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