Bethune: The US Airline industry makeup needs to change. Is he right?

Gordon Bethune - Boeing exec turned Continental saviour turned Aloha Chairman and Industry Analyst - recently sat down with the Houston Chronicle's Bill Hensel. See the interview here: http://www.chron.com/disp/story.mpl/business/5546668.html

So is he right? If not then what?

My answer is: Yes and No.

Yes it needs to change and No the big mergers are not the answer. In fact quite the opposite. We need MORE competition not less.

So IF the US Congress is listening here is a 6 point manifesto for such an industry make up change:

1. Remove all ownership restrictions. Allow foreign ownership and control.
2. Remove all 5th, 6th and 7th Freedom constraints and have open skies into and out of the country effective immediately.
3. Open 7th and 8th Freedom rights provided that the airlines can show an economic return. IE no dumping. You might want to wait a year before implementing this.
4. Implement a true Carbon Footprint policy - comprehensive that covers limits on emissions and promotes trading against a global metric.
5. Implement open airport pricing including freeing the airports (not the Feds) to charge Peak/Off Peak pricing
6. Stimulate new entrants through a domestic program similar to the ExIm Bank for foreign purchasers.

Put this in place and you will have a free market environment that will stimulate low cost entrants and competitive market pricing. Then it doesn't matter if you have big or small airlines.

And before I am hoist on a petard with cries of "Naive" I would encourage the US to pay close attention to the European model. Effectively this is what they have. True it has been a very bumpy road to get there but essentially it is mostly now in place.

Open Skies - US and OZ but with a catch

Australia and the US have announced a new Open Skies agreement. But it comes with a little catch. It is bilateral only.

It is really interesting to see that one of the first truly large scale (seventh freedom) Open Skies agreements came between the UK and Singapore, it becomes effective March 30th. However this OZ-US arrangement will effectively hamper Singapore's efforts to open up SQ service from Oz to the US west coast. Ditto the UK will not be able to operate freely from US to OZ despite having operated 7th Freedom right services in the 80s and 1990s as a code share.

One of these days we will see the USA operate a truly Open Skies agreement worldwide with fully all freedom's One through Eight. So US Congress - put your money where your mouth is....

But then I am only an analyst.

Currency, Fees - Fees and Taxes UGH!

We used to joke that the most complex market to sell travel products was India and the most numbers in currency on a ticket was Turkey and Poland.

Well chaps - it ain't so easy any more in some of the regular markets.

For GDS users the unbundling of products and adding in of fees is making it more and more difficult to get this right. PLUS the calculations are getting weirder.

To illustrate my point - lets just look at the recently introduced (and effective July 08) Lufthansa OB Fees. So its a 4.90 Euros per segment. Actually that is a TAXABLE charge subject to VAT. Holy cow (or what ever that is in German) how the heck do you calculate that?

With the world moving off the dollar standard and onto other currency standards - the nice stable world of currencies has gone. Now we have Euros and Pounds and Dollars all calculated on a daily basis. And in many cases calculated differently by GDS and private fare engines.

I would hate to have to be the one who has to work on these things.

One word of advice? NOW is the time to start planning your own system instead of just using a GDS on its own. The days of a nice homogeneous and holistic distribution system are long gone. Time to call it a night or the cavalry...

Check out our videos from WIT 2007

http:// www.webintravel.com/gallery_video.php

Also while you are there - see if you can come to WIT 2008.

Cheers

Timothy