03 October 2009

Amadeus to German Agents: Free Money!

At the FVW Kongress in Cologne last month, Amadeus offered a hint in a speech that they would be reconsidering the issue of the 4.90 Euros fee that Lufthansa has been leveraging for segments booked on Amadeus for the PFP program.

A quick recap. Last year LH introduced the Private Fares Program which essentially raised all fares 15 Euros each way if the fares were booked without a contract. With a special contract between LH and the agency - the agents could get the lower negotiated rate provided it was booked via a channel that LH designated. Travelport and Sabre signed up for the program and therefore there is no charge for agents from LH for PNRs booked via these GDSs on the PFP fares. The largest GDS in Germany is Amadeus. For the first 6 months or so they picked up the 4.90 fee until they realized how much it would cost them to do so. This "pick up the tab" program ended at the start of February this year. Thus agents who book a PFP fare now pay 4.90 per segment for every ticket issued via Amadeus. Interestingly it is collected via an agent debit memo!

Fast forward to yesterday Amadeus has announced that it will again pick up the tab for the fee - well now its only SOME of the fee. They are offering to pay 3.40 Euros for the LH PFP segments. Leaving just 1.50 to still be funded by the agent.

Battle lines drawn again - clearly there must have been an impact in the German market for Amadeus by defections to the airline direct, to other GDSs and to third party technology solutions such as offered by AER Ticket (the largest consolidator) via the LUTE platform.

One has to ask why? and why now?

The offer by Amadeus states that it will be effective from January 1 2010 for the whole year or until Amadeus and its part owner Lufthansa come to some agreement. This could be very expensive for Amadeus even at the lower fee. So free money for the agents.

Interestingly one has to ask if Lufthansa has become successful at this why don't other airlines propose to do the same? Indeed is this a model for airlines outside of the German market? AF/KL have already tried this with Travelport earlier in 2009 which brought a new level of agreement between the two. So it seems that airlines have found a tool with which to leverage a different contract arrangement between the players.

With the GDSs unbundling their services and appearing (if one can judge from the Travelport financials) to be able to increase their yields from the airlines, it seems only natural that the airlines need to push back. This might be the answer. I leave you all to work out the mathematics on this one.

In our discussions with agencies on the current status of the market for GDS products, my team and I have noticed a trend that (according to multiple agents) in different markets the GDSs are not in fact cutting back the incentives but offering even more in some cases greater incentives than before.

There will be tears....someone is bound not to be happy.


02 October 2009

Nokia Buys Dopplr - Finally Mobile Gets Travel?

The leading mobile players are the handset guys and the networks.

Up till now they have disdained the travel market plumbing for the sexier applications such as music. However I have always believed that the real deployment of smart handsets would occur when the applications moved into being more generic.

Although there was a link between Dopplr and Nokia before (shall we just say it was family), the move is a smart one for Nokia. They are now staking a claim in the concept that the handset really is a PID - Personal Information Device. This makes the device a serious contender for the user's favorite service. Up till now Blackberry has been leading in this space with the delivery of most applications via the BB service.

The stunning success of Apple and the iphone has changed the paradigm. The vast number of user based applications is great but after a while you are bewildered with the array of choice and the support of these applications makes big demands on the user. Great and fun for now in a social context - but perhaps not so interesting in the "useful" category. I realize that I will be slammed by the faithful for this statement - but bear with me a little. I have watched a lot of iPhone users (from the original to the latest 2 versions) and you can see how the lack of some functionality hurts and the frustration of having too many different apps becomes counter productive. In essence the line "there is an application for that" is now replaced with "how the heck do I manage all that".

The silence of the network providers is stunning in all of this. The profitability of the mobile environment even after forking out all that money for 3G licenses remains almost obscene. However the network providers who have tried so desperately to avoid becoming just a pipe as the internet was for fixed line operators are not necessarily winning the war for the hearts and minds of the user. We are seeing higher churn rates in different countries where the networks have matured. I believe that the applications like Dopplr need to be offered by the networks and that the networks need to be far more involved in the PID services than they have in the past.

So SOME of Mobile gets Travel. When will Mobile really get Travel? I am hoping that it will be sooner rather than later.

01 October 2009

So How Much Was/Is BMI Worth?

About 4 and half LHR slots.

Today LH announced buying the remaining 20% of BD for $38 million. That is less than a slot pair price at LHR. Thus the total value of the airline is - well about - 4 and a half LHR slots.

Last time I checked BD is the #2 carrier at LHR.

It also bought BMED for 30 million pounds. With at least 11 slots at LHR. So you do the maths....



29 September 2009

New Numbers from US TIA and UK CAA – Still Not Good

While I think there is a return to optimism (from the downright pessimism) all is not yet right. We are not back to a state of growth if we will ever be back to that same level that existed in say 2007.

The latest data from TIA and the UK's CAA for the month of July shows the 9th consecutive fall of expenditure. Remember that this was the month when traffic started to pick up. With the pound strengthening against the dollar (as the latter falls yet again) we should see some positive signs soon. Given the lag time – we may see traffic uptick in September compared to 9/08 when confidence took a dive.

The positive side is that on time performance has improved.

Yields will continue to be depressed for quite some time. 2010 will be a year of stability. As I predicted at the end of 2008 – we should see some positive signs in September – just based on the drop in the prior year. Bu the emergence from the recession will not be even. The US may emerge faster than say UK. Asia Pacific is still pretty much in the doldrums. LCCs are fairing a LOT better than their networked bretheren.

Let’s hope that things start to improve soon.



So I am fascinated by the way that the social networks have dominated much of our thinking and indeed how pervasive they are. Yesterday I attended a family event in France with a large amount of my relatives there were 4 generations represented. It was quite a show.

However the biggest topic of conversation was how we could all continue to maintain our relationships given that we were highly disparate. The family is now spread from Sydney to Seattle and all points in between. Most of us are now connected via Facebook so we will continue to expand that link.

Now it struck me that these are real family and BFFs – we grew up together. A lot of shared experiences. Good or bad they are real.

At the same time – I have become increasingly aware of a new class of person - I call them FFFs or Faux Friend Followers. These are the people who try to link to you and also follow you on Twitter. These are people who actually benefit from being your “friend” and in your “network”. I admit that I have probably linked to people in the past in order to enhance the value of my own network. But I have lately tried to be judicious about this. I am trying to personally ask with a personalized message rather than … link to me….

So I am going to be pretty hard about FFFs. For my personal relationships – I will maintain a tight control. For a public persona – perhaps I wont be quite so picky and choosy. But just because we are linked doesn’t make us BFFs.

So what about your relationships? Is this the same for you?

I might use this as my next poll topic


27 September 2009

The Professor's Alter Ego Now On TNOOZ

OK so occasionally I will expose my real self (no this is not the naked bike ride). However I am honoured to be part of a new community of contributors in TNOOZ started by Kevin May - he of Travolution fame.

I highly recommend the site because you will get a good group of minds focused on the area we all know and love.

Passion will definitely be there. Analysis - yes. Dissent? Guaranteed.

Just the sort of thing you want to make sense of the fluff, the noise, the laughter and the joy - not to mention the BS and sniffware.


Best Cartoon Found This Week

I love the New Yorker. I get so rarely to read it - perhaps I should subscribe.

However this year my family gave me the New Yorker Cartoon one a day calendar. September second's entry can be viewed from the New Yorker website

It really does reflect what I am....

Enjoy it


787 - I will be watching VERY carefully which plane I fly

So let's assume that the 787 program will now go smoothly - as we have seen that's a big - very big - assumption. But humour me here for a moment.

Reading FlightBlogger's post on the production schedule it confirms the beliefs that I have harboured for some time.

1. The prototype will be pretty far from the production standard.
2. The early models will have gone through several modifications.

The first one is to be expected.

However the process of modifying the early production aircraft is somewhat drastic. As there are a lot of unknowns in the design and process of Boeing's new integrated supply chain this represents a sea change of activity ranging from the material (composite vs metal) to the production process (disparate vs all in the same place). As Boeing has frequently admitted this was not their finest hour and they still have to get the supply chain monster under control.

I realize that all aircraft are somewhat wonders of integration that get them into the air in the first place. However the element that causes me so much concern is that from the gitgo the process was designed to lead to a high volume production rate with little thought (in my opinion) to the process of incorporating changes. If you want an example of how spectacularly that could fail look no further than the now defunct Eclipse Aviation.

Bottom line for me - I will be avoiding flying on ANA and other early adopters of the 787. I shall be watching for aircraft tail numbers tied into MSN numbers before boarding a 787 commercially. However I wish everyone success in this project. Just let me not be the guinea pig.


BIABLT and Innovation

One of the Professor's favorite sayings are:

Because Its Always Been Like That. BIABLT. This week Gerry McGovern picks up on the theme to explain about challenging the status quo.

So what does BIABLT signify? It signifies the reasons why some rather illogical and very often times unnecessary processes, procedures etc exist. it should also be a catalyst to challenge this status quo and find innovative ways around the issue or problem.

Gerry's examples are a bit lame - it is a series of metaphors on Ovens and Pigs - but his point should be well taken. In these days of GFC and challenged budgets, we have to be innovative more than we have ever been. it means that we cannot sit on our hands. It also means that we should NEVER ASSUME anything.

One of my father's favorite expressions was "Opposite of the Obvious". Now that is a lesson we can all learn


CAPA and IAG's Airline Dummy's Guide To Social Media

Almost but not quite but a very good (and thorough) piece on Twitter and Blogging with focus as a how to get ahead on Twitter as an airline.

Entitled The Airline Industry and Social Media - A Review & Analysis it is available from CAPA or IAG. Mention The Professor - via a chat link and you will get a 10% discount from IAG. (Because I am a nice person). You can purchase it here. it was prepared as a joint venture from IAG, CAPA and the Travelstrategist.com. (NOTE the Professor does not profit from this discount).

This report is explained in pretty simple and (for a Dummy like me) straightforward.

I recommend this report to any airline considering taking the plunge into the Digital Dysfunctional world.

One caveat. Do it quickly. This information and the background info will age fast. However for now it is a great tool for some guidance. The dos and don'ts are points to be taken by anyone - airline dummy or not.