Martin Broughton is BA's Chairman - also head of the CBI and various other entities, was waxing lyrically yesterday to e-tid on the launch of T5. Broughton says T5 fiasco lost BA passengers
and he "was ‘mortified’ at the debacle following the opening of Heathrow Terminal 5."
‘There is no question we lost passengers as a result. However, we have now had 9m passengers travelling through T5, and the vast majority have seen that it is a dramatically better terminal.’
I am not sure he ever really experienced the joys of the former deadbeat terminals 1,2, and 4 that BA occupied. T4 was a complete joke. T1 has wonderful moments on YouTube showing the awful state of the processing of people through the security and immigration lines.
But for now BA's chairman can chide the BAA since they have now become everyone's favorite whipping boy.
The interesting battle to follow pits David Cameron's "New" Conservatives against the Tories' long time backer BA. I can well remember the moment when Maggie Thatcher draped her scarf over Robert Ayeling's "theme" tails at the Tory Conference in Blackpool. The new battle is less prosaic than about the airline livery but about what to do with LHR. And I am firmly in the camp of developing a new airport rather than continuing to shoe horn traffic into LHR. While The Thames Estuary is a nice place and would make the best choice - we should make sure that they reconsider Gatwick.
Cheers
02 October 2008
01 October 2008
Fliers Rights Still Getting Trampled – Bad Airline Habits.
I like to think I am a passionate believer and hopefully advocate for the triple headed monster of Aviation, Travel and Tourism markets.
I also eat my own dog food by being on the road about half the year. So I can attest to what its like really to use and be abused by the "system". Last year’s terrible service record particularly on airlines was directly related to the amount of traffic. The system found it hard to cope with 90%+ load factors and 80%+ occupancy levels. So this week was my first road trip after the big cut. Is the situation better or worse than it was? I travelled to 2 separate locations returning to my home on the West coast over a 4 day period this week to experience first hand what its like out there.
Firstly its quiet – very quiet. So my friends there will be more cuts coming. I have already written that some airlines have not cut back deeply enough for the reduction in flights and aircraft – particularly United. I predict that there will a further round of cuts beginning in November and taking effect after the turn of the year – if not sooner. Check out this picture of the screens at CVG. In normal times all 12 screens would be populated.
Next the airlines have resorted to some interesting behavior – it’s just a bad habit – let’s hope it doesn’t stay that way. I will highlight two of them.
Trend #1 – Telling Porky Pies. The growth of systems that now feed off automatic tracking and published data in real or near real time means that there is a greater pressure to “appear” to be doing the right thing. While I don’t think (at least I hope not) we will see repeats of such behavior as the 15 foot push back. We have seen that airlines are not updating their FIDS (Flight Information Display Systems) data as often as they need to. I have observed several airlines by tracking their website and airport display information vs the data displayed by independent sources such as the FAA. On several flights I have been on – I have observed the inbound flight coming in long after the departure time of the outgoing flight. Yet the airline still was pronouncing to the world that their flight was “On Time”. Thus the published information out there was still showing incorrectly for the world to believe that the airline was doing a great job.
Baloney!
Trend #2 – Leaving Early. This is a really nasty habit. Airlines have started to leave early. I have actually been on a flight that left 15 minutes early. Of course the airlines are not revising their plans accordingly. But an ON TIME arrival allows for a flight to arrive less than 15 minutes past the schedule. With most airports around the USA at 30 minutes MCT (minimum connecting time) for online connections – this makes a connection impossible. Yet the airline will not show any problem in the reporting of its data. Case in point. I arrived within a scheduled arrival time (13 minutes late) and the departing aircraft was 2 terminals away at CVG. I arrived at the gate having sprinted with my bags in less than 10 minutes. Only to see that they had closed the door and refused to board me. I was actually there before departure. I was told that it was my fault that I had not arrived at the gate at the right time. So if this happens to you – now you know why.
Moral of this story is that the airlines have found yet another stupid pet trick up their sleeves. I was told that it was my fault that I had not arrived at the gate at the right time.
I find it somewhat disingenuous of the head of the ATA James C Mays in telling everyone in an Op-Ed piece in today’s (Oct 1) USA Today that things are doing so much better. http://blogs.usatoday.com/oped/2008/10/flying-experien.html
Baloney
Cheers
Corrections comments etc REGULARS PLEASE NOTE
Greetings good readers.
I was a little hasty this week and miswrote ITALY condemning that market when the bloodbath is likely to happen in India.
http://t2impact.blogspot.com/2008/09/maybe-mondays-are-better-news-roundup.html
Sorry and thanks to Professor Bruce for that one.
Just a comment on what to do with comments and discussions. Our policy at T2 is that we will not edit the comments and will publish them as is provided they are not defamatory, just plain nasty, inappropriate or sales related. If you have a question please contact us directly. Comments should be germane otherwise it confuses me and presumably other readers as well. Thanks but keep writing!!!! Please email us. For editorial comments you can also speak to The Professor directly: TheProfessor@T2News.com
A public message then to the folks at Fortune Hotels - please no sales items - I will reject those types of messages. If you wish to promote something then fine but try not to use anonymous postings as a way to do it. If you have some point to make then send me the information and I will be happy to consider writing a story on the subject.
Thanks to you all
Cheers
I was a little hasty this week and miswrote ITALY condemning that market when the bloodbath is likely to happen in India.
http://t2impact.blogspot.com/2008/09/maybe-mondays-are-better-news-roundup.html
Sorry and thanks to Professor Bruce for that one.
Just a comment on what to do with comments and discussions. Our policy at T2 is that we will not edit the comments and will publish them as is provided they are not defamatory, just plain nasty, inappropriate or sales related. If you have a question please contact us directly. Comments should be germane otherwise it confuses me and presumably other readers as well. Thanks but keep writing!!!! Please email us. For editorial comments you can also speak to The Professor directly: TheProfessor@T2News.com
A public message then to the folks at Fortune Hotels - please no sales items - I will reject those types of messages. If you wish to promote something then fine but try not to use anonymous postings as a way to do it. If you have some point to make then send me the information and I will be happy to consider writing a story on the subject.
Thanks to you all
Cheers
30 September 2008
Amadeus loses a big one - To one of its parents
Amadeus lost a major battle in court last week.
The story so far is that LH imposed a "fee" on all bookings made via a GDS. However in a strange quirk of the story - they have negotiated a deal whereby Travelport and Sabre will not have to pay the fee. That leaves Amadeus with 80%+ market share in Germany picking up the tab for the fee as it has chosen not to implement the fee yet.
Basically a court ruled that it is legal for Lufthansa to ask for the higher fares with separate fees via different channels. While this this verdict may be subject to an appeal, it will take quite some time. For now, Amadeus has to live with the ruling for now. They will have to go on subsidizing the segment fee. That is going to be expensive, so I think we will see a new round of negotiations between Lufthansa and its naughty child.
Local media is also saying that a similar line of argument filed by a complaint at the Cartel office has no chance for success.
Another nail in the GDS model coffin?
You be the judge
Cheers
The story so far is that LH imposed a "fee" on all bookings made via a GDS. However in a strange quirk of the story - they have negotiated a deal whereby Travelport and Sabre will not have to pay the fee. That leaves Amadeus with 80%+ market share in Germany picking up the tab for the fee as it has chosen not to implement the fee yet.
Basically a court ruled that it is legal for Lufthansa to ask for the higher fares with separate fees via different channels. While this this verdict may be subject to an appeal, it will take quite some time. For now, Amadeus has to live with the ruling for now. They will have to go on subsidizing the segment fee. That is going to be expensive, so I think we will see a new round of negotiations between Lufthansa and its naughty child.
Local media is also saying that a similar line of argument filed by a complaint at the Cartel office has no chance for success.
Another nail in the GDS model coffin?
You be the judge
Cheers
XL Recovery - final stats
The CAA (UK's regulator) gave up the statistics from the repatriations it conducted as a result of the XL collapse. The numbers are staggering:
222 repatriation flights from 40 destinations,
repatriating some 83,000 holidaymakers to the UK,
in the 17 days following XL’s 12 September collapse
Wow!
Whose next?
According to Paddy's bets... it was Fly Globespan but they have taken the death list off the site.
Cheers
222 repatriation flights from 40 destinations,
repatriating some 83,000 holidaymakers to the UK,
in the 17 days following XL’s 12 September collapse
Wow!
Whose next?
According to Paddy's bets... it was Fly Globespan but they have taken the death list off the site.
Cheers
29 September 2008
Maybe Monday's are better - News Roundup
I thought I liked Fridays. Well this Monday is full of stories. So I will condense for the assembled masses with some commentary along the way.
1. Thomas Cook pulls out of German consolidation talks. So along with the patent's decision (or rather indecision) on its future the formation of a 3rd force in Germany looks set for the round file for a while. This in turn gives Air Berlin some breathing space to get its house in order. I shall be flying long haul on AB in 2 weeks - I will let you know what its like.
2. India - $1.5 billion market loss predicted by IATA out of $5.2 billion loss globally predicted for 2008. Bisignani is predicting a bloodbath for India unless a new regulator steps in. He could well be right. Already the premium paid for fuel in India is approximately 50%. The market is now experiencing negative growth (down 7.5% for the second half). This will impact not just the airlines but also the 4 major Online players in the market.
3. Kelleher calls for development of cheap 110-125 seater. Exhorting his "children" - Herb was waxing lyrically on two major topics. One was the regulation of ATC and the development of better processes and control in Europe. The other was the development of a low cost single aisle aircraft. Neither Boeing nor Airbus are keen to do this at the moment. More on this later when I have thought about it.
4. Low Cost Congress in London. Lots of news going on there - I hope to do a recap by the end of this week.
5. On Airline Bankruptcies... ABTN was calling for the CAA to learn how to be an Undertaker after the ludicrous handling of the XL failure. BTW Paddy says FlyGlobespan is next to go. Easing odds on Alitalia who has a respite until October 15th. I believe the CAA should be reformed and some of its functions divested. However I do agree with Malcolm that there needs to be a better handling of processes with regards to addressing big failures. The UK has not seen such a failure since the Court Line crash in the 1970s.
6. Pilot Charged with Mooning. A TransStates/United Express pilot was charged with being drunk and indecent behavior after he mooned traffic. The pilot told police officers he had an early morning flight, and he hoped the officers were happy because "50 people's flight would be delayed because of (Officer Dustin Cook, the arresting officer)," according to the news report. Makes you think carefully about flying on an RJ.
7. One of the big losers in the Wamu failure of course was TPG who saw their $1.5 billion investment wiped out. Looks like TPG will have a much harder time in raising capital for any major project. That means they will be sitting out on the sidelines for the foreseeable future. The impact on the BA -IB match up is yet to be determined.
There is more... but for now digest this lot!
Cheers
1. Thomas Cook pulls out of German consolidation talks. So along with the patent's decision (or rather indecision) on its future the formation of a 3rd force in Germany looks set for the round file for a while. This in turn gives Air Berlin some breathing space to get its house in order. I shall be flying long haul on AB in 2 weeks - I will let you know what its like.
2. India - $1.5 billion market loss predicted by IATA out of $5.2 billion loss globally predicted for 2008. Bisignani is predicting a bloodbath for India unless a new regulator steps in. He could well be right. Already the premium paid for fuel in India is approximately 50%. The market is now experiencing negative growth (down 7.5% for the second half). This will impact not just the airlines but also the 4 major Online players in the market.
3. Kelleher calls for development of cheap 110-125 seater. Exhorting his "children" - Herb was waxing lyrically on two major topics. One was the regulation of ATC and the development of better processes and control in Europe. The other was the development of a low cost single aisle aircraft. Neither Boeing nor Airbus are keen to do this at the moment. More on this later when I have thought about it.
4. Low Cost Congress in London. Lots of news going on there - I hope to do a recap by the end of this week.
5. On Airline Bankruptcies... ABTN was calling for the CAA to learn how to be an Undertaker after the ludicrous handling of the XL failure. BTW Paddy says FlyGlobespan is next to go. Easing odds on Alitalia who has a respite until October 15th. I believe the CAA should be reformed and some of its functions divested. However I do agree with Malcolm that there needs to be a better handling of processes with regards to addressing big failures. The UK has not seen such a failure since the Court Line crash in the 1970s.
6. Pilot Charged with Mooning. A TransStates/United Express pilot was charged with being drunk and indecent behavior after he mooned traffic. The pilot told police officers he had an early morning flight, and he hoped the officers were happy because "50 people's flight would be delayed because of (Officer Dustin Cook, the arresting officer)," according to the news report. Makes you think carefully about flying on an RJ.
7. One of the big losers in the Wamu failure of course was TPG who saw their $1.5 billion investment wiped out. Looks like TPG will have a much harder time in raising capital for any major project. That means they will be sitting out on the sidelines for the foreseeable future. The impact on the BA -IB match up is yet to be determined.
There is more... but for now digest this lot!
Cheers
26 September 2008
So its all over bar the shouting.... New Delta
Given the lame duck status of most of the Congress, the Administration and the current focus on other things - the FAA, the European Commission and the shareholders/boards of both airlines have all agreed that there is no stopping this monster merger.
Lost in this - perhaps - is the impact on the consumer and the industry itself. It is unlikely that there is any appetite to object. We cannot forget that implicit in the merger is market power and a raising of airfares by New Delta. The process of rationalization will result in some (shocking) uncovering by New Delta that the extent of the cuts necessary to make the merger work will exceed the case the original players put forward.
The follow on will be a new dance of potential mergers but this wont start to happen until at least the first half of 2009 when the new US Administration is in place.
If we believe Boeing and that oil will return to $80 a barrel - then the remaining US carriers will be well positioned to ride out the recession. However if oil stays north of $100 and/or the recession bites deeper next year than anyone else sees - then we are going to see an "urge to merge" occurring sooner.
Cheers
Lost in this - perhaps - is the impact on the consumer and the industry itself. It is unlikely that there is any appetite to object. We cannot forget that implicit in the merger is market power and a raising of airfares by New Delta. The process of rationalization will result in some (shocking) uncovering by New Delta that the extent of the cuts necessary to make the merger work will exceed the case the original players put forward.
The follow on will be a new dance of potential mergers but this wont start to happen until at least the first half of 2009 when the new US Administration is in place.
If we believe Boeing and that oil will return to $80 a barrel - then the remaining US carriers will be well positioned to ride out the recession. However if oil stays north of $100 and/or the recession bites deeper next year than anyone else sees - then we are going to see an "urge to merge" occurring sooner.
Cheers
Why I love Fridays - The BA vs Virgin fight
Gotta Love Fridays. People put out such wonderful stuff for us all to read over the weekend.
Virgin's Branson today responded to Willie's 6 Questions. The questions and the responses deserve a good reading, so for your reading pleasure I republish them here.
Happy Reading and have a good weekend
Cheers
Virgin Atlantic sent yesterday a letter for publication to BA's in-house newsletter, BA News, after its Chief Executive (Walsh) posed six questions to Virgin Atlantic's Sir Richard Branson about the planned alliance between BA and AA.
Virgin Atlantic is publishing the answers in full from Sir Richard so that BA staff and the public can see the true facts and the damage that such a monster monopoly between BA and AA would do.
1. Why is it fair for Lufthansa and Air France/KLM to have anti-trust immunity (ATI) with their US alliance partners but not British Airways?
The truth is that the Star and SkyTeam alliances, from their own hubs, cannot match the capacity to the US that BA already has from Heathrow, even before any tie-up with AA. In July, from Heathrow to the US, BA flew 11% more Available Seat Kilometres (ASKs) than Star from Frankfurt and 14% more than SkyTeam from Paris Charles De Gaulle. BA/AA immunity would increase their ASKs at Heathrow sharply. Crucially, BA is already bigger than Star and SkyTeam at Heathrow. Anyway, it's not a question of what's fair for an airline but what's fair for consumers.
(Comment from the Professor - to see the numbers please go to: http://t2impact.blogspot.com/2008/08/baaabis-argument-for-immunity-at-lhr.html ).
2. What is there to stop Virgin Atlantic seeking an alliance partner and applying for ATI itself?
Virgin Atlantic may wish to enter into an alliance and may one day seek anti-trust immunity where such an alliance and immunity would lead to consumer benefit. We are not saying that all alliances are bad and no doubt the regulators would scrutinise such an alliance in the same way as we are asking them to scrutinise BA/AA. But any Virgin Atlantic alliance would be a world away from seeking anti-trust immunity with the biggest airline in the world, AA. It doesn't matter what we do as we could never replicate the scale of BA/AA's dominance at Heathrow which would reduce competition on transatlantic, European and domestic routes.
3. If BA and American Airlines used their alliance to put up fares and reduce service levels, as Virgin alleges, surely this would give Virgin a huge competitive opportunity?
The stranglehold that BA/AA would have over travel agents and corporate customers, let alone over nearly half of all slots at Heathrow, would be used in an attempt to destroy its competitors. Any ability to respond would also be restricted due to the power of BA/AA's dominant shorthaul network which can channel passengers onto its own transatlantic flights, therefore diverting feed passengers away from other carriers.
4. If BA/AA is approved, there will still be seven EU or US airlines flying to America from Heathrow - and nothing to stop others starting. This is far more than from any other European airport. Why is it uncompetitive?
The seven EU and US airlines flying to the US from Heathrow offer limited services to only a few destinations. A price tag of £30m for decent slot pairs is a huge barrier to any airline looking to start a profitable service at the airport. There are actually only two new competitors that have entered routes where BA and AA overlap. In one case, this has been negated by a withdrawal and in the other it is simply one daily flight to LA. On all routes between Heathrow and the US, the removal of AA as a result of BA/AA immunity would severely reduce consumer choice.
5. BA/AA’s market share on transatlantic routes from Heathrow (51%) is much smaller than Lufthansa/Star alliance from Frankfurt (80%) or the Air France/SkyTeam alliance from Paris (73%) Why would the competition authorities regard BA/AA’s position as unfair?
Heathrow is absolutely at the heart of this debate as nearly a quarter of all passengers between the EU and the US go through Heathrow, more than travel from Frankfurt or Charles de Gaulle. Misleadingly, BA has been using data which hides the 6 million passengers who book direct or transfer onto transatlantic flights. This allows BA to claim a smaller share of passengers than the more accurate onboard picture shows. Transfer passengers are a vital part of an airline's route profitability. As for direct bookings, under what logic would you leave out all those passengers who book direct through BA and AA's call centres! Or websites! Or at airport ticket desks!
6. Why does Virgin have a ‘monster monopoly’ on fast train services between
London and Manchester - and why does it want to create another one running
Gatwick Airport?
Virgin Trains competes against BA, bmi, some other train operators and millions of vehicles between London and Manchester, so it certainly doesn't have a monopoly. In fact, BA had an almost dominant share of business travellers until Virgin introduced new trains and now BA's monopoly is dwindling fast. Transatlantic passengers are more limited in their choice as they can't drive or take a train, or even swim, and will be more limited if BA/AA immunity was granted. At Gatwick, Virgin Atlantic wouldn't have a monopoly as it doesn't want to own the airport outright but hold a small stake with partners, in order to improve the quality of customer service, something which BA should be interested in too.
Virgin's Branson today responded to Willie's 6 Questions. The questions and the responses deserve a good reading, so for your reading pleasure I republish them here.
Happy Reading and have a good weekend
Cheers
Virgin Atlantic sent yesterday a letter for publication to BA's in-house newsletter, BA News, after its Chief Executive (Walsh) posed six questions to Virgin Atlantic's Sir Richard Branson about the planned alliance between BA and AA.
Virgin Atlantic is publishing the answers in full from Sir Richard so that BA staff and the public can see the true facts and the damage that such a monster monopoly between BA and AA would do.
1. Why is it fair for Lufthansa and Air France/KLM to have anti-trust immunity (ATI) with their US alliance partners but not British Airways?
The truth is that the Star and SkyTeam alliances, from their own hubs, cannot match the capacity to the US that BA already has from Heathrow, even before any tie-up with AA. In July, from Heathrow to the US, BA flew 11% more Available Seat Kilometres (ASKs) than Star from Frankfurt and 14% more than SkyTeam from Paris Charles De Gaulle. BA/AA immunity would increase their ASKs at Heathrow sharply. Crucially, BA is already bigger than Star and SkyTeam at Heathrow. Anyway, it's not a question of what's fair for an airline but what's fair for consumers.
(Comment from the Professor - to see the numbers please go to: http://t2impact.blogspot.com/2008/08/baaabis-argument-for-immunity-at-lhr.html ).
2. What is there to stop Virgin Atlantic seeking an alliance partner and applying for ATI itself?
Virgin Atlantic may wish to enter into an alliance and may one day seek anti-trust immunity where such an alliance and immunity would lead to consumer benefit. We are not saying that all alliances are bad and no doubt the regulators would scrutinise such an alliance in the same way as we are asking them to scrutinise BA/AA. But any Virgin Atlantic alliance would be a world away from seeking anti-trust immunity with the biggest airline in the world, AA. It doesn't matter what we do as we could never replicate the scale of BA/AA's dominance at Heathrow which would reduce competition on transatlantic, European and domestic routes.
3. If BA and American Airlines used their alliance to put up fares and reduce service levels, as Virgin alleges, surely this would give Virgin a huge competitive opportunity?
The stranglehold that BA/AA would have over travel agents and corporate customers, let alone over nearly half of all slots at Heathrow, would be used in an attempt to destroy its competitors. Any ability to respond would also be restricted due to the power of BA/AA's dominant shorthaul network which can channel passengers onto its own transatlantic flights, therefore diverting feed passengers away from other carriers.
4. If BA/AA is approved, there will still be seven EU or US airlines flying to America from Heathrow - and nothing to stop others starting. This is far more than from any other European airport. Why is it uncompetitive?
The seven EU and US airlines flying to the US from Heathrow offer limited services to only a few destinations. A price tag of £30m for decent slot pairs is a huge barrier to any airline looking to start a profitable service at the airport. There are actually only two new competitors that have entered routes where BA and AA overlap. In one case, this has been negated by a withdrawal and in the other it is simply one daily flight to LA. On all routes between Heathrow and the US, the removal of AA as a result of BA/AA immunity would severely reduce consumer choice.
5. BA/AA’s market share on transatlantic routes from Heathrow (51%) is much smaller than Lufthansa/Star alliance from Frankfurt (80%) or the Air France/SkyTeam alliance from Paris (73%) Why would the competition authorities regard BA/AA’s position as unfair?
Heathrow is absolutely at the heart of this debate as nearly a quarter of all passengers between the EU and the US go through Heathrow, more than travel from Frankfurt or Charles de Gaulle. Misleadingly, BA has been using data which hides the 6 million passengers who book direct or transfer onto transatlantic flights. This allows BA to claim a smaller share of passengers than the more accurate onboard picture shows. Transfer passengers are a vital part of an airline's route profitability. As for direct bookings, under what logic would you leave out all those passengers who book direct through BA and AA's call centres! Or websites! Or at airport ticket desks!
6. Why does Virgin have a ‘monster monopoly’ on fast train services between
London and Manchester - and why does it want to create another one running
Gatwick Airport?
Virgin Trains competes against BA, bmi, some other train operators and millions of vehicles between London and Manchester, so it certainly doesn't have a monopoly. In fact, BA had an almost dominant share of business travellers until Virgin introduced new trains and now BA's monopoly is dwindling fast. Transatlantic passengers are more limited in their choice as they can't drive or take a train, or even swim, and will be more limited if BA/AA immunity was granted. At Gatwick, Virgin Atlantic wouldn't have a monopoly as it doesn't want to own the airport outright but hold a small stake with partners, in order to improve the quality of customer service, something which BA should be interested in too.
O'Leary Slams Regulator; Demands Boss's Resignation, The Professor Says Breakup.
Normally most of us have reactions ranging from a wry smile or a smirk to a rearranging of the clothing when we read or hear something from the flamboyant CEO of Ryanair.
Today's outburst is aimed at Dr Harry Bush the head of the UK Aviation Regulator the CAA.
The somewhat abrupt U-Turn by Dr Bush on the privatization of BAA plc is the issue. Earlier this week the CAA came out publicly in support of the breakup of BAA. And here MOL has a good point. For the past 20 years the CAA has rubber stamped what ever BAA wanted. While the charges, to those who follow Ryanair vs Dublin Airport (in all its guises), may sound remarkably similar - MOL does indeed have a solid case that the CAA as regulator has been somewhat asleep at the wheel while London's airports have deteriorated in service and capability over the last 20 years.
Veteran readers of this blog will recall the Professor's rants about the state of BAA and its service offerings over the last 3 years. Terminal 2 is a disgrace and now thankfully will be put out of its misery. Terminal 1 is finally starting to get some attention and Terminal 4 well the best description I can give it is downright grungy. T5 while a distinct improvement still has some fundamental flaws in its design and the quality of the workmanship was just appalling.
Compared to the simplicity of design of other new terminals for high volume airports elsewhere in the world - the CAA supervised BAA designs have been a major disappointment.
It seems that only now the regulator has woken up to the fact that there may be a problem.
So I will go one better than MOL and demand that the CAA be broken up into at least 2 possibly separate entities.
Airport/Airways infrastructure should be handled by a single entity. This is distinct function. Aircraft licensing and everything thing to do with registrations - should be kept or even placed into another.
Finally the bonding issue is not something that the regulator should be involved in. Make a decision and move on. This can be handled by a commercially mandated company. In the same way that the slot committee (Airport Coordination Ltd) is run.
Cheers
Timothy
Today's outburst is aimed at Dr Harry Bush the head of the UK Aviation Regulator the CAA.
The somewhat abrupt U-Turn by Dr Bush on the privatization of BAA plc is the issue. Earlier this week the CAA came out publicly in support of the breakup of BAA. And here MOL has a good point. For the past 20 years the CAA has rubber stamped what ever BAA wanted. While the charges, to those who follow Ryanair vs Dublin Airport (in all its guises), may sound remarkably similar - MOL does indeed have a solid case that the CAA as regulator has been somewhat asleep at the wheel while London's airports have deteriorated in service and capability over the last 20 years.
Veteran readers of this blog will recall the Professor's rants about the state of BAA and its service offerings over the last 3 years. Terminal 2 is a disgrace and now thankfully will be put out of its misery. Terminal 1 is finally starting to get some attention and Terminal 4 well the best description I can give it is downright grungy. T5 while a distinct improvement still has some fundamental flaws in its design and the quality of the workmanship was just appalling.
Compared to the simplicity of design of other new terminals for high volume airports elsewhere in the world - the CAA supervised BAA designs have been a major disappointment.
It seems that only now the regulator has woken up to the fact that there may be a problem.
So I will go one better than MOL and demand that the CAA be broken up into at least 2 possibly separate entities.
Airport/Airways infrastructure should be handled by a single entity. This is distinct function. Aircraft licensing and everything thing to do with registrations - should be kept or even placed into another.
Finally the bonding issue is not something that the regulator should be involved in. Make a decision and move on. This can be handled by a commercially mandated company. In the same way that the slot committee (Airport Coordination Ltd) is run.
Cheers
Timothy
25 September 2008
So who will be paying for the bailouts?
I really hope we have a way to fund the bailout of the financial institution. $700 BILLION is a very large number. But even a small number of tax avoidance should be addressed.
Seems like someone else agrees with me... here is a blog that quotes the Professor..
http://www.walletpop.com/blog/2008/09/24/are-the-airlines-extra-fees-cheating-the-u-s-out-of-tax-dollar/
Do you agree? let me know what you think
Cheers
Seems like someone else agrees with me... here is a blog that quotes the Professor..
http://www.walletpop.com/blog/2008/09/24/are-the-airlines-extra-fees-cheating-the-u-s-out-of-tax-dollar/
Do you agree? let me know what you think
Cheers
I want what Boeing is smoking....
Randy Tinseth - normally a sane and rational guy - and one of Boeing's ace salesman if not THE guy - made a comment in Sydney yesterday that really needs a degree of scrutiny. He said that Boeing expects oil to stabilize at $70-$80 per barrel (in 2008 dollars) over the next 20 years adding that the company's forecasts have proven to be "quite accurate" this decade.
OK - that sounds very fluffy. However I really have to say I dont think so. In 2008 dollars - I think he is off at least 20 points. But there is an interesting corollary to his statement.
At this price the economics of older generation Stage 2+ jets stays pretty active. MD80s (according to one analyst's numbers) become price prohibitive at about $107 pb in 2008 dollars. (Actually 2007). So that means that MD80s and 737 classics (300/400/500) can be quite an attractive proposition if oil does keep to his numbers. The 20 year average however gives him a LOT of wiggle room.
So for a new "'plane" salesman to make this kind of statement makes me wonder if he was smoking something. Those nice parking spots in the US Southwest start to look very attractive as a place to get bargains.
It makes companies like Allegiant look really good.
Cheers
Timothy
OK - that sounds very fluffy. However I really have to say I dont think so. In 2008 dollars - I think he is off at least 20 points. But there is an interesting corollary to his statement.
At this price the economics of older generation Stage 2+ jets stays pretty active. MD80s (according to one analyst's numbers) become price prohibitive at about $107 pb in 2008 dollars. (Actually 2007). So that means that MD80s and 737 classics (300/400/500) can be quite an attractive proposition if oil does keep to his numbers. The 20 year average however gives him a LOT of wiggle room.
So for a new "'plane" salesman to make this kind of statement makes me wonder if he was smoking something. Those nice parking spots in the US Southwest start to look very attractive as a place to get bargains.
It makes companies like Allegiant look really good.
Cheers
Timothy
24 September 2008
Pantheon - A Panoply of Protests
The Greek government's plan to privatize Olympic is running into a little opposition and protest. Indeed almost all the unions are not happy that the airline will downsize by about 40% in terms of head count.
Despite "an only in Greece solution" that takes the best of Varig's bad bankruptcy solution and a smattering of the Alitalia bail out (now almost dead) which offered state jobs to half the cut workers and very nice redundancy payments to others, the staff are not happy.
"Olympic Airlines is a national matter, it is the flag of the Greeks in the skies, and we will never, as simple workers and citizens, accept that this company stops flying," said Manolis Patetsos, head of the Civil Aviation Trade Union Federation, who was part of the protest.
I think that states exactly the problem.
Despite "an only in Greece solution" that takes the best of Varig's bad bankruptcy solution and a smattering of the Alitalia bail out (now almost dead) which offered state jobs to half the cut workers and very nice redundancy payments to others, the staff are not happy.
"Olympic Airlines is a national matter, it is the flag of the Greeks in the skies, and we will never, as simple workers and citizens, accept that this company stops flying," said Manolis Patetsos, head of the Civil Aviation Trade Union Federation, who was part of the protest.
I think that states exactly the problem.
23 September 2008
The State of Airfares - Confusion Reigns Supreme
Air Travel is supposed to be one of the purest forms of market that exists anywhere. As such it should be driven by supply and demand - rising and falling accordingly.
Currently the fall in demand is acute - the fall in capacity has been even greater but so far we are not seeing corresponding rises in yield across the board.
We have therefore a number of factors. On the demand side clearly demand is falling - we believe that corporate/business demand is falling more rapidly. Willie Walsh has said that premium traffic is falling for BA faster than it expected. The meltdown in the US markets and the spreading virus has curtailed demand in many areas of high yielding business traffic. Those Wall Street and City types really like to travel in the front cabin. Well that business is WAY off. Generally the economy is falling so travel is being curtailed. I have always maintained that the amount of VFR traffic (Visiting Friends and Relatives) is far less discretionary than other forms. It also makes up a sizable portion of the US market and is not reported separately (unlike Europe and Asia/Pac where it is a recognized traveling segment.
Capacity domestically in the US market has been slashed but not enough. Capacity has been switched to International sectors which in turn has boosted capacity into a weak market particularly UK-USA as a result of Open Skies. One point of Domestic capacity shifted results in 8+ points if international capacity increase. As a result we are seeing drops in key markets. Topaz who tracks this sort of thing reports spot market yields off - such as Paris NYC. London-NYC etc.
Finally the impact of fees or ancillary revenue charges - inconsistent application of taxes (lets call this obfuscation) has resulted confusion on the part of the consumer who is not happy. Resulting in moving to more direct access.
We foresee a significant amount of price volatility for the next few months with increased "fire" sales and last minute revenue generating events. Peak travel times will actually see an increase in rates but off peak will plummet in pricing.
All in all - a very confused situation before Christmas. After the turn of the year - we will see a significant amount of breath holding and lack of forward commitment in advance bookings. This will take many months to sort itself out before easy and clear patterns emerge. Rest assured on the supply and intermediary side we are all in for a bit of a wild ride.
Cheers
Currently the fall in demand is acute - the fall in capacity has been even greater but so far we are not seeing corresponding rises in yield across the board.
We have therefore a number of factors. On the demand side clearly demand is falling - we believe that corporate/business demand is falling more rapidly. Willie Walsh has said that premium traffic is falling for BA faster than it expected. The meltdown in the US markets and the spreading virus has curtailed demand in many areas of high yielding business traffic. Those Wall Street and City types really like to travel in the front cabin. Well that business is WAY off. Generally the economy is falling so travel is being curtailed. I have always maintained that the amount of VFR traffic (Visiting Friends and Relatives) is far less discretionary than other forms. It also makes up a sizable portion of the US market and is not reported separately (unlike Europe and Asia/Pac where it is a recognized traveling segment.
Capacity domestically in the US market has been slashed but not enough. Capacity has been switched to International sectors which in turn has boosted capacity into a weak market particularly UK-USA as a result of Open Skies. One point of Domestic capacity shifted results in 8+ points if international capacity increase. As a result we are seeing drops in key markets. Topaz who tracks this sort of thing reports spot market yields off - such as Paris NYC. London-NYC etc.
Finally the impact of fees or ancillary revenue charges - inconsistent application of taxes (lets call this obfuscation) has resulted confusion on the part of the consumer who is not happy. Resulting in moving to more direct access.
We foresee a significant amount of price volatility for the next few months with increased "fire" sales and last minute revenue generating events. Peak travel times will actually see an increase in rates but off peak will plummet in pricing.
All in all - a very confused situation before Christmas. After the turn of the year - we will see a significant amount of breath holding and lack of forward commitment in advance bookings. This will take many months to sort itself out before easy and clear patterns emerge. Rest assured on the supply and intermediary side we are all in for a bit of a wild ride.
Cheers
South Africa - a Small market? Think Again!
The potential for Low Cost Carriers to reform a market remains one of the bright spots in these dark days. As if to prove it, Kulula in South Africa held a "garage sale" and in one day sold 55,000 tickets. That works out to about 350 Boeing 737s worth of tickets IN 18 HOURS.... that's about 1 Ticket a second.
So more power to Gidon and the lads for this one. If they can do it (remember this is a 62 YEAR OLD Company) then shame on anyone else who says they cannot.
Cheers
So more power to Gidon and the lads for this one. If they can do it (remember this is a 62 YEAR OLD Company) then shame on anyone else who says they cannot.
Cheers
22 September 2008
Could This Be Boris' White Elephant ? I Hope Not.
In the 1960s and 1970s there were many conversations about developing a so called London's 3rd Airport. Ultimately Stansted was developed at a time when in fact there were 3 already (they kinda forgot about Luton). The controversy over developing LHR (a 3rd Runway) or LGW (a second Runway) has raged long and hard. In reality it will probably be another 10 years or so before we get any form of change.
The proposal for LHR's 3rd runway has been floated for many years but recently received some added attention. Now of course it may be too late. Demolishing homes is not a politically smart thing to do. Even if a 3rd runway is added - the layout of LHR would be hard pressed to deal with a true 50% increase in traffic potential. What to do?
Boris Johnson, the erudite new Mayor of London, wants to look at a different alternative altogether. His idea is to revive the Maplin Sands/Foulness idea. In 1969 the then Wilson government proposed several sites but only one was a coastal site. I remember well the protest from the local people where my family lived to make sure it didn't come to Nuthampsted. The Roskill Commission was charged with evaluating it. Voila end result was Stansted started its development 20 years later.
Boris wants to build a 4 runways on the water where it is only 10 feet deep with landfill, expanding it to 6 runways if necessary later. His idea merits a lot of attention.
Let's start with the fact there is no good answer to the problem. London needs an decent airport. The current "third world" edifice that is LHR is a disgrace and just plain bad in terms of how an airport should be. The impact of the environment is actually worse keeping it. The lack of planning by successive UK Governments has now come back to haunt the current administration (if Gordon Brown survives). A Conservative Majority at the next election could easily be given a mandate for change. This is one of those key changes that is required.
So there is no point in arguing about it. Developing the site and delivering it would take about 6 years AFTER final approval. Since in the UK that will take at LEAST 4 years - I believe that this should start now and in earnest.
The economic and environmental benefits far outweigh all the negatives. Imagine if you will an airport powered in a large part by low cost wave energy in a location that reduces its environmental impact. The Southeast of England would have new land available for development on the old LHR site. it would open up a corridor to the east of London and benefit the country as a whole.
And your problem with this is what?
The proposal for LHR's 3rd runway has been floated for many years but recently received some added attention. Now of course it may be too late. Demolishing homes is not a politically smart thing to do. Even if a 3rd runway is added - the layout of LHR would be hard pressed to deal with a true 50% increase in traffic potential. What to do?
Boris Johnson, the erudite new Mayor of London, wants to look at a different alternative altogether. His idea is to revive the Maplin Sands/Foulness idea. In 1969 the then Wilson government proposed several sites but only one was a coastal site. I remember well the protest from the local people where my family lived to make sure it didn't come to Nuthampsted. The Roskill Commission was charged with evaluating it. Voila end result was Stansted started its development 20 years later.
Boris wants to build a 4 runways on the water where it is only 10 feet deep with landfill, expanding it to 6 runways if necessary later. His idea merits a lot of attention.
Let's start with the fact there is no good answer to the problem. London needs an decent airport. The current "third world" edifice that is LHR is a disgrace and just plain bad in terms of how an airport should be. The impact of the environment is actually worse keeping it. The lack of planning by successive UK Governments has now come back to haunt the current administration (if Gordon Brown survives). A Conservative Majority at the next election could easily be given a mandate for change. This is one of those key changes that is required.
So there is no point in arguing about it. Developing the site and delivering it would take about 6 years AFTER final approval. Since in the UK that will take at LEAST 4 years - I believe that this should start now and in earnest.
The economic and environmental benefits far outweigh all the negatives. Imagine if you will an airport powered in a large part by low cost wave energy in a location that reduces its environmental impact. The Southeast of England would have new land available for development on the old LHR site. it would open up a corridor to the east of London and benefit the country as a whole.
And your problem with this is what?
21 September 2008
You can no longer Jabber freely
I love working with the tools that chaps in garages or bedrooms have worked on which are simple and elegant solutions to pressing needs. That said I am not a huge fan of the long tail model. The assumption that we can all make money in the 1-2% forgets one thing. We still have to compete with the scarce resources of time and total cash.
Jabber was one such tool. Simple easy elegant and free. Or pay for a site license and you can install it yourself. Simple - elegant - independent - private messaging. Well scratch the middle word from that list. Cisco bought them. So far Cisco has ended up buying many of the applications that I used to use. Webex (who in turn had already bought Intranets), Linksys (the ubiquitous company for SOHO networking) etc etc, now they have acquired Jabber.
So staying one step ahead of these big boys and keeping independent is getting harder. There are several tools for web demos. Actually there are few that I like but I keep looking. I love 37Signals (thanks to Professor Hrush for introducing me to that one). So I will probably stick with using Skype as my preferred "presence"
provider. It has become the indispensable tool for our business and personal multi channel communication services. I keep a single machine where I dont load MS stuff - using Open Office etc. Every now and then I go and play with it to see if it can compete with the Office Juggernaut. It doesn't but for others who just need simple stuff this is not bad. (Shhh dont tell anyone but I also have a MAC)
Cheers
Jabber was one such tool. Simple easy elegant and free. Or pay for a site license and you can install it yourself. Simple - elegant - independent - private messaging. Well scratch the middle word from that list. Cisco bought them. So far Cisco has ended up buying many of the applications that I used to use. Webex (who in turn had already bought Intranets), Linksys (the ubiquitous company for SOHO networking) etc etc, now they have acquired Jabber.
So staying one step ahead of these big boys and keeping independent is getting harder. There are several tools for web demos. Actually there are few that I like but I keep looking. I love 37Signals (thanks to Professor Hrush for introducing me to that one). So I will probably stick with using Skype as my preferred "presence"
provider. It has become the indispensable tool for our business and personal multi channel communication services. I keep a single machine where I dont load MS stuff - using Open Office etc. Every now and then I go and play with it to see if it can compete with the Office Juggernaut. It doesn't but for others who just need simple stuff this is not bad. (Shhh dont tell anyone but I also have a MAC)
Cheers
20 September 2008
Dayjet goes Night Night
Sadly a great idea bit the dust yesterday. I was hoping not to have to write this entry.
However a good idea has fallen foul of circumstances and the market.
I firmly believe the model can work if correctly capitalized. The users loved it. They ended up with a good size working model and needed a little more scale but I do believe they could have made it work. Perversely the current cutbacks in Airline routings actually benefited the model. So we should hopefully see someone step in.
If someone is interested in forming a rescue bid - give me a ping.
Cheers
However a good idea has fallen foul of circumstances and the market.
I firmly believe the model can work if correctly capitalized. The users loved it. They ended up with a good size working model and needed a little more scale but I do believe they could have made it work. Perversely the current cutbacks in Airline routings actually benefited the model. So we should hopefully see someone step in.
If someone is interested in forming a rescue bid - give me a ping.
Cheers
18 September 2008
Airlines Defrauding Governments out of Millions?
Well that got your attention didn’t it.
If this blog entry doesn’t send you to sleep you are a better person than most! But I do encourage you to read this. It is a pretty detailed analysis of the taxation system. It should be considered that we as involuntary tax payers are being charged fees and the airlines who are benefiting from the imposition of charges are actually diverting money away from the government.
My supposition seems to be that in the rush to address revenue schemes of various sources, some airlines may be defrauding the US government. How so? Kudos to Professor A&P for bringing this one to my attention.
I am no lawyer and certainly no expert on the US tax code. But as a US tax payer, I think that the US government - for example and others also - could be cheated out of millions dollars in airline ticket taxes. This may not be the most popular statement, and no one in an official capacity may really want to examine this issue that carefully. With airlines now unbundling their services, things that we use to pay for that was part of the air fare that WAS taxed is no longer taxed, especially for domestic US travel. A little background. The current funding mechanism for the AATF – this is the federal tax revenue to fund infrastructure that supports air transport in the USA - (http://www.faa.gov/airports_airtraffic/trust_fund/ ) is however pretty specific that unless the charge is directly related to the ticket then it is not taxable. Fine. But I am not as I said earlier a lawyer (and I am really am not one nor ever want to be one) however I could argue that a requirement to pay for a service which is ancillary to my basic ticket and which I cannot avoid (like the first bag charge) could be construed as covered by the ticket cost. But then again I could be wrong.
Let me give you a simple example and its impact. We were not charged extra to check a bag in days gone by. The service was included as part of the base fare of the ticket that was taxed 7.5%. Now the service is no longer part of the base fare that is taxed. United Airlines is now charging (as are several other airlines) $15.00 for the first checked bag and $50.00 for the second checked bag. For the average Joe, UA would charge an additional $130.00 for a round trip. Voila there is no airline tax being collected on that amount. Since they didn’t actually lower the fare for this but used it to raise their revenues the airlines are effectively defrauding the tax authorities (specifically the FAA) out of that taxable income. There are other items now that have been spun out of the basic ticket price. But you get my point. What about other things that use to be included in the cost of a ticket that they now charge for – reservations, meals, etc etc
Judging by the current programs alone – United claimed in their first attack on the ancillary revenue pot that the second bag revenue @$25 would have yielded in excess of $100 million gross additional revenue. At the current tax rate of 7.5% domestic ticket tax that would be $7.5 million that has now escaped the US taxman. (Note I am speaking of the specific US domestic airline tax here). At the current new program charge scheme that taxation gross number has probably escalated to over $20 million for United alone on this single line item.
I consulted with several folks on the matter who process tax fees on a regular basis. And there are a number of “tax” charges that are not indeed taxes yet are calculated as such. Here are some good resources on the subject which hopefully you can use to further educate yourself. Clearly when you see the boxes on Kayak, Orbitz, Expedia or even the airlines direct sites – you could be lulled into believing that the charges are all taxes.
Rick Seaney who runs FareCompare.com has lots of lovely notes on fares. He really is a fare geek! http://rickseaney.com/2007/09/28/tax-free-domestic-airline-ticket-party/ .
The UK CAA has a nice little explanation on their website on the matter: http://www.caa.co.uk/default.aspx?catid=589&pagetype=90&pageid=2449.
One of the most comprehensive descriptions of the whole arcane ticket and tax process I have seen is on the Advantage Agency group pages. This is an association of travel agents in the UK. In this entry they actually show the raw GDS screens and how the taxes are charged and implemented. Here is the full link: http://www.advantagetravel.co.uk/Travel-Articles/Airline_Taxes.html
The insidious nature of this is that everyone is confused. (See my post earlier on obfuscation http://t2impact.blogspot.com/2008/09/trickery-obfuscation-is-this-politics.html#links ).
I could get really obtuse and give you a whole host of different explanations but just for illustration look at the YQ or YR type of “tax and surcharge” code. This is used as a catch all for things like fuel surcharges. Delta for example is very clear about this although the information is buried DEEP inside their website and can only be seen easily once you are in the purchase flow: https://www.delta.com/planning_reservations/plan_flight/online_reservations/fares_ticketing_rules/taxes_fees/index.jsp
Here is one airline’s YQ table. (this is a PDF file from BMI): http://www.flybmi.com/downloads/trade/BD_YQ_Intent_Trade_2008-09-04.pdf .
PHEW!
So one last comment is that since the gross airline departure ticket taxes are likely to decrease in total revenue terms due to a reduction in passengers flying, as a result the FAA in the US in my example is likely to experience a short fall in its collections. I am not a fan of big government and collecting extra taxes but addressing this problem could be away to make up that short fall. I am sure now that I will be labeled a tax and spend kind of guy. My sentiment here though is that I don’t like stealth taxes. I don’t like complicated taxes and I don’t like being charged for things that are not fairly applied. We should all be paying a simplified tax and surcharge supplement to the ticket. CLEARLY SEPARATED INTO TAXES AND AIRLINE IMPOSED FEES It seems hypercritical of ALL the taxation authorities that we are constantly bombarded with extra fees and charges because we the travelling public are a captive audience. The Europeans have now implemented a new regime of a total tax amount. Perhaps the US should do the same and be clear and transparent about it. I know – dream on.
Cheers
Timothy J O'Neil-Dunne
Managing Partner - T2Impact Ltd
Global Travel eBusiness
Tel (US) +1 425 836 4770
Mobile (US) +1 425 785 4457
Mobile (International) +44 7770 33 81 75
Fax +1 815 377 1583
UNIVERSAL VOICEMAIL BOX +1 425 749 4221
www.t2impact.com
Please treat this email and all forms of communication as confidential use only for the direct recipient(s).
Read our Blog: blog.t2news.com
Catch up on our public research: www.t2news.com
If this blog entry doesn’t send you to sleep you are a better person than most! But I do encourage you to read this. It is a pretty detailed analysis of the taxation system. It should be considered that we as involuntary tax payers are being charged fees and the airlines who are benefiting from the imposition of charges are actually diverting money away from the government.
My supposition seems to be that in the rush to address revenue schemes of various sources, some airlines may be defrauding the US government. How so? Kudos to Professor A&P for bringing this one to my attention.
I am no lawyer and certainly no expert on the US tax code. But as a US tax payer, I think that the US government - for example and others also - could be cheated out of millions dollars in airline ticket taxes. This may not be the most popular statement, and no one in an official capacity may really want to examine this issue that carefully. With airlines now unbundling their services, things that we use to pay for that was part of the air fare that WAS taxed is no longer taxed, especially for domestic US travel. A little background. The current funding mechanism for the AATF – this is the federal tax revenue to fund infrastructure that supports air transport in the USA - (http://www.faa.gov/airports_airtraffic/trust_fund/ ) is however pretty specific that unless the charge is directly related to the ticket then it is not taxable. Fine. But I am not as I said earlier a lawyer (and I am really am not one nor ever want to be one) however I could argue that a requirement to pay for a service which is ancillary to my basic ticket and which I cannot avoid (like the first bag charge) could be construed as covered by the ticket cost. But then again I could be wrong.
Let me give you a simple example and its impact. We were not charged extra to check a bag in days gone by. The service was included as part of the base fare of the ticket that was taxed 7.5%. Now the service is no longer part of the base fare that is taxed. United Airlines is now charging (as are several other airlines) $15.00 for the first checked bag and $50.00 for the second checked bag. For the average Joe, UA would charge an additional $130.00 for a round trip. Voila there is no airline tax being collected on that amount. Since they didn’t actually lower the fare for this but used it to raise their revenues the airlines are effectively defrauding the tax authorities (specifically the FAA) out of that taxable income. There are other items now that have been spun out of the basic ticket price. But you get my point. What about other things that use to be included in the cost of a ticket that they now charge for – reservations, meals, etc etc
Judging by the current programs alone – United claimed in their first attack on the ancillary revenue pot that the second bag revenue @$25 would have yielded in excess of $100 million gross additional revenue. At the current tax rate of 7.5% domestic ticket tax that would be $7.5 million that has now escaped the US taxman. (Note I am speaking of the specific US domestic airline tax here). At the current new program charge scheme that taxation gross number has probably escalated to over $20 million for United alone on this single line item.
I consulted with several folks on the matter who process tax fees on a regular basis. And there are a number of “tax” charges that are not indeed taxes yet are calculated as such. Here are some good resources on the subject which hopefully you can use to further educate yourself. Clearly when you see the boxes on Kayak, Orbitz, Expedia or even the airlines direct sites – you could be lulled into believing that the charges are all taxes.
Rick Seaney who runs FareCompare.com has lots of lovely notes on fares. He really is a fare geek! http://rickseaney.com/2007/09/28/tax-free-domestic-airline-ticket-party/ .
The UK CAA has a nice little explanation on their website on the matter: http://www.caa.co.uk/default.aspx?catid=589&pagetype=90&pageid=2449.
One of the most comprehensive descriptions of the whole arcane ticket and tax process I have seen is on the Advantage Agency group pages. This is an association of travel agents in the UK. In this entry they actually show the raw GDS screens and how the taxes are charged and implemented. Here is the full link: http://www.advantagetravel.co.uk/Travel-Articles/Airline_Taxes.html
The insidious nature of this is that everyone is confused. (See my post earlier on obfuscation http://t2impact.blogspot.com/2008/09/trickery-obfuscation-is-this-politics.html#links ).
I could get really obtuse and give you a whole host of different explanations but just for illustration look at the YQ or YR type of “tax and surcharge” code. This is used as a catch all for things like fuel surcharges. Delta for example is very clear about this although the information is buried DEEP inside their website and can only be seen easily once you are in the purchase flow: https://www.delta.com/planning_reservations/plan_flight/online_reservations/fares_ticketing_rules/taxes_fees/index.jsp
Here is one airline’s YQ table. (this is a PDF file from BMI): http://www.flybmi.com/downloads/trade/BD_YQ_Intent_Trade_2008-09-04.pdf .
PHEW!
So one last comment is that since the gross airline departure ticket taxes are likely to decrease in total revenue terms due to a reduction in passengers flying, as a result the FAA in the US in my example is likely to experience a short fall in its collections. I am not a fan of big government and collecting extra taxes but addressing this problem could be away to make up that short fall. I am sure now that I will be labeled a tax and spend kind of guy. My sentiment here though is that I don’t like stealth taxes. I don’t like complicated taxes and I don’t like being charged for things that are not fairly applied. We should all be paying a simplified tax and surcharge supplement to the ticket. CLEARLY SEPARATED INTO TAXES AND AIRLINE IMPOSED FEES It seems hypercritical of ALL the taxation authorities that we are constantly bombarded with extra fees and charges because we the travelling public are a captive audience. The Europeans have now implemented a new regime of a total tax amount. Perhaps the US should do the same and be clear and transparent about it. I know – dream on.
Cheers
Timothy J O'Neil-Dunne
Managing Partner - T2Impact Ltd
Global Travel eBusiness
Tel (US) +1 425 836 4770
Mobile (US) +1 425 785 4457
Mobile (International) +44 7770 33 81 75
Fax +1 815 377 1583
UNIVERSAL VOICEMAIL BOX +1 425 749 4221
www.t2impact.com
Please treat this email and all forms of communication as confidential use only for the direct recipient(s).
Read our Blog: blog.t2news.com
Catch up on our public research: www.t2news.com
6 Online Travel Myths - evaluated
PhocusWright issued a press release yesterday aiming to debunk some myths about the state of the Online Travel Agency Market. I would like to address some of these for clarity sake. Then you be the judge as to whether these are myths or realities. The Professors opinion is listed under each myth.
Myth #1: The number of online travel buyers in the U.S. is declining.
UNTRUE. Absolutely incorrect - we are still seeing a rise in the number of buyers. However of course as we have a maturing market the profile is changing. This is where you have to be very careful in defining the exact terminology.
Myth #2 More and more online travel shoppers use supplier sites than online travel agencies.
TRUE. If you use the correct terminology and clarify here. If the statement was that Supplier sites are getting an increasing number of transactions - then this statement is true. As capacity shrinks in the USA (the most mature market for Online Travel) the hunt seats intensifies. This is actually causing an increase in visits to all sites. Further the proliferation of search sites and meta crawling engines is raising traffic but not raising sales. Internationally non-US speaking there are still better growth rates on OTA sites for transactions.
3. Travel agencies are experiencing a resurgence as travelers return to traditional purchasing channels.
UNTRUE. Wow who started this myth. Someone out of their tree. There is no need for much debate on this issue - numbers of agents are WAY down. However there is a degree of flight to quality. Again as it gets harder to search due to shortage of inventory the noise (web traffic) increases. There is a stubborn hard core of people who refuse to switch for either looking or buying. But in general NAH!!!
Myth #4. The next generation of travelers prefers to do everything online.
TRUE. Actually this is part of the obfuscation of reports like this. The difference between traffic and transactions. Again looking at the USA market there is a considerable amount of traffic that cannot be purchased online STILL. However we believe that if there was a general universe that the preference for Millenials and GenY would be to use an online tool for search and transaction.
Myth #5. Social networks and travel reviews have the greatest influence on travel decision-making.
UNTRUE. Your friends and relatives have greater influence. However there is a lot of study on this topic that shows that Social media - call them user reviews because that is what they mostly are - have a considerable influence. What we see here is that there is a real concentration around the Expedia owned Trip Advisor businesses that stand clearly above everyone else. Further NOT having a user review section for your site actually makes your site less appealing. If you were to change the statement to Social networks and travel reviews have SIGNIFICANT influence on travel decision-making, then I would rate this as a true.
Myth #6. Online travel markets need high credit card and Internet penetration to succeed.
DRAW. This is an "it depends" answer. With all due respect to Philip and Ram - India is not a proxy for the rest of the world. Germany too has low credit card penetration (less than 40% yet it is a thriving market - albeit with lower penetration). The problems of credit cards with fraud and cardholder protection allows significant rates of fraud to exist to the detriment of the merchant. Developing multi-channel strategies is critical to success. There are very few markets where pure online works - but there are still a large number of markets where travel agents still work. Financial Fulfillment is a critical element of defining this. But a credit card is not the exclusive answer and sub-networks including non-internet ones, do work for Travel.
So how did we do on the test?
Interestingly there are 3 UNTRUES, 2 TRUES and a DRAW. I am favoring the UNTRUES due to the actual wording of the statements in PCW's myths.
Perhaps we should run a Travel Mythbusters for Travel and have Adam and Jamie replicated to go through the 6 Myths.
Let me know if you want to take up that challenge.
Myth #1: The number of online travel buyers in the U.S. is declining.
UNTRUE. Absolutely incorrect - we are still seeing a rise in the number of buyers. However of course as we have a maturing market the profile is changing. This is where you have to be very careful in defining the exact terminology.
Myth #2 More and more online travel shoppers use supplier sites than online travel agencies.
TRUE. If you use the correct terminology and clarify here. If the statement was that Supplier sites are getting an increasing number of transactions - then this statement is true. As capacity shrinks in the USA (the most mature market for Online Travel) the hunt seats intensifies. This is actually causing an increase in visits to all sites. Further the proliferation of search sites and meta crawling engines is raising traffic but not raising sales. Internationally non-US speaking there are still better growth rates on OTA sites for transactions.
3. Travel agencies are experiencing a resurgence as travelers return to traditional purchasing channels.
UNTRUE. Wow who started this myth. Someone out of their tree. There is no need for much debate on this issue - numbers of agents are WAY down. However there is a degree of flight to quality. Again as it gets harder to search due to shortage of inventory the noise (web traffic) increases. There is a stubborn hard core of people who refuse to switch for either looking or buying. But in general NAH!!!
Myth #4. The next generation of travelers prefers to do everything online.
TRUE. Actually this is part of the obfuscation of reports like this. The difference between traffic and transactions. Again looking at the USA market there is a considerable amount of traffic that cannot be purchased online STILL. However we believe that if there was a general universe that the preference for Millenials and GenY would be to use an online tool for search and transaction.
Myth #5. Social networks and travel reviews have the greatest influence on travel decision-making.
UNTRUE. Your friends and relatives have greater influence. However there is a lot of study on this topic that shows that Social media - call them user reviews because that is what they mostly are - have a considerable influence. What we see here is that there is a real concentration around the Expedia owned Trip Advisor businesses that stand clearly above everyone else. Further NOT having a user review section for your site actually makes your site less appealing. If you were to change the statement to Social networks and travel reviews have SIGNIFICANT influence on travel decision-making, then I would rate this as a true.
Myth #6. Online travel markets need high credit card and Internet penetration to succeed.
DRAW. This is an "it depends" answer. With all due respect to Philip and Ram - India is not a proxy for the rest of the world. Germany too has low credit card penetration (less than 40% yet it is a thriving market - albeit with lower penetration). The problems of credit cards with fraud and cardholder protection allows significant rates of fraud to exist to the detriment of the merchant. Developing multi-channel strategies is critical to success. There are very few markets where pure online works - but there are still a large number of markets where travel agents still work. Financial Fulfillment is a critical element of defining this. But a credit card is not the exclusive answer and sub-networks including non-internet ones, do work for Travel.
So how did we do on the test?
Interestingly there are 3 UNTRUES, 2 TRUES and a DRAW. I am favoring the UNTRUES due to the actual wording of the statements in PCW's myths.
Perhaps we should run a Travel Mythbusters for Travel and have Adam and Jamie replicated to go through the 6 Myths.
Let me know if you want to take up that challenge.
The Perils of Hedging
Two players admitted goofing up on their fuel hedges. As far as common characteristics, you could not have two more diametrically opposed airlines.
United will take a half billion charge. It got it wrong by not hedging in the swift run up in price that peaked at $147 per barrel in the summer. Now it is going to have to cover the cost of fuel that it did hedge at too high a price.
Unlike the many other things that Ryanair gets right - it seem as that Fuel Hedging is not one of them. So I will retract an earlier statement that Ryanair was good at Hedging. They are not. However at least despite them saying how much they had committed no more than a few weeks ago for the fall and Q1 2009 periods all at prices well over the $120 mark, it seems that either they have got out of them or they have managed to mitigate them.
So far only Southwest seems to have got this delicate dance right.
Cheers
United will take a half billion charge. It got it wrong by not hedging in the swift run up in price that peaked at $147 per barrel in the summer. Now it is going to have to cover the cost of fuel that it did hedge at too high a price.
Unlike the many other things that Ryanair gets right - it seem as that Fuel Hedging is not one of them. So I will retract an earlier statement that Ryanair was good at Hedging. They are not. However at least despite them saying how much they had committed no more than a few weeks ago for the fall and Q1 2009 periods all at prices well over the $120 mark, it seems that either they have got out of them or they have managed to mitigate them.
So far only Southwest seems to have got this delicate dance right.
Cheers
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