Pure Speculation - Considering the GDS Model

Yes its been an interesting week. The reporting season has brought further evidence of how badly off travel is in the recession. While the US ponders a fall of 2.8 in retail sales Y/Y - Travel is down WAY further at least 7 points worldwide and as much as 12 points in the US market.

So here is my weekly reflection and just me being speculative.

After looking harder at the depressing news from Travelport, I started to reflect as to what could be done by the players. we seem to have a mutually symbiotic set of problems that are besetting the Travel Intermediaries (OTAs and Traditional) as well as the GDS.

Fixing these problems is going to require a set of radical solutions. I am not going to outline a State of the Union address on the situation but I will float an idea.

One of my regular contributors is Professor Alex who hails from Germany. He opines that the splitting of Orbitz and the GDS businesses of Travelport/Blackstone nee Cendant was a mistake. Further he states that with the importance of the hotel businesses (GTA, Synxis etc) of these companies that perhaps there is time for a rethink of the full service model of the GDS. Clearly the core GDS model is in decline so at what point does it actually start to fall apart and what can be done to compensate for the loss of this formerly lucrative and secure cash flow. I think he could be onto something. Perhaps there is a market for the re-alignment of the major OTA players and the GDSs. Perhaps there is a case for Expedia to use its cash pile to align with one of the other players. Of course it would have a ripple out effect on the current GDS based revenue that is more profitable for the GDS (and indeed the airlines) IE Business travel from such players as the Big 4 corporates.

As noted above this is pure speculation - but it is an interesting theory. There would be 4 lines of business for each of the big 3 players:

Corporate Intermediary Services
Leisure branded Intermediary Services
White Label Distribution and Core GDS Services
IT Services

Hmmm Food For thought?

I would be interested in people's views.

Cheers

3rd Party Victims of the Recession

Last night I had dinner with another Professor. He is on assignment with a large travel supplier trying to solve a complex internal set of problems relating to IT.

We discussed how the recession will impact the functions he interacts with - both corporate and the subsidiary he works for. There are going to be a lot of people who will be toast. Our original aggressive estimate of up to 100K people who are laid off or cut totally in the US market for Aviation and Travel for 2008 now seems light.

Despite the need to cut costs even further will mean that there will be some tough decisions. We have seen certain facilities cut and now we are hearing that hotels have cut services as well as shutting whole floors to reduce costs. The products are being quietly cut, certain cruise lines (probably all of them) have cut headcount at head office and indeed on some of the ships. Work rules have been altered.

One area I didn't expect to take the hit so soon is the outsourcing market in South Asia, Eastern Europe and other similar locations. Already I have seen significant cuts in companies we know operate in ATT (Aviation Travel and Tourism). I have received many different requests for assistance and work projects. I cannot even hazard a guess other than to say India is going to experience a severe cold from the cancellation, delay and reduction of outsourcing work. As these workers are themselves part of the class who are now starting to enter the middle class consumerism - particularly travel inside India - it will reverberate outwards.

China is also holding on to its pocket books tightly. A combination of Chinese policy (for example restricting visits to Macao for local Chinese would be gamblers) a significant fall in confidence and an overly zealous restrictive policy during the Olympics has resulted in very large drops in occupancy and yields. The markets that have started to become dependent on China for tourists is also seeing significant drops.

So for how long will they (and us) have to suffer? 2009 is a write off - 2010 is not looking too good.

Best of luck to all of us.

The Professor at PhocusWright Next Week

Greetings readers and friends.

The Professor will be at PhocusWright next week. I will be speaking at the Blogger's Summit on Tuesday with 2 sessions one in the morning and one in the afternoon. Moderated by Siew Hoon of WIT, the panel (which will run twice) which I will sit includes other expert travel bloggers from all over the globe including Stephen Joyce, Travel & Tourism Technology Trends; Kevin May, Travolution Blog; Ben Mutzabaugh, USA TODAY's Today in the Sky; Alicia Whalen, Couple of Chicks e-Marketing and yours truly. The 2008 PhoCusWright conference attracts over 900 delegates many of whom are online marketing leaders in their fields.

See you there.... come and throw pastries or cash at me if you wish - or even heckle.

Active participation is definitely encouraged.

Boeing's troubles extend to 747-8

With various impacts spreading from the now over machinists strike - it seems that Boeing's supply chain is running a little ragged at the moment.

There are reports of fastener problems on the 737 line. Now the 747-8 has been pushed back to deliveries in 2009 for the Cargo version and Lufthansa's new pax planes are not due now until 2010.

With Airbus also struggling to meet production ramp up goals for the giant A380 - it seems the bad news is not good.

Some good news for both ultra large plane makers. The Russian government just removed tariffs on all planes over 300 seats.

Cheers

Alaska Cozies up to Delta

Seattle's home town airline is getting closer to Delta. This may signify the end of their "friends with everyone" strategy that has held them so well. On the other hand maybe not.

On Monday they announce a big partnership. as far as I can tell from inside sources this is an upgrade to the existing independent alliances that Delta has had for the last 3 years and the much older Northwest relationship. It involves codeshares and frequent flyer tieups.

Where this leaves OneWorld remains to be seen. At present Alaska has FF tie ups with the following airlines:

*Air France
*American Airlines
British Airways
Cathay Pacific
Continental Airlines
*Delta Air Lines
Era Aviation
*Horizon Air
*KLM
Korean Air
*LAN
*Northwest Airlines
PenAir
Qantas

* means a premium link.

Cheers

New Sneaky Devaluation of FF Currency

Stealth devaluation of the Frequent Flyer Currency has been occurring for some time. Now here is the latest one. Skyteam announces an upgrade from full fare coach to Business Class for 25,000 miles.

OK sound reasonable right? Well not exactly. Why would they invest all this time and effort to do something without a gimme on the back. The gimme being that it will be full fare prices as the flex. This program is clearly targeted at the newly constrained corporate traveller who has seen his "privileges" curtailed and he wont be allowed to fly in C/J class. Skyteam must have looked at their forward bookings and thought - oh dear we need to do something about our yields.

On the positive side it does mean that Skyteam sales people may have a tool to play with when negotiating with corporates. Giving them access to this facility might swing revenue from another carrier. Right now everyone is scrapping for every passenger.

Longer term though this will be a loser for FF premium guys. I will not be surprised if (after seeing the recent survey from Delta) that the 6 international upgrades that used to accompany your Platinum miles renewal each year, goes the way of hot meals in coach.

Expedia restructures - big changes for OTAs

Uh oh.... not happy news at my neighbor's place. Expedia is restructuring.

Gone are heavyweights like Paul Brown. A restructuring build around brands not geography will signal significant upheaval at the Bellevue based company.

For those who provide supply to Expedia this cannot come at a worse time. It means that the company will be in some degree of turmoil at the very time when product merchandising and short term deals dynamic to the minute are being worked out.

All of the US major markets are in decline - Vegas, Hawaii, Orlando, California, New York and the nearby international markets are also seeing rapid falls - Canada, Mexico and the Caribbean.

Couple this with reductions of 10% at Orbitz and Travelocity must also be looking to cut staff. The one bright spot - Priceline seems to be doing quite well on the strength of their EMEA based business.

There must be some very unhappy people. Barry Diller, Blackstone and TPG boys to name but a few.

Tough times are not going to be short lived either.

What's in your wallet?
c
Cheers

Travelport:: GDS Segment bleeding is "quite serious"

Well we knew the bleeding would be bad - we just didn't know quite how bad. Well today we found out.

Travelport's numbers are just awful.

A listen to the call was quite sobering. Given the downturn they reported in August and the forward outlook in the early days of that month we knew the cuts and the impact would be in excess of 10% and my estimate was north of 15%. What we have seen is now that the capacity cuts are still not enough. Early figures for November show a fall in excess Y/Y of 19% for Travelport as a whole.

I will be doing a more detailed review later - but I see this as a harbinger of change.

Clearly ARC's numbers and Travelport's are tracking downwards. October was off 15% and now we see early November is down 20%. That means that airlines are getting more direct business. it means that the ability for the GDS to maintain pricing will be hard. It also means that they will be under considerable pressure to continue incentive payments thus creating further pressure on the relationship with the airlines.

The battle lines are drawn now for next year's PCA negotiations between airlines and GDSs.

Prognosis is poor

EC approves Alitalia bailout. Is this it?

So with an Italian as EC Commissioner for Transport, the Europeans have now formally approved the Alitalia rescue program.

This includes making Alitalia repay its loan to the Italian government. So this works out ok because Alitalia's current owners (that would be the Italian Government) will repay the debt to the Italian Government.

So is this it? The fodder for countless blogs and articles for years?

Probably not - There have been strikes this week and more are scheduled not to mention unscheduled work stoppages. So the labour unions are not in sync on this one.

I guess we will have to see how much patience everyone has. Just for the record - I am not anti-Italian. But this soap opera could only play out this way in Italy!

Cheers

October ARC Sales WAY off. Brace for more bad news

ARC Has just published its sales figures for October. The month on month and the YTD figures are looking rather off.

Our research so far is showing that the total passenger numbers or off in the region of 10% capacity cuts and about 11-12% in traffic (pax) numbers.

ARC seems to be looking at a little more.

Here are the key numbers:

Total Transactions OCT -15.3%
Total Transactions YTD -6.46%
Total Sales OCT -13.57%
Total Sales YTD + 0.44%

As an aside the domestic total transactions YTD are off 16.07%

GDS numbers should track to the ARC numbers. Airlines numbers are still doing a little better but still not enough - this means more cuts to come.

Cheers

GDS model in for more scrutiny. Sabre placed on watch

I realize that some times I can be a bit of a curmudgeon about the GDS model. I think its flawed and due for reform. That said - they have provided a valuable service for some time. BUT as a class the GDS are now in a certain degree of hurt. It seems that others are begining to come round to my point of view. For example lets take Standard and Poors. On November 10th they placed Sabre on negative watch.

This is an abstract - from S&P's own website.

Sabre Holdings Corp. 'B+' CCR Placed On Watch Negative Based On Weaker Travel Demand Southlake, Texas-based Sabre is a leading provider of electronic travel distribution services. Since its acquisition, Sabre does not disclose its financial results publicly. Date: 2008-11-10

This is not a good situation for them to be in - so I dug a little deeper. It seems that there is a significant set of impending problems that each of the GDS companies has to face. These are:

1. The financial health of their parents. I cannot assess Amadeus's parents - but both TPG and Blackstone have recently gone through a number of major reversals.

2. A significant reduction in traffic. We don't have data from Sabre or Amadeus as their numbers are not public. But Travelport's numbers are public. Their last report was August 13th for Q2. We are awaiting their Q3 numbers - they are not likely to be pretty. Whilst Travelport has some expectation of synergy cost reductions as a result of their integrating Worldspan's operations - Sabre doesn't have that advantage. Amadeus similarly should be able to cut costs due to so far having avoided this process.

3. The expectation of an IPO in 2nd half 2008 has left them bereft of investment funds since the focus was on getting to an IPO or some other major event which would require recapitalization.

4. Need for investment for new services to combat the encroachment of competitors invading their turf.

5. Increasing need for cash to pay incentives to hold onto accounts in a fierce competitive market.

Tough times in river city

Cheers

Physician Heal Thyself of Tarmac Delay Ills

Gotta love those guys... the Government and Industry and "users" all 36 of the task force could not do anything better than waste US Taxpayer money ($135,000) and decide the best way to solve the airline tarmac problems that beset the industry in 2007 with ...

Drum roll and anticipation - excitement is building...

Yes the airlines and the FAA can work this out themselves. Over and Out.

Any idiot can see that if this is really the answer they would have solved it before now. So as usual sanity and common sense has failed to prevail. Remember that this is coming at a time when the Airlines and the FAA are now at true loggerheads over the issue of airport slots.

So expect this to end some time at the end of Obama's Administration.

Congrats to all the participants in this quango. You have deservedly won the old Coveted Proxmire Golden Fleece Award. Which for the benefit of all I am resurrecting specifically for this instance!

For official seekers - here are the relevant links for you:

I went to the FAA site - here is the press release:

http://www.dot.gov/affairs/dot16308.htm

Here is the report itself:

http://www.dot.gov/affairs/Tarmac.pdf

Officially called the " Tarmac Delay Task Force"

The official release about setting up the task force in January:

http://www.dot.gov/affairs/peters012208.htm

Cheers

Cutting Starts in Travel Distribution

With a 10% capacity cut across the board at the airlines - it was only a matter of time before other parts of the food chain started to feel the pinch of the reduction in both capacity and more importantly traffic.

I have no numbers in Hotels but believe that there has been widespread cuts in Hotels both front line and managerial staffs in the properties and at the head offices.

Orbitz earlier this week announced a loss and a 10% staff cut across the board. Not to be outdone, At least one of the GDSs has quietly been laying off staff in the US market. We wait to see if there have been cuts at Travelport who should announce their numbers in the next 10 days.

Returning to Orbitz, Steve Barnhart was none to optimistic. On the Analysts call he said: "Although we achieved our target growth rate for net revenue in the third quarter, we do not expect to reach that long-term target range of 9 percent to 12 percent growth in gross bookings and net revenue again until economic conditions improve..." .

We have already seen hiring freezes across the board. Restrictions on travel and indeed any expense. Cutting back on all cost generation and delaying investment.

This is not going to get better any time soon. Budgets for next year's corporate travel have been slashed. Based on our discussions with players with large budgets in all 4 major geographies (North America, South America, EMEA and Asia Pac) we believe that budgets have been cut an estimate 15-20% across the board. From prior experience that tends towards a lower cut number only because exceptions are made. One characteristic we have seen is a decision to lower the budget for trips. IE fewer and fewer premium class authorizations.

Ouch!

And whats in your budget?

Home and Away's Valuation - Plain Silly

I am sorry but I cannot let this one pass by without a comment.

TechCrunch (via Tim Hughes' BOOT blog) announced a $250 million (not lira) round for the Austin based H&A business. Led by TCV, this has to be one of the most irrational plays I have seen in a long time.

It has a world of problems associated with the valuation metrics. So I must have missed the KoolAid they were giving out this week.

You be the judge

Here is the link from the NY Times blog site:

http://bits.blogs.nytimes.com/2008/11/11/vacation-rental-site-raises-250-million-in-venture-funds/?pagemode=print

London ready for Olympics? Not by a long shot.

The first 2 days of WTM - the premier UK based travel show have shown that London is definitely not ready for prime time.

Absolute chaos usually reigns at WTM since it moved to the Excel Center in Docklands. Each year there was a different excuse. DLR wasn't ready, DLR upgrading, building the DLR extension to LCY etc etc.

So London you have about 1300 days to get this sorted out. I really don't believe that London will get this ready for quite some time. Just keeping the London Underground running is a major undertaking. Getting it to work and be able to accommodate the hoards that will come for the Olympics is for me an impossible task.

So I throw down the gauntlet. Boris and Co - get with the program - you have this time to fix it. You had just better focus on it because right now your plans are inadequate and based on too many flimsy assumptions that will never hold up.

Still we all hope - me included

Cheers

Forrester says - set your site up for hunters

There are gathers and then there are hunters.

If you lay out your stall on the web - you had better be prepared for hunters. Forrester (www.forrester.com) has just put out one of their little research pieces. This one is entitled:

US Travelers And The Recession: A Glance Ahead To 2009
Here is the exec sum from their website:

"US leisure travelers cut both their non-travel and travel spending during the summer of 2008. Forrester's Consumer Technographics® data currently shows that there are more US leisure travelers who plan to spend more on their leisure travel in the next 12 months than plan to spend less. Analysis of the data shows that many of those who plan to spend more are older travelers who may be more affected by recent stock market gyrations — meaning stated intentions are subject to change. What is certain is that travelers will search for value in 2009 with the same intensity as a pig searching for truffles. To help them succeed, travel eBusiness professionals need to take three simple — and relatively inexpensive — steps to improve their Web sites' future appeal and utility."

This has got me thinking about what sellers in travel need to do during the recession.

This research is important because it points to a change you need to have in the emphasis of your message. Next week at PhocusWright there will be the Innovation Summit: (go to the PCW site for more details). I have looked at a lot of them and frankly I am not sure there is a good enough story there for many of the sites. However you be the judge if you are going on Monday. I will be listening carefully in the audience to as many of them as I can handle.

There has been a lot of emphasis over the past year on the long tail - trying to mine the ends of the spectrum. That is always a hard sell to an investor - TRUST ME on this one.

I firmly believe that a commercial website needs to be constantly updated to keep it fresh for your consumers. Now more than ever the story has to be not just "value" but it needs to be screaming BEST price and DEALS HERE. The consumer is so punch drunk with woolly sounding value that he ignores that story. If you are not focusing on this element then subsidiary and nice to haves are going to be both lost in the noise and the hunt.

Right now she/he wants a deal and you need to be merchandising to her/him big time.

So dearly beloved. No fluffy stuff. You need to be screaming price and deals. If you dont then Forrester's truffle hunting pig will be skipping your site.

You have been warned

Cheers

Farelogix extends the Open Source environment

OK - I admit it - I like the GDS "green screen" interface. Heck over time I have learned to use 9 different res systems (many of them just not around any more) and 5 different CRS/GDS screens (Aha - which one was number 5 you ask!). I like them because I can always make it work the way I want it to. Its a command line lover's dream. The response times are fabulous, I can get exactly what I want. Its a bit like being an advocate of the 2nd Amendment. They will have to pry my fingers off it!

So i have always felt that scripting and highlighting were somewhat clunky. For the record the first highlight logic screen was not developed by TRX/BCD but by my team at PARS.

with that out of the way - I was intrigued to read about "Project Hawkeye" from Farelogix. I am presuming that this is named after the character from M*A*S*H!

I wont bore you with the technical details but it really does come to one of the last remaining factors that people hold onto for the justification of sticking with "green screens".

What "Hawkeye" will do is create an open source environment for the integration of Farelogix app set into the operating and/or desktop environment of any user community through a user interface tool kit.

This is not trivial folks. It is very hard and very complex. From bitter personal experience and hard fought battles - I can assure you that creating this environment is a tough development. A VERY necessary change that can really open up the non-homogeneous reservations infrastructure.

All users of reservations systems - well almost all - are (if you will pardon my analogy - a little bit pregnant. They need to access multiple res sources because long ago the myth of the GDS providing access to all supply and content ceased to be a reality. The top 4 Corp Agencies all have their own platforms at the desktop. Travelport even purchased a desktop environment from the now almost defunct G2 Switchworks. The OTA platforms all of systems at the back to enable connecting to multiple host systems and all of them do it (shhhh don't tell anyone).

So - this is a bit of a game changer. I can just see the chaps at Travelport trying now to "disallow" access by a user from the G2 environment to "Hawkeye". That will be an interesting battle.

In the end the battle really wont be a big deal. It will happen slowly but surely. Farelogix project is just another step along the way.

For more details - check out the ATW article: http://www.atwonline.com/news/story.html?storyID=14658

The full story will be out tomorrow check out the FLX website. www.farelogix.com

Cheers

Ouch Airbus ends the month in the loss column

Despite the mega order from Grupo Marsans - Airbus has actually bad news to report. it has 71 orders that were canceled during October.

while this may seem a lot (it is) there is some sanity behind this. The biggest loss which takes the year to date losses to 119 cancellations comes from a single customer - Skybus's order for 65 aircraft has actually been formally canceled. This gets Airbus off the hook for all those A319s it might have been forced to build for the defunct Columbus based carrier.

So far I have not been able to see what Boeing's numbers are - I suspect they will reflect a similar number but that is pure speculation on my part. Anyone from Boeing care to comment?

Cheers

LCC triumvirate to rule North America

Reprinted from our INtheKNO Blog

Southwest Airlines and Volaris the upstart Mexican airline have today announced their long awaited tie up.

Southwest previously announced a northern alliance with Westjet.

So let's speculate at the moment that this in turn shields each other's market and creates a Non-GDS based alliance of almost biblical proportions.

The 3 airlines represent the pinnacle of the North American version of the LCC model. Each is very strong in their own right and all 3 will create a partnership that could knock the pants off any player or even combination of players north of the Panama Canal.

This will put a crimp in the style of JetBlue's southward expansion and also start a rush to further non-GDS based alliances.

I would take issue with the "seamless" integration statement in their PR release. That is a little over the top.

And yes that crumbling sound you hear in the background IS the sound of the GDS model falling.

Martin Geoge and Co head to Court on Wednesday

The long protracted battle over price fixing in the transatlantic market heads for a new phase on Wednesday when 4 execs - Martin George (formerly BA's Commercial Director) airline's current head of sales, Andrew Crawley, and two other former chaps: Iain Burns, its former communications chief; and Alan Burnett, who was in charge of UK and Ireland sales.

I still dont get while Burns got caught up in this but well he gets his day in court.

Note this is a criminal case and that all 4 defendants could end up in Jail and with hefty fines.

Sad really.

October Air Traffic numbers - pretty awful

So the 6 majors showed a net decline of 6.8% for the month of October. Only Southwest (surprise surprise) actually showed an increase with a scant 0.5%. When you include the reduction by the minor airlines and the loss of some airlines such as ATA and Aloha as well as the reduction by the remaining carriers and we get pretty close to the 10% number I have been banding about for some time now. Frankly the numbers show that the capacity cuts have not been enough and we need another - albeit smaller - round of cuts to bring the market to equilibrium. The fact that Southwest is flying around with 1/3rd empty seats is a telling sign.

The airlines are not necessarily being smart about the situation. Their seat sales are rather anemic and they are not doing anything to burn off the FF debt mountain. Other that is than devaluing the currency.

Traffic declines however do not take into consideration the reduction of the premium traffic mostly business that moves those nice people to the back of the bus. Further we are also seeing reductions in actual passenger numbers of a similar number as the US in the European and Asian markets.

There are some bright spots. Air Arabia continues its march as probably the world's most profitable airline by gross profit per pax metric. It saw a slight slip in yields but still its running at 87% load factor rates. This confirms that the decision by the Dubai Government to create FlyDubai is a good decision.

Freight however is a really sorry state.

Things do seem to be about where they should be but more belt tightening is needed. Our original projection of employee reductions of over 100,000 in 2008 seem to be coming true.

Cheers

Neeleman'ss Azul get OK from Brazil's ANAC

Services slated to start December 15th 2008.

Best of luck to David and the crew.

Cheers

Ancillary Revenues Unravelling?

United has adjusted its bag policy - that I personally felt was draconian. They have lowered the first bag and abolished the second bag fee.

With most airlines backing off from the fuel surcharges this means we are likely to see a sense of sanity returning. But abandoning the model? I dont think so.

What is for sure its in a state of flux

Cheers

BMI to end Long Haul from Manchester

BMI's efforts to get a toe hold on the Transatlantic market seem to be at an end.

As a result their new sugar Daddy Lufthansa will likely beef up some connections to retain the business.

Look for LH to announce some time soon that Las Vegas joins their other service spots in the USA.

Cheers

The UK's Plane Graveyard

Here are some great pics from the UK's very own Plane graveyard.

http://www.telegraph.co.uk/finance/financetopics/recession/3401080/The-budget-airline-graveyard.html

So far I have seen several ex-Zoom 767s. In Miami at the AAI facility. Just 2 weeks ago in Atlanta at DL's facility. Now I can see one in this picture.

The UK's climate is not exactly the best place in the world to store aircraft out in the open. I hope they move them soon...

Cheers

Love those Virgin Seats? See you in court

You know those nice Upper Class Suites that we all want to ride in when flying long haul with Virgin? Well it seems that Virgin wants you only to fly in these nice pods on VS only or perhaps other airlines who they approve. VS thinks that the design of the pods are its intellectual property and is going to court to prove this.

The Sunday Telegraph in the UK is reporting that there is a High Court battle starting this week between VS and Contour that manufactures the seats. They are aiming to prevent sales to people like Delta and Jet Airways. No so AIr NZ who did this under agreement from VS.

So stay tuned on this one

Cheers

Poster Child Air Canada - trouble in the Great White North

Air Canada has been lauded from here to the stars about their unbundled pricing model.

The airline made a remarkable recovery from its first foray into the Canadian equivelenet of Chapter 11 and then the restructuring that occurred in 2003/4. From then the company seems to have gone from strength to strength. It became a stock market darling for spinning out several assets - the FF program (Aeroplan) their Regional Subsidiary (Jazz), MRO etc.

However it seems not all is sweetness and light these days in the House that Robert built. AC like the US carriers is suffering the dramatic decline in both total traffic and in particular high value premium biz travelers. As Westjet continues to slowly eat away at AC base we can see that AC is facing a winter of discontent.

Over the weekend the Wall Street Journal put out a story on concerns for AC's liquidity that no doubt will be big news among the Canadian biz rags today.

http://online.wsj.com/article/BT-CO-20081107-715914.html

In the professor's opinion, I believe that AC has some work to do to shore up its finances just like the other North American carriers. Particularly is fellow Star Alliance members US Airways and United are probably in fairly shaky condition should the economy head further south which is of course fairly likely.

Further - this should be a caution to those who think the AC model is the right one. Consider this. AC is still struggling to get its Polaris project (new PSS) out the door. The complexity of its GVC product line has created confusion among the passenger community. Unlike the US airline who have serious coin coming in from ancillary revenue - the unbundled model is not generating new gross revenues for the Canadian airline.

Stay tuned, AC could be in for a bumpy ride.

Cheers

Travel Mobile's Achilles Heel

Mobile and Travel belong together. Natural and synergistic... all those wonderful buzz words that can apply - but it has an Achilles heel. The business model.

I am sure that I will be loudly roasted for taking this position but after 15 years of watching and in many cases trying to break through this Gordian Knot - I can assure you there is not an easy way to make this category a success. It remains stuck in the one place where it needs to be unstuck. The business model.

So what are the obstacles?

Is it the hardware?

Nope - we have some great smartphones and even regular phones that can do just about anything. Great Machines like the iPhone, the Sony C902, The Blackberry Bold and Storm, etc etc.

Is it the client side software?

Nope - smart people have written some great apps that do a whole load of things: Make bookings, Manage reservations, consolidate data, help with trip repair, etc etc

Is it the server side software?

Definitely not - there are some great applications, SaaS and conventional web services. There is a plethora of these out there. Perhaps too many!

Is it the network?

Nope - we have been able to do some incredible things using plain old SMS 140 character limit solutions. There is an issue of unreliable network performance but this will ultimately be resolved. It just doesnt hold up the services though. Using Wifi or Wimax is too unreliable at this stage because of the poor coverage.

So what the FUBAR is the problem?

It is simply that for many applications to work we need to have an "all you can eat model" for communications costs. It must be as easy and at least the same price as a service on the web. So there are too many mouths to feed and the carriers refuse to play ball with this. Google's Android concept should be better at enabling a possible way to leverage cost - but frankly I still don't yet see it. Perhaps Wimax might resolve this? Probably not. So what will work? Frankly it will be competition. Only when we have open access and open competition and both the FCC and the EU Commissions step up to the plate will we have something.

So I hope that the incoming FCC Commission Chairman and both EC ladies Viviane Reding (Information Society and Media) and Neelie Kroes (Competition) get their act together. Not in 2009 or even 2010.


Is there any hope for the future?

I am optimistic - but staying optimistic for 15 years takes either a stupid person or someone who is a few screws loose. I think I qualify in both categories. However for the short term - I will avoid making any near term projections because I don't think we are looking at any near term solution that will break through the current Mobile Operators gravy train. Their argument is that they invested Billions of Euros/Dollars in both the licenses and networks. Frankly that argument doesnt hold up since they already paid the money. Now they need to provide a low cost service that makes sense to the consumer community.

IF only they would see that by enabling a marquee application like Mobile Travel then they would move people to using mobile data services. But this is not happening.

So I am not holding my breath... but just maybe someone will surprise me. In the mean time I will continue to experiment and hope that someone figures it out.


What do you think?