The Paris Olympics are driving overseas visitors away from the French capital – and one major US company is worried.
Paris Olympic Problems
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The Olympic Games will attract millions of visitors to its host city of Paris this year. While the event will boost profits for countless businesses, not everyone is happy – including Delta Air Lines.
Olympic Disruptions
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This week Delta reported that the ‘City of Love’ is expecting a major decline in tourist numbers this summer, as the Olympic developments disrupt some of the most popular tourist destinations in the French capital – including the river Seine.
“People Aren’t Going to Paris”
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“Unless you’re going to the Olympics, people aren’t going to Paris…very few are,” CEO Ed Bastian told reporters. “Business travel, you know, other types of tourism is potentially going elsewhere.”
Major Loss for Delta
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This dearth of summer travelers signals a major loss for Delta, which usually sees big business ferrying visitors to and from Paris.
$100 Million Drop in Revenue
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With the largest share of air service to Paris of any US airline, the company is likely to lose as much as $100 million as a direct result of the Paris Olympics, as reported in its third-quarter profit and revenue forecast.
Disappointing Forecast
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The forecast was released on Thursday with revenue projections falling short of Wall Street expectations, with sales expected to rise no more than 4% in the current quarter, nearly 2% below the 5.8% growth predicted by LSEG analysts.
Two Airlines Most Affected?
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Delta is not the only major airline affected by the Olympics. Due to a partnership between the two companies, both Delta and Air France have seen their forecasted revenue suffer.
Air France Losing Too
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Air France-KLM, the airline’s parent company, has reported an even larger projected revenue loss from the event. It expects to lose as much as 180 million euros ($195.5 million).
Postponing Holidays
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“International markets show a significant avoidance of Paris,” Air-France-KLM reported. “Travel between the city and other destinations is also below the usual June-August average as residents in France seem to be postponing their holidays until after the Olympic Games or considering alternative travel plans.”
70% Market Share
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Together, Delta and Air France hold a 70% market share in flights to and from France and the US, according to a CNBC report.
City Tourism Office Supports It
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Projections from both airlines are supported by data from the city’s tourism office, which has also projected that Paris will see a 15% drop in foreign visitors across the month of July.
During Peak Tourism Season
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The Summer Olympics will run from July 26 to August 11 this year, which is part of the peak tourist season for Paris.
Mostly European Tourists
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According to Le Monde, 15 million visitors are expected to rush to the city to see the Olympics. However, only 2 million of those people will come from overseas, with the rest traveling from within France and the wider European continent.
Overseas Visitors Avoiding It
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Vacationers are likely to avoid the city during the Olympics period due to large crowds and much higher prices, particularly for accommodation.
Changes to the Euro Summer
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While the summer period is an important time for carriers operating in and out of Europe, Delta president Glen Hauenstein noted that travelers were already looking to push their vacations outside of the traditional European summer period.
Extending the Season
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“We see the season extending as a whole group of people, whether or not it’s retirees, whether or not it’s people with double incomes and without children, who don’t have the school concerns,” he said in an earnings call.
Avoiding Summer Heat
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“It’s actually a better time to go to Europe in September and October than it is potentially in July and August when the weather is so hot and everything is so packed,” he continued.
Demand Still High
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Hausenstein also confirmed that despite the revenue loss for that period, demand for summer travel is still high across the board. “Outside of this temporary event, summer travel demand to Europe is strong and consistent with our expectations,” he added.
Japan Taking Off
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While revenue in Europe is dipping for the Olympics, profits are picking up for Delta in other countries, such as Japan.
Favorable Exchange Rate
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During the earnings call, Hausenstein described US travel to Japan as booming. This is thanks to the highly favorable exchange rate which has made travel in the country more affordable for US tourists.
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