Palmair, one time world best airline, and the oldest tour operator in Britain, turns 50

Bournemouth (UK) based Palmair announced that it intends to suspend all services at Bournemouth Airport for the months of Nov-2010, Dec-2010 and Jan-2011, citing poor advance bookings for winter, but hopes to produce a reduced winter timetable from Feb-2011 onwards. Despite this temporary setback Palmair, which claims to be Britain’s oldest tour operator, is one of the industry’s survivors, having been in business as the ‘in-house’ airline of a travel agent and tour operator, Bath Travel, since 1958 – 52 years.

Today the airline has been replaced by a tour operation with the flights themselves being operated by Astraeus, under the Palmair brand name. Astraeus itself has changed its own business model since 2008. It no longer offers scheduled or charter services of its own, preferring to wet, damp or dry lease to airlines such as bmi, Aerosur and Iceland Express, which is owned by Astraeus’ parent company, Eignarhaldsfelagid Fengur hf, an Icelandic based travel group. Iceland Express’ ambitious transatlantic route network for 2011, connecting London Gatwick (Astraeus’ home base) with New York, Boston, Chicago, Orlando Sanford and Winnipeg via Reykjavik, will be operated by Astraeus B757-200 aircraft.

Genuine red carpet service, each flight farewelled by the Chairman

Palmair has an interesting history. It was launched initially as a tour operator in order to satisfy foreign ‘package holiday’ demand in 1958 (the sort of demand that has largely been replaced now by LCCs), with a small series of flights to Palma, Majorca from Bournemouth, using Viking then Vickers Viscount, Vanguard and BAC-111 aircraft. The company Chairman personally saw off every flight and even provided a red carpet for passengers. As the range of destinations grew the company formed its own airline, Palmair Flightline, in 1993, operating a single BAe 146 aircraft, after it found it increasingly difficult to persuade airlines to reposition empty aircraft to Bournemouth.

The BAe 146 flew to 70 different destinations and a fly-cruise programme was introduced. A B737 replaced the BAe 146 and Palmair European was formed. The influential consumer magazine - Which? - polled 20,000 customers in 1997; they voted it the most popular British airline and the fifth most popular in the world.

Voted the world’s favourite airline in 2003

In 2003, Which? readers went a step further and voted Palmair #1 airline in Britain and in the world. By that time, having established scheduled flights to 10 European cities for a period, Palmair was mainly flying ‘day trips’ (excursions), occasionally as far a-field as Cairo and Luxor and more day trip destinations were available from Bournemouth than from any other UK airport. (Bournemouth is at the centre of what is recognised as the ‘grey’ capital of the UK [wealthy retirees] and is close to Sandbanks, an island enclave with the most expensive property anywhere in the country).

But with the onset of the recession and the failure of European Aviation, which had been operating a B737-200 for Palmair, followed by a brief flirtation with Jet2.com, a new business model was required; and in 2009 Palmair formed a new airline with Astraeus, taking delivery of a B737-500 that avoided the need for a fuel stop on longer routes such as those to the Canary Islands.

Many of the reasons Palmair was able to win those popularity awards are still evident today in a series of service features that LCCs have no intention of replicating. They include free seat allocation at check-in with no extra cost for families, and row-by-row boarding (which was supervised by the Managing Director until his retirement). Then there are no baggage charges, with a 20 kg allowance on checked baggage. In-flight meals (hot) and snacks are provided without extra charge. Once on the ground, complimentary hotel transfers are provided. Moreover Palmair boasts that it does not have a ‘call centre’, rather that telephone enquiries are met immediately by a staff member that can deal with any enquiry.

Intriguingly, Palmair does deal with many ‘last minute’ bookings, which explains its uncertainty before now in bringing down the curtain on the winter flights.

Bournemouth Airport feeling the pain of a downturn

An ‘LCC’ attempting to introduce such levels of inclusive service whilst keeping fares low would be committing commercial suicide but Palmair’s longevity has proved that a degree of demand does still exist, even if it is in one of the UK’s wealthier regions. As LCCs evolve into adolescence, it seems hardly likely that they will still be performing the same operating model when - or if - they reach 50 years of age. Somewhat ironically, the other main operator at Bournemouth Airport offers a service level at the opposite end of the scale - Ryanair.

In the short term Palmair’s service suspension announcement is not good news for Bournemouth Airport, which belongs within the Manchester Airports Group (MAG) stable as a 100% owned entity. Palmair’s decision comes only months after the opening of a new GBP45 million terminal at the airport and followed Ryanair’s decision to suspend winter flights at Bournemouth this year (2010-11). Ryanair now habitually suspends service each winter at numerous airports, but the traffic figures at Bournemouth in the first months of 2010 were dire. In each of Jan, Feb, Mar and Apr-2010, traffic was down by between 24% and 29% compared with 2009, with an improvement down to (only) single figure percentage losses in May and Jun-2010; a small gain (+0.4%) in Jul-2010 was welcome.

Some of the worst operating results in the UK

These are some of the worst results recorded in the UK. the other airports reporting such large passenger losses are all in the industrial north or midlands of England where the recession has hit hardest.

Bournemouth Airport’s Commercial Director remains confident that Ryanair and Palmair are both committed long-term to the airport and, for now at least, Thomson will operate its full winter schedule while Thomas Cook has flights operating in November. Discussions are taking place with other operators to help fill the gaps. Nevertheless,

Bournemouth’s management admits that “winter will be tough”. With a rumoured strategic review under way as a new CEO takes over at MAG, the future of Bournemouth Airport may be up for discussion. The management there will be aware that Bournemouth’s competitors, namely Southampton Airport (BAA) and Exeter Airport (Balfour Beatty consortium), have come through the downturn in the first half of 2010 generally in better shape, if not by much.

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