With UA restructuring by borrowing $659 million to refinance debt; the US airlines have now completed a round of debt refinancing.
So far we have seen all the US majors (with the exception of WN whose balance sheet is quite healthy thank you). This doesn’t mean that the effort is over. Far from it.
US, UA, CO, DL, AA have all managed to engage in some financial re-engineering over the past 4 months. This is good because it means going into the “bad” winter season - the carriers have bolstered their cash positions and will now emerge next year reasonably healthy. It also shows that the credit markets are indeed loosening up. So the US airlines are now a reasonable bet for the coming months. I think we will see a period of stock declines until the first shoots of spring start to pick up. However – I think we will see only good news on lift numbers. Yield of course will remain depressed.
With the US carriers now with a cleaner financial bill of health – what about the other airlines. BA is in need of some financial help. Irish carrier Aer Lingus is still a basket case. JAL we know is sick. The other airline to watch is Scandinavian. They are struggling. Camping outside Star partner LH is not necessarily the right answer but seems to be the only conventional outcome. Among the other airlines – we see that Malaysian is “accelerating” its restructuring program. There are several other airlines that are in similar situations.
One thing is for certain – the airlines will emerge in 2010 much leaner. Anyone who doesn’t will find themselves somewhat challenged in fighting the competition.
Cheers
05 October 2009
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.
Cheers
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.
Cheers
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.
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....
Cheers
Timothy
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....
Cheers
Timothy
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