08 August 2008

Labour troubles at Lufthansa spreading

Lufthansa has been on a roll lately - they are definitely one of the survivors as identified by Michael O'Leary but they seem to have courted a number of problems that are now comping back to bite them.

They are in a dominant market position in the German and German speaking market. With no real indigenous challengers (they own part of EuroWings/GermanWings the largest local German LCC) they are able to dominate their market. The labour unions obviously would like a part of that by getting better working conditions and/or higher wages.

2 Weeks ago it was the ground staff. This week it is the German pilot's union "Cockpit" . The first demand is for parity from the LH Regional subsidiary Cityline and the mainline pilots. Why would someone flying a RJ get parity? Well actually its a little more complicated. As LH replaces its AVROs with newer Embraer E-Jets it will use these aircraft too to replace the older Boeing 737-500s and -300s. Currently Cockpit has a restriction in its contract for letting the Cityline pilots only fly less than 70 seaters. As the E-Jets go to over 100 - then this is a problem. Hence the strike.

But the current strike is but a skirmish for the main event where the mainline pilots want bigger raises and better benefits. So far LH has seen a little disruption from this current spate of strikes. But if this continues then we can see further strife affecting the airline's bottom line. Thus puts LH and its fellow network carriers in a difficult position. If LH caves in and pays the new wages then you can be sure that AF/KL and BA or rather their unions will join suit.

At just the time when restraint is needed we may have strong upward pressures on airline labour costs. One lesson they have learned is that when oil prices rose so spectaculalry how easy it was for the airlines to absorb such rises. So clearly that makes them easily capable of absorbing more wages costs.

05 August 2008

Cool Website for Hotelies

One of my favorite hotel websites was for the longest time SeatGuru.com. Sadly now swallowed up by the Expedia monster.

However I found another site that does for Hotels what Seat Guru did for seats (not snakes) on a plane. Its early days but I think this will be immensely useful.


Check it out.



So are you a good traveller? How many states have you visited?

According to the AOL Zogby survey not that many... read on:

More than one-third of Americans have traveled to fewer than ten states in their entire lifetimes.
But most (almost two thirds) have visited Florida, while more than half have also gone to California and New York, according to Greyhound.
More than half of Americans say they have less money for vacations in 2008 then they did last year.
More than two-thirds say, however, that gas prices will not affect their plans (source: AOL/Zogby Travel Survey).
Social media continues to grow in importance. In a recent study 48% of travelers read user reviews for hotels and lodging before booking their stay, according to AOL/Zogby.

If you are a real traveller then you need to have visited 100 countries or more. For this go to the elite of elites list:




Bishins's Genesis Still Born

It is not often that I am pleased to see enterprises go out of business. However in this case I will make an exception. The Genesis project - brain child of one Bruce Bishins was probably one of the most ill conceived projects ever devised in the Travel Business. And we have seen some REAL doozies over the years.

It is sad that those - especially small agency - enterprises who invested in the premise have seen their hard earned cash evaporate.

Genesis and its sister organizations were based on an idea that was always an obsolescent concept and out of pace with the technology of the time and the service model expected by the consumer. It has now gone to that graveyard of not so great ideas and in my opinion rightly so.

It never achieved traction in the manner its promoters claimed.

Fragmentation in the travel distribution systems is a way of life. But this particular niche just had no viability.



BA-AA Perhaps Way?

Timot for Virgin Atlantic to dust off its BA/AA No Way stickers.

WSJ and others are reporting that the proposed Alliance between AA and BA to create the world's largest airline (when included with Iberia) is further along and that an announcement can be expected in a matter of weeks.

The BA-AA Alliance in what ever form it takes would be a formidible competitor. It would dominate the UK-US traffic. Reducing the competition to effectively a big 2 (BA/AA/IB and the DL/KL/AF/NW) would force a re-shuffling of the deck chairs amongst the other players. LH would look to make a big effort to acquire an additional US presence and must be looking hard at CO. UAL and US are both probably too sick to warrant much interest.

Interestingly all of the players (CO excepted) have a culture of market dominant behavior. Frankly this merger mania will not result in an improved market position for any of them and would likely result in more shareholder writedowns and still not improvement in the service offering by the respective carriers.

On the positive side - the folks at Virgin America must be throwing wild parties and thanking their lucky stars that this is happening. it will open up opportunities for them in the Domestic US market. Similarly Alaska and AirTran should be happy. It even makes the Frontier business look actually quite attractive.

Of course Mr Oberstar and his friends will probably have something to say about this. I would challenge all of this assumption that merger is the answer to the root cause of the industry's ills.



The Cutbacks - USA Today's MAP

Dearly beloved,

The nice people at OAG and USA Today have put together a map that shows the impact of the currently scheduled flight cancellations YoY 2008/2007. It makes sobering viewing. However to some extent it is actually masking the impact of the cutbacks in that it only demonstrates FLIGHTS not passenger capacity. So with the downshift to smaller aircraft and the parking of some larger ones we should see a few more points of reduction. Further the full schedule cutbacks have not yet been published. It is estimated that LAX for example will see greater than 20% cutbacks.

Have the airlines cut back too far and is this necessarily saving them money and raising the yield potential. I am unconvinced.



03 August 2008

If Alitalia's financing sounds creative - lets look back

Perhaps one of the most dramatic bankruptcies in history was the Swissair - then known as the SAIR group which brought down two of Europe's most storied carriers - Swissair and Sabena (my sentimental favorite).

As we look at the very funky way that the Italian government plans to 'rescue" Alitalia lets look back at what happened.

For a good history narrative go here:


But just for fun fill in the blanks:

(BLANK BANK) chairman (XXX) said: "This drastic restructuring was the only alternative to secure the future of the (BLANK COUNTRY) aviation business. It is important for the (BLANK COUNTRY) public and for our economy and financial centre that a national flag carrier should provide services out of (BLANK COUNTRY)."

Lets see what happens in Italy and Greece. I suspect that we may see other countries and definitely different airlines using the same logic.