29 January 2011

Have We Reached The Bottom Of Airfares? Can We Stay There?

The USA Average fare domestically is about $230 in 2009 (the last full year of data). This is in my view the lowest it will ever be. The decline from ten years earlier dropped the fare from $300.

Why do I come to this conclusion? The cost of the ticket will now rise above this number as its not possible in my view to get a lower price into the equation. The unbundling of the price of the ticket also means that we will see some headline prices but we will never see a lower average fare than what it is now. But to keep the real prices low - we all have to be vigilant. Fighting to keep the real process open and continual focus on the removal of costs - particularly legacy and unnecessary consumer costs - must be maintained.

So spare a thought for the process of lowering the fares. The work of such luminaries as the late Sen Ted Kennedy, President Ford, and Alfred Kahn. Jimmy Carter gets the credit for seeing the process through to its conclusion. All of them deserve the credit.

Here is a nice little piece in Business Week/Bloomberg about the "good old days".

Frankly the noise over those who are complaining about the lack of transparency and the addition of fees need to just get a life. You my friends are living in a bygone era. Today's customer is SO MUCH smarter than you give them credit. They will find the lower price that suits them no matter what happens.

Thanks to the pioneers who went before us and created the environment for these low fares. For those unsung heroes in the airlines and in the various distribution outlets who enabled the lowering of airfare by taking cost out of the equation and finding innovative ways to promote and sell low cost - THANK YOU. For those of you who are fighting to preserve an outdated system that in fact does the opposite and raises fares through the use of obsolete technology and outmoded business practices - SHAME ON YOU. Particularly for cloaking your bad behaviour in the coat of consumer advocacy.


28 January 2011

Judge In Travelport vs AA Erred According TW's "Legal Briefs"

Travel Weekly USA has a column entitled Legal Briefs penned by Mark Pestronk - a veteran Travel Agent Advocacy Attorney. In the post dated Jan 27th 2011 he presents the case that the judge erred and he has an interesting conclusion that while "the case will continue, unless American files a motion for summary judgment to get the case thrown out, which will probably succeed, given the court's reasoning so far."

The mysteries of the American Legal System I find always fascinating.

If AA did file - then the case would leave so many unanswered questions that I think all of us would be disappointed.

However so far AA has not filed in this fashion and they seem focused on going through with the case.

Do read the piece - you can reach it by clicking on the link above.



Shhhhh Amadeus Having WebSite Problems

I thought the Professor's readers would get a little giggle out of this.

I was searching for some information and wanted the real source - here is the resulting message from Amadeus.

I do hope this isn't as a result of their having to put more resources into making money ;-)


2010 Hotels in USA - Still Pretty Much a Blood Bath

I had a look at the STR data for 2010. This single slide is pretty self explanatory. Click the link for the whole presentation.


Can be the best description for 2010.

2011 is shaping up to be a recovery but we are still a long way from home as this absolute data shows comparing 2007 vs 2010 and no accounting for inflation.

Not so good.


27 January 2011

Another PSS vendor without a customer

Add IBS to the list of PSS vendors who doesn't have a client. That list includes ITA and several others.

IBS has now lost its first and only Reservations system client - Virgin America to Sabre.

I have flown Virgin many times and have heard several of the agents using the system who came form other legacy airlines and used to using a larger system curse under their breath on the tool. That said apart from some early teething problems I never was adversely affected.

So lets see what will happen when VX becomes Sabres latest player. For sure they received a SWEET HEART deal


25 January 2011

Farewell Horizon/QX

The little airline that could and did will soon be consigned to history.

Another carrier who will disappear from our skies is Alaska Group Horizon Air.

Having flown on all of their planes from a Metro to the Canadairs (and some REALLY old F28s) here's to you Horizon. Farewell QX.

The good news is that they are promising to keep the logo college planes and also the free beer/wine in the afternoons.


24 January 2011

Twitter Revenue Starts Slowly

Finally that Ad model is starting to show some value.

Ad Revenues will be about $150 million this year (2011) however the non-US revenues are a very minor $11 million

So do the Europeans know something we dont know?


How Personal Are You In Your Online Messaging?

Dear Amazon User...

(After I had just signed up for their premium service)

Dear Customer...

Dear Air X Flyer

(after I just completed half a million miles)

And you don't think that hurts your brand. Er excuse me are we on the same planet?

Well now you had better start doing a lot more about your data quality. That means rolling up your sleeves and going through your customer database and cleaning it up. You will be amazed at how much you can learn

Its worth the time


Note To Social Media Mavens - Better Think ROI in 2011

OK here is a quick one for you.

In case you think that just because you "think" you are a social media "expert" that it will be enough to just put "Social" into your plans this year and get automatic approval. Guess again!

You had better make sure you have a very clear value proposition and use some pretty conventional metrics to demonstrate ROI.

Those of you who are already heavily involved in Social Media already know that. The vast majority of Newbies coming in this year (just because they have a Facebook account does not make you an expert!) will not know what hits them.

You have been warned


Social Ad Spending Growing Large

As a category - I find it hard to understand how Social Ad spending can add up to much.

Well seems I may be very wrong. Ad spending is projected to reach over $3 billion in 2011. To put that in relevance - that is 10% of Google's total revenue.

Hmmm this is getting very scary. Are we being spammed and we dont know it?

As my team is developing more and more tools for alternatives to conventional search - I can see it growing.

Its still scary though

Check out this report on the subject. I am not so sure I want to give Mr Zuckerberg any more than he already has.


Will Customer's Embrace LBS?

There has been a lot of talk about Location Based Services - LBS.

Frankly it can be appropriate but probably considered for service rather than push marketing. We all know what will happen if true LBS is openly enabled. Marketers will just spam the users. They always do.

Checkin - FourSquare et al is going to make this even worse in my view. Like all things it will become unmanageable.

Well enough about me - what do others say. Interesting report from eMarketer on the subject. I do agree it is more than just the checkin process. As with many things... context!

I cannot say I am as enthused as they seem to be

You be the judge


Touching Not Groping the Customer

Jan Carlson who was regarded as being a little ahead of his time when he ran SAS had this theory about providing a customer experience that was consistent at every touchpoint. So that whenever SAS touched a customer the customer felt special.

He even wrote a book in which case he described the touch point as a "Moment of Truth" about it. His famous presentation is on the web.

In today's web world - there are many more opportunities for touching the customer. And many more occasions when you will screw up.

Last year the Ash Cloud and the Inclement Weather forced the airlines to change what they do and how they do it. Not that these events were unique in themselves but how the airlines who have reduced their customer service personnel significantly in recent years needed to respond differently. AND better. As I have written before they have done a good job - at least they are getting better. Airlines are notoriously bad at this. Their customer service people act as if they are all knowing and frequently as I can attest - they have the wrong position.

Just last week - the (AF/KL owned) Cobalt team at LHR handling DL refused to fix a problem that was so patently the fault of the airline. Only when I insisted on getting the lone DL rep did we get a better result. And hats off to the DL supervisor who spent more than 20 mins fixing the problem caused by a simple mistake by a res agent.

This flies in the face of the current Delta Airlines ad campaign that talks about its great people. Yes WHEN its a Delta person. But a significant percentage of those "Moments of Truth" are NOT in the control of the airline itself. And boy is that obvious!

There is a good article on this topic of marketing to a customer at each and every touchpoint. Go to emarketer.

However here is a word of caution. Dont assume that just because you can - that the customer welcomes that moment of marketing.

Interestingly it seems that both Google's Chrome and Firefox browsers are competing with each other to remove personal information from browsing sessions.

Anonymous moments of truth... now there's a thought.


Boeing and Ryanair. Still Married?

Michael O’Leary and Ryanair are inseparable as personas.

They are one and the same. (Tony Ryan Who? – with apologies to the late good Doctor).

Never a person to mince a word or add nicety when an insult or an in your face comment would achieve the same. He is the complete antithesis of the Honey vs Vinegar approach. But FR faces some severe challenges on the horizon. There are few aircraft on order past 2012. So this is a pivotal year for the airline to determine its future. This analysis is based on the itnerviews given, the market current, the data available and – well like most analyses – a strong sense of a hunch.

Next Gen Boeing 737.
On the 737, McNerney has previously (in 2010) said Boeing executives will decide this year (2010) between re-engining and a new airplane. So far in 2011 we are hearing the same noise. Airbus' decision regarding its A320 won't bear much on that, he said.
"The No. 1 thing I want to know is: During what time frame we can get an all-new airplane done that our customers will pay for?" he said. "If that answer is 2025, then the case for re-engining strengthens. If the answer is 2020, no matter what Airbus does I think customers will wait for us." (Re-engined single-aisle airliners would be expected around 2016.)
One factor is that the 737 now accounts for a huge part of Boeing's order backlog, McNerney acknowledged. "I'd rather not put the backlog at risk twice unless we have to."
Responding to a moderator's comment that airlines are looking for direct operating cost savings or 15 or even 20 percent from a new jet, McNerney said: "I think that level or a little above is sort of the test that we're looking at for what the new airplane has to be so that it would be good enough, so there would be enough economics in it for us to share it with our customers." The development cost for a new airliner could exceed that of re-engining by by "a factor of four or five," he said
And what about this new design. Flight global opined that it could be the short stubby flying egg. http://www.flightglobal.com/blogs/flightblogger/2010/09/boeing-patent-may-provide-glim.html Others have speculated on a number of things but Boeing is stuck because the 737 core design cannot accommodate the new GTF type engines that are on offer for re-engining. The 17 inch clearance requirement makes anything other than a radical new undercarriage design (with its attendant costs of design and efficiency penalties) almost impossible. As an added distraction if you pay attention as a Boeing watcher – they acquired Summit in Montana. Summit has as one of its key knowledge in the creation of folding systems.

As we have seen from the NEO A320 the cost truly is a development package of about 20% of the cost of a brand new aircraft in BOEING and AIRBUS terms not necessarily in terms of what Bombardier, The Chinese and Japanese are going to spend on similar sized aircraft. Remember too that Boeing has a problem with the 787 in that the cost of the smaller aircraft in terms of capital to direct operating costs is making the 787-9 much more popular than its smaller sibling(s) with the 783 unlikely ever to see the light of day. The Achilles heel of the 787 is not actually at the top of the range its at the bottom. The benefit of the Airbus family is that while the A321 has not been a great seller its size has enabled efficiencies for those airline customers. IE just 2 aircraft types A330/A340/350 and A319-A321 size really does pay off in efficiency.

The Boeing Y1 and 737RS studies were based on certain assumptions about the GTF style of engine. This short term growth and being a new engine design the potential for longer term higher efficiencies and performance were enough to convince Airbus to proceed – after a lot of prodding from customers – with the A320 NEO derivative. As much an enhancement to the product line as the 737NG family was to the venerable 737 design.

So where does Michael O’Leary fit into this equation? Simply – his 300 plane order. Not to snub our noses at Delta’s reported 100-200 plane order or indeed Indigos 180 plane order – but 300 does kinda dwarf that.

Airbus now has a plane it can deliver in his timeframe and Boeing does not. Airbus can also demonstrate (courtesy of Air Berlin and Easyjet) comparable operating cost models for a single aircraft fleet vs a dual fleet. Further Airbus is in a catbird position because there is a quirk in Ryanair that would favour a fast transition out of the Boeing fleet into an All Airbus one. Ryanair disposes of a large quantity of its aircraft at the end of each year in sale or leases out to operators hungry for next gen aircraft at a reasonable price.

Ryanair does not give 2 hoots for the new Sky Interior. I am sure a few choice words were exhibited by MOL when the Boeing Salesman offered it to him.

Boeing Salesman (BS) to Michael O’Leary (MOL)

BS: Michael – have you seen our fabulous new Sky Interiors on the 737s?
MOL: Fuck off
BS: they are even fuel savings associated with this new design
MOL: Prove the ROI in 12 months
BS: Well the value is in customer service and improved passenger comfort
MOL: Tell that to Mrs O’Shaunessy when I tell her the ticket price went up 2 euros?
BS (Desperately): When the passengers are standing in the aisle waiting to pay their 1 euro for a trip to the lav – they wont be so unhappy…
MOL: Sonny – how much are you going to pay me to take this awful poncy lighting?
BS: Let me call you back….

Bottom line – Ryanair could change the market for new aircraft. An opportunity that has not escaped either the Chinese (C919), Bombardier (Cxx) and of course the two traditional players.

They had better get the pencils really sharp. Latest word is that Airbus and FR have gone cool. But I never believe that stuff


23 January 2011

A View From The Trenches

PROFESSOR SABENA NOTE: I have called on the notable voice of Professor Murray to give his view on Direct Connect and what it means to him as an independent agent serving the business community. It is not often we have a guest columnist and I am grateful to him for his contribution. The words here are his own and I present them here for your edification.

These are his words.

I have been asked to contribute to this column on the subject of the value of Direct Connect to the consumer. Professor Sabena has been making the case that Direct Connect is not as bad as perhaps it has been made out to be. I am beginning to see a different picture. It may be helpful, if this project is to be understood by the end users (ie the likes of me who travail as the independent agents) if we start by dropping the term "direct connect". It may be correct but it implies that we would be linked to AA and AA alone. Perhaps something like "Universal Itinerary Source"... or something which implies a much broader selection, could be considered.

Please remember that the end user (Yup, me again) treat our traditional GDS like a car. We know how to drive it, but what actually sits under the bonnet (hood) is not something we concern ourselves with. Mechanics (technology geeks like Professor Sabena!) fix that bit. So, if your airline clients' want to put in a new engine, all well and good, but please don't scare the living daylights out of all us end users by suggesting our for-many-years-reliable diesel is about to be replaced by a couple of pedals... which may have some bearing on why the TMC's (Business Travel Agents) are beginning to get a tad hot under the collar.

You can do the basics, accounts, reporting, BSP, ticketing and such. So far so good. 6 airlines is not enough. You need all airlines or a way to get to a good percentage of them. More than that, I need to have the feeling that I have not missed something, which, in the present climate, is a feeling which grows greater day by day.

Presently, for booking, I need to use my traditional GDS, I then need to double check using Expedia or Travelocity (I am not, here, talking about simple point to point stuff) as a "crib sheet" for CAT35 fares, with the occasional input of Google Earth, if I am not too sure where a place is (last used to locate JUB!) I then need in some cases to have a quick check on the likes of meta search companies like kayak and skyscanner in case there is a lurking low cost carrier which I may have missed.

Having done that, I can take my crib sheet and replicate that on my GDS - and then play about with the results (sometimes expedia and others have a rather fanciful view of what is worth saving money on... a trip that takes, direct, say, 5 hours is not worth spending 22 hours on, to save £30). With this information I can then advise my client which itinerary represents best value (which is NOT the same as "cheapest") for their intended trip.

By trip, I mean such itineraries as LHR LOS ABJ FNA YAO LHR or LHR ASB DYU TAS LHR (and I think Baku was in their somewhere, as well) or LHR x/MIA BZE HAV (!) POP LHR or simply LHR LAX LIM LHR (and try to get LAX to LIM at a reasonable price - actually I did it on CO but there was a lot of bouncing about) or LHR THR KBL LHR (Yes! really!) These itineraries are a real test of a system (not to mention the agent and I am sure other TMC's have similar even more complicated stuff) . Once the itinerary is sorted, I need to be able to work on fares and how to ticket.

You will need to be able to offer, as you say, the CAT35 fares (which may or may not be an easy task. I can think of a few fare sources who may not be as easy as one thinks, to encourage to put their fares on) and I need to be able to juggle things around. Note the "I" here. That's "I" need to juggle things around. I don't want a system that suggests how I juggle things around, or a system that fiddles about making me point and click my way around. As you say, raw data is best, coupled with a very simple way of getting about that data. Perhaps here, in a strange way, the last thing any agent wants is "functionality". The point and click version of nearly all GDS systems never took off... can't think why!

Not forgetting, of course, hotels, car hire and auxillary segments (can you fit in Eurostar and continental rail?) and of course a www.virtuallythere.com or www.checkmytrip.com type interface for the clients (now updated with an i-bore app, or Tripit no doubt) but certainly the information all download-able to any soft fruit termed or other communication device.

Once any journey is underway, if there are any hiccups, I need to see what the airline has done, messages, action and the like. I need to be able to get into a booking and amend, re-issue, re-validate and so on in the certain knowledge that what I have done will be made to happen and what an airline has done, I am made to see.

As a business agent, I take the view that my clients pay their travelling executives to land them multi million dollar deals, they do not pay them a lot of money to work out how to get from A to B (and/ or C, D and E as well). As I say to them: "You worry about landing the deal, I will worry about getting you to the right office, well and refreshed, at the right time". I need to be sure - and I could not give a rancid roadkilled rodent what AA or anyone else says - that I have all the above in my reservation system "package"; that it is 150% accurate and more robust than a brick house - before I would even think of changing.

Now, if someone out there can provide me better tools, I can do a better job - and they are onto a winner, I would venture.

Bon chance!

Bad Search and Not Fair Search. Quality and Reference Point Matters

There has been a lot of talk about consumer fair search and the value of the travel agent in the mix.

The rhetoric is loud and raucous on both sides. Let me make one thing completely clear - the Professor is WHOLE HEARTED in his support of the agency community. I firmly believe that the neutral channel is viable - indeed essential - in today's environment. However where I differ from the so called Open Allies Group is that I believe that the tools provided into the market are bad - IE Legacy GDS solutions are just inadequate and fail to provide the consumer choice. The old story of GARBAGE IN GARBAGE OUT applies no more clearly than in Travel Agent Search Tools from the legacy GDSs.

The value an agent is supposed to bring to the consumer is that he can interpret the possible results and help the consumer to make the best choice possible. But what if the tools he uses are not that good? Is the consumer then best served?

To illustrate my point here are 3 different results sets from Delta.com, Orbitz and LUTE Technologies Agent tool YuFares powered by Everbread.

The query is the same and should therefore represent the same basic result no matter what. My designated query here was as follows:

Seattle to London - simple roundtrip
Outbound Feb 6th
Inbound March 18th
Price led search

However the results shown here are constrained by certain parameters.

Let's look at the airline direct result first. Delta.com - I use this site a lot because I fly DL a lot. However I know the constraints on the site. For example in this display I want see what I can get. There are 20 results. The shortest elapsed time in the 20 results that Delta.com returned to me was 23 hour and 45 mins. The longest time was 35 hours 17 mins with a 22 hour and 10 min layover. The price range of the results was from $731.70 to $758.70

NOTE I believe that Delta uses the Travelport search system. Travelport also owns Galileo and Worldspan and is currently embroiled in a legal fight with American Airlines.

Next I looked at Orbitz. This is the master Orbitz site in the USA. Same search parameters. After getting the master display - I used the Delta only results - there are considerably more possibilities that I could have chosen. According to Orbitz it gave me 24 Delta specific choices (including code shares and interline with partner results -AF and KL). The time line ranged from 12 hours 30 to 15 hours 20 and the price ranged from $756 to $1934.

Note: I believe that Orbitz uses the ITA Software engine. ITA Software is involved in a takeover by Google. Orbitz is embroiled in a fight with AA and is 48% owned by Travelport.

So finally I looked at one of our clients LUTE Technologies whose product YuFares uses the Everbread engine for B2B and B2C customers. The version I used was open and used the B2C standard interface. I will ignore that B2B Agent version as this found fares cheaper than the previous sites with some complexity. While the complexity of the trip was within the boundaries of what the other sites found and would be normal for an agent to offer a customer - I thought it would be fairer to use the untuned version as the results were within acceptable boundaries.

The system returned 111 results of which it displayed 15. The timeline range was from 12 hours 30 to 16 hours. The price range was from $769 to $887.

Note: I investigated the results for each of the hosts and I can see that Worldspan which powers Orbitz actually constructs a lower fare than the LUTE results. For the LUTE results - the engine can choose from any GDS - so I selected a different GDS to highlight the difference. In this case I used the Amadeus GDS for availability options. When switching the engine to the different host - LUTE and Orbitz match. I indeed checked this on ITA's own mobile app and it too confirmed the results.

The clear conclusion one can draw is that for a simple search the results can vary rapidly. The fact that Delta seems to use an inferior tool for its search results is something that Delta will have to address as they go through the process of upgrading its site. For Orbitz (ITA) and the LUTE Technologies (Everbread) engines - it can be seen that the consumer benefits from a better tool.

Based on the results: -

Who had the cheapest fare?
The airline

Who had the optimized search?
Orbitz and LUTE tie with a nudge to Orbitz for the cheaper fare using Worldspan (See note above on host systems).

Who had the best elapsed flight timea?
LUTE and Orbitz tie

Who returned the fastest result?
Lute by a hair. Orbitz near enough as a tie. Airline result was much slower.

Clearly if the legacy GDS is the system powering these results then one has to ask - what is fair search?

If you evaluate the consumer position would the consumer actually make a decision that has him sitting at an airport for nearly 24 hours to save a whole $23.70. That would easily get consumed in a few trips to the airport junk food court.

The possible results from availability differences are clear. If you use the GDS tools then you are likely to see different results as each GDS is constrained in what it can provide as a set of results. It is not that the answers are not there - it is that the GDS cannot display all the spectrum of possible answers. Newer technologies such as ITA and the YuFares powered results clearly demonstrate this. The brute force solution of lowest fare no matter what shows that there is a subtle case for displaying results based on business rules. The legacy GDSs cannot do that.

I hope that this adds to the debate and puts the issues of search in context. In my view search is not a simple thing and by now anyone who has taken more than 5 minutes to assess the situation must understand that Available Airfare search is a pretty hard and complex thing. From a consumer perspective with all this complexity - Google making an entrance can be seen as positive.

For the consumer the issue of search is cannot be just about price. But making an informed decision in a transparent manner is not trivial. The chorus of those who say that the legacy GDS is the be all and end all needs to get real about the issue. The issue of Direct Connect should be about quality of result and service to the consumer. Sadly that seems to have been forgotten. All these organizations claiming that legacy GDS powered results are essential to the framework of freedom of choice is pure hogwash. I don't think there is any 1950s/60s technology that should - or should I say COULD - ever make that claim. GDSs can do somethings really well. Search just happens not to be one of them.

So what do you think?

Don't Worry Expedia Has Your Back - Maybe...

Gotta love those guys at Expedia.

They are really looking out for me - they just got me my best deal EVER.

Hey Expedia - you are so right - Where you buy matters.

Oh and in case you dont see it - Expedia got me a great discount on this hotel in Miami

ZERO percent savings.