19 December 2008

Twas the Podcast before Christmas...

And all through the house,
Not a blogger was stirring,
Not even a well respected analyst (or 4)
The Airlines were hung by their thumbs with care,
In hopes that the Professors wouldn't skewer them there...

Well if you want to listen to this somewhat irreverent look at the year past and the year to come - go here and listen to four normally respected and respectable people make their annual prognostications. They are Mrs O'Leary (no relation to anyone from the Emerald Isle), Professor Pan Am (a Left Coaster if ever there was one), Professor Rhodesia (he with a doctorate to his name) and your truly Professor Sabena (who of course should have known better than to hang out with this lot).

And for the nominees:

Airline of the Year: Ryanair, United and Alitalia
Airport of the Year: Geary Indiana, Rockford Illinois, Stansted
Airline personality of the year: Sir Richard Branson, Willie Walsh, Glen Tilton and of course Michael O'Leary
Special Awards for Airline Concept of the Year and more.


Enjoy it - consider it an early Christmas Present.


4 Billion Mobiles in the world!

I am staggered by the number of people who have adopted Mobiles worldwide. There are now more mobiles than fixed landlines by a factor of over 2.5:1 (19% vs 50%) penetration per 100 Inhabitants.

Harnessing all that power...

And to think we used to feel sorry for the mobile operators paying too much for 3G.


18 December 2008

BTC vs LH PFP. Interesting Dialogue

There was something very comforting about the days of the Bell System monopoly. You could always pick up the phone and you always got dial tone. Things had to be pretty bad before the comforting noise in your ear. Today we ask questions like "Where are you?" and we know that we have a 50:50 chance of no dial tone.

I use this analogy to illustrate how complicated things have become in distribution. Today, you cannot rely on the GDS any more to provide you with 100% of distribution needs. As I love to say (and this is no disrespect to mothers-to-be) we are all a little bit pregnant here! Connectivity to multiple sources of information (content if you prefer) in the form of Direct (LCCs and Legacy airlines) Travel types (Hotels vs Airlines) and products etc are a must for any intermediary.

While I applaud BTC's efforts to get the airlines to play ball in making the GDS channels work to ease distribution woes - I think its a losing battle.

LH has responded to the BTC appeal over its push to get Amadeus (in which it owns a 11.5% interest) to play ball. BTC feels justifiably - that the corporate travel managers are a pawn in the game. They are.

However in the longer run - Amadeus is the one who has to change and adapt. With approx 80% of the indirect distribution share across Europe - they need to deal with the issue and come to the table and make a deal. If not they must accept the consequences. So far there is no movement on their part. In the mean time users are scrambling to adapt. And adapt they will.

For the LH letter response and the dialogue - go to this link. Its worth a complete read.



Traffic, Yields all Crash according to AAA

I think this is a PR release that needs no embellishment - just read it and feel the pain.

Over the last few weeks I have spoken to colleagues and friends from around the world to get a sense of the downturn and its direct impact. Everyone is feeling it. From Russia (Thanks Pavel) to Rotorua. From Thailand (thanks Eric) to Tyneside. From Seattle to Singapore (Thanks Ms Cloud). The impact is devastating to many and hard for all.

In the new year - I hope that we can speak of ways to boost traffic.

In the mean time - the release below makes for some very sobering reading


AAA Sees Decline in Holiday Travel This Season

AAA projects a slight decline in the number of Americans traveling during the Christmas holiday period. Nearly 63.9 million Americans will travel 50 miles or more from home during the Christmas holiday travel period, a decrease of 1.4 million travelers (2.1 percent) from last year's total of 65.3 million. This is the first decline in Christmas holiday travelers since 2002. AAA projected year-to-year decreases in the number of travelers for all five of the major travel holidays this year (Memorial Day, Fourth of July, Labor Day, Thanksgiving and Christmas).

"Without question, the economic downturn of 2008 eroded the discretionary income many Americans would have spent on travel and, for some, altered their travel plans throughout the year," said AAA President and CEO Robert L. Darbelnet. "However, those traveling this holiday season can take advantage of declining hotel rates and fuel prices more than a dollar per gallon less than a year ago."

More than 52.4 million Americans (82 percent of all holiday travelers) intend to travel by automobile, a 1.2 percent decrease from the 53 million people who drove last year. Motorists across the country, on average, can expect to see gasoline prices about $1.30 per gallon less than last year and 50 cents less than a month ago.

Approximately 8.1 million (13 percent of holiday travelers) expect to travel by airplane, an 8.5 percent decline from the 8.9 million travelers who flew last year. More than 3.33 million Americans plan to travel by train, bus or other mode of transportation. That is an increase of 0.7 percent from a year ago.

According to AAA's Leisure Travel Index (LTI), which is based on available rates this holiday, Americans can expect lower hotel rates and higher car rental rates throughout the holiday season. However, travelers should expect different trends in airfares depending upon the week of travel.

For Americans traveling during the week of Christmas, rates for AAA Three Diamond hotels are down an average of three percent compared to last year. On average, travelers renting a vehicle during the week of Christmas will pay two percent more than a year ago for the same period. Air passengers, however, can expect some relief in airfares this Christmas with prices nine percent less than last year.

Those planning to travel the week of New Year's will welcome a significant decline in hotel costs with rates for AAA Three Diamond hotels 16 percent less than a year ago. Car rentals rates are eight percent higher than last year for the same period. Americans traveling by air will pay an average of three percent more for airfares than a year ago.

Car rental rates vary from location to location, so some cities in AAA's LTI show significant increases when compared to last year, while others show significant decreases. AAA's index for car rentals is based on the average lowest intermediate size car daily rate in 20 U.S. airport locations. The rates do not include sales tax, insurance and other miscellaneous charges.

Research for Christmas holiday travel projections are derived from the Travel Industry Association's (TIA) Holiday Travel Forecast Model. The model was developed based on consumer travel intentions and TIA's quarterly travel forecast data. The travel intentions data are collected through an online survey of nearly 2,300 adults nationwide, supplemented by an additional 5,000 Americans surveyed from the top 10 states of origin in the United States. Historical travel volume and other economic data such as GDP, disposable income, employment and travel costs (including fuel prices) are also incorporated into the model. The Travel Industry Association, which conducts special research for AAA, analyzes the data and the forecasts.

As North America's largest motoring and leisure travel organization, AAA provides more than 51 million members with travel, insurance, financial and automotive-related services. Since its founding in 1902, the not-for-profit, fully tax-paying AAA has been a leader and advocate for the safety and security of all travelers. AAA clubs can be visited on the Internet at www.AAA.com.

Sigh of Relief at Jet Airways

So despite all its troubles - Jet Airways are now looking at their bulging order book. Oh dear - in Dollars - it could be very expensive.

Well now it seems it has found a home for some of its very expensive planes which are no longer going to be flying on routes that Jet Airways has canceled or curtailed.

As a result three 777s are going to Turkish Airways who seems to have received a boost of adrenaline lately. They will use the equipment to expand long haul services. From North American to Singapore.


More European Musical Chairs or Not

AF/KLM Group has agreed to acquire the remaining shares in Martinair that it doesn’t hold. They are assuming that the tough times will allow it to proceed to consolidate its ownership. I am not so sure that the competition authorities will be quite so happy. But they have EC approval so I guess its ok. Really I do think the EU commission does tend to work on a double standard with some of these decisions. Hmmm

The Latvian Government has reversed itself and decided not to proceed with acquiring the balance of Air Baltic its JV with struggling SAS. The latter is back in talks with LH. (Are you keeping up???)

LH is making a play for AZ offering to retain both hubs at MXP and FCO – presumably offering to ax its planned LH Italia sub who will operate out of the northern Italian hub.

Etc etc


Consolidation Curtails Gold Medal’s Independence in UK

UK’s Iconic Gold Medal Travel, after 30 years and the largest UK consolidator has agreed to be acquired by Thomas Cook for GBP87 Million.

This should allow the business unit when combined with TC’s consolidator operations to grow through the own distribution network. Couple this with the decision to cut back on its traditional Short haul package tour business and you have a transformation of the former Temperance Tour Operator.


Fedex slashes

FedEx said it was cutting nonunion workers' salaries by 5% and plans deeper cuts for CEO Frederick W. Smith and senior executives, citing "some of the worst economic conditions" in the company's history. It is also eliminating bonuses and suspending company matching for its 401(k) plan.


BA’s Bad Dating Habits

It seems that the dating habits of the world’s once favorite airline are not going that well. After just 3 weeks the Kangaroo jumping seems to have come to an end. The Spanish are not happy as the original deal is now not as attractive to them. Go failed, they have missed out of Brussels Airlines, Austrian Airlines amongst others, American Airlines is going no where fast… so in what could be described as desperation now they are going after CAI and AZ. British Airways: “What we are offering, under current conditions, is a credible collaboration that will leave the Italian company the possibility of deciding its own future in a flexible manner," Willies Walsh, CEO. (Thanks to Professor John for this one).

At this rate their next opportunity will be Olympic but if they do that they will be up against Etihad and James Hogan.


India liberalizes Airline Ownership Rules

Perhaps too late for BA’s proposed stake in Go (not to be confused with the Mesa Hawaiian Subsidiary of similar name), India has liberalized its foreign investment amounts up to 49% and up to 100% for Non resident Indians provided they are not airlines.

This could open up the Indian market for foreign investment at a time when the market desperately needs cash injections. However the Red Tape could mean a very long time before anyone does anything.


EU Court Slaps EC over Charleroi

Europe’s #2 court slapped the commission over its ruling that the agreement between Ryanair and the Belgian Airport constituted State Aid. I don’t think this one is over yet. It will probably go one stage higher. I am actually a believer that the local authority and airport should be able to operate commercially and this was an economic decision. So lets see if this one gets all the way or is left to stand.

At the moment it opens the door for many secondary airports to encourage airlines to come in with incentives. Hmmm secret admirers of Ryanair this Judge types


BAA must sell 3 airports Southampton however is not amongst them

BAA took another blow with the UK’s competition authority forcing them to add Stansted to their divestiture plans. This marks another blow for the Spanish owners Ferrovial. "Having provisionally identified competition problems at each of BAA's seven airports, we are proposing remedies which address them directly and comprehensively through a combination of divestment and other measures to improve investment and levels of service,” Christopher Clarke, Chairman Competition Commission’s BAA Airports Inquiry, 17-Dec-08.

One unhappy camper with this is Flybe who wanted to see the divestiture of Southampton so they could potentially acquire the facility and build it up servicing markets south of London.

This is going to be an interesting story worth watching.


16 December 2008

Asia Action - CX and MH - Different Challenges

The markets in Asia are not immune from the global recession.

Two carriers are facing different variations on the challenges.

For Cathay Pacific, there is a general downturn just after they bet the farm on growth from China. At the same time fortress Hong Kong is experiencing a fundamental change which few thought possible. Taiwan - the rebel province is now becoming more important and with the establishment of direct Taiwan-China air services CX is seeing traffic evaporate.

From 18 to 138 flights a week is a huge jump in traffic. And CX is seeing none of it. If it goes to 200 or even higher - same thing. Much of that traffic is new but a significant amount of it is siphoned off from CX.

For MAS - their seminal moment came over two years ago. The new management team has stabilized and now made the perennial sick airline well. And they have come to a modus operandi with Air Asia. Now it is becoming a player in the consolidation. Today talks are under way with Qantas for a joint relationship which could range from code-share all the way through to a JV and even cross equity stakes. (Are you listening BA?)

Different Challenges - Different Worlds - Different Answers


Payment Processing - A New Frontier

For many travel suppliers and sellers - one of the last major hurdles in cost is the payment processing.

Costs related to payment processing come from a variety of sources but it is important to understand the big 3 - which are interrelated:

Processing Costs from provider
Internal and Manual costs

Each of these have to be managed very carefully. If you miss any one it will kill you. Of course regulatory compliance is another big issue.

I urge you to go to this website and download the presentations from the recent Travel Payment Summit that was held in FRA earlier this month.

Many of the presentations are available online. It's important that you get acquainted with the subject matter. This is a rapidly evolving subject matter area.



Amadeus and Etihad form JV in the MENA area

There is a great game of one-upmanship in the Middle East.

So why should GDS be any different. After the blockbuster announcement earlier this year of Emirates subsidiary Mercator and its company Emquest forming a JV to market Sabre in GCC, MENA and certain other markets in Africa - Etihad has formed a JV with Amadeus that will be 51% owned by the Abu Dhabi based airline.

There is even more. The big loser in all of this has been Travelport who on Jan 1st 2009 loses the AACO Arab Air Carriers Organization GDS based contract to Amadeus.

Travelport was somewhat unaware of the play that Amadeus pulled with the AACO airlines. Sabre realized that their relationship with Gulf Air - formerly their sales agent in the GCC - known as Falcon was also not going anywhere.

The GCC is one of the very few markets where the still GDS makes sense and is a growing market. In the mature markets the GDS model is slowly but surely falling back as we see in North America and Europe.

Still a lot to play for. The competition will be fun in that market - that is for sure.

Chris Elliott names The Professor one of Top 100 Blogs

OK - just a little puffed chest - Chris named this blog as one of the top 100 Blogs:


So you are in good company!

Cheers and thanks Chris

Mesa's Grab for Aloha Name Thwarted

This has to be one of the most perverse stories I have seen in a long time. So bear with me - this one takes a little getting into. if it wasn't for a Federal Bankruptcy Judge - Mesa's grab for Aloha's storied brand might have gone through unnoticed.

So first here is a bit of the PR Spin from Mesa Air Group's Hawaiian based subsidiary Go! Airways announcing their November 2008 figures and their recent settlement of the outstanding lawsuit caused by the demise of Aloha Airlines at the hands of Mesa. I am trying to use my words carefully here.

...."The word 'Aloha' uniquely represents Hawaii throughout the world and by promoting it internationally we will add valuable support for inbound tourism, the economic lifeblood of Hawaii," said Paul Skellon, VP. "Aloha is a name dear to all of us and we at go! would love to see it as a symbol of great service, the lowest fares and affordable inter-island travel for everyone."

So lets follow the story. It has been widely reported and covered in the media that the collapse of Aloha Airlines was driven by a failed set of business models by Yucaipa (the investment group linked to former president Bill Clinton) and the predatory pricing by Mesa which destroyed yields in the Hawaiian market at a time when they could ill afford it. This blame is Congressional public testimony from the then 3 other airlines in Hawaii - Island Air (formerly part of Aloha), Hawaiian (now the big fish) and Aloha's failed CEO.

At the auction of the assets of Aloha Air Group - Saltchuk (who also owns Northern Air Cargo) picked up the still running Aloha Air Cargo business and its ground ground handling business went to Pacific Air Group. The name and brand rested with Yucaipa, who claimed losses of over $150 million and sued Mesa as its former fellow inter Island carrier had.

In Q2 of 2008 Hawaiian Airlines - who like Aloha - had been courting Mesa Air as a potential investor only to find that Mesa had allegedly used the information to form the business plan that became Go! - settled out of court and reached a $52.5 million before-tax settlement with Mesa, which Hawaiian received to settle its lawsuit over anti-competitive practices in the interisland market. So the debtors of Aloha mostly Yucaipa clearly thought they had at least that claim's worth of money coming to them.

Astonishingly Yucaipa settled with Mesa for just $2 million plus a sum of of free tickets to be provided to former employees of Aloha the injured party in all of this. There is a promise of some future share of profits but that is a slim possibility judging by the performance of Mesa's other businesses in recent years.

After fully 6 months of the new world order in the Hawaiian Islands - Mesa Air announced with significant relish that their traffic Y/Y was up (drum roll please) just over 1% for November 2008 over the same period a year earlier.

Here are their figures:

November Results Nov-08 Nov-07 Change
------ ------ ------
RPM (000) 8,138 7,927 2.67%
ASM (000) 12,744 11,254 13.24%
Passengers Carried 55,591 54,895 1.27%
Load Factor 63.86% 70.43% (6.6) pt

Year-to-date Results YTD 08 YTD 07 Change
- ----- ------ ------
RPM (000) 107,413 91,758 17.06%
ASM (000) 158,664 136,371 16.35%
Passengers Carried 737,674 640,114 15.24%
Load Factor 67.70% 67.29% 0.4 pt

So despite dumping over 13% more capacity in the market and achieving a paltry 2.7% increase in RPMs they still couldn't make a big dent in the market. Clearly anyone who could was avoiding Go! like the plague. Year to date the numbers look better but not by mutch.

Mesa's press release goes on to say ..."and our recent settlement of our lawsuit with Aloha has given us another reason to be optimistic. The settlement resolves all claims made by Aloha Airlines and permits us to focus on our longstanding objectives of providing the best service and the lowest fares to the people of Hawaii."

Not so fast Mr Ornstein (Chairman of Mesa Group) that is not true. And I quote from the local Honolulu news paper the Star Bulletin December 5th, 2008:

"A federal Bankruptcy Court judge blasted the insensitivity of the parties involved in a licensing agreement and temporarily blocked a deal that would have allowed bankrupt Aloha Airlines' bitter rival to re-brand its go! planes with the Aloha name.

Judge Lloyd King postponed yesterday a hearing on a licensing pact between Mesa Air Group and Yucaipa Cos. until Feb. 19 to give supporters and opponents of the deal more time to respond.

"How about all the people whose lives were devastated in this case?" asked King, noting that Mesa and go! are largely blamed for Aloha's demise. "Doesn't that count? Is it just the money?"

Yucaipa, the former controlling shareholder of Aloha, had won the rights to Aloha's intellectual property at an auction Tuesday with a $750,000 bid. Aloha received court approval in June to sell its lawsuit against Mesa to Yucaipa, which settled the suit on Friday with Mesa.

Local aviation historian Peter Forman said if Mesa acquires the Aloha name, it would create "a monster - an airline with the face of a friendly kamaaina company but with the heart of a mainland predator. This would be heartbreaking for the former Aloha Employees." End Quote.

So if Mesa thinks that it has the market open to itself it clearly wasn't paying attention to the former commuter carrier that was operating in Go colors as Go Express - Mokulele Airlines. They didn't waste any time in seeing that the opportunity was there for a lower cost competitor in the market and partnered with Republic Air's Shuttle American subsidiary and is now operating flights on Embraer 170s with 70 seats vs Mesa's older Canadair CRJs which seat a maximum 50 seats. So Mokulele Airlines dumped Mesa and started its own business. Having operated since 1998 it knew a little about the market. At the same time it has partnered with several carriers including Alaska Airlines to provide InterIsland feeds.


Moral of the story - always watch your back and never trust the nice smiling guy. And MOST of all DONT believe all the PR Bullshit you could read.


Postscript and Disclosure. The Professor was involved in an attempt to revive the Aloha company.

15 December 2008

12/12 New Dawn or Last Post for Alitalia?

Could this be the start of something great for Italy? Or is this just another part of the long drawn out death throes of Italian Aviation?

Either way - it will be an interesting ride for the chaps at CAI who now own the Alitalia brand and its assets without any debt. Is that enough though? The routes are essentially the same - the employees are the same - the service is the same... So we shall have to see.

Bringing in the AirOne franchise is beneficial but we cannot rely on that being the only differentiating factor. The new AZ will have to contend with a steady encroachment on its turf with a big growth from Ryanair who has been having a lot of fun in Italy and of course the growth of a new Italian version of Lufthansa - AKA LH-Italia.

I cannot help but think that the opportunity is dimmed for AZ and its future is not that bright. But we have seen things turn around. Witness Aer Lingus.

Best of luck or arrivederci?

Top Travel Security Breaches in 2008

not a good thing to be known for but acording to Baseline Magazine the top 2 security breaches belong to

Alaska Airlines (#5)
Best Western (#6)



14 December 2008

India and China - 2 New Basket Cases?

Both India and China are suffering from the affects of the global recession. India remains down after suffering from the high price of oil during the summer. China on the other hand is suffering from some mis-steps that have been both self inflected and some external problems.

For China now the consolidation appears to be under way with a contraction from the current big 6 down to perhaps 4 or even 3 major carriers. The first to succumb from the urge to merge is the oft engaged China Eastern and Shanghai airlines. Interestingly the architects of the failed SQ marriage appear to have been given the boot with the New Chairman of China Eastern being the former Chairman of China Southern and the new President being from CNAC.

For India the consolidation process is now being felt in the domestic market. Indian Ministry of Civil Aviation reported November's domestic traffic highlights as follows: Total - Passenger numbers: 3.0 million, -21.7% year-on-year fall 2008 from 2009. With Kingfisher and Jet now coordinating activities they form the most powerful block in Indian Aviation's domestic market with over 50% of the market. Here are the rest of the results for November 2008:

Jet Airways (including Jetlite): 802,000, Down (for mainline -33.1%);
Kingfisher + Deccan: 746,000, Down (for Kingfisher -33.1%);
Air India: 539,000, Down -10.0%; (including Indian Airlines)
IndiGo: 441,000, +16.7%; a surprising growth spurt puts them into 4th place ahead of
SpiceJet: 325,000, -19.6%;
Paramount: 71,000, +121.9%;
Go Air: 70,000, -59.1%;
MDLR: 7,000, n/a;

So traffic is definitely going down there.

This will reshape the market and poses a challenge for the OTAs in the market. However alliances are not that stable. So can we rely on Jet and Kingfisher (with their chairman and their reported strong egos) staying friends? That remains to be seen.