The Man Who Pays His Way

So long as you don't have the misfortune to work in the travel industry, 2003 is shaping up pretty well for people hoping to see a lot of the planet. At the start of last year, you may recall, conventional wisdom held that we would collectively travel a lot less because of the reverberations of September 11. The industry, we were assured, had anticipated this decline in demand and had cut supply sharply.

So long as you don't have the misfortune to work in the travel industry, 2003 is shaping up pretty well for people hoping to see a lot of the planet. At the start of last year, you may recall, conventional wisdom held that we would collectively travel a lot less because of the reverberations of September 11. The industry, we were assured, had anticipated this decline in demand and had cut supply sharply.

In the event, that threat remained as empty as the average Jerusalem hotel room. Holiday companies such as MyTravel (you remember, the firm that first revealed its no-frills airline, and then revealed its no-calculator accounts) revealed plenty of capacity. Even in August, you could pick up a week's package to Mallorca for £149. And if none of the unsold packages took your fancy, it was easier than ever to stitch together your own trip.

We begin this year with around 100 more air routes from Britain than at the start of 2002. Most of the new destinations are served by no-frills airlines, many of them places you never knew you wanted to go. Prague is a place you definitely want to go – but who, at the start of the year, would have predicted that we would end it with 12 flights a week between East Midlands and Prague on two competing airlines?

* The growth in travel opportunities will continue through 2003, with at least 50 new ways to leave your country. But the low-cost gateways in the south-east are filling up fast, owing to lamentable planning for runway capacity. Few slots are available at Luton or Stansted at peak times, so most of the expansion is likely to be outside London. We are promised new budget bases at Bournemouth, Leeds-Bradford, Newcastle and Prestwick; only Manchester continues to be a virtually no-frills-free zone.

Most of the new routes will point south to the Mediterranean. This will put yet more pressure on three groups that have had a tough year: air-traffic controllers, tour operators and travel agents. The traveller can do little to avoid the imperfections of National Air Traffic Services, short of going by rail or ferry, but there are plenty of alternatives to the traditional package holiday.

* The market for packages is static (cynics would say "stagnant"). But each year the market loses around half a million holidaymakers, because they die, or their circumstances change, or they simply lose interest in the offerings of the inclusive-tour producers and come up with an alternative that they arrange themselves: driving over to France, opting for Bridlington, or staying at home watching the latest crop of package-holiday disaster documentaries on TV.

The industry has the tricky task of persuading a new generation of travellers that the middle-aged Great British package holiday – 53 years old this year – is the solution to their travel needs. It must also convince them that locking into a particular holiday many months in advance, despite the uncertain world, is a good idea. But many bright young sparks will simply buy online. The internet is revealing many of the tricks of the trade. Anyone with a PC and a modem believes themselves capable of constructing a holiday: sourcing the right flights, surfing the beachside-hotel websites, and steering through the car-rental contraflow.

In short, we have become travel agents, or at least we fondly imagine we have. And just thinking that DIY holidays are easy could be enough to wound a travel industry that is still largely living in the early Eighties, technologically speaking.

* British Airways and the other long-haul airlines have a tough time ahead. The business traveller, whose high spending has traditionally supported the whole fragile structure of conventional airlines, is no longer prepared to subsidise the backpacker. So the traditional carriers are casting their nets in what they hope will be more profitable waters. British Airways is dropping Cardiff and Leeds-Bradford in favour of London City and Luanda. "We've been trying to go there for five years," says BA's chief executive, Rod Eddington. "We'll make good money to Luanda."

Virgin is also looking south, with a venture into unknown African territory: Port Harcourt, Nigeria. "Port Harcourt is the big oil city of North Africa and we think this can be profitable almost from day one," says Sir Richard Branson.

Even Stornoway in the Outer Hebrides is no longer financially further than Sydney from London, thanks to a new BMI link from Edinburgh.

Meanwhile, the shrewd budget traveller knows that the aviation industry still suffers from huge oversupply, and sits back and waits for bargains to arrive.

* Look, here's one already. The year begins with the UK's biggest airline selling thousands of seats across the Atlantic for £166 return through the website it part-owns, When you strip away the taxes, that is the lowest fare British Airways has charged to fly to New York and back since the airline was formed in 1972. Here in the real world, prices for almost everything else have risen eightfold in that time.

In the past few weeks, the cost of aviation fuel has rocketed. But the airline industry continues to run on an unhealthy mixture of groundless optimism and minuscule margins. And the war with Iraq hasn't even begun yet.

If and when conflict breaks out, the airline industry will receive yet another hammering. A war would hit the airlines hard; BA has built up a war chest of £2bn in cash and guaranteed loans to cope with a sharp loss of revenue. It will no doubt survive under the prudent guidance of Rod Eddington; 90 per cent of its fuel needs has been "hedged" at fixed prices until the end of March. But for the world's more fragile airlines, any war could prove as fatal as it will for the long-suffering people of Iraq.

* What effect will the war have on the British holiday industry? A question for Neil Taylor of Regent Holidays, a man who has been in the business long enough to have weathered the many storms that have battered the travel trade.

"Assuming Iraq is in for a short sharp shock, the war should have little long-term effect on the travel business here. There was a catch-up after the Falklands and the Gulf War, and the same should apply on this occasion. Firms absolutely on the brink, such as Clarksons during the Cyprus War in 1974 or Intasun during the Gulf War, will go under. But everyone else has surely had enough warning to put aside some reserves for the duration of the conflict."

* Terrorists attack travellers for one of two motives. The first is to frighten away future tourists in a bid to wreck the local economy and destabilise the government. That was the apparent motive behind the bombings in Djerba in April in which 11 German tourists died.

The second intention is to demonstrate hatred for a particular nation, such as the attacks on America on September 11 2001, and on Israeli tourists in Mombasa in November. The terrible attack in Bali in October when 200 holidaymakers and local people perished appears to have been inspired by both these aims.

We will doubtless see more of both in the coming year, with Britain an object of hatred because of our compliance in any war on Iraq. But I still worry more about the bike ride to the airport than I do about a terrorist attack. Despite the Government's constant exhortations for "worldwide caution" and "constant vigilance", the chances of dying at the hands of terrorists remain minimal when compared with the risks prevailing on foreign roads and waters. Apprehension is a useful travelling companion, but only if you keep your worries in proportion to the real dangers.

* A new year, a new way to score the success of airlines: what proportion of the national population does it carry? Yesterday, Ryanair announced it had flown 14.5m passengers in 2002 – four times the population of Ireland, its home country. This easily beats Southwest, America's most successful airline, which carries only one in four US citizens each year. BA scores a reasonable 0.7. Global winner, though, is plucky Icelandair, which each year flies more than five times the national population. Serving ancient glacial ice in the on-board drinks clearly works.