Travelport Makes Claims That Sound Too Good To Be True

Sometimes - you see information and then you say to yourself... this can't be right. Such is the case with the Travelport numbers in their latest press release that went out this morning. So with my painstaking efforts and several hours of detective work - here is what I believe is the CORRECT information.

IF I AM WRONG - then can Travelport please correct my numbers or my calculations.

So I read with interest the Press Release from Travelport. You can read the whole release here, I draw your attention to the following section:

“Notes to Editors:
• According to Travelport estimates, only 13% of all airline passengers boarding flights in the United States purchased their tickets through Travelport's GDS travel agent subscribers. These subscribers earned an average distribution fee of (1.2%) less than 2% of the average ticket price. In comparison, the average distribution expense for a US hotel is 1.5 % of the cost of a stay.
• Over the last five years, Travelport estimates that the distribution prices paid by US airlines to Travelport have declined by 18%. On a real or inflation adjusted basis, distribution prices charged to US airlines have declined by 24% over the last five years.”

So I will challenge these statements using Travelport's own numbers:

1. The subscriber fee statement information is in my opinion misleading.

According to the US Dept. of Transportation the average domestic ticket paid in Q3 2010 (latest data from Feb 2011), the price is $340.
Using the average ticket price, the average number of segments (Per ARC Corp is 2.2 segments per ticket) at the average segment fee paid to Travelport (from Q4 2010 Travelport) of $5.71 net revenue – then the average ticket price is comprised of $12.57 or 3.7% of the ticket ON AVERAGE. However using the Travelport percentage of 1.2% then it means that 32.5% of all GDS segment fees are passed on as incentives to “subscribers”.

As an exact example for a family of 4 travelling from West Virginia to Daytona Beach it requires a connection so if the ticket was purchased through a Travelport agency – this family of four would pay (hidden in the ticket price) $91.04 in GDS segment fees.

The statement itself is misleading. Travelport is mixing apples and oranges. The distribution fee is 3.7% but the subscribers get 1.2%. Using a comparison with hotels not irrelevant as total cost to the supply owner for hotel distribution would be many times this and is not a fair comparison.

2. That the Distribution Fees have declined over the past 5 years is misleading and false. In fact the differences are significant with a rise adjusted for inflation of more than half.

Using the information in the Travelport financials – they give us some great data and it’s certifiable. This tells a very different story. Using the two reports which are currently available. Q4 2007 and Q4 2010. I can pull consolidated information from Q4 and Full year 2006 and compare it to the corresponding information for 2010. If we use the numbers correctly according to the logic outlined by Travelport then a total of $648 million in 2010 was paid by Travelport as inducements, segment incentive fees to Travel Agencies. That number, if correct, would be a very large number indeed. For the source of my information and calculations please see the following links.

2010

2006

Overall, The GDS net revenues (as defined by Travelport) actually rose 31.66% despite a significant decline in Segments that went through the Travelport GDSs (namely Apollo, Galileo and Worldspan) down 22.6%. This translates into a net revenue in absolute terms increase per segment of 70.17%. Adjusted for inflation of 8.2% (using this calculator) this means a 56.22% IE more than half increase in GDS charges from 2006 to 2010.

So is the release correct? Is it misleading? You can be the judge. I am happy to share my numbers with bona fide individuals - please email me professorsabena@gmail.com.

Cheers

Oh Dear - Another Hanger Queen

One of Qantas's A380s is known for being a bit of a Hanger Queen. Well it seems that Air France seems to have one too.

Here is a quote from Flight:

The Air France A380 involved in the collision had itself been grounded last autumn after being clipped by another aircraft.

One of four A380s in the Air France fleet, the jet was damaged at Paris Charles de Gaulle on 30 October last year when, while parked, its tail cone was struck and damaged by an Airbus A330's wing, forcing the double-deck aircraft to be taken out of service for repairs.

So check out my original post on the subject

Cheers

1 Blind Mouse

Hickdory Dickory Dock, the mouse ran up the clock. The clock struck one and the rest of the industry died in a nuclear holocaust.

OK so its a parody but it hides a very serious message.

I read today the latest missive from the kitchen table in Radnor PA. BTC released yet another of its fine episodes in "as the world turns"

QUOTE:

"For two and one-half years, despite major corporations’ substantial collective purchasing power and their continuing calls for full disclosure of fee data, airlines have refused to provide the travel agency sales channel with this vital information. This refusal is well-defined evidence of a marketplace that is not functioning properly." END QUOTE.

Well this is not the case.

Each airline is obliged by law to explain its pricing and provide that information to the public. It so does - or risks the wrath of every consumer protection and government regulatory body under the sun.

And let me be clear - there have been transgressions in the past.

But in the main the US airlines are good at this. They provide the information to the consumers and to the agency community.

A long time ago - the airlines got tired of using the rather poor legacy GDS vehicles for disclosure of information. Instead they turned to the preferred form of communication that the vast majority of both consumers and travel agents use today - namely the Internet.

C'mon guys. No one owes anyone a living. Comparative shopping COULD have been easily provided in an innovative form by these GDS players but they chose not to. Consequently this is why Google stepped into the game and bought ITA for $700 million. If the GDSs had done their job well and in a time when there was good cooperation with the airlines - then companies like ITA and Everbread etc would not have been able to come into being. So let us not shed a tear for companies who today make between 27% (Travelport 2010 Q4 numbers) to more than 46% profit on their GDS operations. (Amadeus 2010 annual report).

And this continual obfuscation over the real issues is just INSANE.

Everyone should as a matter of course READ the complaint in full. Then make up your mind. There is a lot of information that should give food for thought to a lot of people. Surprisingly I found it very informative as an eye opener onto the issues.

DO NOT DISMISS THE CONTENT & DETAIL. It has relevance for everyone concerned with this debate.

DO NOT JUDGE until you have read the document and the expected responses from Travelport. I hope that the complaint comes to trial early but alas I fear that American justice moves at a slow pace. About the only thing I agree with the Press Release is the following statement:

"Expensive and years-long court proceedings"


Cheers

Why I Don't Like Facebook's Policies

So Facebook is OK for a wide number of things. it is quite fun to be on Facebook. But some of its policies to me are insidious.

For example look at the request for PeerIndex to access my Facebook information.

I do not get the option to opt out of one or more of the possibilities, I only get the option of All or Nothing.

Not cool Facebook for only enabling this to the external party and NOT to me to CONTROL it.

BAD Facebook

ASTA and BTC Try Scare Tactics On Public

Those nice people at BTC and ASTA having failed with the formal amendment to the FAA re authorization bill is now resorting to scare tactics to try one last ditch effort to get their nose into the political pork trough. According to Travel Agent Central website:

In a letter to the industry, the BTC noted that, over the next few weeks, there will be U.S. House and Senate meetings to reconcile competing Federal Aviation Administration reauthorization bills.

‘This will be our last opportunity to influence the outcome of one of the most important issues facing our industry,” the BTC and ASTA said.

The conference committee that will conduct these reconciliation meetings will be comprised of several senators and representatives led by Senator John D. Rockefeller (D-WV) and Congressman John Mica (R-7th FL) respectively, BTC said.

“We have previously provided members of Congress with the perspective of leisure-travel consumers on this issue,” BTC said. “It is now time to focus committee members on the concerns and views of major corporate buyers of air transportation services, i.e. corporate travel managers.” END QUOTE.

OK So lets speak again with the truth in mind.

1. The BTC/ASTA amendment to HR658 was voted down in Congress. So it was given a good chance with a debate in the House of Representatives but failed on a vote. To be sure it was requested that this be a formal vote count rather than the usual voice vote. It still lost.

2. The FAA re-authorization bill has NOTHING to do with Ancillary Service Fees.

But that does not seem to deter ASTA and BTC from their mission.

These esteemed organizations - well one which is a proper membership organization and files all the necessary paperwork to be so - are misleading both the Congress and the general public to support their own ends.

Let us not bury this provision into the vital FAA vote for the future of our safe Air Traffic Control system.

If you want to do this - then you have plenty of lobbying power to introduce such a bill into Congress directly. For clarity - this is NOT THE LAST CHANCE. You have so many chances. BUT please be honest with the public and the industry at large.

To ASTA and BTC - please come clean about this effort. Tell the world where your funding is coming from and also disclose publicly that there are existing provisions for the disclosure of the fees. Forcing this disclosure exclusively via a GDS - which was the original aim of BTC seems to have slipped from their vocabulary. So what we are left with is a requirement for a regulation that is at best unnecessary - at worst more cost to the American taxpayer.

Thank you again from diverting the lawmakers attention from important things like the budget.

Cheers

Do Air France A380 Drivers Need Rear View Mirrors?

Oh dear for the second time in the relatively short in service life of the A380 with Air France an A380 has to be removed from service because of a bit of bad driving.

IE these issues occurred ON THE GROUND. First up last October in Paris an A330 winglet tip sliced through the tail cone of an A380 parked at an adjacent gate. The guy at fault was the A330 driver.




On April 11th, at JFK in the evening AF7, operating with a full load of 520 passengers touched a Comair Commuter CRJ-700 with 62 passengers operating as a Delta Connection DL6293 service touched and broke the winglets on the A380. The guy at fault was PIC on the A380. For a bit of dramatic video... check out CNN with video from NBC New York.



So we have a recommendation to Air France. Please get rearview mirrors or a back up camera. Alternatively - please send your drivers to advanced school.

The US Authorities according to the Guardian have impounded both planes and are running a full investigation. So the plane will be out of service for a few days. That is expensive.

Cheers

Thinking About An iPad2 - Hit Pause.

Here is a just a pause for thought. I have been resisting the urge to buy an iPad2. It is a very strong temptation. I am in meetings these days where people are happy to flash their tech cred by bringing out their iPads. But then I watch them. They are generally playing with some of the little toys.

I have tried facetime and I like it but I am actually quite OK with skype and its chat features.

One of the fellow Professors has made similar comments - a great toy.

Well here is a more objective view from PCWeek.

Perhaps I will wait a bit

cheers

Japan - A Study In Courage

Now you can do something about it.

I grew up in the UK in a world where the defeated Axis powers were still seen as potential threats. Xenophobia was widely extant. Postwar Baby Boomers like myself were the children and grand children of families who fought in at least one global conflict. It was also a world where a fair degree of racism existed on all sides from one to another.

What a difference a generation or two makes. I was very fortunate to be able to travel long distances. I was exposed to many cultures and my parents welcomed different cultures, colours and creeds into our home. I gratified to see that most of the Millenials I come into contact with are truly colour blind.

The recent tragic events in Northern Japan - a natural disaster of epic proportions compounded with the issues of the nuclear powerplant - have shown the world the true nature of the Japanese people to deal with such calamities. The world has watched while they dealt with the tragedy in real time. Like many I was transfixed with the images emerging from Japan on March 10th 2011. Most of it was surreal. Our immediate reaction was to reach out and help.

My good friend Morris Sim Co-Founder of Circos Brand Karma has started a website http://japantastic.org/ which I urge you to visit. Morris and his team understand and have been able to demonstrate the value of Brand Management in a Social Media world, so it was only natural for him and his team to harness some of that power for more than just commercial ends. Here is what he says are the goals of the site:

".... our concern is that money isn't all that Japan needs -- they need to continue to have a sense of hope. So we created Japantastic.org, which is a communal wall that invites people to share their positive experiences of Japan and Japanese products. Our goal is to have a mass outpouring of love from the world towards Japan, and to give the site to the Japanese tourism bureau when they're ready to invite people back. No donations are required... we just want people to donate their positive memories."

So go for it. Tell them the Professor sent you.

Domo - Arigato