29 May 2010

Why Is This Man Smiling?

OK so he scored big in last month's IPO.

So is it because he got to put a fair amount of cash in his pocket?

Is it because they had a solid quarter?

Is it that he gets to tell the faithful this week at the Annual 1A Bash in Nice? All the top guys are going (I need a rest so sorry I wont be there!)

Is it because Travel is on the upswing?

Or because Amadeus market share is starting to soar?

But perhaps the real reason he is smiling is because he is going to retire.

I wonder... anyone care to enlighten me?


Music Can Teach Travel

I love online Music.

Like most people I spend a lot of time in front of my PC

My first love has been Pandora - but of late, Pandora has been failing me. It now limits my sessions to 40 hours a month. So I have been using LastFM, also pretty good. So now I am with Jango and I switch between all 3 but in essence I have created my own set of music on these stations. I have 4 types of music in general I can listen to, it depends on my mood.

And this reflects the way I think that nuance can apply to Travel and inspiration. Both Music and Travel appeal to the left brain. We always seek inspiration. Every year I try to take at least one trip that will inspire me. I find that Asia does that and I have some interesting Travelista friends who are pretty good at helping me to do that. For someone who is as right brain heavy as I am - this is good centering activity.

One person I admire for his work in this area is Professor Martin Collings his recent posts on TNooz should be required reading as well as checking out his own blog - Sheerwater. It is interesting as a fellow right brainer how he manages to weave in the good stuff.

But returning to Music, of late my journey to Search Utopia has had me thinking about how much we could learn from Music. So let me give ways.

Music Genres are more easily identified than Travel Genres. I was chatting to my son the other day and we had an interesting dialogue that says with iTunes and basically our ability to define our own music there is a distinct lack of music which defines the now generation. We could not think of anything that really encapsulates the mood of the Oughts or the Teens in the same way that Soul (Motown) and Rock defined the 60s and 70s. Surprisingly (he is a head banger) we both felt that this was a loss to society.

Travel Genres are harder to specify. They typically are defined by very generic terms (beach, culture, food, ski etc) and by location. But as I have written before unlike Music - Travel and location are not automatically linked. Despite our global village view of the world and the dreaded homogenization - different places can mean vastly different things. Let me give you some examples.

People in the First and Second World look at Bali as one of the most exotic locations to travel to. Yet for Aussies and Singaporeans - its a trip for a quick weekend getaway. While we can easily see that Las Vegas is pretty much the same for everyone - Glitz, Neon and Gambling - Spain has vastly connotations for Northern Europeans and North Americans. The former see it as Sun Sand Sea Sex and Beer!!! the latter see Spain as culture and cuisine.

So far I have yet to see anyone who has done a really good job at inspiring me to think of travel in the same way I see music. I see all travel sites as an explicit and largely tedious interface experience. I long for someone who can inspire and suggest and let me lean back and enjoy the process as much as I do music.

The experience I think I lack is a way to browse travel. Oh how I long for something like that....


And Special Thanks to Kate Bush for letting me use her album cover. If only she would put out another recording.

Which Is Worse - Social Media or Email? Part 2

So having set up the premise that Work/Personal life is a mess - now we can see how bad it really is. This is a chart from eMarketer for this week that shows the extent of the damage we inflict on ourselves. This is from a study by Osterman Research. The startling for me conclusion was that 79% of of the workers who call themselves mobile plan on taking their work-related devices with them on vacation. Is that a big percentage of the population? Well according to a separate study the USA has the highest percentage of mobile workers in its workforce, according to February 2010 data from IDC, with 75.5% of the workforce, or 119.7 million people, expected to be mobile by 2013.

And this will be when Millennials will be in the work force in droves. You can just here Apple and Google lapping this up as Android and iPhone take over the world.

While I don't feel quite so alone any more (Gee I thought I was special) I do think we need to get the balance a bit better.

Perhaps we should start having a "Turn Off Your PED" day. Or "Leave your iphone at home" day.

What example are we giving our kids.

Happy Days.... not....

Which Is Worse - Social Media or Email?

For the longest time the bete noir of our work/personal life battle has been email. The jokes and stories of people having crackberries under the bed or sneaking out in the middle of the night to read email are legendary.

But now we have another beast we have to feed. Neilsen tracked that Social Media over took email last year. The growth in social media is the single most significant story in the online media space today. Social networking sites eclipsed personal e-mail in global reach at 68.4% vs. 64.8%, in February 2009. And even more significant—in only the first few months of 2009—the reach of these sites is growing at a brisk pace, faster than any other online sector.

Oh dear so now we spend time doing not just one or the other - WE DO BOTH.

Are we nuts....

Yup... and ADD too


Bad Google?

Google is part of our everyday life whether we like it or not.

Actually I really like their stuff. I have GMAIL accounts and use GoogleMaps. I think Google Earth is very cool. I love Picassa.

There are some things about Google that makes me nervous. The Do No Evil thing is a bit long in the tooth and patently not true any more. Whether accidental it was a fine ethic to aspire to but really doesn't work.


Let's just ask Lauren Rosenberg. She is suing Google for getting hit while using their product Google Maps.

Here is the full story and you have to read it all. What is interesting is that the interaction with GoogleMaps and Blackberry may be core to the case. And this has my attention. If Google does start offering services that are ubiquitous and doesn't give the right level of service or more importantly doesn't exert enough care to ensure its product is used properly - then it can do bad.

I shudder to think what will happen to consumer software if the hapless Ms Rosenberg prevails in her lawsuit. even worse - and we don't know this for sure - but a swift search of Bing tells me that there is a Ms Rosenberg with the same name who runs a PR agency in Santa Monica California... ooops not good for Moose either.

But let us keep an eye on this - it will likely impact us all.


UA+CO - The Debate Rolls On

The wonderful battle that will keep us entertained for many months has just been joined. UA+CO went from the UA+US potential merger in less than four weeks to a full blown merger announcement by the New United pair on May 03. Now the dust has had some time to settle we can start to sort the elements out and see who sits on which side of the debate.

On the positive side sits obviously the airlines themselves. They have brought in a whole cadre of experts to support their position. Many of the experts are from the macro economic fold whose view is that the failure to merge will result in disadvantaged players so they tend to look at the bigger picture in the hope that the little issues can be resolved with exceptions. The basic economic argument is that the US market can only support three big airline alliance networks. If you would like the read the paid for analysis from Airline Economics click on the link. I suggest you do read it as it provides good ammunition for both sides of the argument, and its a good document to read anyway.

Also aligned with this position is the Department of Transportation which fervently believes in Big Airline. If you want some evidence of this look no further than their recent rulings and awards.

From a certain perspective it seems that the past 100 years of airline transport might have been an aberration in some people's eyes but you can't fault the millions of people who worked in it and pioneered the (mostly) safe and reliable utility service model that we have today. Not to mention the millions more who have invested in it.

So on the opposition side are the soon to be disadvantaged Houstonians (and others who will feel the pain like Ohio) and the likelihood that the DoJ will flex its muscles to either kill, hobble or delay what could be inevitable. And then there is Mr Oberstar. The Senior Congressman from Minnesota. he is the most powerful man in Congress in aviation interests. He staked his position in an Op-Ed piece in USA Today of all places on May 13th. One week earlier he had formally asked US DoJ to block the merger. Seeming to support him, on the House side, Judiciary Committee Chairman John Conyers says he "wants more specific answers after getting a letter from the two airline CEOs that he found lacking in specific answers."

One notable voice to come out in opposition is former AA Chairman Robert Crandall. Still as Acerbic as ever just celebrated his 12th anniversary of his retirement from AA's top position (May 20th 1998). But so far things are pretty quiet and it would seem that most of the focus is on who does what next - clearly Mr Parker and Mr Arpey are probably chatting via crackberries about forming what would then become the largest US airline.

And let me add one element to the fire of the debate. Oberstar was suitably less than vocal during the NW+DL discussions as he used his position to secure more concessions from DL for his home state of MN. He made some suitably mumbled comments that he could use later to justify his position that he did put up SOME opposition to the original merger that resulted in new Delta. Did the rot set in then? partially in my view. But to some extent this form of consolidation/concentration power was inevitable. That doesn't make it right or proper.

So let me return to the issue of the economic argument. I don't see anyone on the pro merger side saying much about Southwest. Surely the arguments being made fail at the evaluation of WN's position in the market. They started at zero and became the largest US Airline in the main organically unlike its larger brethren who ALL had some major merger in their history. It also consistently blows away the competition in profitability. All without any alliance (except for that somewhat quirky Transtar experiment in the 1980s and the even stranger ATA short lived alliance. But these were marketing agreements and as I have noted before we can still expect to see some of these from every player.

Nor do I buy that the GDSs exert so much influence (one of the older merger arguments) that this is a factor in the urge to merge. Virtual Interlining is now possible and is already in practice by individuals and systems.

Therefore in my view the argument that economics make this the only way to go fail on a large number of points. But - the practice of not allowing an airline to fail in bad times yet to merge in good times in my view is inconsistent.

The possibility for increasing competition can be seen in such proposed arrangements as the cosying up of partially Lufthansa owned JetBlue's relationship with AA and other airlines. The approved route and facility swap between Delta and US Airways is yet another example.

I am of the opinion that the merger of UA and CO will lead to an increased concentration which in turn will result in a reduction of service totally and quality (assuredly). We need good old fashioned competition to keep the market honest. Allowing CO and UA to merge their operations totally as opposed to allowing perhaps a lesser alliance such as one that currently exists with the A++ anti-trust immunity would hurt competition. It is a decision that for me is a bridge too far.

The alternatives are acceptance or rejection of the companies proposed merger. I think that the current level of alliance is more than adequate to maintain competition within the market. If the merger is allowed to proceed then the US consumer will be disadvantaged. At the end of the day that must be the determining factor.


28 May 2010

Wow - Huge Increase in April Hotel GDS Bookings

This is really quite interesting. For those of us who watch trends these numbers are significant. It shows a robustness that belies some general trends that we have seen elsewhere.

Now a big caution - these numbers are from Pegasus GDS bookings which are largely corporate bookings. I would be very careful to take this as a general trend. And also I would say that the depression in 2009 was so sudden and deep that this represents a generalized recovery rather than a spike and a return to normal. There is still significant discounting out there.

We must also show that there was a benefit for the hotels that the airlines didn't share in - IE the effects of the Ash cloud covered a number of people who were stranded and needed to be accommodated while their planes were grounded.

May will be a tough one to call for the residual impact of the Ash Cloud, but my guess is that we will see a continued YoY improvement and definitely an improvement in yield for the airlines. For the hotels we should see a moderated growth - we are seeing 2010/2009 up over 10% on the year. We should see better than that for May hotels.

The Real Test will be in September when the first normalized return will be recognized in the USA market which has a significant bias for these numbers. I think it will be healthy. How healthy is up to a number of factors - for the summer the price of gas will be an impact - the constrained capacity of the airlines will not help matters.

Absent in this group is a major growth for Hawaii and Las Vegas.

Time to get Hawaii and Vegas planners into a room and thinking of big picture solutions.


A Kinder Gentler Ryanair?

I love posing these questions.

But this note caught my eye today. So maybe it wasn't such a slow news day after all.

Suffice to say that my day job has been a bit busy this week and for the past month of travel - I have tried to catch up, lots of great stories out there. Now I can catch up on some of them

Rynair has appointed two new Non-Exec Directors. Both of whom come with a somewhat softer image (that isn't saying much) than what used to be out there.

The Irish airline has appointed former EU Commissioner Charlie McCreevy and Declan McKeon former Audit Partner of PricewaterhouseCoopers (Dublin) as non-executive directors on its board.It has also raised the board size to 8 from 6. It might actually start to get crowded during board meetings.

Commenting on the expansion, Ryanair’s Chairman, David Bonderman said: “I am delighted to welcome Charlie and Declan to the Board of Ryanair Holdings, where I believe their skill and experience will allow them to play a significant role in ensuring that Ryanair continues to grow safely and profitably, while lowering fares and improving our industry leading customer service.”

Does this signal a change in direction for the spunky Irish carrier? I doubt it will show immediately but I do believe that the move signals a start of a process that will ultimately see a changing of the guard at the top. It also means that the airline is positioning its self for a broader move which should see it expand to broader jurisdictions. Like across the Atlantic for example.

And I think for many - it will mean a change for the better. Let's hope so.


Time for the GML Change at CX

Every so often Cathy Pacific which is still run by the John Swire Group - one of the last Taipan businesses in Hong Kong - changes its folks around. There is a general move into the and out of the airline. Of late the number of such changes at a senior level have become less and less. So the Swire people tend to specialize earlier and stay with the airline in a more focused role.

So the latest round of GML changes as reported in Speed News looks like this:

James Barrington, currently Director Sales & Marketing, will become Director Corporate Development. Rupert Hogg, currently Director Cargo, will become Director Sales & Marketing. Tomasz Smaczny, now General Manager Information Management, will become Director Information Management. The current incumbent in the Director Information Management role, Edward Nicol, is retiring after 35 years’ service with the Swire group. In Flight Operations, Richard Hall, currently General Manager Aircrew, will take up the position of Director Flight Operations – a post currently held by Nick Rhodes. Mr Rhodes will become Director Cargo. Ian Shiu, the current Director Corporate Development at Cathay Pacific, has been appointed a Senior Director of John Swire & Sons (HK) Ltd with a brief which covers staff matters in Hong Kong and strategic developments in Mainland China and Taiwan.

So now you know...


Our Future Might Just Be OK.... ADS-B to the Rescue

This week the US Dept of Transportation awarded its next gen ATC initial contracts.

This means that the USA has finally after YEARS or wrangling and false starts the US Government has finally taken the leadership role and published the rules for Next Gen Aircraft tracking and management.

The US DOT announced this week the performance requirements for aircraft tracking equipment that will be required under the Next Generation Air Transportation System. The avionics will allow aircraft to be controlled and monitored with greater precision and accuracy by a satellite-based system called Automatic Dependent Surveillance – Broadcast. (ADS-B).

“This technology represents another step forward in our ability to make America’s skies the safest in the world," The Obama Administration's point man Secretary Ray LaHood said.

The final rule requires aircraft flying in certain airspace to broadcast their position via ADS-B by 2020. The rule mandates that the broadcast signal meet specific requirements in terms of accuracy, integrity, power and latency.

“This rule gives the green light for manufacturers to begin building the onboard equipment that will allow our air traffic controllers to know where aircraft are with greater precision and reliability,” FAA Administrator Randy Babbitt said. “That is one of the key elements of NextGen that will improve the safety and efficiency of flight.”

Additional ADS-B services should allow pilots to view cockpit displays to see the location of other aircraft in the sky around them. ADS-B displays are envisioned to show pilots where they are in relation to bad weather and terrain – even at night or in conditions with poor visibility – and provide flight information, including temporary flight restrictions.

This has been a long time coming.

So what does it mean?

Effectively it means that everyone in the air turns on the light so that they can be seen in 3 dimensions no matter what the weather or terrain. Current generation equipment is susceptible to both and is cobbled together using different technologies and processes. Imagine that someone turned the main lights on for the whole room rather than individual spot lights in a dimly lit room.

At the same time - the US FAA awarded 3 contracts to the leading lights in this area - Boeing, General Dynamics and ITT to provide flying demonstration laboratories that show the full integration of these services. These contracts will then lead to the awarding of the final NextGen solutions for a US Airspace wide advanced capability. Thereby lessening the requirement for guided air traffic and thus ensuring more efficient use of the sky and more efficient flight planning and use of tools to make the use of scarce resources which includes fuel much much better than today's heavily managed processes.

Its a lot to make work and it is still far into the future but this is a very good step for all of us. Now the rest of the world has to agree. But at least there is a model to follow.

Image Courtesy of ITT one of the bidders on the contracts

Microsoft's Failed Future - A Chance For Redemption

Of late things have not been good for Microsoft. In the past week they have lost two of their stellar chaps. They are spending a lot of time looking failure in the face. We could catalog these - Mobile, Search, etc.... Indeed the ignmony was palpable - Apple the arch rival became a bigger company by stock value than Microsoft.

But what could the company do to fix things. I will give my thoughts at the end of this piece.

But let's examine why Google and Apple have beaten the former tech giant into pieces. These may not be things you want to believe...

1. They don't listen to customers. Apple and Google definitely do their own thing. If they didn't the Mac, the iPod and the iPhone would never see the light of day
2. The closely tie the software and the hardware together - none of this open stuff especially if its from other people
3. They don't care about taking other people's ideas
4. Proprietary is the order of the day - their proprietary.

So for a good few ideas of what MS could do check out this article.

And what do I think they should do?

I already dumped most of my stock a long time ago. So I have no ax to grind at my alma mater. But here is what I think they should do. SPLIT THE COMPANY into smaller units.

Looking at Microsoft which has become big fat and ossified. I don't care how energetic Steve can be to rouse the faithful - he has become largely irrelevant to the world of technology. He should have looked into the crystal ball and seen that indeed Microsoft became - well just like IBM. Maybe even more so.

So SPLIT the company and let them compete in the market as much as they could compete against themselves.

And perhaps we should consider what companies in travel are guilty of the same sins - maybe even a former relative?

So that's my opinion - what's yours?


Bags And Why I Hate Checking Them

Its a holiday weekend in the USA and its getting to be a slow news day.

Not much going on - Google and ITA still haven't married yet. (We understand they are sleeping in separate rooms at the moment). Oil is still gushing out of the floor of the Gulf of Mexico. Oh yes and it's raining in Seattle.

I travel a lot. More flights than I should take. A lot of them are on airlines with very strict bag policies such as weight and size and number.

Whenever I fly I try to keep to the rule either it fits in my suit case and the laptop bag or it doesn't make it. I have been using the Swiss Army luggage for nearly 10 years. I have gone through 4 of them so far and the current model is dying so I will have to buy a new one. The current model - Werks Traveler™ 3.0 looks like it still does the trick.

You can find it here on the web. But do shop around - you can find lots of them at discount prices.

The current one has had a lot done to it. Replaced handles, replaced wheels, fixed zippers. The biggest criticsm I have of the bag is that the zipper tags are too flimsy. They break and then its a tough job to use them. Believe me I abuse the bag something rotten. But it is easily the best quality I have used.

Now the ideal laptop bag has been a tough one for me. My laptop bag currently has been 18 months since I won a copy for a piece I did for Chris Elliott's blog

It is a Skooba Design. It is the best one I have ever owned. Someone told me for a gift I am getting a replacement (but I am not supposed to know shhh). But this is the ideal laptop bag for me.

Its light, it has incredible zippers, it protects the laptop and it has the versatility I need.

So now my rant (take a deep breath).

The airlines have stopped fighting the abuse of people who use them as excuses to get free luggage. Now they have made it basically impossible to get compensation and recovery if they damage your bag.

The following items are SPECIFICALLY excluded if they get broken:

Handle surrounds

Basically only if you find parts of an aircraft embedded in your luggage can you sue the airline or get any compensation. Of course they can always lose it (don't they always).

In the past 20 times I have had to check my bag. It has failed to arrive with me on 3 occasions. By my calculation that is 15%.

According to the BTS statistics - the current mishandled bag rate is about 7 incidents reported for every 1000 passenger journeys. Remember that this is what is reported to the DoT. Given that in none of my cases would a report be generated to the DoT and also given that the airlines now have stopped taking reports on their damaged bags for the issues listed above. It would seem to indicate that the number of actual bags TRULY "mishandled" damaged, lost and delayed is probably significantly in excess of 10%.

Does that make you feel better?

No - me neither but at least I got to rant about it,

Cheers and have a great weekend. If you are in the USA it's the Memorial Day weekend - enjoy the time with your families and try and remember why it is a holiday and why we are celebrating it.

26 May 2010

Is Resistance Futile? NO!!!

Resist the Borg....

A great piece by Siew Hoon at WIT - check it out and see if you agree.


And while you are there check out some of the more interesting articles. It should stimulate some of that left hemisphere that has been somewhat sleepy of late.

And just remember - the iPhone is the instrument of the devil!


25 May 2010

More on Flight 3407 - PBS Frontline Program

I was channel flipping this evening - I am recovering from a cold and not at my very best - when I came across a re-broadcast of the Frontline Documentary on CO3407.

Here is the link - http://www.pbs.org/wgbh/pages/frontline/flyingcheap/view/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid

I am not sure if viewers outside the USA will be able to see the program due to copyright laws. But it is a reasonable presentation of the data albeit with a one sided slant that you would expect. Still the issues are real and the viewer can draw their own conclusions.

I recommend that everyone should spend as much time learning about the issue and then doing our respective part to address the fundementals of the problem that the ATW article June 2010 so clearly lays out.


Its Top 10 Time Again

I am picking up the challenge from Tim Hughes on his top 10 airlines.

So this year - I am going to provide 2 top ten lists.

List 1 is my favorite airlines, List 2 is the ones I have used the most.

Top 10 Favorite Airlines

Emirates - Back at Number 1
Virgin America
British Airways up 1 place
Tiger Airways
Air Asia

Top 10 Used Airlines

British Airways
Air Berlin

This represented the following:

189 flights.
2 RTWs
14 Transatlantic Crossings
5 Continents
All classes
215 days away from my home.
Over 215,000 miles of flying


Carnival Cruises Curtails Air Sea & other Programs

Quoted in Tranvel Market Report, Carlos Garcia, vice president, Travel Services & Guest Logistics, explained the reason for the canceled programs: “Over the past several years the number of guests choosing to purchase these ancillary products from us has been decreasing for a myriad of reasons,” he said, citing guests’ use of hotel or credit cards points as one way in which they book their own pre- and post-hotel nights. for some time now consumers have been using their frequent flyer miles to get to and from the port cities.

Regarding the Deviation Program, which was the most active of the two cancelled programs, Garcia said that most guests who purchase air from the cruise line do so through the FlyAweigh Program (which is continuing). “They choose a regular program and do not need to make changes. Most of them are interested in flying in to meet their ships on the day of sailing.”

In 2007, the cruise lines cut back their air-sea blocks significantly as the price value proposition waned. They also cut back on staffing in these areas to reflect the more modest use. With cruise lines growing rapidly and air traffic still stalled or growing modestly there will be spot outages of matched capacity which resulted in some interesting situations last year when significant discounts were offered to locally boarding traffic in Florida's key cruise ports such as Port Everglades and Miami.

Interestingly the sale of cruises through non-traditional outlets such as cruise only non-ARC or Airline websites are continuing to grow as a share of the total distribution pier for cruise products.

So if you are in the cruise business - better make sure that you can secure your flights to and from the cruises. Its going to get a lot harder to find space.


UK Cancels Major Airport Expansion

BAA - the Spanish owned company that controls STN and LHR - has canceled the two major projects for the London area which will have a major impact on the future of airline traffic in the UK.

LHR T6 and the 3rd runway was always going to be a battle. In my view the alternative of a new airport would be a better bet. However Stansted cancellation of the 2nd runway is both short sighted and a clear mis-read of the market by the politicians.

Accepting that you will never make all of the people happy all of the time comes down to a decision of what is the optimal solution for the country as a whole. The nature of the UK will be that the infrastructure of ground transportation such as high speed rail between the mainland and the UK will never give the level of support and value than the continued growth of airline traffic. Stansted is a classic case. It is in the middle of the country side and very few people are actually impacted. Whereas LHR is a different proposition. Even Gatwick's second runway is viable - more so that LHR's 3rd runway.

The UK government cannot simply abandon two runways and expect no economic impact.

With no mitigation strategy by the UK coalition government this will have to wait for up to 5 more years before the issue is addressed again.

As we have seen the fragility of the Channel Tunnel continues to blight traffic to and from the Mainland of Europe. The UK needs a balanced mix of international transportation links. Without it the country will be seriously disadvantaged.

I urge the UK Government to re-open the solution for the need of additional runway capacity in the UK.


24 May 2010

BTC on New United, Who Flies You Baby?

I am not a lover of huge concentrations of business. The argument that big is beautiful over all other criteria rings hollow to me.

This morning in my in-box - arrived Kevin Mitchel's BTC opinion. It is a sound set of reasoning. I reprint it here for your benefit since it is now in the public domain.

One thing I have come to notice of late is the issue of expectation of service from that ticket you bought. I actually try and avoid a codeshare flight whenever possible. The reason is that in general I find I can usually obtain a better fare from the operating carrier. The only time this doesn't apply is on the commuter and regional airlines.

And here is where things start to go awry. There is a gaping hole in the US regional market. That of adequate standards in pilot proficiency. I strongly suggest you read this article in Air Transport World - if that doesn't scare you - I don't know what will.

Getting back to New United (I hate the idea of the livery BTW it is completely without thought) - is this a bridge too far? Mr Oberstar is going to fight it. And this time as I noted before the jurisdiction is with the Dept of Justice more than the Dept of Transport who would have likely rubber stamped the agreement.

In my opinion the resulting shake out would see a very large number of communities who would lose air service (as in reduction not elimination) as flights to hubs were combined. In all of the merger between DL and NW, there was a significant reduction in ASMs from the smaller communities.

I think the time to draw the line in the sand has come. CO has said numerous times that it can stand on its own. Ditto US. So let it be so. I think the public will lose and prices will rise significantly if the degree of concentration is allowed in the UA+CO and subsequent AA+US mergers are allowed to proceed. Then the question of who flies you will be very interesting and confusing to the general consumer. Even today US Airways still has not merged it pilot seniority lists fully despite a 4 year period since the merger. The outsourcing of airline service says to me that when I contract with United to fly me - I expect the same level of pilot proficiency in managing the plane. Yet as the unfortunate passengers on that fateful flight last year found out - that their ability to choose how they flew was without choice. Not a single passenger on that plane paid for a revenue ticket to anyone but to Continental Airlines. However if you read the articles - no one seems to have the guts to describe the flight as being a Continental Airlines flight.

Just so we are clear - I am not picking on CO. They are a fine airline. I am against the practice of obfuscating the true nature of the service you are purchasing.

While - I am all for efficiency - I think that choice trumps efficiency. A creation of the mega monoliths in the US airline industry will do serious harm to the consumer.



United Airlines – Continental Proposed Merger

Business Travel Coalition
May 24, 2010

Business Travel Coalition (BTC) has long viewed airline mergers and industry consolidation with a good measure of skepticism regarding anticipated benefits for all stakeholders. While we are still working to formulate a public position on the proposed Continental (CO) – United (UA) merger, there are several areas of concern worth noting ahead of U.S. Senate and House hearings that suggest the antitrust analysis should go beyond management spin that this is an end-to-end network combination made in heaven that will drive benefits for all and that should be approved post haste.

The concern over the Delta – Northwest proposed merger in 2008 that prompted BTC to testify in the House and Senate in opposition to it was that it would trigger radical consolidation to 3 mega carriers against a history of failed mergers while raising prices and reducing service. Soaring jet fuel prices and worsening airline financial results in 2008 effectively put consolidation on hold.

A CO-UA merger would likely cause an American Airlines combination with US Airways, and thus, 3 mega carriers would result. Even non-CO or UA executives publically exclaim, as non-merger participants, the benefits to their airlines from the capacity removed, and attendant pricing power achieved, by this proposed merger.

Rationale to support a CO-UA merger would include that in the 2 years since DL-NWA (1) low cost carriers have continued their growth, (2) network airlines’ balance sheets have continued to deteriorate, (3) jet-fuel prices are on the upswing again, (4) business travel volume and yields still have not recovered and (5) low cost new entry is poised to increase as parked aircraft and crews are available and capital markets are loosening.

Some analysts argue that 3 major network carriers are all that the U.S. market can handle if supply is to be right-sized to demand for the purpose of enabling these carriers to recover their cost of capital over a full economic cycle. However, these same analysts agree that due to low barriers to entry for low-cost carriers (equipment, crews, capital) there will always be excess capacity in their view and thus airlines will never represent attractive long-term investments. These two arguments are contradictory. Mergers and consolidation, aside from a near-term valuation play, are not usually effective industry solutions and could cause significant problems for many stakeholders.

These analysts likewise argue that 3 strong national network airlines would provide effective competition for all consumers. However, this does not recognize the unique hub-market dominate structure of the industry and that corporations located in hubs do not always have the ability to successfully play one supplier off against another as is the case in other industries. No one of these 3 national network carriers would be able to meet the vast majority of most corporations’ air travel needs, thus corporations’ parity at the negotiation table could be greatly impaired. In contrast, Boeing or Airbus can meet virtually 100% of an airline’s wide-body aircraft needs; thus, airlines benefit from near-perfect price competition with just two suppliers. Consolidation to 3 network carriers would enable these firms to further fortify their hubs to the possible detriment of corporate buyers.

With 3 mega-network carriers and their alliance partners acting as a single buyer there is the risk of these groupings exercising monopsony power, i.e. driving pricing for all manner of services below competitive levels. At risk are travel agents, global distribution systems, airports, food service providers, labor, equipment manufacturers and many other services providers. As a consequence, it could be easier by an order of magnitude for these behemoths to shift distribution and other costs to the consumer.

With 3 mega-network carriers and their alliance partners acting as a single seller there is also the risk of these groupings exercising monopoly power, i.e. driving pricing for air services above competitive levels. For example, under current airline alliance antitrust immunity provisions, an alliance can refuse to deal with a corporate buyer unless that buyer agrees to deal only with the alliance, versus individual members. Radical consolidation would likely further strengthen these alliances in dealings with corporate customers driving down the value of their contracts.

With one less major network carrier, in an oligopolistic industry, the Coordinated Effects Doctrine becomes relevant as there would be one less veto vote available to reject system-wide fare increases, or fare surcharges for peak summer travel. Once consolidated to 3 major carriers, concentration at the national, hub and city-pair market levels becomes less relevant as across-the-board fare and fee increases would be much more easily facilitated.

Analysts argue that the alternative to mergers and consolidation is a slow liquidation for network carriers. Antitrust law does allow for the Failing Firm Doctrine under carefully specified conditions, however, the laws are not concerned with shareholders’ interests or the fact that an industry is unprofitable. Rather, antitrust laws are purposed to protect competition and the consumer against combinations that will likely lead to higher prices, less output and lower quality. Moreover, one or two failures would in fact allow more efficient airline operators to acquire the assets and deploy them at higher and better economic uses to the consumer’s benefit. This outcome could be superior to structurally institutionalizing failed businesses on the backs of consumers.

Evaluation of the CO-UA proposed merger would need to assume the collapse of network carriers to 3. Remedies would need to be considered that reflect the unique competitive structure of the industry wherein in mega carriers would be able to more easily wield their power against consumers as well as supply chain participants.

23 May 2010

The Professor Is Having An "Andy Rooney" Social Media Moment So Bear With Him

I seem lately to be having a lot of time to think about Social Media. Lord knows – I don’t really have time to think about much these days as I continue to drink from the firehose. But sitting on a lot of planes lately has made me think a bit.

I remember about 2 years ago that Andy Rooney did a piece on Computers and Bill Gates (Like many things you can find it on YouTube) ... which itself is I suppose "Social Media". With some Squillion Page Views a day it’s a scary site.

In my thoughts I have been trying to compare Social Media with – well regular media and our consumption of it. And in doing so I have been trying to get a sense of how they compare for use and advertising. I used to be an Ad man (think Mad Money!) and worked in London, California and New York at some great advertising agencies. I worked in a variety of roles but mostly in Media Planning and Account Management. Long before they had electronic spreadsheets I used paper ones to calculate ad effectiveness. Ah those were the days. But I always found one thing troubling until over one meeting at a local watering hole, one of the people I would call a mentor used an expression that has stuck with me. He described advertising that “worked” as being dependent on “effective media consumption”. And lately that is where my mind seems to wander. With all this social distraction (oops I mean media) how effectively do we consume it? We seem to have so many ways to metric how we can know just about everything. But I still don’t know how effective it is.

Today Facebook tells me that is has a load of people – more than 400 million - on its pages. Man that is a lot of interaction. But what of the quality? And why does it seem that your friends always have more friends than you do? Actually this is an easy one. Based on original research by Scott L Feld and updated by Satoshi Kanazawa. I bring you this piece so now you don’t have to feel inadequate.

In my continuous search of this perplexing question, I tried everything from experimentation to observation to straight research. But the core question is still troubling me. One of the more interesting pieces I read (other than large amounts of tomes that tried to explain the situation in words that no one will understand) is this piece. Here Cameron Marlow describes the difference between an active and a passive relationship. Ah so we are segmenting our relationships. Perhaps we always did. Are you “in” or not. This might explain the stalker mentality for all of us. The Ashton Kutcher Tweets…. There is no way Mr AK can keep up. He now has 4.9 million people following him. For what? Are we that sad? For most people the actual number of “real” close friends that you can maintain is probably about 5. (Its no accident that the show “Friends” was actually 6 people.) Windows Phone (Mobile or whatever they are calling it) has an ad campaign going for its new Kin phone. In this they paid for a girl named Rosa to go and actually visit all the people in her social network.

So here’s the thing, Social Media is not really that – it is not terribly social but it is media. And it is a media business. The effective consumption of Social Media has in my humble opinion already reached its inflection point where we can’t absorb any more. I am not talking about the untapped markets of Asia, Latin America or Africa – I am talking about the mature markets where we physically don’t have enough actual time available to consumer any more. According to the US Dept of Labour’s latest statistics http://www.bls.gov/news.release/atus.t08.htm – there is no such category as “doing nothing”. So the time available for the consumption of this Social Media has to come from somewhere. Check out Nielsen’s rating, and see how we spend our time… wasting away….

So this is why I hate all the overt and less than subtle exhortations to “follow me on Twitter” “be my friend on Facebook” why the heck would I want to do this. It has become de-rigeur that if you do not ask someone then you are not cool. What I hate is that the onus is on me to opt out. I have to READ the section where it tells me whether I have to opt in or out. No wonder people sign contracts that are so inspirationally stupid. Just ask yourself one question. How many times a day do you interact with an entity that you have a contractual obligation to and that you have signed away all your rights to??? Contrast that with years ago. People I am drowning in too much information. OK – Rant over – I feel better now.

But you get my point. We have too much "stuff" to consume. Alan Greenspan’s “Conspicuous Consumption” in the 90s can now be replaced by “Profligate Consumption of Social Media of little worth”. And the number of people pushing stuff at you has reached epic proportions.

From my side – barstool research – I actually counted the number of times I was asked if I wanted to engage in Social Media during one week The week of May 16th 2010. It was a staggering 167 times. (Emails, Tweets, Linked in, Plaxo, Facebook requests, invoices and other forms of communication). And this included 12 personal requests when I actually spoke to someone either in person or on the phone.

Now can you understand why I am having that Andy Rooney moment….