23 January 2010

Easyjet Shows Boost in Yields But .........From Where?

Easyjet has made a lot of play lately that it is making more money from its GDS revenue. However the recent numbers dont show this.

Indeed an examination of their numbers show that total revenue actually only just rose. Given the troublesome year - this is still quite an achievement.

Total revenue per seat (£) 47.50 45.57 4.2%
Passenger revenue per seat (£) 37.60 36.90 1.9%
Ancillary revenue per seat (£)
Including checked bag charge 9.90 8.68 14.0%
Total revenue per passenger (£) 55.38 54.66 1.3%

So the real driver comes again from the ancillary revenue bucket. With baggage fees definitely helping along.

Ryanair's numbers (in dollar value) are not quite as good but still very healthy.

So there is still a lot of room for growth.

One observation is that clearly the model of being able to get ancillary revenue at the point of sale is going to be a driver for all airlines


Europe Shows Its Incompetency Again

The battle royal that is raging at EADS and its troubled military program is sadly yet another example of how Europe has shown itself to be inept in Airframe manufacturing.

The current battle has EADS saying that its A400M customers are responsible for the additional payments required to bring the project under control. He had some uncharacteristically unkind words to describe the political quango that runs the program.

One only has to look at recent years for programs that were viable yet bit the dust.

At present Airbus is looking a lot shakier than it did this time last year. It has at least 3 programs that are under threat. The A380 is undergoing yet another rationalization in order to get its Jumbo on track. No one is buying the A340. The A400M is 3 years late. The A350 is facing a cash shortfall.

By now you would think that Europe had got it right... not so.

Oh well - when will they ever learn....

22 January 2010

Ryanair Takes Aim At Its Favourite Target Dublin Airport (Again)

Ryanair and its ebullient boss Michael O'Leary - is at it again.

In response to the sharp raising of fees (as high as 40%) approved by the Irish Government for DAA - Dublin Airport Authority, he is cutting back the number of aircraft from 18 to 15 that will be based in the Irish Capital. As a result 150 jobs will go from FR and perhaps up to 10 times that in support jobs outside of FR.

With the collapse last year of Budget Travel the picking will be leaner for Irish low cost bargain hunters. The national airline too has been quietly cutting capacity including slashing its base at London Gatwick. This doesn't make as much sense now that Easyjet is the largest airline at LGW and a much fiercer competitor that others who are there.

As for the Terminal Two - many feel that it was a foolhardy move and quietly applaud MOL's opposition to the new facility. Whether or not it actually opens remains something of a quandary for the government agency. More cuts means even less reason to open it. Clearly DUB is operating at a much lower operating limit that was envisaged by the rather optimistic planners at DAA.


21 January 2010

A New New Pegasus Team Takes Shape

After another round of cuts at the Dallas based Hotel Switch provider at the end of 2009, new appointees have appeared to lead the company into the next phase.

In total 5 new hire and elevations have taken place.

Pegasus Solutions has promoted Ric Leutwyler to Chief Operating Officer as part of a senior management restructure who expands his current Marketing portfolio to include include COO with responsibility for strategic planning and continuous process improvement. Mark Peacock, who has joined as chief information officer, from Achstone Consulting. Aaron Shepherd moves to the cushy title of Pegasus Fellow, with a focus on the strategic evolution of Pegasus’s next generation CRS.

Three other senior managers have also been appointed. Steve Lapekas becomes Executive VP of corporate business development, Connie Rheams SVP of strategic sales, and finally Mike Montemurro joins as VP of CRS product management.

This is a much slimmer organization than one that existed just two years ago.

Best of luck to the team in Dallas.


Security: Live It! Be It!

So yesterday Jan 20th I happened to be at Munich Airport on my way to Berlin.

I had a ticket on LH and then stepped out of the check in process only to walk right into the mess. If you want to understand what happened go here.

So let's deal with two aspects of what happened in Munich yesterday.

1. Is how to provide customer information
2. The response to bad behavior.

In the first area - Munich Airport and Lufthansa lead tenant for Terminal 2 did a lousy job of communicating the issue. They clearly had no clue what to do - down to the inability to use the PA system to deliver pertinent (and useful) information to the people in the halls. Instead individual employees dribbled information to the assembled crowds (at one point probably around two thousand people) verbally using normal speaking voices.

In the second area they acted correctly. Shutting down the whole terminal and clearing it out was the right action. It doesn't matter whose fault it was or how the person managed to breech the security cordon - the fact is that this person did and the correct response was to shut down the terminal no matter what the cost.

However what this shows is that there is not enough empowerment at the security gates for security guards to actually handle security. This same charge can be leveled against Newark Airport in the incident over New Year. That says to me that after all this time - some authorities still have a poor impression of what their role is in security.

Finally the spin machine was completely out of line...

In an official statement - it just shows either the police were out to lunch or trying too much to put spin on it. Either way this is not acceptable and here is the quote:

The impression of officials was that "the passenger likely was in a bit of a hurry, grabbed his luggage and headed off," federal police spokesman Albert Poerschke said.

I rest my case.

I will say again. We ALL have a role in security. We all have to be constantly vigilant. Security is not something that other people do.


UK Based Apartments Abroad Goes Belly Up - Market Too Crowded or Too Soft?

UK accommodation specialist Apartments Abroad has gone into voluntary liquidation today.

This sad situation should give pause to thought that the somewhat rosy picture that has been painted about the homes rental market may not be quite so wonderful after all.

With the very high valuation price placed on such online sites as Home and Away - some investors will be getting a little nervous that the space is a little crowded.

The UK market managed in the main to survive the downturn with two notable bankruptcies XL Airways in 2008 and FlyGlobespan in 2009 - both linked to the credit card clearer eClear itself now wound up after it couldn't produce the cash it was allegedly holding for clients who had paid for trips on these two airlines.

So clearly the market needs to be looking carefully at some of the risk factors associated with Travel based businesses.


Tom Klein Takes President's Post At Sabre Holdings

Tom Klein a long time Sabre staffer has been elevated to the position of Sabre Holdings President.

This is an indication that more could be in store for him.

With Amadeus recently firming up its succession plans as part of the process for IPO - this leaves and even Travelport's recent elevation of Gordon Wilson - the die should be cast for the IPO gang of three to go to market.

It would seem logical that Amadeus is going to appear on the Madrid exchange, Travelport now slated for the London market so Sabre will likely go to the US exchange. Which one will it be - tech heavy Nasdaq or the tony exchange on Wall Street?

Congrats to Tom.


JAL: Gloves vs. Honey from OneWorld

So having tried to sweeten the pot to (by some reports) nearly $2Billion, the OneWorld group are now resorting to some subtle and not so subtle threats if JAL moves to rival alliance Skyteam.

According to Aviator.Aero:

American Airlines warns alliance partner Japan Airlines JAL of lengthy and messy fight if it switches allegiance to Delta Air Lines.



Are The GDSs Buying Business?

I have been doing a straw poll among some of our clients and friends to see what their segment incentive fees are from the GDSs. A disclaimer here is that this is from a non-representative sample of agencies. However I don't think they are atypical. The sample size was from a mixture of major and non-major travel markets worldwide. The reason for doing the poll was because an associate quoted a number of one of his clients to me that I thought was somewhat high. Boy was I wrong.

Without disclosing confidential details I can assure you of two things.

1. The Segment Incentive Fees are rising - markets across the globe report this.
2. The Airlines are supposedly signing deals that should either cap the segment fees or eliminate them altogether.

I was shocked to hear that in the last quarter in many markets the segment fees quoted by our clients and friends exceeded an average of $3 per segment. These companies are not all mega agencies or OTAs and these numbers were not isolated examples they were average numbers. In several cases in 3 markets the amounts quoted by these people as being paid were $4 and above. I had to speak to more than one agency to make sure it was not a clear single aberration for "strategic" reasons.

If one follows that the average GDS fee collected from the airline (using publicly available data from Travelport as the base) of $6 (rough average), then something is not right.

So one can conclude that with the sudden rise in these incentive fees can be tied into either a war between the GDSs or some other reason like making the numbers look good prior to an IPO. Further one can conclude that to pay for these increased segment fees that the GDSs are either becoming more efficient in extracting cost from their businesses or they have found ways to increase revenue - my analysis of the Travelport data would indicate that the benefits of the integration have now been fully washed out. So I have to conclude that there is a strong possibility of the legacy GDSs buying business. (As an aside - my friends at Travelport get unhappy when I use data from their financials. So I want to be clear the reason I am using Travelport's numbers is that they are the only comprehensive public information sources that are out there).

All this in a year that saw significant declines in transactions.

I am sure that writing this piece is like poking a hornets nest. But in my travels around - I find it hard to comprehend why this raising of the incentive fees is occurring at a time when it should be decreasing. Indeed perhaps the core question to be asked "Is this sustainable?"

This is welcome news for agencies who have come to depend on the GDS segment fee as a critical part of their revenue mix. However it probably wont be so welcomed by agencies who are not getting these numbers or the airlines who ultimately have to pay the freight.

Am I missing something here or is something rotten in the State of Denmark? Is this an series of unnatural acts? Someone will have to pay the piper (I love mixed metaphors). Let's just hope the Singapore Government and other institutional investors who are looking at the coming IPOs do their sums right and due diligence.

Cheers - I think I had better look under my car tonight when I drive home....

18 January 2010

ARC Drafting Error To Affect Number Of US Agents

While the actual extent of the "drafting error" has yet to be fully determined, initial reports indicate it could be a large number.

Hopefully the number of instances will be small but it has upset the agency community.

The actual error was not clear at time of writing. ARC has admitted the issue and will reimburse agents for ARC based charges.


Tomorrow (19th) Will Be The New Dawn For JAL

JAL's new business plan and structure will be announced tomorrow.

Stay tuned