at £5m to £6m a day while budget carrier easyJet put its costs at £5m a day. Shares in airline and holidays companies across Europe suffered sharp falls on stock markets as the disruption intensified.

BA chief executive Willie Walsh said: "This is an unprecedented situation that is having a huge impact on customers and airlines alike. We continue to offer as much support as we can to our customers. However, these are extraordinary circumstances that are beyond all airlines' control.

"To assist us with this situation, European airlines have asked the EU and national governments for financial compensation for the closure of airspace. There is a precedent for this to happen as compensation was paid after the closure of US airspace following the terrorist events of 9/11 and clearly the impact of the current situation is more considerable."

British Airways shares were one of the biggest fallers in the FTSE 100, dropping just over 3% to 227p. Tour group Thomas Cook was down 4.5% at 249.8p, easyJet shares were down 5% at 545p and Tui Travel shed almost 4% to 280.4p.

BA said it has "significant funding available to it to sustain a considerable period of closure of the UK's airspace". At the start of the flying restrictions on 14 April, it had more than £1.7bn of cash and more than £400m in available credit lines it can draw on if necessary.

It said customers booked to travel on a cancelled flight can claim a full refund or rebook their flight for a later date.

Tui, the company behind Thomson Holidays and First Choice, said it is losing between £5m and £6m a day because of the flight ban. The disruption caused by the ash emitted from Iceland's Eyjafjallajokull volcano has already cost the holiday operator £20m, it said. About 100,000 of its customers are stranded overseas, and Tui is unable to bring them home while European airspace remains locked down.

"For the group, this is a period of relatively low holiday activity, but the disruption to our programmes will still have a financial impact," it said.

The company said it was providing "appropriate assistance" to travellers stuck in their holiday resorts. Customers who cannot begin their holiday because UK airports have been closed since late last week have been given the choice of a refund from Tui, or rescheduling their trip. About 90% of UK customers have chosen to rebook.

Tui added that it was working with other operators and airlines in the hope that regulators "permit the resumption of flights as soon as possible".

Tui reported last month that it was seeing a recovery in consumer demand as the summer trading period approached. In the last financial year it made an underlying profit of £366m, from revenue of £13.8bn.

http://www.guardian.co.uk/business/2010/apr/19/ba-volcanic-ash-losing-money

Discussion

As we can see that natural calamities are unpredictable, and cost millions to the companies which depends on weather .In the case of British airways we can see that ash cloud was, such a calamity which costed not only British airways in millions ,but other airlines too. Particularly in the case of British airways, we can see that, it incurred heavy losses. According to the report by Rob Hull as stated in share prices .com Share prices in the airline rose late in the to a closing price of 235p after news reports suggested operations from major airports could be back up and running at some point .

And despite some flights were able to go ahead on Tuesday april morning from northern UK airports, British Airways has had to ground all their shorthaul flights for the sixth consecutive day due to uncertainty surrounding the new volcanic ash cloud.

As a result, BA share prices sunked again to a low of 229.30p already with current prices at 09.15 being 230p and 0.73 per cent down, with predicted total losses of £15m to £20m a day for the group.

British Airways said in a statement earlier that morning: "We were planning to operate shorthaul flights scheduled to depart from 7pm, but these have now been cancelled.

"We are still hoping to operate longhaul flights which are scheduled to depart after 4pm on Tuesday 20 April, however this remains subject to the full and permanent opening of airspace."

Another statement regarding the potential re-opening of airports from the National Air Traffic Services is due at 15:00 today with NATS maintaining close communication with the Met Office regarding the state of British airspace.

And as we head into day six of cancelled flights, airline and travel groups are now reportedly turning to the Government for compensatory deals.

According to reports, TUI Travel (LON:TT.) is already £20m down with daily bills of up to £6m, Easyjet (LON: EZJ) has lost a total of £40m so far and Thomas Cook (LON: TCG) is claiming £7m losses since Thursday last week.

All four groups including British Airways could be looking to the Government for compensation for these huge losses.

However, both Easy jet and Thomas Cook Group along with Ryanair (LON:RYA) were all in positive territory , with the FTSE 100 0.36 per cent up in all at 09:40 on Tuesday ,20th April.

TUI Travel share prices, like BA, are still down but the group has released information saying it intends to raise around £500m of new financing through a convertible bond and additional bank facilities. Therefore we can see that, whereas short haul airways such as Ryan air and easy jet were not so much affected by the ash cloud, British airways and Virgin airways ,which are basically long haul airlines were heavily affected by this calamity( Rob Hull

shareprices.com - Tuesday, April 20, 2010)

http://www.businessweek.com/news/2010-04-16/british-airways-virgin-atlantic-may-suffer-most-from-ash-cloud.html

April 16, 2010, 10:52 AM EDT

A final thought: In a final thought we can say that natural calamities are unstoppable and ,companies relying on it has to frame additional plans that can help cope up with busy and anxious situations like this .In the case Of British Airways

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