05 April 2008

Correction - that's 4 Airlines not 3 - Champion Air to cease service

One of the last of the 1980s startups is finally shutting its doors. Champion Air who began life as first First Air then MGM Grand Air has finally agreed to an orderly shutdown of its business. It will ground its 12 Boeing 727s and exit the business. While not a scheduled carrier - it was one of those airlines that filled a nice niche serving Las Vegas and the charter market. Obviously with only a small operation - it is not going to make a huge dent in the market.

the real killer for them was Allegiant grew too strong. Oil at over $100/pbl also was a killer for the old gas guzzlers.

So whose left in this space? Allegiant is clearly the star here. But OAS - Omni Air Services and the two surviving members of Global - World Airways and North American Air are surviving. The rest are pretty much all gone.

Is this an opportunity one may ask? I think the answer is yes for smart investors and careful seasoned management teams.



ASTA says Travel Agents are doing OK

ASTA just released a report on the Financial health of the US Travel Agent community. Even though it took them a year to publish the findings - I hope that wasn't to get rid of unflattering information.

ASTA is doing a good job in trying to keep the Agency community psyched up on the one hand and the consumer protected on the other. Despite having a job that is akin to putting fingers in the dyke - they continue to put on a brave face.

But the role of an agent has forever changed. It is doubtful by looking at these numbers that the agent model is sustainable at anything but a niche business.

Here is the full text of the Press Release.

ASTA Releases 2nd Annual Financial Benchmarking Report
Alexandria, Va., April 3, 2008-ASTA today released its second annual Financial Benchmarking Report, the results of which provide travel agencies with data that can be used to pinpoint areas of excellence, as well as areas which can be improved. Among the key findings, the report discovered that of those surveyed, the majority (75.6%) were profitable in 2006 and similarly expect to be profitable again in 2007 and 2008. The average profit (as defined by percentage of revenue) reported for 2006 was 7.1 percent, and forecasts for 2007 and 2008 show stronger profits are expected. The study, which Premium members receive as part of their membership package, is the only industry report of its kind to specifically examine travel agency financial benchmarks, including revenue sources and annual travel agent revenue

"ASTA is an industry leader in developing and analyzing studies that get to the very heart of what it takes to be successful in an increasingly competitive industry. The results of this report will help travel agencies maximize their earnings by showing them the most profitable revenue mix," said Cheryl Hudak, CTC, ASTA president and CEO. "Armed with this kind of data, agency owners and managers will be able to determine whether their agents and independent contractors are generating revenues at a competitive level."

Not surprisingly, the study found that labor and rent are the two largest areas of operating expenditures. Employee salaries and benefits alone represent 49.6 percent of operating expenses, although that percentage varied, anywhere from 41.5 percent to 59.0 percent depending on the responding agency's regional location. As such, rent and labor represent the two best options for agencies looking to improve their financial situation, either by cutting expenses or, as in the case of labor, increasing revenue through increased productivity.

Among other findings:

On average, respondents have 9.8 Full-Time Equivalents (FTEs) in their agency. The median was 4.8 FTE.
73.6 percent of those surveyed reported that they sell primarily leisure-based travel.
With respect to commissions and service fees, base commission revenue was the primary source of revenue for cruises and tours, while when examining non-air travel segments, only car rental revenue comes primarily from service fees.
Revenue from transactions and service fees was the largest source of ARC and non-ARC revenue for airline bookings.
For air bookings, 16.6 percent of ARC revenue was derived from international flights.
The full report is available for purchase for $950 to non-members. ASTA Travel Agent members receive a complimentary 2-page summary of the report; those interested in receiving the full study receive a substantial discount and pay only $350.

The study was conducted in May 2007 and polled ASTA's Research Family, a group of 491 travel agents. The survey has a 95 percent degree of confidence with an error rate of +/- 6.

ASTA's (American Society of Travel Agents) mission is to facilitate the business of selling travel through effective representation, shared knowledge and the enhancement of professionalism. ASTA seeks a retail travel marketplace that is profitable, growing and a rewarding place to work, invest and do business.

American (AA) finally joins epay - but with a twist

American has finally decided that it can make money from those people who dont want to use credit cards or those people that would prefer a more direct relationship. They are now prepared to accept direct debit via electronic check when buying tickets on the airline’s Web site, AA.com.

“We continue to enhance our AA.com site to make it an unequaled resource for travel planning and trip purchases,” said Derek DeCross, American’s Managing Director – Interactive Marketing. “By adding the ability to pay for tickets with electronic checks, we’re offering customers more choice and greater control over the purchase process. Electronic checks are another example of our focus on making it even easier to do business with American Airlines.”

Now some would say that the process of doing business with AA is not exactly the easiest. (Try deciding you don't want to be an Aadvantage member). But give them some marks for trying this approach. Still there are no airlines yet accepting Google Checkout. I cannot for the life of me understand why. Several airlines (EG Northwest and Southwest) are already using Paypal.

Unfettered and secure financial instruments are needed to power the web to greater heights.



Brits can now be told where to go.

Where is the Value for the UK traveler? The UK de-nationalized Post Office would like you tell you.

On April 1st the UK Post Office Travel Division published its report on the value destinations based on currency rates and usage. In the plus column UK and Sterling holders should consider South Africa, the Caribbean, Hong Kong and the USA. However on the downside the slide in the Pound is most noticeable in Europe falling 17% in the past year against the Euro. Even those currencies that are currently pegged to the US dollar such as the Gulf (GCC) states are suffering the impact with inflation and rising costs eating into holiday spending. US food and transportation costs have risen significantly during the past year.

The savvy British Traveller doesn’t always follow logic. The exchange usage – Pound into Euros – has escalated nearly 30% year on year. So the general health of the UK market seems to be holding up. However – we are now starting to see the twin impacts of the global economic turndown and the rapidly rising price of fuel. Still the price of the flights on discount Low Cost Carriers has not kept pace with the rise in Fuel costs.

So where is your best value according to the Post Office? South Africa or Jamaica if you have the time. If not – stay home.

3 Down - Any more?

So this has been an interesting week. First Aloha (citing competition from a predatory competitor (read Mesa's go!) then ATA (citing loss of the Fedex teaming contract) and now Skybus (citing the economy and fuel) have all shut down this week.

So will there be any more?

There are a few carriers who are in trouble. These 3 airlines will not withdraw enough capacity from the system to make a big difference so the basic issues still remain. Airlines need to have a better and more rational approach to their commercial model.

T2 believes that there will be a few attempts at resuscitating these airlines. We hope for the employees sakes that this is successful.



03 April 2008

LHR - T5 - Horrid for BAA and Airlines

Knock on effect from BA’s debacle at LHR. Other carriers are stymied

While BA is grappling with its baggage woes – lets not think that everything is rosy for everyone else at Heathrow.

First BAA. As we have clearly seen the Spanish both paid too much for BAA and at the same time (or even as a consequence) they have very little money to invest. The uncertainty of the situation is exacerbated by the parliamentary investigation of BAA which could lead to a break up of the former government monopoly. This is even more likely to involve in delays in investment to fix LHR’s woes. And they are both legionary and legendary.

For the other airlines – this means delays for both Star and Skyteam airlines to move to their new homes. Which in turn need to be refurbished and brought up to something better than “less than a third world airport” that is now LHR. I recently flew through LHR and T4. It is amazing the building hasn’t been condemned.

The real winners – CDG, AMS, MAD, FRA and MUC.

Is Alitalia finally finished?

The AZ unions are banking on a Silvio win in the coming elections to bail them out. How short sighted are they?

This is the cras behavior of the worst order. Silvio will make nice pronouncements for votes and then be forced by the EU to accept a compromise. The Italian government cannot put more money into AZ - under current laws.

This bodes very badly for Olympic.



ATA Stops Flying - Files for Protection

The list of creditors is nearly 400 pages.

This is quite sad but in context people! ATA was already sick. Now with them out - Southwest has a problem with all the people booked to Hawaii. Expect WN to take a small hit and be a creditor also. At least they got something tangible - the gates at MDW.



I picked a hella of a time to quit....

The immortal lines spoken from Lloyd Bridges in Airplane seem very apropos this week. So I will be doing some blogging during the evening and night times...

I know - I am supposed to be on Vacation



02 April 2008

Travel Agents dropping like flies... again

The latest numbers from the UK's CAA - the official licencing body for UK Travel Agency bonding via its ATOL scheme - show a decline of 252 agencies who were not renewed. This comprises agents who have gone out of business, failed to meet the requirements or were just too late. Essentially this represents a pretty heavy drop of agents who have fallen by the wayside.

It is interesting that the UK market system with bonding has actually preserved the small agent longer than the US system who saw their peak in 1998 and now is just a shadow of its former self.

Sad really. They were warned!ATOL

01 April 2008

Brazilian Market enters turmoil again

After the stellar growth of both TAM and GoL over the last few years – both airlines are now hitting some turbulence. Are we likely to see some major cutbacks or will they be able to ride out the storm before David Neeleman enters the scene?

Both TAM and GoL reported poor results this time out. GoL is now saddled with the rump of Varig which is probably now on business plan number 93. If the once national carrier sounds like the Hokey Pokey you would be forgiven for thinking so. Both airlines though need to rationalize their operations.

However the regulator ANAC needs to accept some responsibility here for playing fast and loose with the politics. They have to either get out or regulate. The quasi interference has not benefitted the public. Brazil is the largest market in South America and it still has a lot of possibility for expansion. Neeleman thinks so. If for no other reason than he has a ready market in the Mormon community!

For now though the regulators need to be looking at supporting the market with stimulus packages. This should include addressing some of the airport infrastructure issues particularly access to and from the airports in Rio and Sao Paolo. Of course it goes without saying that the Government needs to invest significantly in the ATC system.

So chaps – better get a move on – your days of fast growth without cost are now over. You don’t have much time before you get new competition – from a professional.



IATA has more bad news – the recession bites deeper and broader

IATA has more bad news – the recession bites deeper and broader into global air transport.

IATA’s latest worldwide traffic numbers are not providing any comfort to beleaguered airline managers.

The latest numbers we are seeing from several key industry indicators are increasingly depressing. The factors affecting traffic are beginning to bite.

Witness the following:

US Airport traffic continues to slow. The extra day of February this leap year masks a flat traffic month.
Load factors are falling across the board.
Yields are significantly off
Deals – especially across the Atlantic abound even for the summer.
Premium traffic that has held up well is now declining.

The airlines are not going to be able to retire large fleets of inefficient jets because the ones that need to go are the ones that they need!

This is going to be a bumpy ride. Sorry but I am now a bear….



31 March 2008

Exclusive: O’Leary Quits Ryanair – to start new Long Haul LCC

Exlusive to T2. O'Leary resigns as CEO of Ryanair.

After 3 years of saying “Maybe” Michael O’Leary has finally taken the plunge and will leave the Irish airline he has nurtured to great success. Today is his last day.

O’Leary is reported to have come to terms with the FR Board and using his position as a director of Ryanair Direct has in fact made himself redundant along with the other 40 employees in Dublin.

Clearly he has his eye on something bigger. Beaten to the punch by David Neeleman of jetBlue in starting a new airline in Brazil, O’Leary will be starting a new airline to be based in Dublin and will start service exactly one year from today 1st April 2009.

T2 can exclusively reveal that the new airline will be built on the pure low cost model. It will feature long and short haul flights but mostly long haul. Its first destination is the Island paradise of San Seriffe in the Indian Ocean where the flights will land at the Capital Bodoni. It’s a bit of a stretch to make a 737-900ER get there but the canny O’Leary was able to snag several in a fire sale at Boeing’s Renton plant now that the original purchaser – Adam Air – has gone out of business. He will initially purchase 4 of the green tails. He is planning to fly next to Hawaii and take over routes previously flown by now defunct Aloha Airlines.

The airline has already been named and the website address Myegoair.com has already been allocated. Commented O’Leary “I am F***ing tired of listening to other S***heads telling me what to do.” Now he feels he can really tell them where to get off. Advanced reservations are already being taken at a brisk pace.

For further details please contact Mr O’Leary directly at tightwad@myegoair.com

G2 Falls to Amadeus

G2Switchworks who has been trying to raise money for the last few months has been unsuccessful and now succumbed to the wiles of the French/Spanish by agreeing to be bought out by Amadeus

The deal has been in the works for months off and on. The US credit crunch exacerbated by the slow development of the core platform has left the company with few options. The existing shareholders were unwilling (and in some cases unable) to pony up any more cash. Looks like today G2 ran out of cash.

This leaves Farelogix in an interesting position.

It also leaves the airlines in somewhat of a quandary. They (the airlines) now have few options to alternative distribution in the neutral world. Plus they all signed rather stringent contracts which will enable the GDSs to squeeze some more blood out of the stone.

Thanks to the legions of people who ping'd me on this one.

Looks like there are some folks in Chicago looking for a new gig. The biz folks are the most affected, the techies get to stay and become part of the monster.



30 March 2008

Sadly Aloha Airlines succumbs

Aloha Airlines one of the last true independent airlines that can trace its lineage back 60 years will cease flying on Monday evening.

While they placed the blame on Mesa's go! airlines subsidiary - it was a combination of factors that forced AQ into the twilight zone.

Let's hope someone picks up the pieces.

Flogging now illegal in Europe

Commercial Blogging become illegal on Monday night in Europe. Those pesky people who wax lyrically and effuse wondrous statements about hotel sites and restaurants will now face the ire of the European Commission.

Not quite sure how it will get enforced but... oh well you have now been warned.

So ANYONE doing this is committing an illegal act.

This practice has some wonderful names:


So you have been warned hoteliers.

Does this mean that we will be clear of content that is not commercial in blogs. Far from it. But anyway... lets hope Tripadvisor and its ilk clean up their act(s) accordingly.



The Professor takes a little time off

Hello dear people.

I shall be away from Blogging next week officially. So depending on my sleep patterns and news stories - expect a lite flurry or nothing at all.



Gotta Love Bush....

I would like to thank the president for disrupting my journey this week. He made a quick trip to Pittsburgh which resulted in complete chaos for that city's commuters and a 45 minute shut down of the airport.

This is the first time I have seen or even heard of this process. Apparently regular mortals are not allowed anywhere near Air Force One.

This was the sequence of events:

He lands in the late afternoon for a quick presentation to an individual who had done sterling work in Africa. Landing closed the airport for a short time while AF1 taxied to a remote part of the massive airport complex. Bush's motorcade then closed down traffic as it went to its 2 stops. Then back out to the airport closing all roads on the West Side of Pittsburgh. A journey that should take about 45 mins in traffic lasted 2. So scraping into the airport we all dutifully board our flights (there were about 10 planes in total waiting) we have to wait until Bush gets back there and then takes off back to DC.

Not that this would be confined to Bush alone, I am sure other president's have done the same thing.

President Bush met with Lydia Humenycky when he hopped off Air Force One at Pittsburgh International Airport on a stopover for a Republican fundraiser. (This was the intro paragraph for the news story on AP). And so she should be honored. But isn't this thing done usually at the White House? Then it was off to a quick fundraiser. Er - so the REAL reason for the trip was a fundraiser. Is this the best use of Government resources? If that total expenditure of funds (just out of pocket) had been donated to the fundraiser it would have saved us all money....

So like I said - Gotta love Bush and the system that allows such profligate expenditure and waste. So thanks GWB. Next time do send me some advance notice on the disruption so we can AVOID YOU!


T5 Showplace or Shambles

"not our finest hour" was Willy Walsh's comment on day 2. However we are now well into Day 3 and things are still not good. A further 54 flights are already cancelled on Monday and disruption will continue into Tuesday at least.

The problem? baggage system and processes.

It seems BA has not learned from the debacle at DIA when that opened over 10 years ago. However there is a subtle difference. At DIA the amount of cross flow bags connecting is actually significantly lower than at LHR. 1 Cabin bag and longer trips means more luggage. BA has also not learned from its own baggage woes of the past 3 years. The unions have bleated long and hard about BA's baggage practices including the outsourcing of a significant part or the baggage process at LHR prior to the move.

This shambles has lasting consequences for BA, BAA and the Transatlantic traffic flows in general. BA has been losing feed at LHR, other airlines are making better connection hubs at AMS, CGD, FRA, MUC, MAD etc. BA's financials will take a big hit from this debacle. Not least of which is the 10,000 Euro fine PER PASSENGER that will be levied for incorrect information passed to customers on Day 1. Couple that with a minimum of 200 Euros per passenger disrupted and the numbers are going to be staggering in compensation. The current rate of chaos means that BA has already lost effectively one day of out its schedule. (Thus this will again be a 365 day year not a leap year for the airline).


But wait. It gets better. BA has been able to borrow T4 this week when they moved into T5. No more. Delta, Continental and Northwest all move over there today with their start of operations. Given that T4's baggage system broke down 3 weeks ago, this is not going to be pretty.

Someone needs to be severely spanked for this bad behavior. It was preventable.