OK listen up chaps - time to learn the new Lexicon for 2009.
Nominated for the award of the word of the Year 2008 - Staycation will be joined by some new siblings.
At the height of the dot com boom we had Extreme Vacations - very popular. Skydiving off Everest, Spending weeks in an underwater hotel... etc etc.
As Wall Street got bigger and more derivative so did their vacation habits. We had 6 Star Luxecation. Exotic locales and all top notch service. Dubai arrived on the map with the most superlative resorts.
We have even seen the Social Vacation with a give back to the community such as building houses for Habitat for Humanity.
So for 2009 I would like to introduce the new watchword in Holidays.
The Nocation
Unlike the Staycation (qv) where the consumer uses no long distance transport, the notable characteristics of the Nocation (also known as the Naycation) are for men - not shaving - the same for women. Kids are allowed to do what they can however using up too much electricity for Guitar Hero is discouraged. Other notable Nocation activities include:
Visiting Garage Sales
Polishing the SUV while it has a for sale sign on it
Visiting Home Depot and staying for the free in store seminars
Trips to The Library during Amnesty days
Days out to Value Village and Thrift Stores as a way to understand the economy
10% of your day is spent on Craig's list while another 10% is deciding what items in your lockup storage can be disposed of on Craigs list.
5% of your time is spent looking for the missing porn on Craigslist
So far no word if there is a Madoff derivative fund for Nocationers.
Cheers
31 December 2008
Whining Northwest wants SEA-PEK delayed
Northwest Airlines was very keen to win the Seattle to Beijing route when it was first mooted. Back then there was competition from even Maxjet. Fast forward to today and Hainan Airways has been flying the route for about 6 months and getting reasonable loads on a 3 to 4 flights a day (A330) rotation set.
Now NW wants to delay its flight but to keep the route.
As I have said many times before the rule should be use it or lose it. (I think that is exactly what the legislation says). But NW's new parent having filed for several new routes that it doesn't want to fly in 2009 - is trying to have its cake and eat it too.
Fair?
You be the judge
Cheers
Now NW wants to delay its flight but to keep the route.
As I have said many times before the rule should be use it or lose it. (I think that is exactly what the legislation says). But NW's new parent having filed for several new routes that it doesn't want to fly in 2009 - is trying to have its cake and eat it too.
Fair?
You be the judge
Cheers
30 December 2008
Psst Want A Free Steak Dinner On Southwest?
In the category of sure win bets - WN CEO Gary Kelly is offering a steak dinner to anyone who can prove that Southwest Airlines does not carry more domestic business travelers than any U.S. carrier.
Southwest Airlines' CEO thinks this is a sure fire win and that he'll never have to pay up. So since the Professor's readers are an ornery lot - I throw down the gauntlet and I will supplement it with a bottle of wine - if anyone does!
Actually its going to be pretty hard because there are few ways to prove him wrong because most airlines don't know the real purposes of many customers' trips. However I think its still possible. With WN the largest domestic airline at well over 100 million trips, Kelly maintains that internal research shows the airline is already No. 1 in US domestic business travel. He is banking on Southwest to capture even more of the business-travel market in 2009. To accomplish that, he's doing some heavy tinkering with a business model that has kept the airline profitable for an unprecedented 35 consecutive years.
However - the end of the egalitarian model that we predicted in 2008 and a move to hybridization does stand the risk of alienating some of the existing customer base. But this will have little impact on WN's growth as the other airlines keep cutting their US domestic ops.
In my opinion this is leading to a large hole in the US market for a next gen LCC to capture trunk and regional business in primary and secondary markets. Actually the opportunity is growing so fast that there is a chance for more than one. The reduction of capacity over the last 12 months is big enough to allow a new airline to build a single hub based operation the size of Alaska Airlines.
Think about it.
Oh yes... and call me when you are having that Steak Dinner - I want to be there just to watch and buy the wine for the two of you...
Cheers
Southwest Airlines' CEO thinks this is a sure fire win and that he'll never have to pay up. So since the Professor's readers are an ornery lot - I throw down the gauntlet and I will supplement it with a bottle of wine - if anyone does!
Actually its going to be pretty hard because there are few ways to prove him wrong because most airlines don't know the real purposes of many customers' trips. However I think its still possible. With WN the largest domestic airline at well over 100 million trips, Kelly maintains that internal research shows the airline is already No. 1 in US domestic business travel. He is banking on Southwest to capture even more of the business-travel market in 2009. To accomplish that, he's doing some heavy tinkering with a business model that has kept the airline profitable for an unprecedented 35 consecutive years.
However - the end of the egalitarian model that we predicted in 2008 and a move to hybridization does stand the risk of alienating some of the existing customer base. But this will have little impact on WN's growth as the other airlines keep cutting their US domestic ops.
In my opinion this is leading to a large hole in the US market for a next gen LCC to capture trunk and regional business in primary and secondary markets. Actually the opportunity is growing so fast that there is a chance for more than one. The reduction of capacity over the last 12 months is big enough to allow a new airline to build a single hub based operation the size of Alaska Airlines.
Think about it.
Oh yes... and call me when you are having that Steak Dinner - I want to be there just to watch and buy the wine for the two of you...
Cheers
29 December 2008
Southwest - Pay The Fine And Get On With It
Southwest is still fighting the fine it has imposed on it for operating approx one thousand flights with aircraft that had not been properly inspected. The FAA in a type of witch hunt has already assessed a fine of $10 Million that Southwest said first it needed more time to pay - now is saying it wont pay and has resorted to hiring lawyers instead.
This is a bad precedent for the industry. So Mr Kelly and crew - pay the fine and just get over it. It would be best that you address the problems - which I am sure you are. But fighting this sets a bad tone that you will have hanging over your head. If you win what will you gain? If you lose it will be the end of a good relationship.
you can easily afford the cash - just do it.
This is my opinion
This is a bad precedent for the industry. So Mr Kelly and crew - pay the fine and just get over it. It would be best that you address the problems - which I am sure you are. But fighting this sets a bad tone that you will have hanging over your head. If you win what will you gain? If you lose it will be the end of a good relationship.
you can easily afford the cash - just do it.
This is my opinion
Part 3 - 2009 a Fantasy in Many Parts?
2009 Predictions, Prognostications and Other Views into the Future – Part III
So in my last part of the year in review – lets look into the future for the next 12 months. Its not pretty.
Let’s start at the top and look at the world in general. 2009 will be a Challenge. There is no easy way to look at it. The Recession will be longer and deeper than anyone ever imagined. We do not see any improvement other than a slowing of the decline until Q3. This means that we have an awful Q1 to look forward to. There will be continuing layoffs and cutbacks. We shall see other programs (such as Delta’s) offering early retirement to large swaths of the Aviation, Travel and Tourism community.
Conflict on Open Skies will emerge between the EU who will push for more liberalization and the USA who will question the advantages. With the current round of Open Skies not showing much advantage to the US carriers – there is going to be a lot more reticence with the new Administration to open the US market. So I would see that the chances for advancement will be slow in that arena.
On the airline front, there will be a new battle for supremacy in the skies – LH will be fighting to absorb what they have already ingested while AF/KL and BA will get feisty. The biggest prize on LH’s radar is SK currently one of the sickest in Europe. Their ability to retain their independence is highly questionable. While they get sicker – Norwegian will get stronger. The battle in the Southern part of Europe will see some minor skirmishes occurring (in order of importance) Iberia, Alitalia and Olympic. The standoff between IB and BA will not progress very far unless BA backs down from its partial high horse. The collapse of the pound against the Euros and even worse against the dollar makes the deal a lot more expensive. Alitalia will continue to be long in recovery. Whether it is off life support yet is open to debate. But we will see a strong Aeroflot as well as the big 3 take turns at saying they do/do not want the Italian basket case. If the Etihad + Olympic deal goes through we should see Qatar and Emirates look at some European airlines. Could there be a Virgin + a GCC airline marriage? Could be possible. In Asia I see a great degree of sickness continuing at the Chinese mainland airlines. Even CX will be under pressure as the pivot of mainland access moves to Taiwan. For Singapore airlines the current climate will provide them with some relief as the Indian Airlines struggle to consolidate their expansion and will likely retrench (as Kingfisher has) as well as form groups.
Sick watch for the year comes to the following: Alitalia (again), SAS (struggling), United (aging ungracefully), Virgin Blue (in search of new direction), Thai Airways (suffering with the collapse of the Thai market), Chinese Airlines (all of them need significant bailouts), Indian Airlines (the depressed economy and the withdrawal of outsourcing contracts from India will see a downturn), Mesa Air Group (how these guys survive is a feat of wonder) and other ACMI/contract carriers. I see that there will be at least one mega merger and/or collapse during 2009. However those carriers who are well managed will emerge stronger for 2010.
For the LCC market RyanAir and Easyjet continue to grow albeit at a more modest pace. Ryanair will look for longer haul activity…. Will Air Berlin turn the corner? The gap between the successful LCCs and the also rans will widen. In the Americas market expect to see the confederation of LCCs (Westjet, Southwest and Volaris) perhaps add another member (Gol?).
The Alliances will face major challenges to justify their existence. The grouping by certain key players will make the Alliances less relevant. Look for at least one major defection.
ATC and Airways performance will improve although governments will not be looking to spend more on these infrastructure projects except perhaps for the USA who is in dire need of good direction and investment – some Stimulus package investment will go here in order for Obama to meet his election pledges. The real improvement will come in the form of less traffic. The danger of VLJs has receded for the near and mid term so the FAA can focus on a reasonable plan.
More fall out from Boeing and Airbus delays – fortunately for them their order books are huge. 2008 will go down as the year of the downturn in the order cycle. Look for 2009 barely to add to the order book tally with many delays and cancellations. Airbus will find quite a few people looking at the A350XWB as the later customers for the smaller 787s look for upsizing and indeed the possibility of earlier delivery positions. Boeing’s short term cash flow may have some hiccoughs in the new year but nothing major. Sentiment will probably flow towards Airbus unless the Unions cause more problems. The 787 WILL FLY in 2009 however it will be later than even the current projections.
Oil – Ah the big wild card. It will rise modestly – project 2009 to end with oil in the $70s-90s per barrel level. Hedges will start to right themselves by mid year. Look for China to stockpile oil early which will drive up oil from the current low numbers. Sadly the grandiose talk of alternative energy will die away unless there is a mandated form of taxation to fund new oil replacement projects.
Being Green will not be as strong as it could have been – but it will be a formal part of everyone’s agenda. Let’s just hope that this is more than the lip service we have seen in the past. We all need to move first to energy neutrality and then to a zero footprint impact. For travel this will be hard but it is achievable. We should look for more replacement and care.
In the area of distribution and product marketing, I believe that Distribution faces significant challenges. For many years I have said that the Distribution Systems are obsolescent. The locked in nature of the GDS and the commercial and technology platforms will be eroded. We face a triple witching hour for the market in Q3/4 with the GDS/PCAs up for renewal. Initiatives such as LH’s PFP program will have significant impact and if successful in Germany will spread out rapidly. The GDS and airlines will unbundle their products which in turn will result in greater evaluation of alternative channels and platforms. The airlines focus on Unbundling will not be a happy result although they will continue to look at this as the savior in 2009. More unbundling and less happy customers will only become apparent in 2010 but the backlash will be significant.
In Technology – the OTA at 10 – it is hard to think that the Open Travel Alliance was formed 10 years ago. What next for the travel industry will be a critical question that many will ponder (The Professor included). My sense is that innovation will come from some unexpected quarters. We will see that the big project solution to Airlines PSS next gen systems will be viewed with skepticism following the less than fast implementations of Altea and CITP. Cloud Computing as a platform will take hold with more and more ATT businesses renting applications (SaaS) so they can focus on their core businesses. One thing is for certain – change will be constant and more fragmentation not less will be the order of the day. Controlling your own destiny even with rented apps will require more tech savvy people at every level. Big Consulting companies will face a pinch and cut back their staff as mega projects are postponed and cancelled in favor or interim and stopgap measures. Expertise will still be a strong currency.
In other sectors of ATT – we see that the Hotel companies will suffer disproportionally than the airlines. And there will be no one to bail them out. Look for massive layoffs worldwide in the Hotel and Restaurant sector labor force. Particularly hard hit will be some of the upscale 5 star businesses. For example the mega projects in Las Vegas, Macau and the UAE will start to look very risky as the worldwide recession takes its toll. Too much supply chasing too few customers.
On the tourism side we see that Hawaii and Mexico will be badly hit. Ditto Thailand. Macau suffers due to too rapid an expansion. Transatlantic travel will be flat at best. The Cruise industry will be affected by the double whammy of traffic declines and lack of sufficient air lift to the ships/ports particularly in the USA. China’s engine of growth for Asia Pacific tourism will stay depressed.
One guarantee – people will be booking later so the market will become highly dynamic. This will boost meta-search and real search companies. Consumers will get smarter and will definitely spend more time searching. Personally I don’t hold the view that there will be a shift to agents. Rather we will see a slowing of the online adoption but more likely the channel form will be less relevant. Woe betide anyone who doesn’t understand the transparency of the web. And yes Facebook will continue to grow.
So here’s to a great 2009 – just keep your head down and like a pig searching for truffles – you will find that there are many opportunities – just make sure you have the right tools, the right attitude and definitely the right friends to help you on the way.
Cheers!
So in my last part of the year in review – lets look into the future for the next 12 months. Its not pretty.
Let’s start at the top and look at the world in general. 2009 will be a Challenge. There is no easy way to look at it. The Recession will be longer and deeper than anyone ever imagined. We do not see any improvement other than a slowing of the decline until Q3. This means that we have an awful Q1 to look forward to. There will be continuing layoffs and cutbacks. We shall see other programs (such as Delta’s) offering early retirement to large swaths of the Aviation, Travel and Tourism community.
Conflict on Open Skies will emerge between the EU who will push for more liberalization and the USA who will question the advantages. With the current round of Open Skies not showing much advantage to the US carriers – there is going to be a lot more reticence with the new Administration to open the US market. So I would see that the chances for advancement will be slow in that arena.
On the airline front, there will be a new battle for supremacy in the skies – LH will be fighting to absorb what they have already ingested while AF/KL and BA will get feisty. The biggest prize on LH’s radar is SK currently one of the sickest in Europe. Their ability to retain their independence is highly questionable. While they get sicker – Norwegian will get stronger. The battle in the Southern part of Europe will see some minor skirmishes occurring (in order of importance) Iberia, Alitalia and Olympic. The standoff between IB and BA will not progress very far unless BA backs down from its partial high horse. The collapse of the pound against the Euros and even worse against the dollar makes the deal a lot more expensive. Alitalia will continue to be long in recovery. Whether it is off life support yet is open to debate. But we will see a strong Aeroflot as well as the big 3 take turns at saying they do/do not want the Italian basket case. If the Etihad + Olympic deal goes through we should see Qatar and Emirates look at some European airlines. Could there be a Virgin + a GCC airline marriage? Could be possible. In Asia I see a great degree of sickness continuing at the Chinese mainland airlines. Even CX will be under pressure as the pivot of mainland access moves to Taiwan. For Singapore airlines the current climate will provide them with some relief as the Indian Airlines struggle to consolidate their expansion and will likely retrench (as Kingfisher has) as well as form groups.
Sick watch for the year comes to the following: Alitalia (again), SAS (struggling), United (aging ungracefully), Virgin Blue (in search of new direction), Thai Airways (suffering with the collapse of the Thai market), Chinese Airlines (all of them need significant bailouts), Indian Airlines (the depressed economy and the withdrawal of outsourcing contracts from India will see a downturn), Mesa Air Group (how these guys survive is a feat of wonder) and other ACMI/contract carriers. I see that there will be at least one mega merger and/or collapse during 2009. However those carriers who are well managed will emerge stronger for 2010.
For the LCC market RyanAir and Easyjet continue to grow albeit at a more modest pace. Ryanair will look for longer haul activity…. Will Air Berlin turn the corner? The gap between the successful LCCs and the also rans will widen. In the Americas market expect to see the confederation of LCCs (Westjet, Southwest and Volaris) perhaps add another member (Gol?).
The Alliances will face major challenges to justify their existence. The grouping by certain key players will make the Alliances less relevant. Look for at least one major defection.
ATC and Airways performance will improve although governments will not be looking to spend more on these infrastructure projects except perhaps for the USA who is in dire need of good direction and investment – some Stimulus package investment will go here in order for Obama to meet his election pledges. The real improvement will come in the form of less traffic. The danger of VLJs has receded for the near and mid term so the FAA can focus on a reasonable plan.
More fall out from Boeing and Airbus delays – fortunately for them their order books are huge. 2008 will go down as the year of the downturn in the order cycle. Look for 2009 barely to add to the order book tally with many delays and cancellations. Airbus will find quite a few people looking at the A350XWB as the later customers for the smaller 787s look for upsizing and indeed the possibility of earlier delivery positions. Boeing’s short term cash flow may have some hiccoughs in the new year but nothing major. Sentiment will probably flow towards Airbus unless the Unions cause more problems. The 787 WILL FLY in 2009 however it will be later than even the current projections.
Oil – Ah the big wild card. It will rise modestly – project 2009 to end with oil in the $70s-90s per barrel level. Hedges will start to right themselves by mid year. Look for China to stockpile oil early which will drive up oil from the current low numbers. Sadly the grandiose talk of alternative energy will die away unless there is a mandated form of taxation to fund new oil replacement projects.
Being Green will not be as strong as it could have been – but it will be a formal part of everyone’s agenda. Let’s just hope that this is more than the lip service we have seen in the past. We all need to move first to energy neutrality and then to a zero footprint impact. For travel this will be hard but it is achievable. We should look for more replacement and care.
In the area of distribution and product marketing, I believe that Distribution faces significant challenges. For many years I have said that the Distribution Systems are obsolescent. The locked in nature of the GDS and the commercial and technology platforms will be eroded. We face a triple witching hour for the market in Q3/4 with the GDS/PCAs up for renewal. Initiatives such as LH’s PFP program will have significant impact and if successful in Germany will spread out rapidly. The GDS and airlines will unbundle their products which in turn will result in greater evaluation of alternative channels and platforms. The airlines focus on Unbundling will not be a happy result although they will continue to look at this as the savior in 2009. More unbundling and less happy customers will only become apparent in 2010 but the backlash will be significant.
In Technology – the OTA at 10 – it is hard to think that the Open Travel Alliance was formed 10 years ago. What next for the travel industry will be a critical question that many will ponder (The Professor included). My sense is that innovation will come from some unexpected quarters. We will see that the big project solution to Airlines PSS next gen systems will be viewed with skepticism following the less than fast implementations of Altea and CITP. Cloud Computing as a platform will take hold with more and more ATT businesses renting applications (SaaS) so they can focus on their core businesses. One thing is for certain – change will be constant and more fragmentation not less will be the order of the day. Controlling your own destiny even with rented apps will require more tech savvy people at every level. Big Consulting companies will face a pinch and cut back their staff as mega projects are postponed and cancelled in favor or interim and stopgap measures. Expertise will still be a strong currency.
In other sectors of ATT – we see that the Hotel companies will suffer disproportionally than the airlines. And there will be no one to bail them out. Look for massive layoffs worldwide in the Hotel and Restaurant sector labor force. Particularly hard hit will be some of the upscale 5 star businesses. For example the mega projects in Las Vegas, Macau and the UAE will start to look very risky as the worldwide recession takes its toll. Too much supply chasing too few customers.
On the tourism side we see that Hawaii and Mexico will be badly hit. Ditto Thailand. Macau suffers due to too rapid an expansion. Transatlantic travel will be flat at best. The Cruise industry will be affected by the double whammy of traffic declines and lack of sufficient air lift to the ships/ports particularly in the USA. China’s engine of growth for Asia Pacific tourism will stay depressed.
One guarantee – people will be booking later so the market will become highly dynamic. This will boost meta-search and real search companies. Consumers will get smarter and will definitely spend more time searching. Personally I don’t hold the view that there will be a shift to agents. Rather we will see a slowing of the online adoption but more likely the channel form will be less relevant. Woe betide anyone who doesn’t understand the transparency of the web. And yes Facebook will continue to grow.
So here’s to a great 2009 – just keep your head down and like a pig searching for truffles – you will find that there are many opportunities – just make sure you have the right tools, the right attitude and definitely the right friends to help you on the way.
Cheers!
28 December 2008
The Saga of my Bag - a Study in Frustration
Since this is the holiday season and we all need some frivolity here is a great story.
This is a post I once wanted to write but never got around to it.
So here it is in all its glory - the story of my globetrotting bag and some wise lessons learned.
Some of you may have noticed that the blog has been relatively quiet over the last few weeks. Just pressure of work rather than subject material. There certainly has been enough happenings of late.
But the one thing that has occupied my waking hours has been the strange case of the lost bag. My bag. This will read like a Shaggy Dog story. But profit from it because you will learn and be able to minimize the disruption to your life.
The bag’s journey
I was on a Round the World itinerary that took in Europe, CIS, Middle East, Asia and then returned home. I have actually flown many times on a RTW using all 3 of the major alliances. They represent tremendous value and are to be highly recommended. This time it was a Travel Agency issued BA RTW Business Class ticket.
Its important to know I am not making this difficult. I have a bag that does meet the needs of the passenger cabin requirements and have taken it with me on many occasions. However in Moscow on my way to Munich via Helsinki on Finnair (AY)– my life became unstuck. Despite my entreaties to the contrary some old holdover from the Stalinist era had decided that I wasn’t going to take the bag on the plane – business class or no. So tagged with an SU baggage number I waved good bye with that sinking feeling when you know Mr Murphy was going to kidnap my bag. It should have been ok. Finnair should be a fine airline, relatively small and accomplished. Their Hub in Helsinki is compact and efficient while however creaking at the seams with expansion. Finnair is profitable at the moment. A 2 hour layover should have been enough time (well within designated MCT parameters) for them to safely transfer my bag.
On arrival at Munich sadly no bag. So joining 9 of my fellow passengers – I waited for 30 minutes to file a lost bag report. Finnair has outsourced its bags like many airlines. Swissport handles AY in Munich. Just my luck to get another ultra rule following German lady. The sin of omission rather than that of commission has always been an airline artform. In this case the usual “call this number and we will let you know.” Said the passenger “but I am leaving tomorrow morning to LHR – what are the chances …” There was no volunteering of information. Only after insisting she tell me the schedule of possible flights from HEL and then realizing that I had only 1 chance to be reunited with my bag – I set off into the sunset with only my laptop bag.
It was still possible to contact HEL so I sat on the phone … and waited for 2 x 45 mins. (They shut me off the first time). Fortunately I had Skype so that made the cost bearable (1 cent vs $1 a minute. Only to be told that the baggage people would not be able to help me – they (yet another outsource) only handled HEL destined bags. Oh yes and that famous telephone number I was supposed to call? Well it was a voicemail box telling me that they were all busy helping other (presumably lost souls) passengers and they could not come to the phone but I could leave a message. Beep – we are sorry to inform you that this mailbox is full Goodbye!
The next morning (I do so love washing my underwear in the sink) I arrived at the airport to try and recover the bag. Swissport actually started to be a little nicer. The weekend crew were a lot more helpful. But still no bag and no sign thereof. However now I had some arming of good data and a plan. They even gave me a nice hoe bag with a T shirt (Finnair tastefully written on the left sleeve) and some toiletries. I could have done with it the night before.
So sadly I bid MUC goodbye and headed via BA to London. Suffice to say there was nothing better going on there. So this time I had to think about getting something better to wear. However 80 Euros will not replace your wardrobe especially if you are going for a business meeting in Dubai the next day. I managed to collect yet another lost bag kit from BA – this time the T shirt had no identifiable marks. BA is more careful. Perhaps that’s why they are more experienced. Having lost 1 million bags in 2006 they should be pretty good at this sort of thing by now.
Calculating that the best place for us to hook up – I sent the request to have my bag delivered to Singapore where I would be for 4 days. On arrival there 3 days later – I was saddened to learn that my file had been closed and STILL no sign of the bag. Plus Finnair in MUC had sent it to a non-existent station manager at Singapore. (Finnair had just closed their online station there. So technically there was no one available to receive the bag shouldit follow the rules and turn up magically. Arriving on Cathay from Dubai via Hing Kong the helpful people in SIN wanted to file a new report. So this time a CX listed “manual and therefore unofficial” report (even though CX had absolutely nothing to do with this) was duly filed. “as a courtesy”.
In order to comply with the Montreal Convention (see sidebar) you have to file your lost bag report within one week. So I duly send an email with all the prerequisite information to an address inside AY. Knowing full well the only reason to do this was to have a record of having met the conditions. (I was wrong – more on this later).
So sadly after successful meetings in Singapore over (still with my 80 Euros of replacement clothing and borrowed shoes) I left to return home. Stopping briefly at baggage handling to make the “unofficial report” into a full time formal “official” report, I now had a total of 4 tracking numbers. 2x AY, and 2 x CX. For the next leg – I flew JAL to Vancouver via Narita. At each stage I chased the bag to whomever could help me. By now the file had reached several pages.
On arrival back in Seattle I opened my email to find – surprise – actually a note from a REAL person in Helsinki who was willing to help me and was on the mission to find my bag. By now there are multiple parties looking out for the bag. Swissport in Munich, BA in London, Cathay Pacific via CATS in Singapore, AY Baggage central in Helsinki,BA in Seattle and I am sure there were others – the list of addresses who got the message was growing exponentially. I was beginning to think my bag could be come the Kevin Bacon of luggage And don’t forget 3 sets of bag tracers on the SITA worldtracer system.
Exactly one week later and 2 weeks after loosing the bag I returned to SEA from CPH to get a message from SQ Baggage in Singapore that they had dispatched the bag the day before via United and it should be in their baggage area. I raised out of customs over to United – my tracking numbers burned in my head and quetly asked the baggage person if the bag was there. “Well it says its here. But we cant reach you because there isn’t a US phone number in here. But lets see ifwe can find it. My heart literally pounding – I follow the baggage supervisor. Yes there it was. Festooned with baggage reports – it was actually all intact. The labels were all there and the tags. Nope no reason why they misconnected.
So now what did I learn and what information can I impart to you
BEFORE YOU GO.
Know your rights. Know the rules. Follow this motto below. Carry copies of everything especially receipts.and take pictures.
Remember - The bag that you hold arrives with you.
Rember the enemy’s motto. Innocent until the passenger proves the airline is guilty according to a set of rules that make no sense and are only known to the airlines and all of which carries the ultimate superior rule – The airline is always right.
CHECKING THE BAG – A SHORT PRIMER
1. Preparation
If you must check your bag then…. Inventory your bag! Almost no one knows that you can go to any IATA airline in the world and give a detailed inventory of the contents of your bag. If the airline accepts it then they are immediately liable for all the contents of the bag – not limited to Montreal Convention amount which is currently 1000 SDRs. (Special Drawing Rights – which is a common currency pegged to the dollar). For the
2. The day of travel
The airlines have a mechanism for identifying the type of bag. This is revised every few years but best to know EXACTLY what your bag looks like. Then the model type. For example my bag was an Ailrine rollerboard type – Type 28!.
3. Handing over your bag
4. Multiple bags
One important thing is to understand if you lost a single bag or multiple bags. So note down WHICH bag goes with WHICH bag tag. Keep copies of the documents. Take pictures of your tags and the bags if possible.
So you lost your bag – remember it was your fault!!!!This is the airlines attitude so you are automatically at fault - guilty. The airline is always teflon clean!
be prepared for the following process you will have to prove...
Step 1 – are you sure its lost? - It didnt come up on the belt so its lost DUH!
Step 2 – report it via The Lost Bag report. AND dont leave the airport until you have reported it, straight away even if you know its on another flight report it no matter what. This is the most frustrating part and time taken of the whole process. Keep the paper and keep calling the number they give you. Best advice - find out who is the local manager responsible for the bag at the airport where you arrived. This is often a contractor such as Swissport so also make sure you get an airline who carried you on the loop.
Step 3 – Know that there could be multiple parties involved. If for example you started your journey at a remote station and connected over a major hub to another remote destination then you could have up to 5 different entities if you changed airlines:
Entity 1 - The airport servicing company. For example Dnata at Dubai.
Entity 2 - the initial airline (who BTW is usually the responsible party under IATA rules but hit all of them don't rely on this).
Entity 3 - the baggage handler at the hub airport. For example this is an outsourced service for British Airways at LHR and LGW so watch out!
Entity 4 - the connecting carrier - if this is different from entity 2 - this will be important as you could arrive at a remote airport and the despatching airline might not have a presence in that airport.
Entity 5 - the Handling agent at the arriving airport - this is the person who acts on behalf of the airline you arrived in and to whom you have to go to file the bag report.
Note if you still don't have your bag before you go on to your next position - you need to keep track of all your flights as the responsible party will try and match your bag to your itinerary. If you are on a long trip - like I was - then better to be safe than sorry - either have them send the bag home or to a future point on your itinerary.
Step 4- Know what to do next – how to track. Many airlines have a tracking system which you can look at online - it is usually managed by SITA. However if its a LCC and not part of IATA then you are SOL!
The reconciliation process - make sure that when you get your bag - either collected by you or delivered by the airline's agent - then check the bag for damage. Usually the bag will have a load of tags on it that include the history. Often the initial bag tracker report is attached so people can see what is supposed to happen. However this is a flimsy piece of paper so the chances of it surviving is slim and none - but I have seen it happen. However MAKE SURE YOU FILE within 24 hours of receiving it if you have damage or loss. Do this at the airport if you collect it.
Don’t Give up. AND BE NOTICED
You have to kick and scream and stamp your foot to get noticed - otherwise the airline will never pay attention to you. Demand for example an overnight kit (Delta and BA have the best I have seen - though SQ's for business is not bad. Even Finnair has a nice one.
How to claim. Each airline is different but keep all receipts and claim for each case and event. IE if the airline doesnt deliver when it says it will then you can go back and claim more. Different rules apply for different delay times. However the airline usually doesn't pay attention after you have submitted one claim.
The Future
The airlines need to do a better job and in some cases they are (Lufthansa for one).
RFID probably holds the best for the future - if Walmart can do it for just about everything - then the airlines can do it for bags.
Phew...
Cheers
This is a post I once wanted to write but never got around to it.
So here it is in all its glory - the story of my globetrotting bag and some wise lessons learned.
Some of you may have noticed that the blog has been relatively quiet over the last few weeks. Just pressure of work rather than subject material. There certainly has been enough happenings of late.
But the one thing that has occupied my waking hours has been the strange case of the lost bag. My bag. This will read like a Shaggy Dog story. But profit from it because you will learn and be able to minimize the disruption to your life.
The bag’s journey
I was on a Round the World itinerary that took in Europe, CIS, Middle East, Asia and then returned home. I have actually flown many times on a RTW using all 3 of the major alliances. They represent tremendous value and are to be highly recommended. This time it was a Travel Agency issued BA RTW Business Class ticket.
Its important to know I am not making this difficult. I have a bag that does meet the needs of the passenger cabin requirements and have taken it with me on many occasions. However in Moscow on my way to Munich via Helsinki on Finnair (AY)– my life became unstuck. Despite my entreaties to the contrary some old holdover from the Stalinist era had decided that I wasn’t going to take the bag on the plane – business class or no. So tagged with an SU baggage number I waved good bye with that sinking feeling when you know Mr Murphy was going to kidnap my bag. It should have been ok. Finnair should be a fine airline, relatively small and accomplished. Their Hub in Helsinki is compact and efficient while however creaking at the seams with expansion. Finnair is profitable at the moment. A 2 hour layover should have been enough time (well within designated MCT parameters) for them to safely transfer my bag.
On arrival at Munich sadly no bag. So joining 9 of my fellow passengers – I waited for 30 minutes to file a lost bag report. Finnair has outsourced its bags like many airlines. Swissport handles AY in Munich. Just my luck to get another ultra rule following German lady. The sin of omission rather than that of commission has always been an airline artform. In this case the usual “call this number and we will let you know.” Said the passenger “but I am leaving tomorrow morning to LHR – what are the chances …” There was no volunteering of information. Only after insisting she tell me the schedule of possible flights from HEL and then realizing that I had only 1 chance to be reunited with my bag – I set off into the sunset with only my laptop bag.
It was still possible to contact HEL so I sat on the phone … and waited for 2 x 45 mins. (They shut me off the first time). Fortunately I had Skype so that made the cost bearable (1 cent vs $1 a minute. Only to be told that the baggage people would not be able to help me – they (yet another outsource) only handled HEL destined bags. Oh yes and that famous telephone number I was supposed to call? Well it was a voicemail box telling me that they were all busy helping other (presumably lost souls) passengers and they could not come to the phone but I could leave a message. Beep – we are sorry to inform you that this mailbox is full Goodbye!
The next morning (I do so love washing my underwear in the sink) I arrived at the airport to try and recover the bag. Swissport actually started to be a little nicer. The weekend crew were a lot more helpful. But still no bag and no sign thereof. However now I had some arming of good data and a plan. They even gave me a nice hoe bag with a T shirt (Finnair tastefully written on the left sleeve) and some toiletries. I could have done with it the night before.
So sadly I bid MUC goodbye and headed via BA to London. Suffice to say there was nothing better going on there. So this time I had to think about getting something better to wear. However 80 Euros will not replace your wardrobe especially if you are going for a business meeting in Dubai the next day. I managed to collect yet another lost bag kit from BA – this time the T shirt had no identifiable marks. BA is more careful. Perhaps that’s why they are more experienced. Having lost 1 million bags in 2006 they should be pretty good at this sort of thing by now.
Calculating that the best place for us to hook up – I sent the request to have my bag delivered to Singapore where I would be for 4 days. On arrival there 3 days later – I was saddened to learn that my file had been closed and STILL no sign of the bag. Plus Finnair in MUC had sent it to a non-existent station manager at Singapore. (Finnair had just closed their online station there. So technically there was no one available to receive the bag shouldit follow the rules and turn up magically. Arriving on Cathay from Dubai via Hing Kong the helpful people in SIN wanted to file a new report. So this time a CX listed “manual and therefore unofficial” report (even though CX had absolutely nothing to do with this) was duly filed. “as a courtesy”.
In order to comply with the Montreal Convention (see sidebar) you have to file your lost bag report within one week. So I duly send an email with all the prerequisite information to an address inside AY. Knowing full well the only reason to do this was to have a record of having met the conditions. (I was wrong – more on this later).
So sadly after successful meetings in Singapore over (still with my 80 Euros of replacement clothing and borrowed shoes) I left to return home. Stopping briefly at baggage handling to make the “unofficial report” into a full time formal “official” report, I now had a total of 4 tracking numbers. 2x AY, and 2 x CX. For the next leg – I flew JAL to Vancouver via Narita. At each stage I chased the bag to whomever could help me. By now the file had reached several pages.
On arrival back in Seattle I opened my email to find – surprise – actually a note from a REAL person in Helsinki who was willing to help me and was on the mission to find my bag. By now there are multiple parties looking out for the bag. Swissport in Munich, BA in London, Cathay Pacific via CATS in Singapore, AY Baggage central in Helsinki,BA in Seattle and I am sure there were others – the list of addresses who got the message was growing exponentially. I was beginning to think my bag could be come the Kevin Bacon of luggage And don’t forget 3 sets of bag tracers on the SITA worldtracer system.
Exactly one week later and 2 weeks after loosing the bag I returned to SEA from CPH to get a message from SQ Baggage in Singapore that they had dispatched the bag the day before via United and it should be in their baggage area. I raised out of customs over to United – my tracking numbers burned in my head and quetly asked the baggage person if the bag was there. “Well it says its here. But we cant reach you because there isn’t a US phone number in here. But lets see ifwe can find it. My heart literally pounding – I follow the baggage supervisor. Yes there it was. Festooned with baggage reports – it was actually all intact. The labels were all there and the tags. Nope no reason why they misconnected.
So now what did I learn and what information can I impart to you
BEFORE YOU GO.
Know your rights. Know the rules. Follow this motto below. Carry copies of everything especially receipts.and take pictures.
Remember - The bag that you hold arrives with you.
Rember the enemy’s motto. Innocent until the passenger proves the airline is guilty according to a set of rules that make no sense and are only known to the airlines and all of which carries the ultimate superior rule – The airline is always right.
CHECKING THE BAG – A SHORT PRIMER
1. Preparation
If you must check your bag then…. Inventory your bag! Almost no one knows that you can go to any IATA airline in the world and give a detailed inventory of the contents of your bag. If the airline accepts it then they are immediately liable for all the contents of the bag – not limited to Montreal Convention amount which is currently 1000 SDRs. (Special Drawing Rights – which is a common currency pegged to the dollar). For the
2. The day of travel
The airlines have a mechanism for identifying the type of bag. This is revised every few years but best to know EXACTLY what your bag looks like. Then the model type. For example my bag was an Ailrine rollerboard type – Type 28!.
3. Handing over your bag
4. Multiple bags
One important thing is to understand if you lost a single bag or multiple bags. So note down WHICH bag goes with WHICH bag tag. Keep copies of the documents. Take pictures of your tags and the bags if possible.
So you lost your bag – remember it was your fault!!!!This is the airlines attitude so you are automatically at fault - guilty. The airline is always teflon clean!
be prepared for the following process you will have to prove...
Step 1 – are you sure its lost? - It didnt come up on the belt so its lost DUH!
Step 2 – report it via The Lost Bag report. AND dont leave the airport until you have reported it, straight away even if you know its on another flight report it no matter what. This is the most frustrating part and time taken of the whole process. Keep the paper and keep calling the number they give you. Best advice - find out who is the local manager responsible for the bag at the airport where you arrived. This is often a contractor such as Swissport so also make sure you get an airline who carried you on the loop.
Step 3 – Know that there could be multiple parties involved. If for example you started your journey at a remote station and connected over a major hub to another remote destination then you could have up to 5 different entities if you changed airlines:
Entity 1 - The airport servicing company. For example Dnata at Dubai.
Entity 2 - the initial airline (who BTW is usually the responsible party under IATA rules but hit all of them don't rely on this).
Entity 3 - the baggage handler at the hub airport. For example this is an outsourced service for British Airways at LHR and LGW so watch out!
Entity 4 - the connecting carrier - if this is different from entity 2 - this will be important as you could arrive at a remote airport and the despatching airline might not have a presence in that airport.
Entity 5 - the Handling agent at the arriving airport - this is the person who acts on behalf of the airline you arrived in and to whom you have to go to file the bag report.
Note if you still don't have your bag before you go on to your next position - you need to keep track of all your flights as the responsible party will try and match your bag to your itinerary. If you are on a long trip - like I was - then better to be safe than sorry - either have them send the bag home or to a future point on your itinerary.
Step 4- Know what to do next – how to track. Many airlines have a tracking system which you can look at online - it is usually managed by SITA. However if its a LCC and not part of IATA then you are SOL!
The reconciliation process - make sure that when you get your bag - either collected by you or delivered by the airline's agent - then check the bag for damage. Usually the bag will have a load of tags on it that include the history. Often the initial bag tracker report is attached so people can see what is supposed to happen. However this is a flimsy piece of paper so the chances of it surviving is slim and none - but I have seen it happen. However MAKE SURE YOU FILE within 24 hours of receiving it if you have damage or loss. Do this at the airport if you collect it.
Don’t Give up. AND BE NOTICED
You have to kick and scream and stamp your foot to get noticed - otherwise the airline will never pay attention to you. Demand for example an overnight kit (Delta and BA have the best I have seen - though SQ's for business is not bad. Even Finnair has a nice one.
How to claim. Each airline is different but keep all receipts and claim for each case and event. IE if the airline doesnt deliver when it says it will then you can go back and claim more. Different rules apply for different delay times. However the airline usually doesn't pay attention after you have submitted one claim.
The Future
The airlines need to do a better job and in some cases they are (Lufthansa for one).
RFID probably holds the best for the future - if Walmart can do it for just about everything - then the airlines can do it for bags.
Phew...
Cheers
25 December 2008
2008 in Review Part 2
Awards, Brickbats, Comments etc
2008 was yet another year of turmoil in the Aviation, Travel and Tourism space.
We kissed goodbye to the dedicated Biz Class airline concept with Silverjet, Eos and Maxjet Sadly we also saw Aloha disappear the result of bad management and a predatory competitor in the form of Jonathan Ornstein. LCCs were also not immune from failure – Zoom, Skybus, ATA and XL Airways collapsed. The landscape was littered with airline corpses. The price of oil and its dependent fuel prices soared to such a high level that some were predicting $200/ppl. It stopped at just under $150 but the impact stayed with us with several airlines STILL charging fuel surcharges. The GDS world got a little uglier with the unbundled model taking hold. ITA Software still hasn’t delivered Polaris (its new PSS), Altea some will say is still not delivered either but what ever the state – it is not getting installed at any decent rate except in the minds of some PR Hacks. Lufthansa’s PFP set the cat amongst the pigeons. There are many airlines waiting to see if it works. So far it has survived court challenges. The real challenge comes when Amadeus stops picking up the tab at the end of January. Travel has fallen deeper and faster than anyone could predict. Its reduction is impacted everyone. No one is immune. The only bright spot with growth is LATAM with some continued stimulus from the GCC upstarts. Tourism’s decline was faster than anyone predicted. The impact of the global recession coupled with the terrorism acts in India and the unrest of Thailand has had a huge dampening impact. The engine of growth that was China sputtered.
Airlines – Who gets the Golden Arrow? Who gets the Broken Wing Award?
The issues affecting airlines are now well understood. Perhaps not so well contemplated is the impact on the airlines brand of the various changes and fees. Airline loyalty has gone into the toilet. This will be a story in a year’s time where the airlines will be scratching their heads asking why are people not responding to the usual stimulus. There will be tears.
So nominees for the Golden Arrow were – Delta, Ryanair, Lufthansa, Virgin America and Turkish Airways. I have selected Lufthansa. Their innovation is still not legendary.. their product however is the archetype of the FNC. What sets them apart is their focus on winning the bigger battle for dominance. LH will be a contender for World’s largest airline. It will have a seat at the big boys table. With their stakes in Swiss, Austrian, German Wings, BMI and Brussels Airlines together with LH Italia and/or AZ the spread of yellow across Europe strikes a huge footprint. The chaps at Star Alliance better be on their best behavior or LH will be exiting the Alliance in favor of their own operated entities. The footprint in the USA with JetBlue is not to be sneezed at. Several carriers have made a pilgrimage to Frankfurt to see if they can have access to the LH pot of gold and magic.
So who gets the Broken Wing Award? Our nominees are United Airlines (for lots of things) , Skybus (for not listening), SilverJet (for sheer hubris), Alitalia (for opera) British Airways (for giant cockups). Our choice just has to be Alitalia. It was a close thing. Until the middle of the month they were a shoe in… then they managed to complete the re-org, then at the end of December they were back to their old tricks with 3 days of strikes. Gotta love those guys! (Thanks to BA for the view of their broken 777).
I have decided not to award Airport of the year (although BAA/Ferrovial definitely deserves the Old Tarmac award). Nor is there a GDS of the year. I am saving that for 2009.
So what was the seminal event or happening of the year? The Professor’s Flying Fickle Finger Award goes to the Recession. It will have the biggest impact on all of us – more than any other influence.
So stay tuned for my prognostications for 2009 which will be coming up shortly
Cheers
2008 was yet another year of turmoil in the Aviation, Travel and Tourism space.
We kissed goodbye to the dedicated Biz Class airline concept with Silverjet, Eos and Maxjet Sadly we also saw Aloha disappear the result of bad management and a predatory competitor in the form of Jonathan Ornstein. LCCs were also not immune from failure – Zoom, Skybus, ATA and XL Airways collapsed. The landscape was littered with airline corpses. The price of oil and its dependent fuel prices soared to such a high level that some were predicting $200/ppl. It stopped at just under $150 but the impact stayed with us with several airlines STILL charging fuel surcharges. The GDS world got a little uglier with the unbundled model taking hold. ITA Software still hasn’t delivered Polaris (its new PSS), Altea some will say is still not delivered either but what ever the state – it is not getting installed at any decent rate except in the minds of some PR Hacks. Lufthansa’s PFP set the cat amongst the pigeons. There are many airlines waiting to see if it works. So far it has survived court challenges. The real challenge comes when Amadeus stops picking up the tab at the end of January. Travel has fallen deeper and faster than anyone could predict. Its reduction is impacted everyone. No one is immune. The only bright spot with growth is LATAM with some continued stimulus from the GCC upstarts. Tourism’s decline was faster than anyone predicted. The impact of the global recession coupled with the terrorism acts in India and the unrest of Thailand has had a huge dampening impact. The engine of growth that was China sputtered.
Airlines – Who gets the Golden Arrow? Who gets the Broken Wing Award?
The issues affecting airlines are now well understood. Perhaps not so well contemplated is the impact on the airlines brand of the various changes and fees. Airline loyalty has gone into the toilet. This will be a story in a year’s time where the airlines will be scratching their heads asking why are people not responding to the usual stimulus. There will be tears.
So nominees for the Golden Arrow were – Delta, Ryanair, Lufthansa, Virgin America and Turkish Airways. I have selected Lufthansa. Their innovation is still not legendary.. their product however is the archetype of the FNC. What sets them apart is their focus on winning the bigger battle for dominance. LH will be a contender for World’s largest airline. It will have a seat at the big boys table. With their stakes in Swiss, Austrian, German Wings, BMI and Brussels Airlines together with LH Italia and/or AZ the spread of yellow across Europe strikes a huge footprint. The chaps at Star Alliance better be on their best behavior or LH will be exiting the Alliance in favor of their own operated entities. The footprint in the USA with JetBlue is not to be sneezed at. Several carriers have made a pilgrimage to Frankfurt to see if they can have access to the LH pot of gold and magic.
So who gets the Broken Wing Award? Our nominees are United Airlines (for lots of things) , Skybus (for not listening), SilverJet (for sheer hubris), Alitalia (for opera) British Airways (for giant cockups). Our choice just has to be Alitalia. It was a close thing. Until the middle of the month they were a shoe in… then they managed to complete the re-org, then at the end of December they were back to their old tricks with 3 days of strikes. Gotta love those guys! (Thanks to BA for the view of their broken 777).
I have decided not to award Airport of the year (although BAA/Ferrovial definitely deserves the Old Tarmac award). Nor is there a GDS of the year. I am saving that for 2009.
So what was the seminal event or happening of the year? The Professor’s Flying Fickle Finger Award goes to the Recession. It will have the biggest impact on all of us – more than any other influence.
So stay tuned for my prognostications for 2009 which will be coming up shortly
Cheers
Revolving Doors/Confusion at Expedia EMEA
Expedia EMEA seems to be having a hard time getting it right. After a stellar start and early market share capture almost entirely organic in the UK and Germany - The business seems to be having a hard time finding its way.
Why is this important? Expedia Europe is a major part of the growth for the company. As the US market turns down - the European area has been the source of good growth in recent years. However despite that other than the UK and perhaps another market - the company has nothing like the footprint of its original market.
The departure is the latest in a line of changes at Expedia following a management shake-up in November which saw the departure of Europe president Dermot Halpin and Expedia Partner Services boss Paul Brown. Halpin is due to leave by the end of the year.
So let's see if we can follow the chronology. Early this year we saw a set of changes that following the exit of managing director Caroline Cartellieri (who is now COO for Myspace EU) from Expedia UK (April) as part of the overall shake up also saw long time DE head Jens Parkitny exit after 11 years. The focus was to build a strong platform and then focus on country. At the same time Alex Zivoder was promoted in to SVP Europe. He also took direct charge of the .co.uk biz.
Well that didn't last long.
In October there was a big change with the focus back on brands and an end to acquisitions - for Europe the last one being Venere.com based in Italy. This was most probably a counter to the success of Priceline's EMEA brands Booking.com and Active Hotels who have been powering Priceline's top and bottom line growth. David Roche was promoted to be president of the revived Hotels.com (now included Venere). This saw also Paul Brown exit stage left to be head of global brands and shared services at Hilton - IE essentially god of everything. But wait there is more - Dermot Halpin another hi-flyer was also given the boot. There were a bunch of other changes but this was it for now. Halpin was due to leave at the end of the year.
At the end of December - Alex Zivonder quit to become managing director for online ticketing service Viagogo. Expedia has not announced who will take over responsibility for European operations. Nominally Eric Grosse, as president for Expedia Worldwide, the chap and should have overall control when Halpin leaves.
Expedia head honcho Dara Khosrowshahi, is pitching in and running the Partner Services Group until a replacement is found. Also lurking around is Henrik Kjellberg who is now president for Expedia Distribution Worldwide in addition he retains his role as chairman of eLong, Expedia Inc's majority owned Chinese OTA.
Coming up is the potential divorce for the SNCF Voyages JV in France which has puttered along since September 2001.
Confused? Imagine what it must be like working there...
Cheers
Why is this important? Expedia Europe is a major part of the growth for the company. As the US market turns down - the European area has been the source of good growth in recent years. However despite that other than the UK and perhaps another market - the company has nothing like the footprint of its original market.
The departure is the latest in a line of changes at Expedia following a management shake-up in November which saw the departure of Europe president Dermot Halpin and Expedia Partner Services boss Paul Brown. Halpin is due to leave by the end of the year.
So let's see if we can follow the chronology. Early this year we saw a set of changes that following the exit of managing director Caroline Cartellieri (who is now COO for Myspace EU) from Expedia UK (April) as part of the overall shake up also saw long time DE head Jens Parkitny exit after 11 years. The focus was to build a strong platform and then focus on country. At the same time Alex Zivoder was promoted in to SVP Europe. He also took direct charge of the .co.uk biz.
Well that didn't last long.
In October there was a big change with the focus back on brands and an end to acquisitions - for Europe the last one being Venere.com based in Italy. This was most probably a counter to the success of Priceline's EMEA brands Booking.com and Active Hotels who have been powering Priceline's top and bottom line growth. David Roche was promoted to be president of the revived Hotels.com (now included Venere). This saw also Paul Brown exit stage left to be head of global brands and shared services at Hilton - IE essentially god of everything. But wait there is more - Dermot Halpin another hi-flyer was also given the boot. There were a bunch of other changes but this was it for now. Halpin was due to leave at the end of the year.
At the end of December - Alex Zivonder quit to become managing director for online ticketing service Viagogo. Expedia has not announced who will take over responsibility for European operations. Nominally Eric Grosse, as president for Expedia Worldwide, the chap and should have overall control when Halpin leaves.
Expedia head honcho Dara Khosrowshahi, is pitching in and running the Partner Services Group until a replacement is found. Also lurking around is Henrik Kjellberg who is now president for Expedia Distribution Worldwide in addition he retains his role as chairman of eLong, Expedia Inc's majority owned Chinese OTA.
Coming up is the potential divorce for the SNCF Voyages JV in France which has puttered along since September 2001.
Confused? Imagine what it must be like working there...
Cheers
24 December 2008
Seasoned Greetings
Just a big thank you to all for the support during the past year.
As you can see we are taking it a little easy over at the Professor's place.
May 2009 by wrapped in twine and delivered with a bow - or at least may it be stable and not too bad for all of us.
Cheers
The Professor’s 2008 Closing Blogs Part 1
For our annual 2008 review we are going to do a three parter. In part one we will examine the world order and its potential impact. In part 2 we will look at some specific cases. In part 3 we will look forward to 2009.
Part 1 The world at large.
As Michele MacDonald describes it – this has definitely been an Annus horribilis
The meltdown occurred despite our best efforts to find ways around, through and over it. The market impact is global. This marks the world’s first global recession. We are all in uncharted territory here. As far as travel is concerned we have seen the impact start with softening in the US market and it spread worldwide. I don’t think we can point a finger at a single element – it is a combination of factors that culminates with the inevitability of gravity – what goes up must come down. Yields, Load Factors, Gross Revenues, Employment etc etc are ALL down.
The US market comprising about a third of all worldwide travel transactions saw the good times come to a halt pretty quickly. The sub-prime market mess spread and brought down almost everything in its wake. In hindsight that was the symptom – the result of individual greed, lying – grand larceny even and a laissez faire market management by the outgoing Bush Administration. The bellweather Las Vegas market went soft in the first quarter. While we were hearing rosy reports of continuing traffic growth from the Caribbean – the truth was that everyone got nervous and then cut back. Hawaii took a huge hit from losing about 20% of lift with the failures of ATA and Aloha Airlines.
For the rest of the Americas – only LATAM shows growth. It is still digging out from its own Armageddon in the late 1990s and early ‘oughts. So this is in reality only a correction – positive of course – to where they should have been. I don’t want to however downplay their own success at creating and stimulating demand. More power to them. Mexico’s Tourism has taken a big hit from the failure of 4 airlines in 2008 and in the reduction of the traffic from north of the border from traditional markets. The impact on Chavez’s Venezuela from the collapse of oil will be catastrophic. One positive element might be the future of a brighter and more realistic relationship between Cuba and the USA.
Europe’s travails was a continued shift from the legacy business models to the lower cost and more dynamic sectors. But traffic fell early. How can we forget the disastrous T5 opening at LHR. Clearly some profited from this situation – Lufthansa took the opportunity to open its piggy bank by taking stakes in JetBlue, Brussels Airlines, German Wings, Austrian and finally BMI. The housing market in the UK fell apart with the failure of Northern Rock. People stopped travelling when they realized they didn’t really have any money. Wholesale axing of programs from Northern Europe spread its impact from Thailand to Trinidad as we saw first the Biz Class carriers fail and then XL Airways and Sterling collapse. No sector nor segment of the market was immune.
Russia – a class of its own is now in trouble. The loss of the commodities prices has slammed Russia very hard. The Oligarchs are suffering and trying to dig out behind now massive debts that will have a major impact on the world credit markets. Travel in Russia is slowing and the failure of a third force (Air Union) is clearly going to ripple out ad the transportation market consolidates. However the private airlines – Transaero and S7 are not necessarily in great shape either.
The Middle East bubble has burst. But Shhh don’t tell anyone yet. First inflation slammed the market with rates as high as 23 % in some countries. On average the region has seen inflation steady in the teens. The crash in the price of oil won’t hurt too much as the average price of the precious fossil fuel was still above 2007’s rate. But wow betide the 2009 year. The price of oil will not rise significantly. At its current spot price in the 30s for a barrel – we can only expect to see moderating gains. We may not get back to the $80/ppl that Boeing thinks should be the moderated price. For UAE – the building boom must end and the market needs to catch up with the supply. Housing prices are staying still for now but are headed in 2009 for a big drop. I can foresee a degree of panic occurring. The continuing growth cycle being driven by the various governments with their massive projects will benefit and stabilize the region but it will take a while for the equilibrium to prevail. Build it and they will come is not a good strategy.
Africa – well its Africa so no real change there. Unrest and lack of mature government controls will continue to dog the markets. Zimbabwe continues its slide into Oblivion. The once beautiful and among the most prosperous countries on the continent is perhaps the symbol and example of all that besets the region. South Africa will continue its march to a stable state and the benefits of Kulula and 1Time will continue to drive opportunity.
In Asia the optimism from the beginning of the year has given way to mass pessimism.
India’s powerhouse growth came to a grinding halt with first high oil prices and then the psychological blow of the Mumbai bombings has evaporated all sense of well being. The airlines have slashed services and all are struggling and looking for handouts. Massive layoffs of skilled workers from the outsource companies is opaque to the outside world – but believe me they are there. This is cutting discretionary income at a time when the market was reaching some good growth stats.
China’s ill timed controls on the market for the Olympics resulted in at best a dud. The controls have indeed stunted the stellar growth, with the end of the year seeing the central Beijing Government passing handouts to the major carriers. With traffic constrained to Macau – the only bright spot is the Trans-Straits traffic to the “rebel” province of Taiwan. However the impact on Hong Kong and Cathay Pacific is being felt.
For the rest of Asia things are looking bad. Thailand has taken a huge hit. Even in October hoteliers were bemoaning the loss of the traditional European charter market that has just evaporated. The civil and political unrest has resulted in empty hotels the length and breadth of the Kingdom. Elsewhere – countries whose tourism is feeding from the trough of China are experiencing significant softness. Perhaps China should consider reinstating the 3rd Golden week. Australia is doing OK but the turmoil among the airlines will continue for some time.
2008 will go down in history as a turning point and not just a temporary one. I believe we will wake up in a few years time to a world that I believe will be kinder and gentler. Less full of irrational exuberance. Less dependent on growth at all costs. More rational? Nah – who am I kidding…
Cheers
Part 1 The world at large.
As Michele MacDonald describes it – this has definitely been an Annus horribilis
The meltdown occurred despite our best efforts to find ways around, through and over it. The market impact is global. This marks the world’s first global recession. We are all in uncharted territory here. As far as travel is concerned we have seen the impact start with softening in the US market and it spread worldwide. I don’t think we can point a finger at a single element – it is a combination of factors that culminates with the inevitability of gravity – what goes up must come down. Yields, Load Factors, Gross Revenues, Employment etc etc are ALL down.
The US market comprising about a third of all worldwide travel transactions saw the good times come to a halt pretty quickly. The sub-prime market mess spread and brought down almost everything in its wake. In hindsight that was the symptom – the result of individual greed, lying – grand larceny even and a laissez faire market management by the outgoing Bush Administration. The bellweather Las Vegas market went soft in the first quarter. While we were hearing rosy reports of continuing traffic growth from the Caribbean – the truth was that everyone got nervous and then cut back. Hawaii took a huge hit from losing about 20% of lift with the failures of ATA and Aloha Airlines.
For the rest of the Americas – only LATAM shows growth. It is still digging out from its own Armageddon in the late 1990s and early ‘oughts. So this is in reality only a correction – positive of course – to where they should have been. I don’t want to however downplay their own success at creating and stimulating demand. More power to them. Mexico’s Tourism has taken a big hit from the failure of 4 airlines in 2008 and in the reduction of the traffic from north of the border from traditional markets. The impact on Chavez’s Venezuela from the collapse of oil will be catastrophic. One positive element might be the future of a brighter and more realistic relationship between Cuba and the USA.
Europe’s travails was a continued shift from the legacy business models to the lower cost and more dynamic sectors. But traffic fell early. How can we forget the disastrous T5 opening at LHR. Clearly some profited from this situation – Lufthansa took the opportunity to open its piggy bank by taking stakes in JetBlue, Brussels Airlines, German Wings, Austrian and finally BMI. The housing market in the UK fell apart with the failure of Northern Rock. People stopped travelling when they realized they didn’t really have any money. Wholesale axing of programs from Northern Europe spread its impact from Thailand to Trinidad as we saw first the Biz Class carriers fail and then XL Airways and Sterling collapse. No sector nor segment of the market was immune.
Russia – a class of its own is now in trouble. The loss of the commodities prices has slammed Russia very hard. The Oligarchs are suffering and trying to dig out behind now massive debts that will have a major impact on the world credit markets. Travel in Russia is slowing and the failure of a third force (Air Union) is clearly going to ripple out ad the transportation market consolidates. However the private airlines – Transaero and S7 are not necessarily in great shape either.
The Middle East bubble has burst. But Shhh don’t tell anyone yet. First inflation slammed the market with rates as high as 23 % in some countries. On average the region has seen inflation steady in the teens. The crash in the price of oil won’t hurt too much as the average price of the precious fossil fuel was still above 2007’s rate. But wow betide the 2009 year. The price of oil will not rise significantly. At its current spot price in the 30s for a barrel – we can only expect to see moderating gains. We may not get back to the $80/ppl that Boeing thinks should be the moderated price. For UAE – the building boom must end and the market needs to catch up with the supply. Housing prices are staying still for now but are headed in 2009 for a big drop. I can foresee a degree of panic occurring. The continuing growth cycle being driven by the various governments with their massive projects will benefit and stabilize the region but it will take a while for the equilibrium to prevail. Build it and they will come is not a good strategy.
Africa – well its Africa so no real change there. Unrest and lack of mature government controls will continue to dog the markets. Zimbabwe continues its slide into Oblivion. The once beautiful and among the most prosperous countries on the continent is perhaps the symbol and example of all that besets the region. South Africa will continue its march to a stable state and the benefits of Kulula and 1Time will continue to drive opportunity.
In Asia the optimism from the beginning of the year has given way to mass pessimism.
India’s powerhouse growth came to a grinding halt with first high oil prices and then the psychological blow of the Mumbai bombings has evaporated all sense of well being. The airlines have slashed services and all are struggling and looking for handouts. Massive layoffs of skilled workers from the outsource companies is opaque to the outside world – but believe me they are there. This is cutting discretionary income at a time when the market was reaching some good growth stats.
China’s ill timed controls on the market for the Olympics resulted in at best a dud. The controls have indeed stunted the stellar growth, with the end of the year seeing the central Beijing Government passing handouts to the major carriers. With traffic constrained to Macau – the only bright spot is the Trans-Straits traffic to the “rebel” province of Taiwan. However the impact on Hong Kong and Cathay Pacific is being felt.
For the rest of Asia things are looking bad. Thailand has taken a huge hit. Even in October hoteliers were bemoaning the loss of the traditional European charter market that has just evaporated. The civil and political unrest has resulted in empty hotels the length and breadth of the Kingdom. Elsewhere – countries whose tourism is feeding from the trough of China are experiencing significant softness. Perhaps China should consider reinstating the 3rd Golden week. Australia is doing OK but the turmoil among the airlines will continue for some time.
2008 will go down in history as a turning point and not just a temporary one. I believe we will wake up in a few years time to a world that I believe will be kinder and gentler. Less full of irrational exuberance. Less dependent on growth at all costs. More rational? Nah – who am I kidding…
Cheers
Those Crazy Italians Strike Again
New Alitalia? Think again... its the same one. On Monday "Labour" disputes caused nearly 100 cancellations and yesterday a further 43 were canceled. Today - who knows....
Gotta love those guys!
Gotta love those guys!
23 December 2008
2008/9 Charity Project Results
Dear All
I received a lot of comments on the charity choices. I would like to thank all the people who sent me comments and suggestions on the choices. If I may I will highlight just a few of the additional choices that I like:
From Professor Stuart: http://www.embraceglobal.org - this really plays to one of my personal strategies in giving, namely helping people to help themselves using simple low cost solutions. check it out.
From Professor Alex who volunteers his time in Miami for Empower Youth. It tries to focus on at risk youths. A very worthy cause.
From Professor Chris - the 1Sky Campaign. Its new so I cannot say much about it other than I like its ideals and I love the name. http://apps.facebook.com/causes/beneficiaries/21473?m=011c4beb
I picked on these 3 as examples for people to look at and stimulate what you can do.
But charity as they say begins at home. I was struck over the last few days to see what happens when our own industry fails itself. I am talking about the massive delays and disruption that occurred in the Pacific Northwest. I witnessed great acts of personal charity that demonstrated how well we can serve our fellow man. My neighbor drove 11 hours to go and fetch his daughter from Spokane and came back with 3 fellow lost souls and got them home. My daughter too brought home a lost soul who has ended up staying with me for 3 days until her next flight out.
So perhaps the next time we see a major system breakdown like this - lets all pitch in if we can. If everybody did just one small thing - gave someone a lift, a bed for the night, a blanket etc... we would all be better off. In these tough times lets all do what we can for each other.
Merry Christmas Virginia - yes there is a Santa Claus and he doesn't have to live at Macys!!!
Cheers
I received a lot of comments on the charity choices. I would like to thank all the people who sent me comments and suggestions on the choices. If I may I will highlight just a few of the additional choices that I like:
From Professor Stuart: http://www.embraceglobal.org - this really plays to one of my personal strategies in giving, namely helping people to help themselves using simple low cost solutions. check it out.
From Professor Alex who volunteers his time in Miami for Empower Youth. It tries to focus on at risk youths. A very worthy cause.
From Professor Chris - the 1Sky Campaign. Its new so I cannot say much about it other than I like its ideals and I love the name. http://apps.facebook.com/causes/beneficiaries/21473?m=011c4beb
I picked on these 3 as examples for people to look at and stimulate what you can do.
But charity as they say begins at home. I was struck over the last few days to see what happens when our own industry fails itself. I am talking about the massive delays and disruption that occurred in the Pacific Northwest. I witnessed great acts of personal charity that demonstrated how well we can serve our fellow man. My neighbor drove 11 hours to go and fetch his daughter from Spokane and came back with 3 fellow lost souls and got them home. My daughter too brought home a lost soul who has ended up staying with me for 3 days until her next flight out.
So perhaps the next time we see a major system breakdown like this - lets all pitch in if we can. If everybody did just one small thing - gave someone a lift, a bed for the night, a blanket etc... we would all be better off. In these tough times lets all do what we can for each other.
Merry Christmas Virginia - yes there is a Santa Claus and he doesn't have to live at Macys!!!
Cheers
The Long Tail Is Officially Dead
Thanks to Professor Joe for this link. I will admit that I am late to this part of the debate. I also have to say I have never been a big fan of the Long Tail idea. It goes against the grain in my head that says:
few big customers = good
small, lots of customers = difficult and bad.
Oh yes and I am a big believer in the Pareto 80/20 rule
So it seems that that on November 17th 2008 Anderson (the editor of Wired Magazine and writer of the now infamous book on the subject) finally gave up the ghost with his end comment in an article in the Wired Blog that appeared that day:
http://www.longtail.com/the_long_tail/2008/11/does-the-long-t.html
"I'll end by conceding a point: It's hard to make money in the Tail."
At which point he got skewered royally around the web for the volte face. For example:
http://www.theregister.co.uk/2008/11/21/anderson_long_tail_fail/
So the idea has finally fallen prey to reality. Hey it was nice while it lasted.
For more from Professor Joe go to his blog:
http://buhlerworks.com/wordpress/2008/12/03/so-the-long-tail-is-dead/
You might also want to go and look at a rather stimulating debate going on here:
http://blog.highlandbusinessresearch.com/2008/12/16/death-of-the-long-tail/comment-page-1/
There are a lot of people out there making money from trying to persuade people that the Long Tail is a good idea and those who are actually trying to make money out of the Long Tail itself. Just Google "Travel+Long Tail" and you should get between 650-700 hits. You will see what I mean. Both categories need to have a serious re-think.
As Eric Schmidt of Google put it (and this is probably what really sparked the debate):
"And just to be clear, it’s a 90/10 model. We love the long tail, but we make most of our money in the head, just because of the math of the powerlaw."
He does however hold out some hope (and if nothing else it is an OK self serving statement):
"But you need both. You need the head and the tail to make the model work."
So another myth debunked, a dream shattered, another dose of hard reality.
These are sobering times
Cheers
few big customers = good
small, lots of customers = difficult and bad.
Oh yes and I am a big believer in the Pareto 80/20 rule
So it seems that that on November 17th 2008 Anderson (the editor of Wired Magazine and writer of the now infamous book on the subject) finally gave up the ghost with his end comment in an article in the Wired Blog that appeared that day:
http://www.longtail.com/the_long_tail/2008/11/does-the-long-t.html
"I'll end by conceding a point: It's hard to make money in the Tail."
At which point he got skewered royally around the web for the volte face. For example:
http://www.theregister.co.uk/2008/11/21/anderson_long_tail_fail/
So the idea has finally fallen prey to reality. Hey it was nice while it lasted.
For more from Professor Joe go to his blog:
http://buhlerworks.com/wordpress/2008/12/03/so-the-long-tail-is-dead/
You might also want to go and look at a rather stimulating debate going on here:
http://blog.highlandbusinessresearch.com/2008/12/16/death-of-the-long-tail/comment-page-1/
There are a lot of people out there making money from trying to persuade people that the Long Tail is a good idea and those who are actually trying to make money out of the Long Tail itself. Just Google "Travel+Long Tail" and you should get between 650-700 hits. You will see what I mean. Both categories need to have a serious re-think.
As Eric Schmidt of Google put it (and this is probably what really sparked the debate):
"And just to be clear, it’s a 90/10 model. We love the long tail, but we make most of our money in the head, just because of the math of the powerlaw."
He does however hold out some hope (and if nothing else it is an OK self serving statement):
"But you need both. You need the head and the tail to make the model work."
So another myth debunked, a dream shattered, another dose of hard reality.
These are sobering times
Cheers
22 December 2008
EI's new religion - LGW
Aer lingus - the little Irish Airline that tries quite hard to be nice - is doing a dramatic about turn and going after some new business by setting up a base at LGW.
In the past year LGW (Currently for forced sale by BAA under UK competition rules) has lost a lot of business. The US carriers have largely shifted their operations to LHR and BA has downsized. On the other hand Easyjet which picked up a nice chunk of the former GB Airways has expanded its presence big time at the Sussex based airport.
So EI is going to base 4 A320s there initially and then hopefully expand to 11. Following the FR model - they will build a minihub there flying to existing EI spots where service has declined.
Interesting huh?
Cheers
In the past year LGW (Currently for forced sale by BAA under UK competition rules) has lost a lot of business. The US carriers have largely shifted their operations to LHR and BA has downsized. On the other hand Easyjet which picked up a nice chunk of the former GB Airways has expanded its presence big time at the Sussex based airport.
So EI is going to base 4 A320s there initially and then hopefully expand to 11. Following the FR model - they will build a minihub there flying to existing EI spots where service has declined.
Interesting huh?
Cheers
Airlines Execution Tool - The ADM
For many of you who follow the Professor - there is an interesting sense of some of the arcane nature of the distribution business for ATT- Aviation, Travel and Tourism.
One of the weirder tools the industry uses to self-regulate is the ADM - Agent Debit Memo.
The concept is simple. If you fail to issue the ticket correctly no matter what the airline can issue a chargeback. FOR THE FULL FARE + Additional charges. BTW the full fare is what ever the airline charges for that class of service many times this is equivalent to the price of a small fortune. Somewhat akin to that price you see behind the door of a hotel room which bears no relation to the price you paid. Oh yes and you have usually only 30 days from the moment the airline finds the error (not when they notify you) to respond.
Voila, the airlines become Judge, Jury and Executioner. It is really hard to get one reversed... I know from bitter experience.
Interestingly you would think that the GDS would protect you if the reservation "autoprices". Just another quick explanation about GDS pricing and ticketing.
There are three types of pricing/ticketing. Note they are different processes and both have to be done according to the book.
Type 1: Autoprice and Autoticket. This is when the Reservation automatically prices at the fare the agent quoted to the passenger. Then the automatic entry to ticket is also used.
Type 2: Forced or Assisted pricing and ticketing. This is when you price and ticket with a small override. Since there are so many fares - you can tell the GDS to 'PRICE AND TICKET AT FARE TYPE YXW28). The system does your bidding and prices but at this point you have overridden the fare rules even though they might be accurate.
Type 3: Manual. I will enter the price manually and then ticket using my created entries. There is no protection if you do this.
Now the airlines protect the GDSs with a contract called a PCA - or Participating Carrier Agreement. In this the airline holds the GDS harmless from incorrect Type 1 pricing and ticketing. Well that's the theory. There is no such protection for Types 2 and 3.
However the airline shoots first and asks questions later. This process is the reverse of the "presumed innocent" logic. An agent is ALWAYS assumed to be a bad person and is guilty until the Agent proves himself innocent.
As you can see it can be quite hard to fix these situations where an agent does everything by the book but the fare is wrong in the mind of the airline. The GDS is supposed to protect the airline and that protection is supposed to extend to the agent in a Type 1 case. However you are long dead if you try fighting it.... Oh yes and did I tell you how the airlines collect the money from you? They take it from your tickets and commissions issued during the next cycle. So for example if you issued say 100 tickets and earned commissions and fees worth $10 per ticket. That would be $1000 total net revenue to you. Lets say you issued one ticket the airlines didn't like. For lets use a very small amount $10. But the ticket's full fare was $1000 plus a $100 fee. Then the total add collect of the ADM would be a net $80 you owed the airline and all your revenue would be wiped out.
Here is the math:
Revenue basis
Total gross revenue to agent $1,000
Cost of chargeback.
Charge back amount $1000
less amount of commission already paid $10
less amount of ticket already paid ($10)
Total = $980
Add $100 fee
Total chargeback value to airline = $1080.
Final calc +$1,000 - $1,080 = You owe the airline $80.
So you can see its not nice.
Here is a salutatory tale from an Agent in Florida - courtesy of a story in Travel Weekly.
http://www.travelweekly.com/article.aspx?id=184064&ad_id=5732
Thanks Professor Scrooge for this story.
One of the weirder tools the industry uses to self-regulate is the ADM - Agent Debit Memo.
The concept is simple. If you fail to issue the ticket correctly no matter what the airline can issue a chargeback. FOR THE FULL FARE + Additional charges. BTW the full fare is what ever the airline charges for that class of service many times this is equivalent to the price of a small fortune. Somewhat akin to that price you see behind the door of a hotel room which bears no relation to the price you paid. Oh yes and you have usually only 30 days from the moment the airline finds the error (not when they notify you) to respond.
Voila, the airlines become Judge, Jury and Executioner. It is really hard to get one reversed... I know from bitter experience.
Interestingly you would think that the GDS would protect you if the reservation "autoprices". Just another quick explanation about GDS pricing and ticketing.
There are three types of pricing/ticketing. Note they are different processes and both have to be done according to the book.
Type 1: Autoprice and Autoticket. This is when the Reservation automatically prices at the fare the agent quoted to the passenger. Then the automatic entry to ticket is also used.
Type 2: Forced or Assisted pricing and ticketing. This is when you price and ticket with a small override. Since there are so many fares - you can tell the GDS to 'PRICE AND TICKET AT FARE TYPE YXW28). The system does your bidding and prices but at this point you have overridden the fare rules even though they might be accurate.
Type 3: Manual. I will enter the price manually and then ticket using my created entries. There is no protection if you do this.
Now the airlines protect the GDSs with a contract called a PCA - or Participating Carrier Agreement. In this the airline holds the GDS harmless from incorrect Type 1 pricing and ticketing. Well that's the theory. There is no such protection for Types 2 and 3.
However the airline shoots first and asks questions later. This process is the reverse of the "presumed innocent" logic. An agent is ALWAYS assumed to be a bad person and is guilty until the Agent proves himself innocent.
As you can see it can be quite hard to fix these situations where an agent does everything by the book but the fare is wrong in the mind of the airline. The GDS is supposed to protect the airline and that protection is supposed to extend to the agent in a Type 1 case. However you are long dead if you try fighting it.... Oh yes and did I tell you how the airlines collect the money from you? They take it from your tickets and commissions issued during the next cycle. So for example if you issued say 100 tickets and earned commissions and fees worth $10 per ticket. That would be $1000 total net revenue to you. Lets say you issued one ticket the airlines didn't like. For lets use a very small amount $10. But the ticket's full fare was $1000 plus a $100 fee. Then the total add collect of the ADM would be a net $80 you owed the airline and all your revenue would be wiped out.
Here is the math:
Revenue basis
Total gross revenue to agent $1,000
Cost of chargeback.
Charge back amount $1000
less amount of commission already paid $10
less amount of ticket already paid ($10)
Total = $980
Add $100 fee
Total chargeback value to airline = $1080.
Final calc +$1,000 - $1,080 = You owe the airline $80.
So you can see its not nice.
Here is a salutatory tale from an Agent in Florida - courtesy of a story in Travel Weekly.
http://www.travelweekly.com/article.aspx?id=184064&ad_id=5732
Thanks Professor Scrooge for this story.
21 December 2008
Air Berlin - seeking cash looks to Etihad
Air Berlin which has big ambitions but far less stellar performance than its fellow members of the big 3 LCC club. (AB+FR+EZ)
It market cap is actually quite low - be far the lowest of the 3. While its hybrid model has great potential - it remains largely a reverse camel - a committee organized by a bunch of donkey largely from the acquisitions.
So to address its perennial lack of capital - it has started discussions with Etihad to create a liaison - dangerous or otherwise - to shore up its balance sheet.
This would mark the second time in as many weeks that Etihad's name has been linked to a major European carrier - the other one being Olympic.
I didn't see the synergy then - I don't see it now.
Would some one care to enlighten me?
Cheers
It market cap is actually quite low - be far the lowest of the 3. While its hybrid model has great potential - it remains largely a reverse camel - a committee organized by a bunch of donkey largely from the acquisitions.
So to address its perennial lack of capital - it has started discussions with Etihad to create a liaison - dangerous or otherwise - to shore up its balance sheet.
This would mark the second time in as many weeks that Etihad's name has been linked to a major European carrier - the other one being Olympic.
I didn't see the synergy then - I don't see it now.
Would some one care to enlighten me?
Cheers
Alaska Air's Schedule falls apart under pressure
Alaska Airlines recently made the decision to lay off 1000 workers.
Could that have been the reason that the schedule fell apart beginning on Saturday December 20th?
That morning a mechanical delayed then canceled their first flight to ORD. The next 48 hours have been a text book case of how not to handle things. While Southwest was able to operate a skeleton schedule - AS literally canceled most of their flights. 47 on saturday and the vast majority into and out of Seatac on Sunday.
With flights being diverted to Spokane and then being stranded there (at least 7 flights at last count - not to mention the flights that didnt go today). at 5PM today the arrivals board showed on one flight of AS operating normally. Yet all the other airlines managed to operate some kind of schedule to their points. So why not AS?
At present it looks like it will take over 5 more days to right the ship. Alaska's legendary superior customer service has totally failed. I watched an arriving passenger from a 10 hour international trip only to have to wait for MORE than 8 hours before she would reach the AS desk for assistance.
Clearly - the AS outsource model should be reviewed. Additionally why a reduced schedule should fall apart so easily indicates that there is something fundementally wrong that they need to fix.
Bill Ayer and his crew better be working late tonight to make this go away and fast.
Cheers
Could that have been the reason that the schedule fell apart beginning on Saturday December 20th?
That morning a mechanical delayed then canceled their first flight to ORD. The next 48 hours have been a text book case of how not to handle things. While Southwest was able to operate a skeleton schedule - AS literally canceled most of their flights. 47 on saturday and the vast majority into and out of Seatac on Sunday.
With flights being diverted to Spokane and then being stranded there (at least 7 flights at last count - not to mention the flights that didnt go today). at 5PM today the arrivals board showed on one flight of AS operating normally. Yet all the other airlines managed to operate some kind of schedule to their points. So why not AS?
At present it looks like it will take over 5 more days to right the ship. Alaska's legendary superior customer service has totally failed. I watched an arriving passenger from a 10 hour international trip only to have to wait for MORE than 8 hours before she would reach the AS desk for assistance.
Clearly - the AS outsource model should be reviewed. Additionally why a reduced schedule should fall apart so easily indicates that there is something fundementally wrong that they need to fix.
Bill Ayer and his crew better be working late tonight to make this go away and fast.
Cheers
So really SEATAC what does $1.5 Billion get you?
Seattle Tacoma International Airport (ICAO: KSEA, IATA: SEA) recently opened its famous 3rd Runway. The justification for which was to enable difficult operations in bad weather and to allow full ops all the time.
OK so this past few days has seen it put to the test... and it well - to the pax who have been left stranded - it seems to have failed.
The travel conditions in the Puget Sound area covered the gamut from high winds to snow and sleet with freezing rain - but as one United Pilot was overheard saying to his colleague - I thought we were supposed to get two operational runways at all times...
And that is true - the whole point of the 3rd runway was to make the airport support better irregular ops. That was the story sold at the funding stages and definitely sold to the 400 plus residents who were turfed out of their houses. Total cost for the project $1.5 Billion plus.
The local marketplace is rife with rumours of kickbacks and poor contract process and management. The local Seattle papers have been having a field day with the shenanigans going on at the authority - Port of Seattle.
So it would seem that the voters got a pig in a poke.
Cheers
OK so this past few days has seen it put to the test... and it well - to the pax who have been left stranded - it seems to have failed.
The travel conditions in the Puget Sound area covered the gamut from high winds to snow and sleet with freezing rain - but as one United Pilot was overheard saying to his colleague - I thought we were supposed to get two operational runways at all times...
And that is true - the whole point of the 3rd runway was to make the airport support better irregular ops. That was the story sold at the funding stages and definitely sold to the 400 plus residents who were turfed out of their houses. Total cost for the project $1.5 Billion plus.
The local marketplace is rife with rumours of kickbacks and poor contract process and management. The local Seattle papers have been having a field day with the shenanigans going on at the authority - Port of Seattle.
So it would seem that the voters got a pig in a poke.
Cheers
19 December 2008
Twas the Podcast before Christmas...
And all through the house,
Not a blogger was stirring,
Not even a well respected analyst (or 4)
The Airlines were hung by their thumbs with care,
In hopes that the Professors wouldn't skewer them there...
Well if you want to listen to this somewhat irreverent look at the year past and the year to come - go here and listen to four normally respected and respectable people make their annual prognostications. They are Mrs O'Leary (no relation to anyone from the Emerald Isle), Professor Pan Am (a Left Coaster if ever there was one), Professor Rhodesia (he with a doctorate to his name) and your truly Professor Sabena (who of course should have known better than to hang out with this lot).
And for the nominees:
Airline of the Year: Ryanair, United and Alitalia
Airport of the Year: Geary Indiana, Rockford Illinois, Stansted
Airline personality of the year: Sir Richard Branson, Willie Walsh, Glen Tilton and of course Michael O'Leary
Special Awards for Airline Concept of the Year and more.
http://iagblog.podOmatic.com/entry/2008-12-19T11_32_53-08_00
Enjoy it - consider it an early Christmas Present.
Cheers
4 Billion Mobiles in the world!
I am staggered by the number of people who have adopted Mobiles worldwide. There are now more mobiles than fixed landlines by a factor of over 2.5:1 (19% vs 50%) penetration per 100 Inhabitants.
Harnessing all that power...
And to think we used to feel sorry for the mobile operators paying too much for 3G.
Cheers
Harnessing all that power...
And to think we used to feel sorry for the mobile operators paying too much for 3G.
Cheers
18 December 2008
BTC vs LH PFP. Interesting Dialogue
There was something very comforting about the days of the Bell System monopoly. You could always pick up the phone and you always got dial tone. Things had to be pretty bad before the comforting noise in your ear. Today we ask questions like "Where are you?" and we know that we have a 50:50 chance of no dial tone.
I use this analogy to illustrate how complicated things have become in distribution. Today, you cannot rely on the GDS any more to provide you with 100% of distribution needs. As I love to say (and this is no disrespect to mothers-to-be) we are all a little bit pregnant here! Connectivity to multiple sources of information (content if you prefer) in the form of Direct (LCCs and Legacy airlines) Travel types (Hotels vs Airlines) and products etc are a must for any intermediary.
While I applaud BTC's efforts to get the airlines to play ball in making the GDS channels work to ease distribution woes - I think its a losing battle.
LH has responded to the BTC appeal over its push to get Amadeus (in which it owns a 11.5% interest) to play ball. BTC feels justifiably - that the corporate travel managers are a pawn in the game. They are.
However in the longer run - Amadeus is the one who has to change and adapt. With approx 80% of the indirect distribution share across Europe - they need to deal with the issue and come to the table and make a deal. If not they must accept the consequences. So far there is no movement on their part. In the mean time users are scrambling to adapt. And adapt they will.
For the LH letter response and the dialogue - go to this link. Its worth a complete read.
http://businesstravelcoalition.com/campaigns/pfp_outreach.pdf
Cheers
I use this analogy to illustrate how complicated things have become in distribution. Today, you cannot rely on the GDS any more to provide you with 100% of distribution needs. As I love to say (and this is no disrespect to mothers-to-be) we are all a little bit pregnant here! Connectivity to multiple sources of information (content if you prefer) in the form of Direct (LCCs and Legacy airlines) Travel types (Hotels vs Airlines) and products etc are a must for any intermediary.
While I applaud BTC's efforts to get the airlines to play ball in making the GDS channels work to ease distribution woes - I think its a losing battle.
LH has responded to the BTC appeal over its push to get Amadeus (in which it owns a 11.5% interest) to play ball. BTC feels justifiably - that the corporate travel managers are a pawn in the game. They are.
However in the longer run - Amadeus is the one who has to change and adapt. With approx 80% of the indirect distribution share across Europe - they need to deal with the issue and come to the table and make a deal. If not they must accept the consequences. So far there is no movement on their part. In the mean time users are scrambling to adapt. And adapt they will.
For the LH letter response and the dialogue - go to this link. Its worth a complete read.
http://businesstravelcoalition.com/campaigns/pfp_outreach.pdf
Cheers
Traffic, Yields all Crash according to AAA
I think this is a PR release that needs no embellishment - just read it and feel the pain.
Over the last few weeks I have spoken to colleagues and friends from around the world to get a sense of the downturn and its direct impact. Everyone is feeling it. From Russia (Thanks Pavel) to Rotorua. From Thailand (thanks Eric) to Tyneside. From Seattle to Singapore (Thanks Ms Cloud). The impact is devastating to many and hard for all.
In the new year - I hope that we can speak of ways to boost traffic.
In the mean time - the release below makes for some very sobering reading
Cheers
AAA Sees Decline in Holiday Travel This Season
AAA projects a slight decline in the number of Americans traveling during the Christmas holiday period. Nearly 63.9 million Americans will travel 50 miles or more from home during the Christmas holiday travel period, a decrease of 1.4 million travelers (2.1 percent) from last year's total of 65.3 million. This is the first decline in Christmas holiday travelers since 2002. AAA projected year-to-year decreases in the number of travelers for all five of the major travel holidays this year (Memorial Day, Fourth of July, Labor Day, Thanksgiving and Christmas).
"Without question, the economic downturn of 2008 eroded the discretionary income many Americans would have spent on travel and, for some, altered their travel plans throughout the year," said AAA President and CEO Robert L. Darbelnet. "However, those traveling this holiday season can take advantage of declining hotel rates and fuel prices more than a dollar per gallon less than a year ago."
More than 52.4 million Americans (82 percent of all holiday travelers) intend to travel by automobile, a 1.2 percent decrease from the 53 million people who drove last year. Motorists across the country, on average, can expect to see gasoline prices about $1.30 per gallon less than last year and 50 cents less than a month ago.
Approximately 8.1 million (13 percent of holiday travelers) expect to travel by airplane, an 8.5 percent decline from the 8.9 million travelers who flew last year. More than 3.33 million Americans plan to travel by train, bus or other mode of transportation. That is an increase of 0.7 percent from a year ago.
According to AAA's Leisure Travel Index (LTI), which is based on available rates this holiday, Americans can expect lower hotel rates and higher car rental rates throughout the holiday season. However, travelers should expect different trends in airfares depending upon the week of travel.
For Americans traveling during the week of Christmas, rates for AAA Three Diamond hotels are down an average of three percent compared to last year. On average, travelers renting a vehicle during the week of Christmas will pay two percent more than a year ago for the same period. Air passengers, however, can expect some relief in airfares this Christmas with prices nine percent less than last year.
Those planning to travel the week of New Year's will welcome a significant decline in hotel costs with rates for AAA Three Diamond hotels 16 percent less than a year ago. Car rentals rates are eight percent higher than last year for the same period. Americans traveling by air will pay an average of three percent more for airfares than a year ago.
Car rental rates vary from location to location, so some cities in AAA's LTI show significant increases when compared to last year, while others show significant decreases. AAA's index for car rentals is based on the average lowest intermediate size car daily rate in 20 U.S. airport locations. The rates do not include sales tax, insurance and other miscellaneous charges.
Research for Christmas holiday travel projections are derived from the Travel Industry Association's (TIA) Holiday Travel Forecast Model. The model was developed based on consumer travel intentions and TIA's quarterly travel forecast data. The travel intentions data are collected through an online survey of nearly 2,300 adults nationwide, supplemented by an additional 5,000 Americans surveyed from the top 10 states of origin in the United States. Historical travel volume and other economic data such as GDP, disposable income, employment and travel costs (including fuel prices) are also incorporated into the model. The Travel Industry Association, which conducts special research for AAA, analyzes the data and the forecasts.
As North America's largest motoring and leisure travel organization, AAA provides more than 51 million members with travel, insurance, financial and automotive-related services. Since its founding in 1902, the not-for-profit, fully tax-paying AAA has been a leader and advocate for the safety and security of all travelers. AAA clubs can be visited on the Internet at www.AAA.com.
Over the last few weeks I have spoken to colleagues and friends from around the world to get a sense of the downturn and its direct impact. Everyone is feeling it. From Russia (Thanks Pavel) to Rotorua. From Thailand (thanks Eric) to Tyneside. From Seattle to Singapore (Thanks Ms Cloud). The impact is devastating to many and hard for all.
In the new year - I hope that we can speak of ways to boost traffic.
In the mean time - the release below makes for some very sobering reading
Cheers
AAA Sees Decline in Holiday Travel This Season
AAA projects a slight decline in the number of Americans traveling during the Christmas holiday period. Nearly 63.9 million Americans will travel 50 miles or more from home during the Christmas holiday travel period, a decrease of 1.4 million travelers (2.1 percent) from last year's total of 65.3 million. This is the first decline in Christmas holiday travelers since 2002. AAA projected year-to-year decreases in the number of travelers for all five of the major travel holidays this year (Memorial Day, Fourth of July, Labor Day, Thanksgiving and Christmas).
"Without question, the economic downturn of 2008 eroded the discretionary income many Americans would have spent on travel and, for some, altered their travel plans throughout the year," said AAA President and CEO Robert L. Darbelnet. "However, those traveling this holiday season can take advantage of declining hotel rates and fuel prices more than a dollar per gallon less than a year ago."
More than 52.4 million Americans (82 percent of all holiday travelers) intend to travel by automobile, a 1.2 percent decrease from the 53 million people who drove last year. Motorists across the country, on average, can expect to see gasoline prices about $1.30 per gallon less than last year and 50 cents less than a month ago.
Approximately 8.1 million (13 percent of holiday travelers) expect to travel by airplane, an 8.5 percent decline from the 8.9 million travelers who flew last year. More than 3.33 million Americans plan to travel by train, bus or other mode of transportation. That is an increase of 0.7 percent from a year ago.
According to AAA's Leisure Travel Index (LTI), which is based on available rates this holiday, Americans can expect lower hotel rates and higher car rental rates throughout the holiday season. However, travelers should expect different trends in airfares depending upon the week of travel.
For Americans traveling during the week of Christmas, rates for AAA Three Diamond hotels are down an average of three percent compared to last year. On average, travelers renting a vehicle during the week of Christmas will pay two percent more than a year ago for the same period. Air passengers, however, can expect some relief in airfares this Christmas with prices nine percent less than last year.
Those planning to travel the week of New Year's will welcome a significant decline in hotel costs with rates for AAA Three Diamond hotels 16 percent less than a year ago. Car rentals rates are eight percent higher than last year for the same period. Americans traveling by air will pay an average of three percent more for airfares than a year ago.
Car rental rates vary from location to location, so some cities in AAA's LTI show significant increases when compared to last year, while others show significant decreases. AAA's index for car rentals is based on the average lowest intermediate size car daily rate in 20 U.S. airport locations. The rates do not include sales tax, insurance and other miscellaneous charges.
Research for Christmas holiday travel projections are derived from the Travel Industry Association's (TIA) Holiday Travel Forecast Model. The model was developed based on consumer travel intentions and TIA's quarterly travel forecast data. The travel intentions data are collected through an online survey of nearly 2,300 adults nationwide, supplemented by an additional 5,000 Americans surveyed from the top 10 states of origin in the United States. Historical travel volume and other economic data such as GDP, disposable income, employment and travel costs (including fuel prices) are also incorporated into the model. The Travel Industry Association, which conducts special research for AAA, analyzes the data and the forecasts.
As North America's largest motoring and leisure travel organization, AAA provides more than 51 million members with travel, insurance, financial and automotive-related services. Since its founding in 1902, the not-for-profit, fully tax-paying AAA has been a leader and advocate for the safety and security of all travelers. AAA clubs can be visited on the Internet at www.AAA.com.
Sigh of Relief at Jet Airways
So despite all its troubles - Jet Airways are now looking at their bulging order book. Oh dear - in Dollars - it could be very expensive.
Well now it seems it has found a home for some of its very expensive planes which are no longer going to be flying on routes that Jet Airways has canceled or curtailed.
As a result three 777s are going to Turkish Airways who seems to have received a boost of adrenaline lately. They will use the equipment to expand long haul services. From North American to Singapore.
Cheers
Well now it seems it has found a home for some of its very expensive planes which are no longer going to be flying on routes that Jet Airways has canceled or curtailed.
As a result three 777s are going to Turkish Airways who seems to have received a boost of adrenaline lately. They will use the equipment to expand long haul services. From North American to Singapore.
Cheers
More European Musical Chairs or Not
AF/KLM Group has agreed to acquire the remaining shares in Martinair that it doesn’t hold. They are assuming that the tough times will allow it to proceed to consolidate its ownership. I am not so sure that the competition authorities will be quite so happy. But they have EC approval so I guess its ok. Really I do think the EU commission does tend to work on a double standard with some of these decisions. Hmmm
The Latvian Government has reversed itself and decided not to proceed with acquiring the balance of Air Baltic its JV with struggling SAS. The latter is back in talks with LH. (Are you keeping up???)
LH is making a play for AZ offering to retain both hubs at MXP and FCO – presumably offering to ax its planned LH Italia sub who will operate out of the northern Italian hub.
Etc etc
Cheers
The Latvian Government has reversed itself and decided not to proceed with acquiring the balance of Air Baltic its JV with struggling SAS. The latter is back in talks with LH. (Are you keeping up???)
LH is making a play for AZ offering to retain both hubs at MXP and FCO – presumably offering to ax its planned LH Italia sub who will operate out of the northern Italian hub.
Etc etc
Cheers
Consolidation Curtails Gold Medal’s Independence in UK
UK’s Iconic Gold Medal Travel, after 30 years and the largest UK consolidator has agreed to be acquired by Thomas Cook for GBP87 Million.
This should allow the business unit when combined with TC’s consolidator operations to grow through the own distribution network. Couple this with the decision to cut back on its traditional Short haul package tour business and you have a transformation of the former Temperance Tour Operator.
Cheers
This should allow the business unit when combined with TC’s consolidator operations to grow through the own distribution network. Couple this with the decision to cut back on its traditional Short haul package tour business and you have a transformation of the former Temperance Tour Operator.
Cheers
Fedex slashes
FedEx said it was cutting nonunion workers' salaries by 5% and plans deeper cuts for CEO Frederick W. Smith and senior executives, citing "some of the worst economic conditions" in the company's history. It is also eliminating bonuses and suspending company matching for its 401(k) plan.
Cheers
Cheers
BA’s Bad Dating Habits
It seems that the dating habits of the world’s once favorite airline are not going that well. After just 3 weeks the Kangaroo jumping seems to have come to an end. The Spanish are not happy as the original deal is now not as attractive to them. Go failed, they have missed out of Brussels Airlines, Austrian Airlines amongst others, American Airlines is going no where fast… so in what could be described as desperation now they are going after CAI and AZ. British Airways: “What we are offering, under current conditions, is a credible collaboration that will leave the Italian company the possibility of deciding its own future in a flexible manner," Willies Walsh, CEO. (Thanks to Professor John for this one).
At this rate their next opportunity will be Olympic but if they do that they will be up against Etihad and James Hogan.
Cheers
At this rate their next opportunity will be Olympic but if they do that they will be up against Etihad and James Hogan.
Cheers
India liberalizes Airline Ownership Rules
Perhaps too late for BA’s proposed stake in Go (not to be confused with the Mesa Hawaiian Subsidiary of similar name), India has liberalized its foreign investment amounts up to 49% and up to 100% for Non resident Indians provided they are not airlines.
This could open up the Indian market for foreign investment at a time when the market desperately needs cash injections. However the Red Tape could mean a very long time before anyone does anything.
Cheers
This could open up the Indian market for foreign investment at a time when the market desperately needs cash injections. However the Red Tape could mean a very long time before anyone does anything.
Cheers
EU Court Slaps EC over Charleroi
Europe’s #2 court slapped the commission over its ruling that the agreement between Ryanair and the Belgian Airport constituted State Aid. I don’t think this one is over yet. It will probably go one stage higher. I am actually a believer that the local authority and airport should be able to operate commercially and this was an economic decision. So lets see if this one gets all the way or is left to stand.
At the moment it opens the door for many secondary airports to encourage airlines to come in with incentives. Hmmm secret admirers of Ryanair this Judge types
Cheers
At the moment it opens the door for many secondary airports to encourage airlines to come in with incentives. Hmmm secret admirers of Ryanair this Judge types
Cheers
BAA must sell 3 airports Southampton however is not amongst them
BAA took another blow with the UK’s competition authority forcing them to add Stansted to their divestiture plans. This marks another blow for the Spanish owners Ferrovial. "Having provisionally identified competition problems at each of BAA's seven airports, we are proposing remedies which address them directly and comprehensively through a combination of divestment and other measures to improve investment and levels of service,” Christopher Clarke, Chairman Competition Commission’s BAA Airports Inquiry, 17-Dec-08.
One unhappy camper with this is Flybe who wanted to see the divestiture of Southampton so they could potentially acquire the facility and build it up servicing markets south of London.
This is going to be an interesting story worth watching.
Cheers
One unhappy camper with this is Flybe who wanted to see the divestiture of Southampton so they could potentially acquire the facility and build it up servicing markets south of London.
This is going to be an interesting story worth watching.
Cheers
16 December 2008
Asia Action - CX and MH - Different Challenges
The markets in Asia are not immune from the global recession.
Two carriers are facing different variations on the challenges.
For Cathay Pacific, there is a general downturn just after they bet the farm on growth from China. At the same time fortress Hong Kong is experiencing a fundamental change which few thought possible. Taiwan - the rebel province is now becoming more important and with the establishment of direct Taiwan-China air services CX is seeing traffic evaporate.
From 18 to 138 flights a week is a huge jump in traffic. And CX is seeing none of it. If it goes to 200 or even higher - same thing. Much of that traffic is new but a significant amount of it is siphoned off from CX.
For MAS - their seminal moment came over two years ago. The new management team has stabilized and now made the perennial sick airline well. And they have come to a modus operandi with Air Asia. Now it is becoming a player in the consolidation. Today talks are under way with Qantas for a joint relationship which could range from code-share all the way through to a JV and even cross equity stakes. (Are you listening BA?)
Different Challenges - Different Worlds - Different Answers
Cheers
Two carriers are facing different variations on the challenges.
For Cathay Pacific, there is a general downturn just after they bet the farm on growth from China. At the same time fortress Hong Kong is experiencing a fundamental change which few thought possible. Taiwan - the rebel province is now becoming more important and with the establishment of direct Taiwan-China air services CX is seeing traffic evaporate.
From 18 to 138 flights a week is a huge jump in traffic. And CX is seeing none of it. If it goes to 200 or even higher - same thing. Much of that traffic is new but a significant amount of it is siphoned off from CX.
For MAS - their seminal moment came over two years ago. The new management team has stabilized and now made the perennial sick airline well. And they have come to a modus operandi with Air Asia. Now it is becoming a player in the consolidation. Today talks are under way with Qantas for a joint relationship which could range from code-share all the way through to a JV and even cross equity stakes. (Are you listening BA?)
Different Challenges - Different Worlds - Different Answers
Cheers
Payment Processing - A New Frontier
For many travel suppliers and sellers - one of the last major hurdles in cost is the payment processing.
Costs related to payment processing come from a variety of sources but it is important to understand the big 3 - which are interrelated:
Processing Costs from provider
Internal and Manual costs
Fraud
Each of these have to be managed very carefully. If you miss any one it will kill you. Of course regulatory compliance is another big issue.
I urge you to go to this website and download the presentations from the recent Travel Payment Summit that was held in FRA earlier this month.
Many of the presentations are available online. It's important that you get acquainted with the subject matter. This is a rapidly evolving subject matter area.
http://www.airlineinformation.org/AI_conferences/TPS2008/index.html
Cheers
Costs related to payment processing come from a variety of sources but it is important to understand the big 3 - which are interrelated:
Processing Costs from provider
Internal and Manual costs
Fraud
Each of these have to be managed very carefully. If you miss any one it will kill you. Of course regulatory compliance is another big issue.
I urge you to go to this website and download the presentations from the recent Travel Payment Summit that was held in FRA earlier this month.
Many of the presentations are available online. It's important that you get acquainted with the subject matter. This is a rapidly evolving subject matter area.
http://www.airlineinformation.org/AI_conferences/TPS2008/index.html
Cheers
Amadeus and Etihad form JV in the MENA area
There is a great game of one-upmanship in the Middle East.
So why should GDS be any different. After the blockbuster announcement earlier this year of Emirates subsidiary Mercator and its company Emquest forming a JV to market Sabre in GCC, MENA and certain other markets in Africa - Etihad has formed a JV with Amadeus that will be 51% owned by the Abu Dhabi based airline.
There is even more. The big loser in all of this has been Travelport who on Jan 1st 2009 loses the AACO Arab Air Carriers Organization GDS based contract to Amadeus.
Travelport was somewhat unaware of the play that Amadeus pulled with the AACO airlines. Sabre realized that their relationship with Gulf Air - formerly their sales agent in the GCC - known as Falcon was also not going anywhere.
The GCC is one of the very few markets where the still GDS makes sense and is a growing market. In the mature markets the GDS model is slowly but surely falling back as we see in North America and Europe.
Still a lot to play for. The competition will be fun in that market - that is for sure.
So why should GDS be any different. After the blockbuster announcement earlier this year of Emirates subsidiary Mercator and its company Emquest forming a JV to market Sabre in GCC, MENA and certain other markets in Africa - Etihad has formed a JV with Amadeus that will be 51% owned by the Abu Dhabi based airline.
There is even more. The big loser in all of this has been Travelport who on Jan 1st 2009 loses the AACO Arab Air Carriers Organization GDS based contract to Amadeus.
Travelport was somewhat unaware of the play that Amadeus pulled with the AACO airlines. Sabre realized that their relationship with Gulf Air - formerly their sales agent in the GCC - known as Falcon was also not going anywhere.
The GCC is one of the very few markets where the still GDS makes sense and is a growing market. In the mature markets the GDS model is slowly but surely falling back as we see in North America and Europe.
Still a lot to play for. The competition will be fun in that market - that is for sure.
Chris Elliott names The Professor one of Top 100 Blogs
OK - just a little puffed chest - Chris named this blog as one of the top 100 Blogs:
http://www.elliott.org/blog/other-peoples-resolutions-what-bloggers-are-saying-about-2008/
So you are in good company!
Cheers and thanks Chris
http://www.elliott.org/blog/other-peoples-resolutions-what-bloggers-are-saying-about-2008/
So you are in good company!
Cheers and thanks Chris
Mesa's Grab for Aloha Name Thwarted
This has to be one of the most perverse stories I have seen in a long time. So bear with me - this one takes a little getting into. if it wasn't for a Federal Bankruptcy Judge - Mesa's grab for Aloha's storied brand might have gone through unnoticed.
So first here is a bit of the PR Spin from Mesa Air Group's Hawaiian based subsidiary Go! Airways announcing their November 2008 figures and their recent settlement of the outstanding lawsuit caused by the demise of Aloha Airlines at the hands of Mesa. I am trying to use my words carefully here.
...."The word 'Aloha' uniquely represents Hawaii throughout the world and by promoting it internationally we will add valuable support for inbound tourism, the economic lifeblood of Hawaii," said Paul Skellon, VP. "Aloha is a name dear to all of us and we at go! would love to see it as a symbol of great service, the lowest fares and affordable inter-island travel for everyone."
So lets follow the story. It has been widely reported and covered in the media that the collapse of Aloha Airlines was driven by a failed set of business models by Yucaipa (the investment group linked to former president Bill Clinton) and the predatory pricing by Mesa which destroyed yields in the Hawaiian market at a time when they could ill afford it. This blame is Congressional public testimony from the then 3 other airlines in Hawaii - Island Air (formerly part of Aloha), Hawaiian (now the big fish) and Aloha's failed CEO.
At the auction of the assets of Aloha Air Group - Saltchuk (who also owns Northern Air Cargo) picked up the still running Aloha Air Cargo business and its ground ground handling business went to Pacific Air Group. The name and brand rested with Yucaipa, who claimed losses of over $150 million and sued Mesa as its former fellow inter Island carrier had.
In Q2 of 2008 Hawaiian Airlines - who like Aloha - had been courting Mesa Air as a potential investor only to find that Mesa had allegedly used the information to form the business plan that became Go! - settled out of court and reached a $52.5 million before-tax settlement with Mesa, which Hawaiian received to settle its lawsuit over anti-competitive practices in the interisland market. So the debtors of Aloha mostly Yucaipa clearly thought they had at least that claim's worth of money coming to them.
Astonishingly Yucaipa settled with Mesa for just $2 million plus a sum of of free tickets to be provided to former employees of Aloha the injured party in all of this. There is a promise of some future share of profits but that is a slim possibility judging by the performance of Mesa's other businesses in recent years.
After fully 6 months of the new world order in the Hawaiian Islands - Mesa Air announced with significant relish that their traffic Y/Y was up (drum roll please) just over 1% for November 2008 over the same period a year earlier.
Here are their figures:
November Results Nov-08 Nov-07 Change
------ ------ ------
RPM (000) 8,138 7,927 2.67%
ASM (000) 12,744 11,254 13.24%
Passengers Carried 55,591 54,895 1.27%
Load Factor 63.86% 70.43% (6.6) pt
Year-to-date Results YTD 08 YTD 07 Change
- ----- ------ ------
RPM (000) 107,413 91,758 17.06%
ASM (000) 158,664 136,371 16.35%
Passengers Carried 737,674 640,114 15.24%
Load Factor 67.70% 67.29% 0.4 pt
So despite dumping over 13% more capacity in the market and achieving a paltry 2.7% increase in RPMs they still couldn't make a big dent in the market. Clearly anyone who could was avoiding Go! like the plague. Year to date the numbers look better but not by mutch.
Mesa's press release goes on to say ..."and our recent settlement of our lawsuit with Aloha has given us another reason to be optimistic. The settlement resolves all claims made by Aloha Airlines and permits us to focus on our longstanding objectives of providing the best service and the lowest fares to the people of Hawaii."
Not so fast Mr Ornstein (Chairman of Mesa Group) that is not true. And I quote from the local Honolulu news paper the Star Bulletin December 5th, 2008:
"A federal Bankruptcy Court judge blasted the insensitivity of the parties involved in a licensing agreement and temporarily blocked a deal that would have allowed bankrupt Aloha Airlines' bitter rival to re-brand its go! planes with the Aloha name.
Judge Lloyd King postponed yesterday a hearing on a licensing pact between Mesa Air Group and Yucaipa Cos. until Feb. 19 to give supporters and opponents of the deal more time to respond.
"How about all the people whose lives were devastated in this case?" asked King, noting that Mesa and go! are largely blamed for Aloha's demise. "Doesn't that count? Is it just the money?"
Yucaipa, the former controlling shareholder of Aloha, had won the rights to Aloha's intellectual property at an auction Tuesday with a $750,000 bid. Aloha received court approval in June to sell its lawsuit against Mesa to Yucaipa, which settled the suit on Friday with Mesa.
Local aviation historian Peter Forman said if Mesa acquires the Aloha name, it would create "a monster - an airline with the face of a friendly kamaaina company but with the heart of a mainland predator. This would be heartbreaking for the former Aloha Employees." End Quote.
So if Mesa thinks that it has the market open to itself it clearly wasn't paying attention to the former commuter carrier that was operating in Go colors as Go Express - Mokulele Airlines. They didn't waste any time in seeing that the opportunity was there for a lower cost competitor in the market and partnered with Republic Air's Shuttle American subsidiary and is now operating flights on Embraer 170s with 70 seats vs Mesa's older Canadair CRJs which seat a maximum 50 seats. So Mokulele Airlines dumped Mesa and started its own business. Having operated since 1998 it knew a little about the market. At the same time it has partnered with several carriers including Alaska Airlines to provide InterIsland feeds.
Phew!
Moral of the story - always watch your back and never trust the nice smiling guy. And MOST of all DONT believe all the PR Bullshit you could read.
Cheers
Postscript and Disclosure. The Professor was involved in an attempt to revive the Aloha company.
So first here is a bit of the PR Spin from Mesa Air Group's Hawaiian based subsidiary Go! Airways announcing their November 2008 figures and their recent settlement of the outstanding lawsuit caused by the demise of Aloha Airlines at the hands of Mesa. I am trying to use my words carefully here.
...."The word 'Aloha' uniquely represents Hawaii throughout the world and by promoting it internationally we will add valuable support for inbound tourism, the economic lifeblood of Hawaii," said Paul Skellon, VP. "Aloha is a name dear to all of us and we at go! would love to see it as a symbol of great service, the lowest fares and affordable inter-island travel for everyone."
So lets follow the story. It has been widely reported and covered in the media that the collapse of Aloha Airlines was driven by a failed set of business models by Yucaipa (the investment group linked to former president Bill Clinton) and the predatory pricing by Mesa which destroyed yields in the Hawaiian market at a time when they could ill afford it. This blame is Congressional public testimony from the then 3 other airlines in Hawaii - Island Air (formerly part of Aloha), Hawaiian (now the big fish) and Aloha's failed CEO.
At the auction of the assets of Aloha Air Group - Saltchuk (who also owns Northern Air Cargo) picked up the still running Aloha Air Cargo business and its ground ground handling business went to Pacific Air Group. The name and brand rested with Yucaipa, who claimed losses of over $150 million and sued Mesa as its former fellow inter Island carrier had.
In Q2 of 2008 Hawaiian Airlines - who like Aloha - had been courting Mesa Air as a potential investor only to find that Mesa had allegedly used the information to form the business plan that became Go! - settled out of court and reached a $52.5 million before-tax settlement with Mesa, which Hawaiian received to settle its lawsuit over anti-competitive practices in the interisland market. So the debtors of Aloha mostly Yucaipa clearly thought they had at least that claim's worth of money coming to them.
Astonishingly Yucaipa settled with Mesa for just $2 million plus a sum of of free tickets to be provided to former employees of Aloha the injured party in all of this. There is a promise of some future share of profits but that is a slim possibility judging by the performance of Mesa's other businesses in recent years.
After fully 6 months of the new world order in the Hawaiian Islands - Mesa Air announced with significant relish that their traffic Y/Y was up (drum roll please) just over 1% for November 2008 over the same period a year earlier.
Here are their figures:
November Results Nov-08 Nov-07 Change
------ ------ ------
RPM (000) 8,138 7,927 2.67%
ASM (000) 12,744 11,254 13.24%
Passengers Carried 55,591 54,895 1.27%
Load Factor 63.86% 70.43% (6.6) pt
Year-to-date Results YTD 08 YTD 07 Change
- ----- ------ ------
RPM (000) 107,413 91,758 17.06%
ASM (000) 158,664 136,371 16.35%
Passengers Carried 737,674 640,114 15.24%
Load Factor 67.70% 67.29% 0.4 pt
So despite dumping over 13% more capacity in the market and achieving a paltry 2.7% increase in RPMs they still couldn't make a big dent in the market. Clearly anyone who could was avoiding Go! like the plague. Year to date the numbers look better but not by mutch.
Mesa's press release goes on to say ..."and our recent settlement of our lawsuit with Aloha has given us another reason to be optimistic. The settlement resolves all claims made by Aloha Airlines and permits us to focus on our longstanding objectives of providing the best service and the lowest fares to the people of Hawaii."
Not so fast Mr Ornstein (Chairman of Mesa Group) that is not true. And I quote from the local Honolulu news paper the Star Bulletin December 5th, 2008:
"A federal Bankruptcy Court judge blasted the insensitivity of the parties involved in a licensing agreement and temporarily blocked a deal that would have allowed bankrupt Aloha Airlines' bitter rival to re-brand its go! planes with the Aloha name.
Judge Lloyd King postponed yesterday a hearing on a licensing pact between Mesa Air Group and Yucaipa Cos. until Feb. 19 to give supporters and opponents of the deal more time to respond.
"How about all the people whose lives were devastated in this case?" asked King, noting that Mesa and go! are largely blamed for Aloha's demise. "Doesn't that count? Is it just the money?"
Yucaipa, the former controlling shareholder of Aloha, had won the rights to Aloha's intellectual property at an auction Tuesday with a $750,000 bid. Aloha received court approval in June to sell its lawsuit against Mesa to Yucaipa, which settled the suit on Friday with Mesa.
Local aviation historian Peter Forman said if Mesa acquires the Aloha name, it would create "a monster - an airline with the face of a friendly kamaaina company but with the heart of a mainland predator. This would be heartbreaking for the former Aloha Employees." End Quote.
So if Mesa thinks that it has the market open to itself it clearly wasn't paying attention to the former commuter carrier that was operating in Go colors as Go Express - Mokulele Airlines. They didn't waste any time in seeing that the opportunity was there for a lower cost competitor in the market and partnered with Republic Air's Shuttle American subsidiary and is now operating flights on Embraer 170s with 70 seats vs Mesa's older Canadair CRJs which seat a maximum 50 seats. So Mokulele Airlines dumped Mesa and started its own business. Having operated since 1998 it knew a little about the market. At the same time it has partnered with several carriers including Alaska Airlines to provide InterIsland feeds.
Phew!
Moral of the story - always watch your back and never trust the nice smiling guy. And MOST of all DONT believe all the PR Bullshit you could read.
Cheers
Postscript and Disclosure. The Professor was involved in an attempt to revive the Aloha company.
15 December 2008
12/12 New Dawn or Last Post for Alitalia?
Could this be the start of something great for Italy? Or is this just another part of the long drawn out death throes of Italian Aviation?
Either way - it will be an interesting ride for the chaps at CAI who now own the Alitalia brand and its assets without any debt. Is that enough though? The routes are essentially the same - the employees are the same - the service is the same... So we shall have to see.
Bringing in the AirOne franchise is beneficial but we cannot rely on that being the only differentiating factor. The new AZ will have to contend with a steady encroachment on its turf with a big growth from Ryanair who has been having a lot of fun in Italy and of course the growth of a new Italian version of Lufthansa - AKA LH-Italia.
I cannot help but think that the opportunity is dimmed for AZ and its future is not that bright. But we have seen things turn around. Witness Aer Lingus.
Best of luck or arrivederci?
Either way - it will be an interesting ride for the chaps at CAI who now own the Alitalia brand and its assets without any debt. Is that enough though? The routes are essentially the same - the employees are the same - the service is the same... So we shall have to see.
Bringing in the AirOne franchise is beneficial but we cannot rely on that being the only differentiating factor. The new AZ will have to contend with a steady encroachment on its turf with a big growth from Ryanair who has been having a lot of fun in Italy and of course the growth of a new Italian version of Lufthansa - AKA LH-Italia.
I cannot help but think that the opportunity is dimmed for AZ and its future is not that bright. But we have seen things turn around. Witness Aer Lingus.
Best of luck or arrivederci?
Top Travel Security Breaches in 2008
not a good thing to be known for but acording to Baseline Magazine the top 2 security breaches belong to
Alaska Airlines (#5)
Best Western (#6)
http://www.baselinemag.com/c/a/IT-Management/Top-10-Security-Breaches-in-2008/?kc=BLBLBEMNL12152008STR1
Ouch
Alaska Airlines (#5)
Best Western (#6)
http://www.baselinemag.com/c/a/IT-Management/Top-10-Security-Breaches-in-2008/?kc=BLBLBEMNL12152008STR1
Ouch
14 December 2008
India and China - 2 New Basket Cases?
Both India and China are suffering from the affects of the global recession. India remains down after suffering from the high price of oil during the summer. China on the other hand is suffering from some mis-steps that have been both self inflected and some external problems.
For China now the consolidation appears to be under way with a contraction from the current big 6 down to perhaps 4 or even 3 major carriers. The first to succumb from the urge to merge is the oft engaged China Eastern and Shanghai airlines. Interestingly the architects of the failed SQ marriage appear to have been given the boot with the New Chairman of China Eastern being the former Chairman of China Southern and the new President being from CNAC.
For India the consolidation process is now being felt in the domestic market. Indian Ministry of Civil Aviation reported November's domestic traffic highlights as follows: Total - Passenger numbers: 3.0 million, -21.7% year-on-year fall 2008 from 2009. With Kingfisher and Jet now coordinating activities they form the most powerful block in Indian Aviation's domestic market with over 50% of the market. Here are the rest of the results for November 2008:
Jet Airways (including Jetlite): 802,000, Down (for mainline -33.1%);
Kingfisher + Deccan: 746,000, Down (for Kingfisher -33.1%);
Air India: 539,000, Down -10.0%; (including Indian Airlines)
IndiGo: 441,000, +16.7%; a surprising growth spurt puts them into 4th place ahead of
SpiceJet: 325,000, -19.6%;
Paramount: 71,000, +121.9%;
Go Air: 70,000, -59.1%;
MDLR: 7,000, n/a;
So traffic is definitely going down there.
This will reshape the market and poses a challenge for the OTAs in the market. However alliances are not that stable. So can we rely on Jet and Kingfisher (with their chairman and their reported strong egos) staying friends? That remains to be seen.
Cheers
For China now the consolidation appears to be under way with a contraction from the current big 6 down to perhaps 4 or even 3 major carriers. The first to succumb from the urge to merge is the oft engaged China Eastern and Shanghai airlines. Interestingly the architects of the failed SQ marriage appear to have been given the boot with the New Chairman of China Eastern being the former Chairman of China Southern and the new President being from CNAC.
For India the consolidation process is now being felt in the domestic market. Indian Ministry of Civil Aviation reported November's domestic traffic highlights as follows: Total - Passenger numbers: 3.0 million, -21.7% year-on-year fall 2008 from 2009. With Kingfisher and Jet now coordinating activities they form the most powerful block in Indian Aviation's domestic market with over 50% of the market. Here are the rest of the results for November 2008:
Jet Airways (including Jetlite): 802,000, Down (for mainline -33.1%);
Kingfisher + Deccan: 746,000, Down (for Kingfisher -33.1%);
Air India: 539,000, Down -10.0%; (including Indian Airlines)
IndiGo: 441,000, +16.7%; a surprising growth spurt puts them into 4th place ahead of
SpiceJet: 325,000, -19.6%;
Paramount: 71,000, +121.9%;
Go Air: 70,000, -59.1%;
MDLR: 7,000, n/a;
So traffic is definitely going down there.
This will reshape the market and poses a challenge for the OTAs in the market. However alliances are not that stable. So can we rely on Jet and Kingfisher (with their chairman and their reported strong egos) staying friends? That remains to be seen.
Cheers
13 December 2008
Help T2 Choose our Charity Project of the year.
Oh Best Beloved... (if you know your Kipling)...
Every year T2 sets up to take an amount of money based on the number of emails received and transmitted during the holiday season. We define this as from Thanksgiving until Jan 6th. So fare we have contributed thousands of dollars to such charities as
Kiva, http://www.kiva.org/app.php?page=home
Heifer, http://www.heifer.org/
Guide Dogs for the Blind, www.guidedogs.org, http://www.guidedogs.org.uk/
UNICEF http://www.unicef.org/
Red Cross. http://www.redcross.org/ and http://www.ifrc.org/
We also contribute to reducing carbon footprints by using TerraPass.
This year we will again be no different. It is probably even more important this year given the economic down turn. This year we will also throw in visits to the Professor's Blog. In the last few months this has been averaging about 400 per week.
So here is my challenge to you. Please help the Professor choose a suitable charity.
You have just to send us an email that states your preference:
Choose from one of the choices above, a different charity or a combination.
Let us know by December 20th.
Cheers
Every year T2 sets up to take an amount of money based on the number of emails received and transmitted during the holiday season. We define this as from Thanksgiving until Jan 6th. So fare we have contributed thousands of dollars to such charities as
Kiva, http://www.kiva.org/app.php?page=home
Heifer, http://www.heifer.org/
Guide Dogs for the Blind, www.guidedogs.org, http://www.guidedogs.org.uk/
UNICEF http://www.unicef.org/
Red Cross. http://www.redcross.org/ and http://www.ifrc.org/
We also contribute to reducing carbon footprints by using TerraPass.
This year we will again be no different. It is probably even more important this year given the economic down turn. This year we will also throw in visits to the Professor's Blog. In the last few months this has been averaging about 400 per week.
So here is my challenge to you. Please help the Professor choose a suitable charity.
You have just to send us an email that states your preference:
Choose from one of the choices above, a different charity or a combination.
Let us know by December 20th.
Cheers
Is the LH PFP a Threat?
The BTC has been sounding the alarm for Corporate Travel Managers and TMCs about the Lufthansa Preferred Fares Program (PFP). I encourage people to read up on this important development in travel distribution realignment.
The bottom line is that LH wants to finally create a ring fence around distribution costs. Their ultimate goal is to shift the cost burden from their side of Operating Expenses to the Distributors of their products. Fine in theory rather more complex in practice which is why this program is difficult to understand and complex to implement.
My personal sense is that this is just another battle in a longer war. LH is determined to reduce their cost structures and improve their bottom line through cost re-deployment. They are well within their rights to do so. But be careful what you wish for. It may just come to pass. If or rather when it does - then I believe the realignment may not necessarily be in favor of the airlines.
The more interesting battle is what is happening behind the scenes between Amadeus (in which LH has an 11.5% share) and the airline. The Travel Managers and the agencies - both corporate and leisure will become pawns in this battle. One can only imagine what Amadeus board meetings must be like with the 2 VCs very unhappy that LH is doing this. if LH is successful there will be no shortage of airlines queuing up to do the same. Even if they are not - there will be other like attempts.
To give you some perspective - I provide verbatim the email from BTC's Kevin Mitchell. I think it behooves all of us - no matter where we sit in the debate - to understand and then to consider what the impact will be. T2 Clients are indeed wrestling with this and we have clearly pointed out where we think it will end up. Lets just say I am somewhat bearish on the GDS model.
Cheers
TEXT follows: From Kevin Mitchell BTC.
Dear Travel Industry Colleague,
I write to you with a sense of urgency regarding a program Lufthansa (LH) introduced called Preferred Fares Program (PFP) that will increase corporate customers’ costs and undermine the highly efficient processes that have become the signature and goal of modern travel management. LH is imposing an indirect fare increase of tens of millions of Euros through its PFP, which will also include increased VAT and credit card costs as well as travel management company (TMC) handling fees.
If LH is successful in shifting virtually all of its distribution costs to its customers, undermining the best-practices of corporate travel managers, and tilting the competitive playing field to its advantage, other global airlines will have little choice but to implement similar programs. I ask that you to consider joining colleagues from around the world and lending your name to the Signatory Letter to LH below. (You can provide your approval to add your name to this letter at http://tinyurl.com/6xhgwg )
Background
In January 2008 LH announced PFP for gradual phasing in beginning 1 July 2008 in Germany, Switzerland, Austria and Lichtenstein. To make the PFP program deceptively “attractive,” LH raised its standard fares by €30 for a round-trip while offering the lower, original fare structure via PFP wherein a €4.90 per-segment surcharge would be applied. As such, a 4-segment roundtrip would cost €19.6 under PFP, compared with a €30 fare increase.
Once it determined that the LH surcharge was part of a larger TMC channel discrimination initiative, Amadeus announced that it would absorb the surcharge on behalf of its TMC subscribers until at least the end of 2008, while it pursued a resolution via negotiations with LH. Amadeus recently communicated its decision that on 1 February it will cease absorbing the LH surcharge.
The goal of the Signatory Letter below is to encourage LH to forge distribution agreements that are equitable for all distribution system participants, including the corporate buyer, and that preserve the efficiency of the present TMC channel.
Thank you for your consideration in this matter.
Best regards,
Kevin Mitchell
Chairman, Business Travel Coalition
+++
+++
DRAFT SIGNATORY LETTER
Tue Dec 9 09:06:28 2008
Mr Wolfgang Mayrhuber
Chairman and Chief Executive Officer
Deutsche Lufthansa AG
Airportring
60546 Frankfurt
Dear Mr Mayrhuber,
As major Lufthansa customers headquartered in Germany and around the world, we are writing to express our anger over your airline's imposition of an indirect fare increase of tens of millions of Euros through your Preferred Fares Program (PFP), which will include increased VAT and credit card costs as well as travel management company (TMC) handling fees.
Worse, your PFP surcharge will undermine our existing highly efficient corporate travel procurement processes by requiring customers to create new infrastructure and workaround procedures. We will be forced into an expensive and inefficient case-by-case analysis of which fare is more economical to purchase -- either a PFP fare with a surcharge and a TMC handling fee, or a standard fare offering.
Lufthansa is attempting to substitute its judgment for our clearly articulated preferences. Without collaboration, you are forcing a choice between a highly inefficient process for us and our TMCs, or paying significantly higher fares. This is a false choice and we do not welcome your unilateral approach. Corporate travel managers, in close collaboration with their TMCs and technology partners, have developed a professional and productive travel procurement environment that must not be poisoned.
The marketplace for commercial air transportation services is now highly transparent as a result of this longstanding and mutually beneficial collaboration. Complete fare information and point of sale functionality are now on one screen for both TMC agents and travelers utilizing automated booking tools. Now, travel managers can use this advanced purchasing process to drive business to preferred airline partners down to the city-pair level.
Your initiative to damage the existing TMC channel and its supporting technology partners; undo our progress in developing efficient, best-practice processes; and once again endeavor to dominate the point of sale is a flawed strategy strongly rejected by your very best customers. We need to find ways to strengthen our preferred channel, not weaken it.
Such negative actions on your part will make it more difficult and expensive for our companies to continue purchasing your product. Our companies, with air travel needs in markets where you are strong, and in markets where you seek to grow, will direct future business to airlines that build their distribution programs around our preferences. As you are no doubt aware, we do have a choice in air travel.
We urge you to promptly forge distribution agreements that are equitable for all distribution system participants, including the corporate buyer, and that preserve the efficiency of the present TMC channel. We hope you will eliminate the PFP program and rededicate Lufthansa to achieving our mutual success.
Sincerely,
You can provide your approval to add your name to this letter at http://tinyurl.com/6xhgwg
The bottom line is that LH wants to finally create a ring fence around distribution costs. Their ultimate goal is to shift the cost burden from their side of Operating Expenses to the Distributors of their products. Fine in theory rather more complex in practice which is why this program is difficult to understand and complex to implement.
My personal sense is that this is just another battle in a longer war. LH is determined to reduce their cost structures and improve their bottom line through cost re-deployment. They are well within their rights to do so. But be careful what you wish for. It may just come to pass. If or rather when it does - then I believe the realignment may not necessarily be in favor of the airlines.
The more interesting battle is what is happening behind the scenes between Amadeus (in which LH has an 11.5% share) and the airline. The Travel Managers and the agencies - both corporate and leisure will become pawns in this battle. One can only imagine what Amadeus board meetings must be like with the 2 VCs very unhappy that LH is doing this. if LH is successful there will be no shortage of airlines queuing up to do the same. Even if they are not - there will be other like attempts.
To give you some perspective - I provide verbatim the email from BTC's Kevin Mitchell. I think it behooves all of us - no matter where we sit in the debate - to understand and then to consider what the impact will be. T2 Clients are indeed wrestling with this and we have clearly pointed out where we think it will end up. Lets just say I am somewhat bearish on the GDS model.
Cheers
TEXT follows: From Kevin Mitchell BTC.
Dear Travel Industry Colleague,
I write to you with a sense of urgency regarding a program Lufthansa (LH) introduced called Preferred Fares Program (PFP) that will increase corporate customers’ costs and undermine the highly efficient processes that have become the signature and goal of modern travel management. LH is imposing an indirect fare increase of tens of millions of Euros through its PFP, which will also include increased VAT and credit card costs as well as travel management company (TMC) handling fees.
If LH is successful in shifting virtually all of its distribution costs to its customers, undermining the best-practices of corporate travel managers, and tilting the competitive playing field to its advantage, other global airlines will have little choice but to implement similar programs. I ask that you to consider joining colleagues from around the world and lending your name to the Signatory Letter to LH below. (You can provide your approval to add your name to this letter at http://tinyurl.com/6xhgwg )
Background
In January 2008 LH announced PFP for gradual phasing in beginning 1 July 2008 in Germany, Switzerland, Austria and Lichtenstein. To make the PFP program deceptively “attractive,” LH raised its standard fares by €30 for a round-trip while offering the lower, original fare structure via PFP wherein a €4.90 per-segment surcharge would be applied. As such, a 4-segment roundtrip would cost €19.6 under PFP, compared with a €30 fare increase.
Once it determined that the LH surcharge was part of a larger TMC channel discrimination initiative, Amadeus announced that it would absorb the surcharge on behalf of its TMC subscribers until at least the end of 2008, while it pursued a resolution via negotiations with LH. Amadeus recently communicated its decision that on 1 February it will cease absorbing the LH surcharge.
The goal of the Signatory Letter below is to encourage LH to forge distribution agreements that are equitable for all distribution system participants, including the corporate buyer, and that preserve the efficiency of the present TMC channel.
Thank you for your consideration in this matter.
Best regards,
Kevin Mitchell
Chairman, Business Travel Coalition
+++
+++
DRAFT SIGNATORY LETTER
Tue Dec 9 09:06:28 2008
Mr Wolfgang Mayrhuber
Chairman and Chief Executive Officer
Deutsche Lufthansa AG
Airportring
60546 Frankfurt
Dear Mr Mayrhuber,
As major Lufthansa customers headquartered in Germany and around the world, we are writing to express our anger over your airline's imposition of an indirect fare increase of tens of millions of Euros through your Preferred Fares Program (PFP), which will include increased VAT and credit card costs as well as travel management company (TMC) handling fees.
Worse, your PFP surcharge will undermine our existing highly efficient corporate travel procurement processes by requiring customers to create new infrastructure and workaround procedures. We will be forced into an expensive and inefficient case-by-case analysis of which fare is more economical to purchase -- either a PFP fare with a surcharge and a TMC handling fee, or a standard fare offering.
Lufthansa is attempting to substitute its judgment for our clearly articulated preferences. Without collaboration, you are forcing a choice between a highly inefficient process for us and our TMCs, or paying significantly higher fares. This is a false choice and we do not welcome your unilateral approach. Corporate travel managers, in close collaboration with their TMCs and technology partners, have developed a professional and productive travel procurement environment that must not be poisoned.
The marketplace for commercial air transportation services is now highly transparent as a result of this longstanding and mutually beneficial collaboration. Complete fare information and point of sale functionality are now on one screen for both TMC agents and travelers utilizing automated booking tools. Now, travel managers can use this advanced purchasing process to drive business to preferred airline partners down to the city-pair level.
Your initiative to damage the existing TMC channel and its supporting technology partners; undo our progress in developing efficient, best-practice processes; and once again endeavor to dominate the point of sale is a flawed strategy strongly rejected by your very best customers. We need to find ways to strengthen our preferred channel, not weaken it.
Such negative actions on your part will make it more difficult and expensive for our companies to continue purchasing your product. Our companies, with air travel needs in markets where you are strong, and in markets where you seek to grow, will direct future business to airlines that build their distribution programs around our preferences. As you are no doubt aware, we do have a choice in air travel.
We urge you to promptly forge distribution agreements that are equitable for all distribution system participants, including the corporate buyer, and that preserve the efficiency of the present TMC channel. We hope you will eliminate the PFP program and rededicate Lufthansa to achieving our mutual success.
Sincerely,
You can provide your approval to add your name to this letter at http://tinyurl.com/6xhgwg
Fair Merger Rules in Europe?
In Houston's George Bush Airport - IAH - the dominance of CO is pretty awesome - 85%. There are few fortress hubs at airports in the world as good as this one. In the US market there are several that can be seen - DL in CVG, NW in DTW and MSP, AA in DFW etc etc.
In Europe the dominance can be seen at CDG (AF) and in Germany both FRA and MUC have LH.
Interestingly from the graphic - you can see what happens if we look at the combination of the top 2 carriers at key airports in Europe. One thing this chart does not show is the dominance that occurs when you add an alliance to the mix. Thus adding all the Star Alliance players in Germany would add significantly to the lift power of LH in FRA and MUC.
The core of the EU's argument against the RyanAer merger was Dublin dominance. However the catchment area for Dublin is but a mere 1/25th of the catchment area for Frankfurt.
So if the EU (Mr Tajani) is going to allow mergers of the size that BA (IB) LH (OS, SN, etc) has embarked on - he needs a different lens.
I hate the idea of mergers and acquisitions of this size and type. But if these current batch are to be allowed then surely FR has a case for EI?
Let me know what you think
Cheers
Rollup Rollup - Stimulus Gravy Train is Here!
Gerald Arpey has suggested that the aviation industry should get a share of the proposed $700 Billion economic stimulus package that President to be Obama will likely unveil in his first state of the Union Address.
This is actually not a bad thing to get behind. While I would prefer that the taxation process of air travel be more accurately focused on a use based tax which in turn would lead to use based investment - this is better than nothing but it is going to be a long road to see anything happen.
As an aside I note that the Tessler car company is requesting $350 million of the tax payers money to develop an electric car to be priced at $60K.
Let's get this gravy train going...
Karl Marx - you can stop spinning in your grave, you are now officially a hero.
Cheers
This is actually not a bad thing to get behind. While I would prefer that the taxation process of air travel be more accurately focused on a use based tax which in turn would lead to use based investment - this is better than nothing but it is going to be a long road to see anything happen.
As an aside I note that the Tessler car company is requesting $350 million of the tax payers money to develop an electric car to be priced at $60K.
Let's get this gravy train going...
Karl Marx - you can stop spinning in your grave, you are now officially a hero.
Cheers
USTA predicts downturn 2-6% in 2009
On Thursday Roger Dow head of the newly merged US Travel Association held a conference call to layout the organizations stall (merger with Travel Roundtable and TIA).
The broader goal from just an inbound promotion group to an Industry wide group should be welcomed.
To read the statement from Roger - please go here:
http://www.tia.org/resources/PDFs/PowerofTravel/Industry_Call_12-11-08.pdf
Cheers
The broader goal from just an inbound promotion group to an Industry wide group should be welcomed.
To read the statement from Roger - please go here:
http://www.tia.org/resources/PDFs/PowerofTravel/Industry_Call_12-11-08.pdf
Cheers
Latin American Carriers continue to buck traffic trends
The latest reports out of ALTA show that the traffic from the airlines in the region continue to defy the global trend of reduced traffic.
Through October RPKs are up 10.9% and passengers are up over 7%. Very healthy numbers.
However the numbers are starting to dip. October traffic was only up RPKs 3.9% and pax up only 1.5%.
For full details go here:
http://www.alta.aero/descargas/trafico/informe_200810.pdf
Cheers
Through October RPKs are up 10.9% and passengers are up over 7%. Very healthy numbers.
However the numbers are starting to dip. October traffic was only up RPKs 3.9% and pax up only 1.5%.
For full details go here:
http://www.alta.aero/descargas/trafico/informe_200810.pdf
Cheers
Coming Clean - A New Boeing 7L87 Experience?
Well sort of.
Boeing has finally come clean that they have real problems in the 787 program and indeed in all their supply chain. While not giving us the details perhaps we would like, I can live with that provided that they have really changed the culture on the program again and indeed in the company.
We all want Boeing to succeed, (unless of course you happen to be an Airbus Salesman!). this program is not only incredibly complex but a generational change in the way that Boeing has done business. Sadly they threw the baby out with the bathwater. Hoping to solve the perennial problems of supply and high cost of new aircraft development - they took on partners to risk and develop share. This has turned out to be a big mistake. Other companies don't necessarily work like Boeing and vice versa. The time line was WAY too aggressive. The manufacturing philosophy was in hindsight also unworkable.
Boeing is not of course coming totally clean on the issue of the causes of the delay to the 787. We have not really heard a mea culpa from them. Indeed the last delay has been laid at the door of Strike by machinists. That of course is rather unfair to the machinists and illogical as well as inaccurate.
Boeing has a lot of work to do to fix the program. Frankly we believe that the (now 5th announced) delay is still not enough. They really should consider our advice to junk the first 4 aircraft and start with ship 5 as the prototype. This is not without precedent at Boeing.
So to quote Rob Stallard of Macquarrie Equities in his advice to clients, the plane has a new moniker - Dreamliner no more it is now the "seven late seven" or to the rest of us 7L87.
Cheers
Boeing has finally come clean that they have real problems in the 787 program and indeed in all their supply chain. While not giving us the details perhaps we would like, I can live with that provided that they have really changed the culture on the program again and indeed in the company.
We all want Boeing to succeed, (unless of course you happen to be an Airbus Salesman!). this program is not only incredibly complex but a generational change in the way that Boeing has done business. Sadly they threw the baby out with the bathwater. Hoping to solve the perennial problems of supply and high cost of new aircraft development - they took on partners to risk and develop share. This has turned out to be a big mistake. Other companies don't necessarily work like Boeing and vice versa. The time line was WAY too aggressive. The manufacturing philosophy was in hindsight also unworkable.
Boeing is not of course coming totally clean on the issue of the causes of the delay to the 787. We have not really heard a mea culpa from them. Indeed the last delay has been laid at the door of Strike by machinists. That of course is rather unfair to the machinists and illogical as well as inaccurate.
Boeing has a lot of work to do to fix the program. Frankly we believe that the (now 5th announced) delay is still not enough. They really should consider our advice to junk the first 4 aircraft and start with ship 5 as the prototype. This is not without precedent at Boeing.
So to quote Rob Stallard of Macquarrie Equities in his advice to clients, the plane has a new moniker - Dreamliner no more it is now the "seven late seven" or to the rest of us 7L87.
Cheers
12 December 2008
DL’s new Medallion Qualification Program
Delta likes new math it would seem.
Platinum miles (or the supposed top tier) comes in at 75,000 MQMs. That means with NW it will create a bigger pool of members. Likely they will reduce the benefit pool.
After the announcement of the deal with Amex - something is not going right here. That is one heck of a lot of miles and seats that someone has actually paid for.
Still if you are in the very exclusive 4th tier (Known as EP) which is so secret most DL employees dont know about after 2 years in operation - I guess you will be happy.
Firstly here is DL’s new Math:
Medallion Level 2009 Qualification Requirements
Silver 25,000 MQMs or 30 Qualification Segments
Gold 50,000 MQMs or 60 Qualification Segments
Platinum 75,000 MQMs or 100 Qualification Segments
As you can see the logic falls apart of gold to platinum which is supposed to raise the barrier.
Based on the survey DL mailed out to top tier people – there will be a pay for play model emerging where your benefits only accrue when you reach certain mileage levels. This is supposition on my part I hasten to add. One of the prized Platinum pieces was the Crown Room admittance. That went away this year. (Along with about half of DL’s crown rooms in remote cities like Seattle.). Now the big benefit for me is the international upgrade program. If that goes away – I shall be very unhappy.
Cheers
Platinum miles (or the supposed top tier) comes in at 75,000 MQMs. That means with NW it will create a bigger pool of members. Likely they will reduce the benefit pool.
After the announcement of the deal with Amex - something is not going right here. That is one heck of a lot of miles and seats that someone has actually paid for.
Still if you are in the very exclusive 4th tier (Known as EP) which is so secret most DL employees dont know about after 2 years in operation - I guess you will be happy.
Firstly here is DL’s new Math:
Medallion Level 2009 Qualification Requirements
Silver 25,000 MQMs or 30 Qualification Segments
Gold 50,000 MQMs or 60 Qualification Segments
Platinum 75,000 MQMs or 100 Qualification Segments
As you can see the logic falls apart of gold to platinum which is supposed to raise the barrier.
Based on the survey DL mailed out to top tier people – there will be a pay for play model emerging where your benefits only accrue when you reach certain mileage levels. This is supposition on my part I hasten to add. One of the prized Platinum pieces was the Crown Room admittance. That went away this year. (Along with about half of DL’s crown rooms in remote cities like Seattle.). Now the big benefit for me is the international upgrade program. If that goes away – I shall be very unhappy.
Cheers
Pet Airways – Are you kidding?
Apparently not – someone is out there trying to raise money for a pet only airline.
Thanks to Professor Stuart who knows I am a big animal lover – but even I am not that crazy.
www.petairways.com
Let’s hope that it doesn’t spawn derivatives like Moose Air or Bovine Air. How about Working Animal Air, Zoo Air or my favorite Air Chimp? And then the LCC version: Air Crate…..
Cheers
Thanks to Professor Stuart who knows I am a big animal lover – but even I am not that crazy.
www.petairways.com
Let’s hope that it doesn’t spawn derivatives like Moose Air or Bovine Air. How about Working Animal Air, Zoo Air or my favorite Air Chimp? And then the LCC version: Air Crate…..
Cheers
European Mood: Quiet Not Desperate, Yet.
Europe is quietly looking around at the deluge of bad news coming from the US. There seems to be a sense of impending doom coming from the USA – bad news on bad news. For the UL the news is even worse as the UK economy starts to tank badly. The value of the UK economy once the largest in the world is now rivaling that of Italy having fallen below France. The Financial Times slammed Gordon Brown in its editorial sections on December 12, 2008. For Germany there is quiet acceptance of the situation. The largest economy of Europe is taking a softly quiet approach. However Angela Merkell has her work cut out for her. Few smiles at conferences these days.
For travel for next year – we are seeing cut backs across the board.
Even the Low Cost Carriers will be cutting capacity led by Ryanair. Although in a cursory review of their schedule I noticed that Ryanair has been playing favorites. Where as flights used to start in the hubs of Stansted and Dublin many of them now start at cheaper airports on the mainland of Europe. Another way to save money. All sectors are cutting back capacity. There is almost no one who is growing. Belt tightening all way round. While the economists are saying that the recession will be over in June – I remain unconvinced. I believe that the uptick will only happen at the end of the year or more likely in Q1 of 2010.
In the coming weeks and months I will be picking on stories that will indicate how this recession is driving innovation and fundamental changes in the fabric of the Aviation, Travel and Tourism sectors.
Not a happy situation for all of us but this is the time for opportunity.
Cheers
For travel for next year – we are seeing cut backs across the board.
Even the Low Cost Carriers will be cutting capacity led by Ryanair. Although in a cursory review of their schedule I noticed that Ryanair has been playing favorites. Where as flights used to start in the hubs of Stansted and Dublin many of them now start at cheaper airports on the mainland of Europe. Another way to save money. All sectors are cutting back capacity. There is almost no one who is growing. Belt tightening all way round. While the economists are saying that the recession will be over in June – I remain unconvinced. I believe that the uptick will only happen at the end of the year or more likely in Q1 of 2010.
In the coming weeks and months I will be picking on stories that will indicate how this recession is driving innovation and fundamental changes in the fabric of the Aviation, Travel and Tourism sectors.
Not a happy situation for all of us but this is the time for opportunity.
Cheers
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