09 December 2006

Could Google be the Airlines' newest best friend?

Google quietly slips in checkout for free in 2007.

· We just found out that Google Checkout is free through 2007 compared to the original campaign of through 2006, https://checkout.google.com/seller/freetransactions.html. This is a big deal in our opinion. Google is spending aggressively on gaining traction with its Checkout product and we think the offering has the possibility of disrupting eBay's off-platform PayPal business as well as the general ecommerce market. Google is now effectively paying all credit card fees for partners for a full year. We think Checkout is becoming Google's Internet Explorer, if you will, and we think it is time to start paying close attention. · A knee-jerk reaction would be to trade Google lower because this IE-like initiative will cost them in processing fees and in terms of consumer incentives, $10 off $30, etc. All else being equal, we would be aggressive buyers of Google into any ST weakness around what is going on at Checkout. We think, if it works, it is potentially very disruptive to competition and materially beneficial to Google's core Adwords business.

What does this mean for airlines?

This is ABSOLUTLEY something that we should all pay attention to. For airlines this would represent the biggest cost reduction in their current hit list of controllable distribution cost targets. This is a BIG DEAL. I can only imagine that at least ONE airline will sign up for this early and get the benefit of the deal extended beyond 2007 and beyond. The airline have to do something to show they are attacking their costs. Doing this deal could cut 2-3 % off the cost of processing. IF the airlines are smart. Are they?

Only time will tell

BA outsources baggage handling at LHR

Well there are good times and there are bad times for doing this. However in your own home market just to make a point with the unions - some times this is just plain INSANE.

So here is the rule. If you check in 2 hours earlier than your flight time - then you cannot check your bag.

This is one of those REALLY stupid rules that can be misinterpreted. Fortunately being a Gold Card holder on BA - i was able to "persuade" the nice check in lady to allow my bag to go through. Needless to say I was not terribly impressed.

On the positive side at least this trip to DMO did not actually have contamination.

Expedia's buyback

Good or bad?

Well its good for the stock and good for the stock sellers. HOWEVER Expedia has been delivering a steady stream of mediocre news for over 2 years now. So is everything OK in the Kingdom of Barry?

Dara and Co clearly have a lot to answer for after presiding over a lacklustre 2 years. The business has made a number of missteps. Specifically in the USA it has failed to keep up with the changing nature of a supply constrained marketplace. In International, failure to to tap into the LCC marketplace has stymied its attempts at a dominant position in Europe. Finally the technology platform roll out has been - frankly - bungled.

This has allowed traditional players in Europe like TUI and Thomas Cook enough breathing space to regroup and represent a credible set of alternatives. The powering ahead of Priceline and (again) First Choice has shown that others can be more nimble and execute better than EXP. Finally no real growth initiatives in a business that demands it have been shown during this time.

Therefore in my humble opinion - Stock Buybacks are always a symptom of deep rooted trouble. Expedia is buying time and using some of the cash pile - unwisely in my opinion. It shows that they have run out of reasonable ways to use the cash for the benefit of the business itself. Once the buy back is completed - then what will Expedia do? It had better be good.