Guest Post: EasyJet slump shows Brexit’s impact on travel sector is real

EasyJet has experienced its worst half-year loss in six years, according to the company’s latest results Continue reading →

By Anthony Hynes, managing director and chief executive, eNett International

EasyJet has experienced its worst half-year loss in six years, according to the company’s latest results. The airline recorded a loss of £212m, compared with £21m in the same period a year ago, with commentators blaming the weak pound as result of the Brexit vote.

Brexit was also blamed for a drop in shares in the airline. And the founder falling 20 places in the Sunday Times’ Top 50 Rich List. Not the best year so far for Sir Stelios.

June marks one year since the British public voted to leave the European Union. The exact terms of Brexit and the ‘divorce bill’ are still being ironed out. There’s huge uncertainty around what it will mean for free movement and whether visas will be reinstated.

What is clear is that the vote already has had some impact on the travel industry, especially when it comes to payments and transactions.

The drop in the value of the Pound was one of the most visible consequences of the Brexit vote. Mark Warner, one of Britain’s largest tour operators, told their customers that they must pay more for their ski breaks due to currency fluctuations. Even after they had booked and paid.

You could argue that the negative press this generated, alongside the poor customer experience, are more costly than the loss in profits should Warner have decided to take the hit. This wasn’t an isolated incident. ABTA reported that at least seven other companies have added surcharges in recent months.

Travel companies book with suppliers but don’t settle until later. Negative fluctuations in currency during the time between booking and settlement means travel companies can see their already tight profit margins eroded when it comes to payment.

This increases the likelihood that travel companies, hotels and airlines, will pass on costs to holiday makers after they’ve booked – or be forced to take a major hit on their profits.

While large firms may be able to absorb this, lower cost operators with smaller margins may not. Smaller firms, who offer attractive prices to drive volume, already suffer from higher operating costs.

This may lead to a cut in routes, in-flight services or increased fees – all of which will impact customer experience. How many of those customers who were asked to pay more after they had booked are likely to book again with the company?

The loss of repeat business can be hugely detrimental. Especially as research shows a 5% increase in customer loyalty can boost profits by up to 85%.

But what happens if the worst should happen and companies can’t stay afloat? In the past 12 months alone, several travel firms and airlines – including Alitalia, Diamond Shortbreak Holidays and Lowcost Holidays – have collapsed.

British people have enjoyed strength of the pound allowing them low-cost European holidays galore, but will this carry on post-Brexit? European legislation is currently in place to protect UK travellers if a travel company goes bust or if there are delays to flights. But new legislation will need to be agreed and this could leave consumers exposed in the interim.

One of the positive things about Brexit is that it has got travel companies thinking about the way they pay. For too long, the travel industry has relied on old-fashioned and outdated payment methods.

In 2017 we still have Fax confirmations for hotels. I have talked about big issues but the solution is a simple one – just change the way you pay. Innovative B2B payment solutions are available that better match the demands of today’s industry. And most importantly better protect travel companies and their customers.

For example, some Virtual Card or Virtual Account Numbers offer the option to lock-in the FX rate at booking so there’s no nasty surprises come settlement time. And ‘charge-back’ capabilities mean you can get your money back in the event of supplier default. One of our own customers was able to charge-back US$1.5m when one of its suppliers went bust. You wouldn’t be able to do that with bank transfers.

These are just of some of the challenges travel firms are facing, and will no doubt continue to come up against, on the road to final Brexit. The industry must act now to reassess and put systems in place to protect themselves, suppliers and – most importantly – customers.