Last Thursday saw the last flights from Berlin's historic Tempelhof airport.
The last major commercial airliner flight was by Cirrus.
For a full history of this famed airport - please go here:
http://www.berlin-airport.de/EN/DankeTHF/DankeTHF/index.php
Having flown from all 3 of the German Capital's airports - Tempelhof was by far the most unusual. While Tegel's close in gates make it convenient, Tempelhof was a step back in time. decidedly gothic it was and remains one of the last symbols of Hitler's vision of Germany.
Let's hope someone decides to do something good with it.
Cheers
01 November 2008
So who should you vote for?
if you are entitled to vote in the US Elections on Tuesday - who should you vote for with an emphasis on ATT - Aviation Travel and Tourism?
There is no clear answer based on the prima facie evidence.
So while I am now clear on who I am going to vote for - I think it would be useful to consider the various positions and then to take one which would appear to be the best bet.
On all the major issues - free trade - tourism - etc etc - both candidates are in the same league. There is little to chose using these criteria. So I have searched and found one criteria which would benefit the US. Namely the US standing abroad.
As Bush has managed to do almost irreparable harm to the US's position in the world, anyone remotely linked to him would perpetuate that sentiment. There is a distinct lack of interest of many nations to visit a Bush dominated America. Likewise, many US citizens have felt un-welcomed outside the USA in recent years. This has harmed US based ATT. We need to break down these barriers. More US tourists are needed world wide and the US needs to be open to all nations and peoples.
So if you are looking for a better world - change is better than any other reason and that would seem to favour Obama.
Whatever your reasons or your affiliation - you should get out the vote and do your part. If you are eligible - it is your duty to vote. Vote for your conscience and if you can vote for a candidate rather than against one. The choices are not easy. Getting past the rhetoric and finding some truth is hard.
May the best candidate win.
Cheers
There is no clear answer based on the prima facie evidence.
So while I am now clear on who I am going to vote for - I think it would be useful to consider the various positions and then to take one which would appear to be the best bet.
On all the major issues - free trade - tourism - etc etc - both candidates are in the same league. There is little to chose using these criteria. So I have searched and found one criteria which would benefit the US. Namely the US standing abroad.
As Bush has managed to do almost irreparable harm to the US's position in the world, anyone remotely linked to him would perpetuate that sentiment. There is a distinct lack of interest of many nations to visit a Bush dominated America. Likewise, many US citizens have felt un-welcomed outside the USA in recent years. This has harmed US based ATT. We need to break down these barriers. More US tourists are needed world wide and the US needs to be open to all nations and peoples.
So if you are looking for a better world - change is better than any other reason and that would seem to favour Obama.
Whatever your reasons or your affiliation - you should get out the vote and do your part. If you are eligible - it is your duty to vote. Vote for your conscience and if you can vote for a candidate rather than against one. The choices are not easy. Getting past the rhetoric and finding some truth is hard.
May the best candidate win.
Cheers
O'Leary a bad man?
These days perhaps you should ask Pádraig Ó Céidigh, a native Gaelic speaking former teacher who was previously one of Michael O'Leary's biggest fans.
In a far reaching and clearly unpolished interview with the Irish Times, Pádraig Ó Céidigh detailed his emotions about O'Leary and how he believes Ryanair is trying to push him out of business. http://www.irishtimes.com/newspaper/weekend/2008/1101/1225321614209.html
Thanks to Professor Stuart for this story.
In these hard times it is understandable why competition makes all fair in love and war. Reading from the history of Ryanair - it is important to understand how the company has grown and now how it intends to maintain its market position. Aer Arann could easily become road kill in this battle.
For those who support the little guys - lets hope not. For the rest of the market - watch out. O'leary takes no prisoners.
Cheers
In a far reaching and clearly unpolished interview with the Irish Times, Pádraig Ó Céidigh detailed his emotions about O'Leary and how he believes Ryanair is trying to push him out of business. http://www.irishtimes.com/newspaper/weekend/2008/1101/1225321614209.html
Thanks to Professor Stuart for this story.
In these hard times it is understandable why competition makes all fair in love and war. Reading from the history of Ryanair - it is important to understand how the company has grown and now how it intends to maintain its market position. Aer Arann could easily become road kill in this battle.
For those who support the little guys - lets hope not. For the rest of the market - watch out. O'leary takes no prisoners.
Cheers
Boozeless in Bali?
I was in Bali last week.
The island is a tremendous boost for the mind and body. It is a very spiritual place. Except perhaps the spirits seem to be locked away in warehouses and not making it into the bars and restaurants.
I was in a small bar in Seminyak and asked for a Vodka and tonic - no vodka, how about a rum and coke - no rum. Hmmm.
So thanks to Professor Bernadette I can assure you that this is not just my imagination.
It seems there is a technical dispute going on with the local tax authorities and the distribution channels. No one can explain the reason. Already imported wine is subject to 300% tax. Now it would appear that cheap booze is about to go the same way.
Even without the booze - Bali still a great place to visit - just take some of your favorite tipple with you when you enter. Its good insurance.
Cheers
The island is a tremendous boost for the mind and body. It is a very spiritual place. Except perhaps the spirits seem to be locked away in warehouses and not making it into the bars and restaurants.
I was in a small bar in Seminyak and asked for a Vodka and tonic - no vodka, how about a rum and coke - no rum. Hmmm.
So thanks to Professor Bernadette I can assure you that this is not just my imagination.
It seems there is a technical dispute going on with the local tax authorities and the distribution channels. No one can explain the reason. Already imported wine is subject to 300% tax. Now it would appear that cheap booze is about to go the same way.
Even without the booze - Bali still a great place to visit - just take some of your favorite tipple with you when you enter. Its good insurance.
Cheers
Are Airlines Courting Tax Investigation?
At the ALTA (Latin American and Caribbean Airlines Association) Legal Conference held in Miami this week, I posed a question to a panel on Taxes and Fees. My question was essentially to ask whether the panel of legal experts thought the airlines were creating a legal liability through unbundled pricing of the ticket. The answer was - a strong possibility.
As regular readers know - this is my concern - that the unbundling of the airline product is opening up the possibility of airlines who charge for things like baggage or other essential parts of the airline transportation product are indeed avoiding taxes such as the US domestic airline tax.
On further investigation it would appear that there are other elements that they could be avoiding. For example without collecting a tax on the value of the ticket and selling the product without any form of tax - the airlines open themselves out (at least in the USA market) for local sales taxes.
I just hope that their accountants and auditors are paying attention to this process because clearly their lawyers are now aware. It will be interesting to see if any auditors qualify the US accounts of any airline which has not set aside a provision for tax liability.
With certain airlines claiming that there are many hundreds of millions of dollars in extra revenues to be had - and as one senior airline exec confided - its a real gravy train - the IRS is sure going to get interested.
Local, State and Federal indeed International tax authorities are going to be hunting for many forms of revenue to help pay for some of the bailouts. Airlines are always an easy target. The Chicago Convention has already been raped and pillaged so now it would seem to be open season for airlines to pay taxes.
Cheers
As regular readers know - this is my concern - that the unbundling of the airline product is opening up the possibility of airlines who charge for things like baggage or other essential parts of the airline transportation product are indeed avoiding taxes such as the US domestic airline tax.
On further investigation it would appear that there are other elements that they could be avoiding. For example without collecting a tax on the value of the ticket and selling the product without any form of tax - the airlines open themselves out (at least in the USA market) for local sales taxes.
I just hope that their accountants and auditors are paying attention to this process because clearly their lawyers are now aware. It will be interesting to see if any auditors qualify the US accounts of any airline which has not set aside a provision for tax liability.
With certain airlines claiming that there are many hundreds of millions of dollars in extra revenues to be had - and as one senior airline exec confided - its a real gravy train - the IRS is sure going to get interested.
Local, State and Federal indeed International tax authorities are going to be hunting for many forms of revenue to help pay for some of the bailouts. Airlines are always an easy target. The Chicago Convention has already been raped and pillaged so now it would seem to be open season for airlines to pay taxes.
Cheers
Travelport CEO tops pay chart @$43 million
Jeff Clarke headed the poll of Private Equity sponsored companies in a recent poll by PE Hub.
Here is the list and the comparisons.
The CEO Salaries of the Five Largest Take-Privates of 2006:
Jeff Clarke, President and CEO, Travelport
Sponsor: Blackstone Group
Total compensation: $42.6 million
Michel Mayer, Chairman & CEO, Freescale Semiconductor
Sponsor: Blackstone Group, Carlyle Group, Permira, TPG
Total compensation: $19.03 million
David Calhoun, CEO, Neilson Co.
Sponsor: Blackstone Group, Carlyle Group, KKR
Total compensation: $18.71 million
William F. Aldinger III, President, CEO and Director, Capmark (formerly known as GMAC Commercial Holding Corp)
Sponsor: KKR, Five Mile Capital Partners, Goldman Sachs Capital Partners
Total compensation: $8.28 million
Eric Feldstein, CEO, GMAC
Sponsor: Cerberus Capital management, Citigroup, Aozora Bank
Total compensation: $3.63 million<–>
Perhaps I should have stayed at Worldspan!
Cheers and thanks to Professor Stuart for sending me this one.
Here is the list and the comparisons.
The CEO Salaries of the Five Largest Take-Privates of 2006:
Jeff Clarke, President and CEO, Travelport
Sponsor: Blackstone Group
Total compensation: $42.6 million
Michel Mayer, Chairman & CEO, Freescale Semiconductor
Sponsor: Blackstone Group, Carlyle Group, Permira, TPG
Total compensation: $19.03 million
David Calhoun, CEO, Neilson Co.
Sponsor: Blackstone Group, Carlyle Group, KKR
Total compensation: $18.71 million
William F. Aldinger III, President, CEO and Director, Capmark (formerly known as GMAC Commercial Holding Corp)
Sponsor: KKR, Five Mile Capital Partners, Goldman Sachs Capital Partners
Total compensation: $8.28 million
Eric Feldstein, CEO, GMAC
Sponsor: Cerberus Capital management, Citigroup, Aozora Bank
Total compensation: $3.63 million<–>
Perhaps I should have stayed at Worldspan!
Cheers and thanks to Professor Stuart for sending me this one.
30 October 2008
Turkey Day Travel Cuts
Great article from USA Today. However the best piece is the interactive map showing the cutbacks in capacity. The map is a good descriptor of the doom and gloom.
Worth having a look
Cheers
DOJ Says - Dont Worry be Happy Mega Merger OK
So the DoJ puts out this great press release on their decision not to challenge the DL-NW merger.
We are not allowed to know the reasons other than they are fact based.
Boy - would I like to see those facts... wouldn't you?
Anyway - read for yourself
Cheers
"After a thorough, six-month investigation, during which the division obtained extensive information from a wide range of market participants - including the companies, other airlines, corporate customers, and travel agents - the division has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit US consumers and is not likely to substantially lessen competition.
"The two airlines currently compete with a number of other legacy and low-cost airlines in the provision of scheduled, air-passenger service on the vast majority of nonstop and connecting routes where they compete with each other. In addition, the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines' networks.
"The division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the division's obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the division's evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly-broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions. Guidance on the division's policy regarding closing statements is available at http://www.usdoj.gov/atr/public/guidelines/201888.htm ."
We are not allowed to know the reasons other than they are fact based.
Boy - would I like to see those facts... wouldn't you?
Anyway - read for yourself
Cheers
"After a thorough, six-month investigation, during which the division obtained extensive information from a wide range of market participants - including the companies, other airlines, corporate customers, and travel agents - the division has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit US consumers and is not likely to substantially lessen competition.
"The two airlines currently compete with a number of other legacy and low-cost airlines in the provision of scheduled, air-passenger service on the vast majority of nonstop and connecting routes where they compete with each other. In addition, the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines' networks.
"The division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the division's obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the division's evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly-broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions. Guidance on the division's policy regarding closing statements is available at http://www.usdoj.gov/atr/public/guidelines/201888.htm ."
The Gap Between Experience and Common Sense
During the WIT 2008 Conference in Singapore last week - Azran Osman Rani who is CEO of Air Asia X the long haul version made a startling if somewhat revolutionary statement that really took me and gave me a wow moment.
Up till now I thought I was the strange person who seems to think that simplicity saves money for users and airlines – it seems that I am not alone. Air Asia has done a lot that’s right – so I think that they deserve some credit and definitely there are a number of items that we can take away from this.
For those of you who are Newsweek readers – the conventional wisdom column is always a good indicator of where to be. In this instance everyone should just take a moment and consider where common sense can be applied. An example – Unbundle pricing actually creates complexity. So let me just focus on that issue for now.
Low Cost Carriers have made a killing in the market by simply being better at making what works go well and eliminating the unnecessary elements of the product. For the network carriers unbundling actually doesn’t work so well. Why???
The first reason just needs common sense. The more complex the product the more elements. Therefore assuming that you can take a 25 feature product and market it the same way you do a 5 feature product is – well – stupid. But that is what the legacy carriers want us to believe. And this will be their downfall.
Bear with me – let me tell you a story of similar dimension.
When I worked at Microsoft – one of my long time friends came to visit from the UK. Choice in the Microsoft Cafeteria was always a big thing. You could choose from Asian to Salads to sandwiches to whatever was on offer that day. So my friend – chose Sandwich. Off he went. He was gone rather a long time. He came back and when he returned he was shaking his head. He blurted out – “Do you know how many questions I was asked? 16 he continued. I was astounded. All I wanted was a sandwich. It took them longer and frankly I was not sure I really got what I wanted.
So let that be a lesson. Does experience really beat common sense as the legacy carriers would have us believe? Perhaps unbundling a complex (legacy) product is not necessarily a good thing. It really does defy common sense. So what do you think?
Cheers
Up till now I thought I was the strange person who seems to think that simplicity saves money for users and airlines – it seems that I am not alone. Air Asia has done a lot that’s right – so I think that they deserve some credit and definitely there are a number of items that we can take away from this.
For those of you who are Newsweek readers – the conventional wisdom column is always a good indicator of where to be. In this instance everyone should just take a moment and consider where common sense can be applied. An example – Unbundle pricing actually creates complexity. So let me just focus on that issue for now.
Low Cost Carriers have made a killing in the market by simply being better at making what works go well and eliminating the unnecessary elements of the product. For the network carriers unbundling actually doesn’t work so well. Why???
The first reason just needs common sense. The more complex the product the more elements. Therefore assuming that you can take a 25 feature product and market it the same way you do a 5 feature product is – well – stupid. But that is what the legacy carriers want us to believe. And this will be their downfall.
Bear with me – let me tell you a story of similar dimension.
When I worked at Microsoft – one of my long time friends came to visit from the UK. Choice in the Microsoft Cafeteria was always a big thing. You could choose from Asian to Salads to sandwiches to whatever was on offer that day. So my friend – chose Sandwich. Off he went. He was gone rather a long time. He came back and when he returned he was shaking his head. He blurted out – “Do you know how many questions I was asked? 16 he continued. I was astounded. All I wanted was a sandwich. It took them longer and frankly I was not sure I really got what I wanted.
So let that be a lesson. Does experience really beat common sense as the legacy carriers would have us believe? Perhaps unbundling a complex (legacy) product is not necessarily a good thing. It really does defy common sense. So what do you think?
Cheers
PCW – The next big things?
PhocusWright has several things up its sleeve planned for next month’s annual bash in Los Angeles. One of which is the Travel Innovation Summit. Here are their 7 big trends:
1. The growth of pure Travel 2.0 businesses is slowing—dramatically..
2. Travelers will enjoy easy access to rich subjective, objective and experiential content for trip planning.
3. Abundant, varied mobile applications are beginning to emerge.
4. The Long Tail is coming of age.
5. Air shopping is still a work in progress.
6. Attention shifts from "learn, shop, book" in the travel value chain.
7. Building supporting business applications loses its luster.
During last week’s WIT which was run in association with ITB Asia and PhocusWright – it was clear that Innovation was a hot topic. With development and research budgets likely to fall victim to the global retrenchment – innovation will get harder but perhaps better. Hard times focus the creative juices. This recession is going to be hard and deep. So will we see a bigger better faster next big thing emerge? Probably not.
In my view – it will be a coalescing of several influences. One big deal will be how to make things simpler and easier. I believe that we are beginning to experience innovation fatigue. Trial of new ideas seem to be fading and some of the biggest fads in recent years are no longer there. Witness such things as MySpace and Second Life as they fade. However it could be that the innovation of the last 12 months has been swallowed up in the other news and attention eaters such as the US presidential election and the current economic crisis. The pre-occupation with other parts of life has crowded out the innovation story. Is now a time for a comeback?
You be the judge
Cheers
1. The growth of pure Travel 2.0 businesses is slowing—dramatically..
2. Travelers will enjoy easy access to rich subjective, objective and experiential content for trip planning.
3. Abundant, varied mobile applications are beginning to emerge.
4. The Long Tail is coming of age.
5. Air shopping is still a work in progress.
6. Attention shifts from "learn, shop, book" in the travel value chain.
7. Building supporting business applications loses its luster.
During last week’s WIT which was run in association with ITB Asia and PhocusWright – it was clear that Innovation was a hot topic. With development and research budgets likely to fall victim to the global retrenchment – innovation will get harder but perhaps better. Hard times focus the creative juices. This recession is going to be hard and deep. So will we see a bigger better faster next big thing emerge? Probably not.
In my view – it will be a coalescing of several influences. One big deal will be how to make things simpler and easier. I believe that we are beginning to experience innovation fatigue. Trial of new ideas seem to be fading and some of the biggest fads in recent years are no longer there. Witness such things as MySpace and Second Life as they fade. However it could be that the innovation of the last 12 months has been swallowed up in the other news and attention eaters such as the US presidential election and the current economic crisis. The pre-occupation with other parts of life has crowded out the innovation story. Is now a time for a comeback?
You be the judge
Cheers
Traffic Results Gloom
Surveying our standard surveys by every measure traffic is off. And off a lot. We were predicting 10% for the USA and the numbers are pretty close. All measures are now clear. The last quarter was just bad and it’s not getting better. What we see now is that the amount of lift has really plummeted but not enough to cope with the reduction in traffic. Here are some highlights.
Of the US hubs – Delta seems to be holding up in Atlanta but CVG has been savaged. NW is experiencing loss in MSP which is also loosing traffic from Sun Country. LA’s numbers surprised us by only dropping 5% which would seem to lend credence that there has been consolidation from the minor airports in the LA Basin. Orlando’s results must be worrying Disney.
In Europe numbers ex-UK are off driven by a general reduction but also steep drops with XL and Zoom carriers now eliminated.
Asia is no bright spot either – BKK, TPE and ICN all reported greater than 10% passenger drops. Beijing was up as a result of the Olympics but not by as much as could have or should have happened. HKG was down even Singapore showed a drop.
Where are the bright spots? Russia in Moscow and St Petersburg, Latin America, GCC and surprisingly Africa has been up.
We believe that this will result in further cutbacks across the board. Hoteliers are going to be very worried. The lack of lift is going to reduce capacity in many resort destinations. Christmas travel from Northern Europe will be a huge bust with Thailand suffering big time. The lack of charter capacity into the market is resulting in bookings being off around 20%.
Of the US hubs – Delta seems to be holding up in Atlanta but CVG has been savaged. NW is experiencing loss in MSP which is also loosing traffic from Sun Country. LA’s numbers surprised us by only dropping 5% which would seem to lend credence that there has been consolidation from the minor airports in the LA Basin. Orlando’s results must be worrying Disney.
In Europe numbers ex-UK are off driven by a general reduction but also steep drops with XL and Zoom carriers now eliminated.
Asia is no bright spot either – BKK, TPE and ICN all reported greater than 10% passenger drops. Beijing was up as a result of the Olympics but not by as much as could have or should have happened. HKG was down even Singapore showed a drop.
Where are the bright spots? Russia in Moscow and St Petersburg, Latin America, GCC and surprisingly Africa has been up.
We believe that this will result in further cutbacks across the board. Hoteliers are going to be very worried. The lack of lift is going to reduce capacity in many resort destinations. Christmas travel from Northern Europe will be a huge bust with Thailand suffering big time. The lack of charter capacity into the market is resulting in bookings being off around 20%.
Consumers Embracing Airline Charges?
One could infer this conclusion judging by the latest results. Airlines are now (almost) all drinking the coolaid of the Ancillary revenue model. Happy bunnies all, the airlines declare that they have finally found their ability to make money from the business model by resorting to their time honored tradition of pricing obfuscation. Only this time it seems to be working. Better than a fuel surcharge – better than an attempted rate hike. Of course there are even those like Robert Buckman, aviation futurist (say what???) and director of airline distribution strategy for Miami-based Amadeus North America who say that Consumers will eventually embrace unbundled pricing. Let’s just say I think he is speaking out of a non-verbal part of his body.
In this article from Travel Weekly: http://www.travelweekly.com/Article.aspx?id=181492 It can be clearly seen that there is a ton of money to be made by following the formula of hiding the true cost of the service and adding to the cost to the consumer.. Thus new and old airlines are now ALL UPCs – Unbundled Pricing Carriers .
So the impact seems to be really great for the airlines and the Wall Street Analysts. But what of the customer and the other businesses/entities that depend on the business model? How are they going to work/live in this new world? Actually the answer is not so happy but in true Lemming like behavior – it may not matter. The consumers are now finding that they cannot predict the real price of the product they are purchasing. The per passenger model becomes harder to understand. Anyone depending on this (such as taxation authorities) are now seeing their model crumble. In a recent survey conducted by the NBTA - Most of 230 U.S. travel buyers responding to a July-September survey felt that airlines have been "misleading the public with the introduction of new fees." Forty-four percent said "apparent competitive fares end up being higher after all the fees are added." Fewer than 20 percent said airlines are not misleading the public. Clearly the travel managers are unhappy in fact at a session I moderated in LA on GDSs in August at the NBTA national convention, this was indeed a hot topic then.
Behavior of the consumer is not however changing. At least we are not yet seeing perceptible changes in behavior from the passengers as would be indicated in their flocking to those who have reduced or not yet implemented fees. While we can expect some benefit for Southwest who is still hawking their non-fee story – we are not seeing significant growth or share shift to Delta who was not a swift adopter of fees. So it is beginning to look like the airlines have found nirvana and a way to raise revenues without touching market share. Remember that the airlines have not yet rolled back the fuel surcharges to the levels they were at before the price of oil skyrocketed.
So now something needs to be done. Finally – the authorities are going to have to look at this. The numbers are staggering. Upwards of $1 billion per airline can now come from the non passenger ticket revenue. OK This is extreme but I am making a point. Air Canada has perfected an unbundled model. Its revenue goals seem to be modest. Currently generating $73 million as opposed to United’s mammoth $1 billion.
From our point of view this is short term win thinking. It is also going to end in tears despite its popularity. I believe that 2009 we will see several initiatives to curtail the model of unbundled pricing. In no market has this type of behavior ever been successful. Long term we will reach a level of acceptance but be careful what you wish for… it may just happen and you won’t like the results. I predict that a battle will ensue in which certain OTA or Meta Search engines will figure out how to display a true cost of product and that users pick up of this information will eventually force all channels to display true pricing. Further the various government authorities – such as the European Community – will force full true price disclosure. A passenger bill of rights will then appear in the USA. Finally the various local and national bodies who depend on the airlines for taxation type revenue will also force the airlines to start handing over cash with an ancillary revenue tax. Then we shall see equilibrium returning. Personally I hope we get back to full transparency in pricing – but judging from our continued coverage of airlines prices particularly international – I don’t see that happening.
Cheers
In this article from Travel Weekly: http://www.travelweekly.com/Article.aspx?id=181492 It can be clearly seen that there is a ton of money to be made by following the formula of hiding the true cost of the service and adding to the cost to the consumer.. Thus new and old airlines are now ALL UPCs – Unbundled Pricing Carriers .
So the impact seems to be really great for the airlines and the Wall Street Analysts. But what of the customer and the other businesses/entities that depend on the business model? How are they going to work/live in this new world? Actually the answer is not so happy but in true Lemming like behavior – it may not matter. The consumers are now finding that they cannot predict the real price of the product they are purchasing. The per passenger model becomes harder to understand. Anyone depending on this (such as taxation authorities) are now seeing their model crumble. In a recent survey conducted by the NBTA - Most of 230 U.S. travel buyers responding to a July-September survey felt that airlines have been "misleading the public with the introduction of new fees." Forty-four percent said "apparent competitive fares end up being higher after all the fees are added." Fewer than 20 percent said airlines are not misleading the public. Clearly the travel managers are unhappy in fact at a session I moderated in LA on GDSs in August at the NBTA national convention, this was indeed a hot topic then.
Behavior of the consumer is not however changing. At least we are not yet seeing perceptible changes in behavior from the passengers as would be indicated in their flocking to those who have reduced or not yet implemented fees. While we can expect some benefit for Southwest who is still hawking their non-fee story – we are not seeing significant growth or share shift to Delta who was not a swift adopter of fees. So it is beginning to look like the airlines have found nirvana and a way to raise revenues without touching market share. Remember that the airlines have not yet rolled back the fuel surcharges to the levels they were at before the price of oil skyrocketed.
So now something needs to be done. Finally – the authorities are going to have to look at this. The numbers are staggering. Upwards of $1 billion per airline can now come from the non passenger ticket revenue. OK This is extreme but I am making a point. Air Canada has perfected an unbundled model. Its revenue goals seem to be modest. Currently generating $73 million as opposed to United’s mammoth $1 billion.
From our point of view this is short term win thinking. It is also going to end in tears despite its popularity. I believe that 2009 we will see several initiatives to curtail the model of unbundled pricing. In no market has this type of behavior ever been successful. Long term we will reach a level of acceptance but be careful what you wish for… it may just happen and you won’t like the results. I predict that a battle will ensue in which certain OTA or Meta Search engines will figure out how to display a true cost of product and that users pick up of this information will eventually force all channels to display true pricing. Further the various government authorities – such as the European Community – will force full true price disclosure. A passenger bill of rights will then appear in the USA. Finally the various local and national bodies who depend on the airlines for taxation type revenue will also force the airlines to start handing over cash with an ancillary revenue tax. Then we shall see equilibrium returning. Personally I hope we get back to full transparency in pricing – but judging from our continued coverage of airlines prices particularly international – I don’t see that happening.
Cheers
Sterling goes under but causes are different
Sterling is part of Northern Travel Holdings and also part of the meltdown in the Icelandic banking system. With no access to cash or credit – its fate was sealed several weeks ago. Other members of the group such as the Ticket web business must also be very shaky at this time. There will be others like this but it’s really interesting to consider that at one time these guys owned large chunks of major players.
Cheers
Cheers
Its Over – The Germans Own The British. A German Virgin next?
So with a whimper BMI falls to LH. Sir Michael decided in the end not to fight it and exercised his option to sell his 50% share to LH who already owned 20%. I wanted to get this story out when I got wind of it over the weekend but sadly – no access to my blog. Oh well. He cashed out his chips
So while the other suitors have been banished – BMI has now fallen. This changes the landscape and allows the cards to fall one particular way. Lets deal with this in 2 parts. First the bigger picture.
So Star now looks like a German network. The chances are that SK’s sale to LH of its BD shares will buy it sometime but SK is looking very shaky at the moment. Look for even closer ties and a potential sale of the Scandinavians to the Germans. Should this happen – the Austrian Government would have no option other than to submit to LH’s outrageous 1 cent a share offer. This would make AZ have to go to AF/KL and BA’s IB+AA deal go through. The only dance cards with no players – Aer Lingus and TAP. But wait there is more. And what of the USA? Given United’s weak position now a 3rd US based Star member (Continental) and LH’s relationship with JetBlue – could that be a sign as well? Will Star actually dump UAL as its second dumpee (remember it dumped Varig).
So let’s go back to Bishop’s soon to be former Baby. Virgin stepped into the fray and said that VS would like to consider a tie up now that the LH-BD deal is done. Logical. They wanted to combine BD and VS but now the issue is moot. The logic of the relationship is still there so VS called a spade and spade and said how about a mega tie up between the brand king and the German Dreadnought.
Hello is anyone awake in Brussels?
So while the other suitors have been banished – BMI has now fallen. This changes the landscape and allows the cards to fall one particular way. Lets deal with this in 2 parts. First the bigger picture.
So Star now looks like a German network. The chances are that SK’s sale to LH of its BD shares will buy it sometime but SK is looking very shaky at the moment. Look for even closer ties and a potential sale of the Scandinavians to the Germans. Should this happen – the Austrian Government would have no option other than to submit to LH’s outrageous 1 cent a share offer. This would make AZ have to go to AF/KL and BA’s IB+AA deal go through. The only dance cards with no players – Aer Lingus and TAP. But wait there is more. And what of the USA? Given United’s weak position now a 3rd US based Star member (Continental) and LH’s relationship with JetBlue – could that be a sign as well? Will Star actually dump UAL as its second dumpee (remember it dumped Varig).
So let’s go back to Bishop’s soon to be former Baby. Virgin stepped into the fray and said that VS would like to consider a tie up now that the LH-BD deal is done. Logical. They wanted to combine BD and VS but now the issue is moot. The logic of the relationship is still there so VS called a spade and spade and said how about a mega tie up between the brand king and the German Dreadnought.
Hello is anyone awake in Brussels?
“Austrian worth – 1 cent per share” says Lufthansa
So while echoing history in trying to build a Hapsburg like Alliance, at the last minute Germany’s Lufthansa was the only carrier to put in any number to bid for fellow Star Alliance member Austrian Airlines.
While the Austrian government was expecting a significant number to offset the approx Euro 500 million required to put OS to right, LH’s offer fell a little short. In fact it said it was willing to pay just €360,000 ($454,090) for OIAG's (The Austrian government’s organization) stake, or €0.01 per share.
Ouch!
And to make matters worse LH even stated that the Austrian Government would still have to fork out the 500 million to put things right.
The Austrian government has now put in a further deadline of December 31st. Unclear is to whether they will allow new bidders to the table. Previously interested parties included Turkish Airlines, S7 Sibir, AF/KL and Aeroflot plus a dark horse bid was mooted from BA.
Speaking personally I think it’s worth 1.0001 Euro cent per share. But clearly LH has a lot more on their mind than little old Austrian.
Cheers
While the Austrian government was expecting a significant number to offset the approx Euro 500 million required to put OS to right, LH’s offer fell a little short. In fact it said it was willing to pay just €360,000 ($454,090) for OIAG's (The Austrian government’s organization) stake, or €0.01 per share.
Ouch!
And to make matters worse LH even stated that the Austrian Government would still have to fork out the 500 million to put things right.
The Austrian government has now put in a further deadline of December 31st. Unclear is to whether they will allow new bidders to the table. Previously interested parties included Turkish Airlines, S7 Sibir, AF/KL and Aeroflot plus a dark horse bid was mooted from BA.
Speaking personally I think it’s worth 1.0001 Euro cent per share. But clearly LH has a lot more on their mind than little old Austrian.
Cheers
The Professor Returns
The Professor is back!
Sorry I was away – I just spent 4 days in Indonesia where for some strange reason both Gmail and my blog entry were restricted. But back to normal – I hope.
While I was in Asia – I spent quite some time listening to what is going on. The growth and contractions of day to day business. Some anger at the USA – this time for causing the meltdown. Many think Greenspan is to blame. Huge optimism for Obama and everyone wanted to know who the Professor would be voting for next week.
The WIT show, ITB Asia and the other conferences held in Singapore also gave an insight into the heart of Asia. Simply put they are poised for growth yet are still attached to the rest of the world’s general economic health. Clearly the fall off in demand has affected everyone from Cab drivers in Bali – to Limo drivers in Singapore. Hoteliers in Beijing, Resort managers in Phuket, to Boat operators in the Spice Islands to the Low Cost Carriers.
A refreshing set of views. Unique yet part of the whole. Decidedly Asian.
Cheers
Sorry I was away – I just spent 4 days in Indonesia where for some strange reason both Gmail and my blog entry were restricted. But back to normal – I hope.
While I was in Asia – I spent quite some time listening to what is going on. The growth and contractions of day to day business. Some anger at the USA – this time for causing the meltdown. Many think Greenspan is to blame. Huge optimism for Obama and everyone wanted to know who the Professor would be voting for next week.
The WIT show, ITB Asia and the other conferences held in Singapore also gave an insight into the heart of Asia. Simply put they are poised for growth yet are still attached to the rest of the world’s general economic health. Clearly the fall off in demand has affected everyone from Cab drivers in Bali – to Limo drivers in Singapore. Hoteliers in Beijing, Resort managers in Phuket, to Boat operators in the Spice Islands to the Low Cost Carriers.
A refreshing set of views. Unique yet part of the whole. Decidedly Asian.
Cheers