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Should airlines be promoting £5.99 flights during the Covid crisis? | Money

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The marketing emails from the airlines have become more frequent and appear more desperate, even as the second wave of the coronavirus pandemic worsens. Over the last two weeks Ryanair has badgered me with its “awesome autumn break sale” then its “latest mega sales event”, followed 48 hours later with a “last-minute weekend away price drop” then, seeing how I had not booked, another tease with “you know the drill, our latest sale must end midnight”.

What a contrast to the Foreign and Commonwealth Office’s official advice which, lest we forget, “advises British nationals against all but essential international travel”, bar a few exceptions.

There was a time when FCO advice against “all but essential” travel effectively put a country off the map for tourist jaunts. No longer.

Instead, Ryanair is promoting a range of mouth-wateringly cheap deals to places the government tells us we are mostly not supposed to be going to. I can pick an October flight from London to heaps of destinations across Europe for less than £10. Madrid for only £5.99. Barcelona, Bratislava, Faro, Pisa, the same. Prague, Milan and Budapest for £7.99. Hell, I can even fly the 2,300km to another continent, Africa, for only £5.99 if Marrakech is where I want to take a sunny break.

Amid Ryanair’s emails imploring me to holiday in Madrid and other European cities with the line “There’s still time for an autumn break”, the Spanish government declared a state of emergency to keep Madrid in partial lockdown. It has banned all non-essential movement in and out of the confined areas of the city and imposed restrictions on restaurants and bars.

Liverpool is already in its “very high alert”, with the local population officially told they “should try to avoid travelling outside their local area”. Meanwhile, Ryanair was this week selling flights from Liverpool airport to Prague, going out on Friday 16 October and returning the following Monday for £9.99 each way.

Prague is itself almost certainly heading into a second lockdown after a dramatic rise in Covid-19 infections that has transformed the Czech Republic into Europe’s fastest-growing outbreak. One wonders how the locals feel about budget airlines potentially adding to their woes by hauling in visitors from pandemic hotspots.

Sun rises over the medieval Charles Bridge in Prague.



You can get a cheap flight to Prague. Photograph: David W Černý/Reuters

The behaviour of the airlines has deeply concerned some public health experts. Dr Gabriel Scally, president of epidemiology and public health at the Royal Society of Medicine in London, wrote last week: “Perhaps the biggest barrier to effective public health measures is the power and influence of the airline and international tourist industries.”

It isn’t, of course, only Ryanair that is operating flights through the pandemic. Another airline sent messages begging me to buy one of “thousands of seats from €13.99”, while easyJet was telling me in September: “Nothing beats exploring Europe’s cities, ticking off world-famous landmarks, tasting authentic local cuisine and experiencing colourful art and culture.”

Maybe nothing does – except when there’s a pandemic gripping the continent. When asked to justify its marketing of autumn breaks across Europe, Ryanair said in a statement: “Ryanair continues to operate flights to ensure essential connectivity for business and/or family purposes. Millions of jobs are dependent on Europe’s aviation industry and we must protect these as well while complying with WHO & EASA/ECDC guidelines as well as government restrictions.”

This week the airline said it would cut the number of its winter flights by a third but added that it was still hoping to keep its planes 70% full.

EasyJet said it was only operating flights where it sees “sufficient demand”. In a statement, it said: “Due to the ongoing impact of the pandemic and related changing restrictions across Europe we are continuing to monitor demand and adjust our flight schedule in line with it. We are only operating where we see sufficient demand from passengers travelling, who decide if they are able and willing to adhere to the advice and restrictions in place such as being able to quarantine or take a test on arrival or on return.

There are good reasons for operating flights for essential connectivity/business/family purposes. What’s more, holidaymakers are probably less of a vector for disease transmission than spreaders such as the meat processing plants, prone to infection all across Europe. But should airlines be feverishly promoting “last-minute” weekend getaways, accompanied by images of happy young couples enjoying their autumn break?

Despite all this, I and many other travellers will be sympathetic to Ryanair and the other airlines as they grapple with this pandemic. Almost no other business sector has been hit harder. As the airlines will ceaselessly tell you, their onboard air filters cut virus transmission risks dramatically – although they can’t protect you much from a passenger next to you who sneezes, or the enclosed airport terminals where you must necessarily spend hours with potentially thousands of other travellers.

The UK has already spent a small fortune helping to prop up the airlines. Ireland-based Ryanair is currently benefiting from £600m under the Bank of England’s Covid Corporate Financing Facility. EasyJet has also drawn £600m, while British Airways and Wizz have been supported to the tune of £300m each.

Would it have been that difficult to add a condition to these loan packages along the lines of “hey guys, could you at least discourage people from travelling unnecessarily while the pandemic is on?”

When the nightmare is over (the virus, Trump, Brexit negotiations … we could be waiting some time yet) and we can joyously spread our wings again, one thing is certain. The boom in air travel will be unparalleled – and the chances of a weekend flight to Prague, Barcelona or Madrid for a fiver a distant, never-to-be-repeated memory.


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The US has a good record on fighting monopolies. Now it’s Google’s turn | Google

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Sundar Pichai, chief executive of Alphabet, Google’s parent company, is a mild-mannered software engineer who is not good at games of verbal fisticuffs with US politicians. He received a drubbing last month during the “big tech” congressional hearing.

Pichai can, however, summon lawyers and lobbyists galore as soon as the game gets more serious, which it definitely has. The US Department of Justice (DoJ) last week launched a huge and historic antitrust case against Google, accusing the tech company of abusing its position to maintain an illegal monopoly over internet searches and search advertising.

In response, Kent Walker, Google’s chief lawyer, published an indignant blogpost that signalled how the firm will fight this. Google will claim it – and not the DoJ – is on the side of the American people and, by extension, people across the world.

“People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” wrote Walker. “This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use”.

This argument has superficial appeal. Google doesn’t charge users and can’t stop them using rivals’ products. In a neat touch, Walker included instructions on how to load Microsoft’s Bing search engine on an Android phone.

As for those multibillion payments to Apple to get Google pre-loaded on iPhones and iPads – one of the DoJ’s main complaints – Walker said they are like the promotional fees a cereal brand might pay a supermarket to stock its products at eye level. Other search engines are free to negotiate space on the digital shelf or home screen, he argued, and this is how software has always been distributed.

Convinced? You shouldn’t be. There are four reasons, at least, why the DoJ is right to fight this case. First, a product that is free (or free at the point of use) can still cause harm to consumers. The process is just indirect. An overly dominant search engine can, for example, raise its prices to advertisers, who then recoup the extra expense by charging more for hotels, flights, electronic gadgets, books, insurance, and so on.

Second, Google’s cereal comparison doesn’t work. A key point about a dominant search engine is that it can gather more data to enhance the offer and thereby achieve greater competitive clout. It has a self-reinforcing aspect that doesn’t apply in the non-data world of cornflakes and Coco Pops.

Third, most users don’t change their default settings. Yes, it’s technically simple to do, but most people don’t. That is why Google is happy to pay Apple a fortune every year for default status – it can be extremely confident of a return on that investment, knowing no rival can match its spending power.

Fourth, there is the deep problem of Google’s sheer size and effective control of 80% of the search market. How could new ideas and approaches ever get a look-in?

“If we let Google continue its anti-competitive ways, we will lose the next wave of innovators and Americans may never get to benefit from the ‘next Google’,” said William Barr, the US attorney-general.

In that final respect, this case is similar to celebrated antitrust challenges of the past – Standard Oil, AT&T and Microsoft. It’s about confronting corporate power when it becomes the gatekeeper to an industry, the lawsuit’s description of Google’s position in search.

Pichai’s usual plea on that point is that “Google’s continued success is not guaranteed”. And that can be rubbished for a simple reason: it is easy to see how the gates would clang shut on any competitor that became truly threatening.

Good luck to the DoJ – this is an important 21st-century case.

Johnson’s plans for British industry are full of wind

Next week, Boris Johnson is expected to deliver a 10-point plan outlining the government’s green industrial strategy before it publishes a long-delayed energy white paper, possibly in November. A fresh strategy paper is a chance for the PM to persuade the electorate that while his character may not be well suited to fighting a pandemic, he knows how to strike an upbeat note when the subject turns to major building projects.

It might have taken him six years as London mayor before he could see cycle superhighways being built across London, but they did happen, and they played a part in transforming the infrastructure of the capital. When he wanted a cable car across the Thames, it arrived and worked, to many people’s amazement.

Unfortunately what you cannot say is that any of the prime minister’s achievements so far are glued together as part of a strategy. They can at best be described as ad hoc, and sit alongside schemes that detract from the central message, if that message is about the climate emergency and carbon emissions.

At this year’s Conservative party conference, Johnson said a green industrial revolution would repair the economy following the pandemic. This month, he repeated a pledge that every home in the UK would be powered by wind energy within 10 years, at a cost of £160bn.

These are laudable aims and show Johnson has been gathering his thoughts. But the manufacturing industry that might have played a big part in building wind turbines was destroyed by previous Tory governments. Now Johnson wants to add a no-deal or limited-deal Brexit that will undermine the rest of the UK’s industrial base.

Britain needs a strategy in many areas. Let’s hope the PM has coordinated a plan across all departments that can rightfully be called a green industrial strategy.

The ticket king’s bid for Viagogo could be about to stall

The $4bn (£3bn) takeover of ticket resale website StubHub by its rival Viagogo had already been dubbed the “worst deal in history”, having been finalised weeks before the pandemic shut down live events indefinitely.

Viagogo boss Eric Baker founded both firms and his dream is to preside as ticket king over a reunited empire. Perhaps blinded by that ambition, he dismissed Covid-19 as a flash in the pan and pressed on with the deal, spending some of his own considerable resources – together with those of financial backers including the mega-rich Waltons, the family behind Walmart.

As ill-timed as the takeover looked a few weeks ago, it looks even worse now that the UK competition watchdog has signalled its intention to block it. The CMA understandably balked at the idea of a tie-up that would give the combined company 90% of the UK ticket resale market.

What now for Viagogo? It’s main target in buying StubHub is the US market, where its rival dominates. Yet the British regulator threatens to scupper everything. If Baker offers to shut down StubHub UK, Viagogo would hoover up its rival’s business anyway, creating a monopoly via a different route. The CMA surely could not allow that. A partial sale of StubHub, a web-based company whose strength is its platform, is impractical to the point of impossibility.

The CMA may ultimately force Viagogo to sell StubHub, appointing a divestiture trustee to seek a buyer. That trustee would have no obligation to recoup Baker’s $4bn.

That’s not the most remarkable thing, though. Part of the CMA’s remit will be, unwittingly, to look out for the interests of professional resellers, the touts who dominate resale listings. As the Observer has shown, many “resellers” use the same methods that saw super-touts Peter Hunter and David Smith jailed last year for fraud. So the CMA may find itself accidentally defending the interests of fraudsters who make a living scamming the public. It seems anything is possible in 2020.


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How first-time buyers are working together to get their deposits | First-time buyers

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It can take years for many people to save up enough cash to get on the property ladder – so what if there was a way to dramatically cut the time it takes to raise a deposit, perhaps down to as little as a couple of months?

Such a scheme does exist in the UK. It is called StepLadder and it allows people to team up with other aspiring first-time buyers in a sort of savings club. Everyone regularly pays in the same amount and each month one member is picked at random and receives all of the cash in the pot, which could be the full amount they need for their deposit.

Needless to say, there are plenty of strings attached to this scheme. There are risks involved, the fees you have to pay are not insignificant, and you are tied in – this is a financial commitment that must be repaid, like a loan.

Also, because of the way it works, there could be an impact on how much you are able to borrow for a mortgage.

StepLadder officially launched in the UK at the start of 2019. London accounts for about 60% of its members but it says there are “clusters” in Birmingham, Leeds, Manchester and other urban areas. Membership is in the hundreds, although it claims to be growing fast.

Technically, this counts as peer-to-peer (P2P) lending, where individuals lend to and borrow from each other directly. StepLadder is an appointed representative of a firm called More Lending Solutions, which is regulated by the Financial Conduct Authority for P2P lending.

The way StepLadder works – a sort of combined saving and borrowing arrangement – may seem odd to many people in Britain but in numerous countries around the world this is a fairly common way of financing big-ticket purchases.

Buildings on the River Thames in London
London accounts for about 60% of StepLadder’s members but it has clusters in Birmingham, Leeds, Manchester and other urban areas. Photograph: David Taylor/Rex/Shutterstock

For example, in Brazil these sorts of schemes are called consórcios, and lots of people use them to buy a car. It is also a popular model in parts of the Caribbean.

StepLadder puts its members into small groups called “circles”. Every member pays in an identical amount – usually ranging from £25 to £1,000 – each month via direct debit over a fixed period of, typically, 10 to 20 months.

The contributions go into a central pot and there is a monthly draw to decide who receives it. This process is repeated until everyone has received their deposit money.

Let’s say you want to save £20,000 for a deposit. You might be put into a circle totalling 20 people, each saving £1,000 a month. Each month the whole pot (£20,000) is awarded to one member. You remain tied to the scheme until everyone has received their payout.

In the above example, if you were picked first, you would have raised your deposit in a fraction of the time it would have taken if you had been saving alone – but you would have to keep paying your £1,000 a month until the end of the 20-month term.

One plus of this scheme is that it can give you a valuable time advantage, particularly if property prices are rising. Even if you end up being the last member to get their deposit, it won’t have taken you any longer than if you had saved the same amount each month on your own.

But being an early “winner” could have its downsides. The ongoing commitment of having to continue paying into the circle could affect how much you are able to borrow for your mortgage, as a lender could factor that into its affordability calculations, says David Hollingworth of the broker L&C Mortgages. “That could put a slight dent in the mortgage amount available,” he says. “However, those with good affordability but a lack of deposit could still find themselves in a position to buy sooner than they otherwise could.”

StepLadder says that, to date, “we haven’t seen members’ mortgage offer amounts meaningfully impacted by their remaining commitment to us”. It says that when a member is ready to obtain a mortgage, the sum of the remaining payments appears as an unsecured debt – for example, if they had six months left of a 20-month commitment to pay £1,000 a month, that’s £6,000. “Like any other amount owed – ie car finance, credit card balance, overdraft – these repayments will factor into each lender’s appetite differently.” it says.

StepLadder members are not covered by the UK’s Financial Services Compensation Scheme (FSCS), so your money is at risk.

And there are fees to pay, which vary based on the size of the circle but are between 3-5% of the monthly payment amount.

There are measures in place to prevent people simply walking away after they have received their deposit money. StepLadder’s small print says it “will have rigorous collections processes for the recovery of unpaid monthly direct debit payments by customers”.

However, StepLadder says its arrears rate is “ultra-low”. And it adds that if you are yet to be picked in the draw and your circumstances change, you can drop out, thereby ending your commitment to make further payments, and get your money back at the end.

Some people may feel this all sounds a bit strange. However, in a blogpost, StepLadder said that with “rotating savings and credit associations” (ROSCAs) – the technical name for this arrangement – circles are not reliant on recruiting new members in order to keep going. It added: “This is why, emphatically and demonstrably, ROSCAs are not pyramid or Ponzi schemes.”

Raising a £10k deposit in six months

Adebiyi Olusola, a self-employed consultant project manager, had struggled to save up the large sum needed for a deposit. “On the scale of one to 10 of the savings I needed, I couldn’t even get to level two by myself,” he says.

Olusola, who lived in Peckham, south London, signed up with StepLadder and was put into a circle of 25 people, each paying in £400 a month. After six months, having contributed £2,400, his name was drawn and he received £10,000.

Although he had to keep paying in for another 19 months, he was able to use the payout, plus savings, to put down a deposit on a three-bedroom house in Kent at a far earlier stage than if he had been trying to raise the deposit alone.

Other ways to get a deposit

One of the toughest tasks facing would-be homeowners is raising a deposit. What are the options if you are struggling to save?

A handout from the bank of mum and dad Financial assistance provided by parents, grandparents, etc will help some cash-strapped first-time buyers get a deposit together. This sort of help is called a gifted deposit. The borrower will typically have to prove the money is a gift, without expectation of repayment, and definitely isn’t a loan. “A gifted deposit letter is usually all that’s required,” says the Mortgage Advice Bureau, a broker. Be aware that if the person who gifts you the money dies within seven years, you will have to pay inheritance tax on it. Also, some lenders, such as Nationwide, have clamped down on financial gifts from parents and others.

So-called guarantor and family assistance deals There are a number of mortgage schemes that may be able to help. With Lloyds Bank’s Lend a Hand 100% mortgages, no deposit is required – instead, a family member puts 10% of the purchase price into a three-year fixed-rate savings account to act as security. But at the time of writing, the bank’s website said these deals were “temporarily unavailable for new applications”.

A pedestrian wearing a face mask walks past a branch of a Barclays bank
Barclays’ Family Springboard mortgage allows a family member, friend or loved one to provide 10% as security. Photograph: Tolga Akmen/AFP/Getty Images

The very similar Family Springboard mortgage from Barclays is still available. Again, you don’t need a deposit – you can borrow the full purchase price because your helper (who can be a family member, friend or loved one) provides 10% as security, in this case for five years. The money sits in a Barclays Helpful Start savings account.

Meanwhile, a deal that lets buyers borrow up to 95%, with a family member assisting with affordability, is available from the Essex-based Saffron building society. With this so-called joint borrower sole proprietor (JBSP) mortgage, the owner borrower must be able to afford to cover a minimum of 70% of the total loan, while the supporting borrower – who has to be a close family member – must meet affordability on the shortfall (that is, up to a maximum of 30%). All borrowers will be “jointly and severally liable” for the monthly mortgage payments and the total sum borrowed.

There’s also Tipton & Coseley building society’s Family Assist mortgage, which lends at 100% loan-to-value and involves a family member accepting a 20% charge on their own property or putting 20% of the amount being borrowed into a special savings account.

Rent-to-buy schemes Rentplus is probably the leading provider of rent-to-buy housing, where you typically pay a reduced rent on a new-build home (perhaps 80% of the local market rent) for five to 20 years and save for a deposit to buy the property. It partners with housing associations, and many of its applicants are key workers who often can’t afford to save up a deposit because their rent and outgoings are too high. At the point of purchase, tenants are gifted 10% of the property’s market value to put towards a deposit.

Do you feel lucky? Cambridge building society has launched a scheme called Rent to Home that will provide one successful would-be first-time buyer (chosen via a ballot) with a newly refurbished home owned by the society that can be rented for up to three years, after which 70% of the rent paid is returned to the tenant to be used as a deposit for a mortgage. Applications are due to close on 30 October.


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Nationwide reduces Flex travel insurance cover for Covid cancellations | Money

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Nationwide building society has announced a significant downgrade to the travel insurance it provides to Flex account customers that means trips booked from 1 January 2021 will not be covered if the account holder is forced to make one of a number of Covid-related cancellations.

The popular insurance, which is supplied for worldwide travel as part of the £13-a-month FlexPlus current account and European trips on standard Flex accounts, currently offers cancellation cover if lockdown or other rules change after a holiday has been booked.

However, for trips booked from 1 January, it will no longer pay out if the Foreign Office changes its advice post-booking and warns against all but essential travel.

Equally, if the insured or a travelling companion are forced to abandon the trip because they have been told to self-isolate – even though they do not actually have coronavirus – they will again be unable to reclaim their losses. It is the same story if your pre-booked accommodation goes into local lockdown.

The building society says it will still pay cancellation claims if the policyholder, a travelling companion or a close relative are diagnosed with the coronavirus after they booked the trip. It will also pay emergency medical expenses abroad if they are diagnosed with Covid-19 while abroad.

Cutting a trip short because of a change in Foreign Office advice, as long as you were not aware of this advice when you travelled, will also be covered.

Until this week’s announcement, Nationwide’s FlexPlus policy was one of the few offering cancellation cover to those caught up in a change of advice by the Foreign Office.

A few specialist insurers still offer this cover at a price.

Currently, UK travellers can only travel to a handful of destinations without having to quarantine, while the government is still advising against holidaying in many popular destinations.


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