IS THERE A SUBTEXT PLOT ABOUT THE COST OF CLEARING?
By now the debate is ranging far and wide about the wisdom of United Airlines decision to push credit card fees down to the agent in certain circumstances. The airline has been vilified on the subject by the Travel Agent press. No one seems to be springing to their defense - and at this stage neither am I - however I do think the issue needs a little deeper evaluation.
My take on this is simple. Now was not the time to do it.
UAL like many airlines is trying to change the model from supplier paid to user paid. Good if you can make it happen. For now however when you need all the distribution channels you can get - particularly if they result in higher yields then you would not want to be pushing them away. There is no doubt that there are instances where the agent may be using UA's merchant agreement in a not so direct and useful way to UA. For example plating on UA in order to get an unusual ticket issued. However the selective imposition would not be a good idea in my humble opinion today. I just think that United should not have chosen now to have this fight.
Longer term this situation does however represent a skirmish in a bigger set of battles - perhaps even a war of Tolkien proportions. That is the issue of the cost of financial fulfillment.
There is a very clear move on behalf of the credit card companies to shore up their business models. With near banks exiting the financial services market and the big banks getting very much bigger - the number and amount of fees on all transactions is rising and rising rapidly. UA is clearly being mindful of the long term trend of this and are trying to do something about it. They should be commended for starting to bring attention to the subject.
So chaps - this is one issue I am going to be following in the coming months. We are definitely going to see this issue stay near the front burner. I do believe we are going to see a strong focus by the supplier community - particularly airlines - on credit card fees.
Cheers
25 June 2009
The Not Quite So Strange Case of Qantas
The Professor is currently on a round the world roadshow trip for one of our clients. In doing so - I have been engaging in a social experiment of doing the entire trip in coach. As I chose BA/QF's low RTW fare - I am experiencing the joys of coach travel much of it on Qantas.
Qantas is an airline in transition. It is moving from a pure legacy carrier and under Joyce aiming to remake its future as a feisty HVC - Hybrid Value Carrier. Let me assure you there are no sacred cows anywhere inside Qantas now (perhaps a sacred 'Roo though!!!)
The business strategy under the Dixon era regime seemed to be almost Microsoft like - Embrace and Extend. Betting on the ability to support multiple brands and multiple business models shoring up the uber Brand.
The new guy - another Irishman - Joyce seems to have understood that the GFC is not going to let that model be sustained. So he has started the arduous process of remaking the airline from the inside out. Bringing with him some of his key Lieutenants from Jetstar - he is determined to lower the cost base and at the same time to enhance the organization to adopt new thinking. This type of behavior would not be possible under the old regime - it is still not without risk given the testy nature of the relations with the Unions. Australian Labour relations are not the easiest to deal with. So delicate would be the description of the negotiations that have to be undertaken. But we can expect to see a brighter smarter definitely more agile QF.
The corridors in Mascott (QF's HQ area) are getting more like ghost towns. Whole departments have been axed or merged. Gardening leave has been ordered for many. Indeed outsourcing the IT area to IBM will put many of that team out to grass for a long time.
Joyce is not mincing any words or so his actions are demonstrating. He is determined to make the mainline airline viable in the face of low cost competition and encroachment from external sources. The traditional battle for maintaining the status quo - and thus ensuring QF's protected position seem to be regarded as lost. Now the airline must compete on its product and conventional market tools. The last vestige of the Flying Kangeroo as a matter of public pride and therefore worthy of public protection has vanished. It can only be a matter of time before the Pacific really opens up. Contrast this with the debate over a possible bail out of BA in the UK.
So QF's protected world is now open. The threats come from local (Virgin Australia group with its 4 airlines), Traditional advisaries - SQ and CX etc, The occassional foray into the Oz market by the US airlines - Delta being the latest one this month to start the service. But perhaps one of the most threatening is the encroachment by the GCC airlines - Qatar, Etihad and of course Emirates that has seen that airline rise to being a major carrier on the Trans Tasman routes.
Today's news shows that QF is now not prepared to tolerate Boeing's BS on the 787. Cancelling part of the 787 order is a major psycholigical blow to the program. Nothing earth threatening but definitely a kick in the teeth. Given the severity of the problem in the 787 program - they are looking at a significant additional delay in deliveries to the early customers. Scuttlebutt says that the redesign could add many many months of delay to the program. This puts another issue BACK on the table with the weight/performance. QF was hoping for the ability to operate SYD-LHR nonstop. That is not going to be on the cards for a while in my opinion.
So watch out world. If Joyce gets his way - QF will emerge from the current crisis a much better animal.
Cheers
Qantas is an airline in transition. It is moving from a pure legacy carrier and under Joyce aiming to remake its future as a feisty HVC - Hybrid Value Carrier. Let me assure you there are no sacred cows anywhere inside Qantas now (perhaps a sacred 'Roo though!!!)
The business strategy under the Dixon era regime seemed to be almost Microsoft like - Embrace and Extend. Betting on the ability to support multiple brands and multiple business models shoring up the uber Brand.
The new guy - another Irishman - Joyce seems to have understood that the GFC is not going to let that model be sustained. So he has started the arduous process of remaking the airline from the inside out. Bringing with him some of his key Lieutenants from Jetstar - he is determined to lower the cost base and at the same time to enhance the organization to adopt new thinking. This type of behavior would not be possible under the old regime - it is still not without risk given the testy nature of the relations with the Unions. Australian Labour relations are not the easiest to deal with. So delicate would be the description of the negotiations that have to be undertaken. But we can expect to see a brighter smarter definitely more agile QF.
The corridors in Mascott (QF's HQ area) are getting more like ghost towns. Whole departments have been axed or merged. Gardening leave has been ordered for many. Indeed outsourcing the IT area to IBM will put many of that team out to grass for a long time.
Joyce is not mincing any words or so his actions are demonstrating. He is determined to make the mainline airline viable in the face of low cost competition and encroachment from external sources. The traditional battle for maintaining the status quo - and thus ensuring QF's protected position seem to be regarded as lost. Now the airline must compete on its product and conventional market tools. The last vestige of the Flying Kangeroo as a matter of public pride and therefore worthy of public protection has vanished. It can only be a matter of time before the Pacific really opens up. Contrast this with the debate over a possible bail out of BA in the UK.
So QF's protected world is now open. The threats come from local (Virgin Australia group with its 4 airlines), Traditional advisaries - SQ and CX etc, The occassional foray into the Oz market by the US airlines - Delta being the latest one this month to start the service. But perhaps one of the most threatening is the encroachment by the GCC airlines - Qatar, Etihad and of course Emirates that has seen that airline rise to being a major carrier on the Trans Tasman routes.
Today's news shows that QF is now not prepared to tolerate Boeing's BS on the 787. Cancelling part of the 787 order is a major psycholigical blow to the program. Nothing earth threatening but definitely a kick in the teeth. Given the severity of the problem in the 787 program - they are looking at a significant additional delay in deliveries to the early customers. Scuttlebutt says that the redesign could add many many months of delay to the program. This puts another issue BACK on the table with the weight/performance. QF was hoping for the ability to operate SYD-LHR nonstop. That is not going to be on the cards for a while in my opinion.
So watch out world. If Joyce gets his way - QF will emerge from the current crisis a much better animal.
Cheers
16 June 2009
The Professor Will Be Away... Again + Google
It seems I am not a master of my own destiny these days. So I shall be away from home base for over a month.
During this time I will not be able to post on this blog as often as I like. So my apologies dear readers.
And here is a comment on Google.
Of late I am starting to think that Google has become a passionate force for not so good. I used to admire them a lot more than I do now.
I have also learned to my cost that form dominates function. Making a change on my blog image resulted in Google's spider dropping me and also their new functions have started to bypass sites such as my blog. Apparently I was not alone - but while others have picked back up - I am languishing and falling behind.
A plot... accidental - deliberate?
Not sure dear reader but it shows the unnecessary power they wield without check
Cheers
During this time I will not be able to post on this blog as often as I like. So my apologies dear readers.
And here is a comment on Google.
Of late I am starting to think that Google has become a passionate force for not so good. I used to admire them a lot more than I do now.
I have also learned to my cost that form dominates function. Making a change on my blog image resulted in Google's spider dropping me and also their new functions have started to bypass sites such as my blog. Apparently I was not alone - but while others have picked back up - I am languishing and falling behind.
A plot... accidental - deliberate?
Not sure dear reader but it shows the unnecessary power they wield without check
Cheers
Ryanair - The First Airline Ever To Publicize An Outage
Well you have to hand it to the boys and girls in Dublin. Calling a spade a spade has never been a problem
So announcing that they will shut the site down on June 24th is a bold but actually pretty fair move.
It is one of the only times I can remember when an airline says it will shut down its site and sets the expectations for how it will handle itself in the process.
I find this very refreshing
Cheers
So announcing that they will shut the site down on June 24th is a bold but actually pretty fair move.
It is one of the only times I can remember when an airline says it will shut down its site and sets the expectations for how it will handle itself in the process.
I find this very refreshing
Cheers
15 June 2009
Do Travel Agents Matter Eh?
In Canada - Yes Sire they do ...
The recent spat over commissions in the vast North of Canada has the Travel Agents - well somewhat in vogue again.
I wont bore with details about the Air Canada and Westjet raise/lower/raise commissions only to make the point that the spat proves that in today's buyer's market the agents are actually very important.
Why? Well if your yield is in the toilet (as it is) it has become an issue of economics for the supply side. Thus the minimal amount that the agents represent in cost compared to the loss of yield actually makes the agents seem like a good deal. For the neighbor to the south, the revenue is off by nearly 30% on only a 6% reduction in passenger numbers (ARC figures for May). That clearly shows that any way to mitigate this drop is good.
What have we seen publicly? Delta introduced 10% on certain routes in the NY market. AC and Westjet settled on 7%. etc etc. So compared to the 10-15% drop in yield for the airlines these commission numbers look actually attractive.
Does this signify that there is a lot of cash awash in the market? Actually when you look behind the numbers we see that the GDSs are still getting wads of cash from the Airlines in GDS transaction costs/fees, commissions are actually rising, the amount of money the publicly traded intermediaries are getting seems to be going north not south. And of course the deals out there for consumers are unheard of.
The airlines are in turmoil and despite the words of wisdom coming from Chairman Willie, we are seeing an about face by the supply side who just 12 months ago still spurned the Agency channel.
So as the pendulum has swung more - let's just take a moment to reflect that there is an opportunity for new found cooperation by the Travel Distribution System as long as people don't get too greedy. That means that the airlines and the user community must continue to look where the costs are and vigorously pursue rooting them out and making the channel(s) more and more efficient. Woe betide anyone who thinks this state of affairs is permanent and they can sit back and sing "Happy Days Are Here Again". Anyone who enables cost reduction in a win win for the suppliers and sellers should be embraced.
But ultimately - this too shall pass. So remember on whose head you trod on the way up. They might just kick you on the way down. As the Emperor Augustus said - Festina Lente - hasten slowly.
Cheers
The recent spat over commissions in the vast North of Canada has the Travel Agents - well somewhat in vogue again.
I wont bore with details about the Air Canada and Westjet raise/lower/raise commissions only to make the point that the spat proves that in today's buyer's market the agents are actually very important.
Why? Well if your yield is in the toilet (as it is) it has become an issue of economics for the supply side. Thus the minimal amount that the agents represent in cost compared to the loss of yield actually makes the agents seem like a good deal. For the neighbor to the south, the revenue is off by nearly 30% on only a 6% reduction in passenger numbers (ARC figures for May). That clearly shows that any way to mitigate this drop is good.
What have we seen publicly? Delta introduced 10% on certain routes in the NY market. AC and Westjet settled on 7%. etc etc. So compared to the 10-15% drop in yield for the airlines these commission numbers look actually attractive.
Does this signify that there is a lot of cash awash in the market? Actually when you look behind the numbers we see that the GDSs are still getting wads of cash from the Airlines in GDS transaction costs/fees, commissions are actually rising, the amount of money the publicly traded intermediaries are getting seems to be going north not south. And of course the deals out there for consumers are unheard of.
The airlines are in turmoil and despite the words of wisdom coming from Chairman Willie, we are seeing an about face by the supply side who just 12 months ago still spurned the Agency channel.
So as the pendulum has swung more - let's just take a moment to reflect that there is an opportunity for new found cooperation by the Travel Distribution System as long as people don't get too greedy. That means that the airlines and the user community must continue to look where the costs are and vigorously pursue rooting them out and making the channel(s) more and more efficient. Woe betide anyone who thinks this state of affairs is permanent and they can sit back and sing "Happy Days Are Here Again". Anyone who enables cost reduction in a win win for the suppliers and sellers should be embraced.
But ultimately - this too shall pass. So remember on whose head you trod on the way up. They might just kick you on the way down. As the Emperor Augustus said - Festina Lente - hasten slowly.
Cheers
HKG Traffic Falls again
6% might not seem like a lot but for the first 5 months of 2009 this is not good news. Worse is that the losses are not abating. May's numbers shows pax were off nearly 13%. Cathy must be suffering badly as the majority of these are going to be business travelers cutting back.
Even the airport is predicting more bad news for June
With China in the doldrums and Swine flu further compounding matters, the recovery will not necessarily be arriving any time soon. Finally the impact of the loss of the trans-shipment (flight from Taiwan can now go direct) Cathay's poisition is looking pretty awful at the moment.
Freight continues to collapse which is the worrying thing for everyone.
Yields are going to stay low for a long while yet.
Cheers
Even the airport is predicting more bad news for June
With China in the doldrums and Swine flu further compounding matters, the recovery will not necessarily be arriving any time soon. Finally the impact of the loss of the trans-shipment (flight from Taiwan can now go direct) Cathay's poisition is looking pretty awful at the moment.
Freight continues to collapse which is the worrying thing for everyone.
Yields are going to stay low for a long while yet.
Cheers
14 June 2009
Swine Flu in Context
The death reported today of the first H1N1 patient in the UK should not be cause for undue alarm. Coming 3 days after the official declaration of pandemic by WHO - the number of cases have risen in the UK by another 11% to over 1400. This shows that the disease is a threat and should not be taken lightly.
However I believe we should not panic.
On my recent travels - I have seen quite a few people sporting facemasks and the like. At the same time - people openly sneezing or with other sundry bad habits continue unabated.
Just remember there is one key thing you can do - WASH YOUR HANDS FREQUENTLY - that is a pretty good way to keep the spread of any disease contained.
Cheers
However I believe we should not panic.
On my recent travels - I have seen quite a few people sporting facemasks and the like. At the same time - people openly sneezing or with other sundry bad habits continue unabated.
Just remember there is one key thing you can do - WASH YOUR HANDS FREQUENTLY - that is a pretty good way to keep the spread of any disease contained.
Cheers
Speculating On The Ryanair Order
So Ryanair is getting a lot of interest in its potential order for up to 300 Aircraft.
Most people poo poo Michael O'Leary as a crank. He frequently floats ideas just for effect. 1 Pound Toilets anyone?
This time however we think he is in deadly earnest and no one can afford to ignore him.
In a year when the NET airline bookings for both Airbus and Boeing have JUST cracked double figures, these sort of numbers are astronomical and terribly important to the stock of both companies. (EADS and Boeing).
The big question really is the likely outcome. So there are 4 doors:
Behind Door #1 is an all Boeing deal. Conventional money is on this one because its somewhat obvious.
Behind Door #2 is an all Airbus deal. This is the risky profile by JL is the master salesman.
Behind Door #3 is a composite deal. This will be expensive for both parties because both suppliers will have to pay extra to allow it.
Behind Door #4 is the goat. IE a laughing MOL.
I am not making any bets - just yet... except the side bet that THERE WILL BE A PR statement during Paris.
I also have a secret bet on something else. I will share with you if it happens. It has to do with a slightly different proposition.
Cheers
Bad Luck Story
Dr Addison Schonland runs the very well put together Podcast and Blogs over at IAG. despite the fact that he is a closet Republican - we do enjoy working together having co-authored 2 studies on LCCs.
Over at his blog is the really sad story of the couple who missed AF447.
http://blackprogram.blogspot.com/2009/06/bad-luck-story-of-week.html
Over at his blog is the really sad story of the couple who missed AF447.
http://blackprogram.blogspot.com/2009/06/bad-luck-story-of-week.html
13 June 2009
Is It Time To Rethink Safety?
We take safety for granted.
We are complacent.
We are in danger.
There are so many studies on the subject of safety that you can drown in the amount of information. It is clear that the travelling public has been essentially "lucky" in that the number of accidents is not higher than it is. Hopefully this luck is not an accident of chance but a result of systematic focus on safety.
One of the most dramatic improvements in cockpit management has been the Electronic Flight Bag - EFB. However the recent incident involving an Emirates A340 at MEL highlights that there is still a problem with the overall safety of the system - namely the human factors side.
http://www.flightglobal.com/articles/2009/05/29/327075/emirates-incident-highlights-electronic-flight-bag-human.html
There is no answer to the question of how to manage safety - it is essentially unmanageable. We just have to hope and pray that the combination of factors that can cause an accident either never happen or that we can create mitigation for them.
Reading the reports of the AF447 accident, it would seem to the layman (and that includes me) that there are circumstances when things go wrong and nothing can be done to fix them if there is a major external distracting event going on. The lessons of Eastern Flight 401 have been researched and analyzed yet the core combination of factors continue to cause either accidents or almost accidents.
The recent revelations of the CO commuter Q400 accident reveals some things that should never have happened. Yet they still do. Crews commuting from more than 2000 miles away and sleeping on couches in a ready-room. Etc Etc.
We all as public and as professionals must be vigilant. We have to ensure that safety is not someone else's job. Its all our job. There is an excellent article in ATW June 2009 entitled back to basics. It makes a sobering read. We cannot just look for politically expedient solutions. We have to bring a culture of endemic focus on safety that embraces us all. We are all part of the solution. We can be thankful to the boys and girls in the front who guide the tubes to their destinations. But they are just part of a machine. That machine needs to work at 100%, all of the time.
Cheers
We are complacent.
We are in danger.
There are so many studies on the subject of safety that you can drown in the amount of information. It is clear that the travelling public has been essentially "lucky" in that the number of accidents is not higher than it is. Hopefully this luck is not an accident of chance but a result of systematic focus on safety.
One of the most dramatic improvements in cockpit management has been the Electronic Flight Bag - EFB. However the recent incident involving an Emirates A340 at MEL highlights that there is still a problem with the overall safety of the system - namely the human factors side.
http://www.flightglobal.com/articles/2009/05/29/327075/emirates-incident-highlights-electronic-flight-bag-human.html
There is no answer to the question of how to manage safety - it is essentially unmanageable. We just have to hope and pray that the combination of factors that can cause an accident either never happen or that we can create mitigation for them.
Reading the reports of the AF447 accident, it would seem to the layman (and that includes me) that there are circumstances when things go wrong and nothing can be done to fix them if there is a major external distracting event going on. The lessons of Eastern Flight 401 have been researched and analyzed yet the core combination of factors continue to cause either accidents or almost accidents.
The recent revelations of the CO commuter Q400 accident reveals some things that should never have happened. Yet they still do. Crews commuting from more than 2000 miles away and sleeping on couches in a ready-room. Etc Etc.
We all as public and as professionals must be vigilant. We have to ensure that safety is not someone else's job. Its all our job. There is an excellent article in ATW June 2009 entitled back to basics. It makes a sobering read. We cannot just look for politically expedient solutions. We have to bring a culture of endemic focus on safety that embraces us all. We are all part of the solution. We can be thankful to the boys and girls in the front who guide the tubes to their destinations. But they are just part of a machine. That machine needs to work at 100%, all of the time.
Cheers
12 June 2009
Once Was Not Enough - Airlines Cut More
Twice was not enough
Will the third round of cuts be enough to bring capacity inline with demand?
Just in time for the Paris Air Show next week we see another dose of (new and really real this time) reality hitting the market. Pursuing the conventional pendulum (aka knee jerk response) to a down turn - we are watching another round of cuts take place in the market. Delta and American shaved another 1-3 points off their capacity in total for the post Labor day schedule. BA is warning of cuts across the board from labour to shuttering OpenSkies. In this month's Air Transport World, Editor Aaron Karp ("Were They Tough Enough? " - http://www.atwonline.com/magazine/currentTOC.html ) makes the case that the bloodletting at the end of 2008 and the first quarter of this year was just not sufficient for the airlines to sustain their business model. The empirical data in support is stark. Yields are in the toilet. US travel agency derived airline passenger revenues were off almost 30% in the month of May 2009 on only a less than 9% drop in passengers. That is pretty bad by any measure.
Those of you who are regulars of this blog will recall that I singled out United last year for not cutting their head count costs commensurate to match the reduction in their fleet.
Now we see the new Boeing CMO 2009-2028 being released and for the first time ever (as far as I can tell) the plane maker is actually cutting its long term forecast. So the pull back is not just temporary. We are seeing a structural change in the market.
http://www.boeing.com/commercial/cmo/index.html
As an aside here it is a great tool and this years version is much easier to use and gives better quality data.
With oil prices rebounding and headed north of $100/ppb, the spectre of the gas guzzling uneconomic fleet is rising again. with effective deflation, rising costs and still declining demand - the airlines are in this perfect storm of bad news. As Willie has exhorted his boys and the rank and file - standard solutions and behavior are not acceptable. However I wonder if the rhetoric matches the execution. And of course while BA is a poster child for this perfect storm of bad news but they are by no means the worst and the sole victim of this situation. At least BA has the ability to control much of its own destiny (Unions willing we think!).
So chaps - brace yourselves for the long haul. There will be more cuts and more belt tightening.
However - while this would be a good time to think about how to radically change the airline cost model not just applying the scalpel, I am just not seeing any evidence of this occurring. Chaps - wake up and smell the coffee. You are being presented with a golden opportunity to make your businesses stronger for the long haul.
Not taking this chance means that the airlines are going to be condemned to having to cut again, and again... Then the opportunity missed will be looked on as a luxury! I hope that in future time I wont have to write about the time when the airlines missed their golden moment.
Cheers
Will the third round of cuts be enough to bring capacity inline with demand?
Just in time for the Paris Air Show next week we see another dose of (new and really real this time) reality hitting the market. Pursuing the conventional pendulum (aka knee jerk response) to a down turn - we are watching another round of cuts take place in the market. Delta and American shaved another 1-3 points off their capacity in total for the post Labor day schedule. BA is warning of cuts across the board from labour to shuttering OpenSkies. In this month's Air Transport World, Editor Aaron Karp ("Were They Tough Enough? " - http://www.atwonline.com/magazine/currentTOC.html ) makes the case that the bloodletting at the end of 2008 and the first quarter of this year was just not sufficient for the airlines to sustain their business model. The empirical data in support is stark. Yields are in the toilet. US travel agency derived airline passenger revenues were off almost 30% in the month of May 2009 on only a less than 9% drop in passengers. That is pretty bad by any measure.
Those of you who are regulars of this blog will recall that I singled out United last year for not cutting their head count costs commensurate to match the reduction in their fleet.
Now we see the new Boeing CMO 2009-2028 being released and for the first time ever (as far as I can tell) the plane maker is actually cutting its long term forecast. So the pull back is not just temporary. We are seeing a structural change in the market.
http://www.boeing.com/commercial/cmo/index.html
As an aside here it is a great tool and this years version is much easier to use and gives better quality data.
With oil prices rebounding and headed north of $100/ppb, the spectre of the gas guzzling uneconomic fleet is rising again. with effective deflation, rising costs and still declining demand - the airlines are in this perfect storm of bad news. As Willie has exhorted his boys and the rank and file - standard solutions and behavior are not acceptable. However I wonder if the rhetoric matches the execution. And of course while BA is a poster child for this perfect storm of bad news but they are by no means the worst and the sole victim of this situation. At least BA has the ability to control much of its own destiny (Unions willing we think!).
So chaps - brace yourselves for the long haul. There will be more cuts and more belt tightening.
However - while this would be a good time to think about how to radically change the airline cost model not just applying the scalpel, I am just not seeing any evidence of this occurring. Chaps - wake up and smell the coffee. You are being presented with a golden opportunity to make your businesses stronger for the long haul.
Not taking this chance means that the airlines are going to be condemned to having to cut again, and again... Then the opportunity missed will be looked on as a luxury! I hope that in future time I wont have to write about the time when the airlines missed their golden moment.
Cheers
11 June 2009
1 Swallow? Try 5 - Assessment of ARC 2009 Year to Date
So we now have 5 full months under our belt and the variances shown from the extra day in 2008 and the differences in Easter now all mitigated, what can we see from the ARC data.
Well we see that the transaction numbers have been slowly improving. But where the big hole exists - its in yield. This bodes badly for the rest of the year for the airlines.
Transactions improved to only being down 8.4% BUT the sales totals are off just under 30%. That means that the airlines must be heavily discounting to maintain revenues. With commissions creeping back into the Airlines and agencies lexicon - something has to be done to improve yield. The airlines don't have the bounce of a strong book of revenue to fall back on either. this puts the airlines into that nastiest of all quandaries. Whether to discount further to capture just about any cash that's out there or to start investing in smart distribution arrangements to boost traffic and reduce COGS.
The drop in sales tracks directly with the drop in commercial traffic. We estimate across the board as a generalization that the market is off 15%. Stories coming from BA, LH and premier GCC and Asian carriers indicate that premium traffic is just off by 30%. No amount of 2 for 1's are going to improve this yield. Further the corporate wallets are going to stay shut for at least through the summer months. Even the last 2 quarters of 2009 are not going to look that much better as the Corporate traveler adjusts to the lack of approved spending.
Chaps we are not anywhere near the bottom yet.
Cheers
Well we see that the transaction numbers have been slowly improving. But where the big hole exists - its in yield. This bodes badly for the rest of the year for the airlines.
Transactions improved to only being down 8.4% BUT the sales totals are off just under 30%. That means that the airlines must be heavily discounting to maintain revenues. With commissions creeping back into the Airlines and agencies lexicon - something has to be done to improve yield. The airlines don't have the bounce of a strong book of revenue to fall back on either. this puts the airlines into that nastiest of all quandaries. Whether to discount further to capture just about any cash that's out there or to start investing in smart distribution arrangements to boost traffic and reduce COGS.
The drop in sales tracks directly with the drop in commercial traffic. We estimate across the board as a generalization that the market is off 15%. Stories coming from BA, LH and premier GCC and Asian carriers indicate that premium traffic is just off by 30%. No amount of 2 for 1's are going to improve this yield. Further the corporate wallets are going to stay shut for at least through the summer months. Even the last 2 quarters of 2009 are not going to look that much better as the Corporate traveler adjusts to the lack of approved spending.
Chaps we are not anywhere near the bottom yet.
Cheers
Longevity, The Gene Pool and ...Travel?
Mortality - we all to some extent (other than the odd monk or two) fear it.
At my mother's passing a few weeks ago, it fell to me to write the Eulogy and I had to assess what defined her life. She was born in India, moved to Canada, then back to England all before the age of 18. During her marriage to my father - they traveled the world extensively and were a part of what constituted then, the jet set. Of course her real passion was always her dogs!
Travel and the cultures they encountered defined the life of my family. My father also was born in a then exotic locale - Shanghai. As I go through the process of closing down the family home - I was struck by how much of what is in the house and was part of my family's life, symbolized that essence of travel - the small mementos and the (in some cases quite large) artifacts they acquired along the way.
Returning to my own home - it struck me that I too have followed that same path. However what was a past time for both parents has turned into a passion for me both professionally and personally.
Travel is far less glamorous today than it was in my parents' time. I recall personal encounters in airports as a child which seemed all quite normal yet today would be regarded as extraordinary. Still the lure of travel affects us all.
However the risk of travel was brought home to us last week with the loss of AF447. My father missed a flight on the original Comet only to be waiting at the airport the next day when news came of the total loss due to a design fault.
My mother lived to a right old age of 98. The week before she died we discussed her coming to visit all her family in the USA this summer. She really loved to travel and frequently - by that I mean every few months - she did so, short and long haul. The family eventually decided to entitle the Eulogy and the service as "A Life Well Lived". I only hope that when it comes time for me to board the great jetliner in the sky, that others will say that Travel defined my life as much as it did hers.
Keep traveling and spread the passion. Travel does indeed make us better people and the world a better place. The longer we live the greater the opportunity to learn and contribute to a better place on this planet. Hopefully that really does get into the gene pool.
Cheers
PS The Professor would like to again thank everyone who sent in emails and wrote cards, Facebook entries and even texts. We encourage everyone who would like to commemorate her life to contribute to her favorite charity which was Guide Dogs for the Blind. There are many such organizations around the world for example:
US: http://www.guidedogs.com/site/PageServer
UK: http://www.guidedogs.org.uk/
I thank you.
At my mother's passing a few weeks ago, it fell to me to write the Eulogy and I had to assess what defined her life. She was born in India, moved to Canada, then back to England all before the age of 18. During her marriage to my father - they traveled the world extensively and were a part of what constituted then, the jet set. Of course her real passion was always her dogs!
Travel and the cultures they encountered defined the life of my family. My father also was born in a then exotic locale - Shanghai. As I go through the process of closing down the family home - I was struck by how much of what is in the house and was part of my family's life, symbolized that essence of travel - the small mementos and the (in some cases quite large) artifacts they acquired along the way.
Returning to my own home - it struck me that I too have followed that same path. However what was a past time for both parents has turned into a passion for me both professionally and personally.
Travel is far less glamorous today than it was in my parents' time. I recall personal encounters in airports as a child which seemed all quite normal yet today would be regarded as extraordinary. Still the lure of travel affects us all.
However the risk of travel was brought home to us last week with the loss of AF447. My father missed a flight on the original Comet only to be waiting at the airport the next day when news came of the total loss due to a design fault.
My mother lived to a right old age of 98. The week before she died we discussed her coming to visit all her family in the USA this summer. She really loved to travel and frequently - by that I mean every few months - she did so, short and long haul. The family eventually decided to entitle the Eulogy and the service as "A Life Well Lived". I only hope that when it comes time for me to board the great jetliner in the sky, that others will say that Travel defined my life as much as it did hers.
Keep traveling and spread the passion. Travel does indeed make us better people and the world a better place. The longer we live the greater the opportunity to learn and contribute to a better place on this planet. Hopefully that really does get into the gene pool.
Cheers
PS The Professor would like to again thank everyone who sent in emails and wrote cards, Facebook entries and even texts. We encourage everyone who would like to commemorate her life to contribute to her favorite charity which was Guide Dogs for the Blind. There are many such organizations around the world for example:
US: http://www.guidedogs.com/site/PageServer
UK: http://www.guidedogs.org.uk/
I thank you.
Social Media And The Act of Hooking Up: No Intimacy And No Loyalty
As I live in America - I am somewhat starved of conventional media's thinking opinions. The BBC and the commercial channels in the UK seem to have a better way of looking into issues - not too superficial and not too self serving. My favorite non-musical radio station where I live is my local NPR outlet KUOW.
On driving to an appointment on Monday I heard a very interesting piece on Sex without Intimacy (a link to the broadcast is below) - this got me thinking of the impact of Social Media on the current generation. If they just want sex without intimacy then surely they have no need for conventional loyalty. And so it seems that as we have changed our channels of communication - the ensuing attachments to (previously) conventional mores seem to have been lost. Perhaps because I am a little older - I value things like loyalty, honour and duty. Today loyalty from Millenials and even Gen X and Gen Y'ers is primarily to one's friends and not to the greater good. Definitely they don't feel the same attachment to brands. If they are the attachment is governed more on the basis of convenience rather than values.
So this got me thinking about brands and loyalty in travel in the age of social media. Bear with me on this one - I think its one of those observations that I hope you will think about.
Therefore it is important for us to consider when pitching to these groups to understand their motivation. While this is probably not a light bulb idea for most people who read this blog - it has taken me quite some time to appreciate it and the depth of the sentiment. It must be that nostalgic streak in me.
http://www.npr.org/templates/story/story.php?storyId=105008712
Listening to the young ladies that were interviewed for the program it somewhat unnerved me to think that they had come to separate the essence of their relationships by splitting the concept of Love Making, Friendship and Intimacy. So too one can infer that these same people have the ability to separate their sentiments and desires when it comes to making purchases - especially for life-style products such as Travel. Please note I am not criticizing this behavior, merely trying to understand the impact of the core thinking by this class of people who are clearly very important to our market.
I put this down to the ability of the young to multi-task like never before and to compartmentalize their emotions and decision making skills. Both left and right sides of the brain. Would that I had that natural skill or that my own brain was rewired in this way. (Banishment of guilt!!!!)
The challenge of brand building in this environment must be enormous. It is probably more relevant today than at any time in the past when one appreciates how difficult it is to build a long lasting brand in this "noisy" environment and just how quickly it can evaporate.
Think about it... ponder the question. Can loyalty actually exist in today's Social Media?
Comments please at your convenience. And don't worry - I wont shout at you nor attempt a virtual Hook Up!
Cheers
On driving to an appointment on Monday I heard a very interesting piece on Sex without Intimacy (a link to the broadcast is below) - this got me thinking of the impact of Social Media on the current generation. If they just want sex without intimacy then surely they have no need for conventional loyalty. And so it seems that as we have changed our channels of communication - the ensuing attachments to (previously) conventional mores seem to have been lost. Perhaps because I am a little older - I value things like loyalty, honour and duty. Today loyalty from Millenials and even Gen X and Gen Y'ers is primarily to one's friends and not to the greater good. Definitely they don't feel the same attachment to brands. If they are the attachment is governed more on the basis of convenience rather than values.
So this got me thinking about brands and loyalty in travel in the age of social media. Bear with me on this one - I think its one of those observations that I hope you will think about.
Therefore it is important for us to consider when pitching to these groups to understand their motivation. While this is probably not a light bulb idea for most people who read this blog - it has taken me quite some time to appreciate it and the depth of the sentiment. It must be that nostalgic streak in me.
http://www.npr.org/templates/story/story.php?storyId=105008712
Listening to the young ladies that were interviewed for the program it somewhat unnerved me to think that they had come to separate the essence of their relationships by splitting the concept of Love Making, Friendship and Intimacy. So too one can infer that these same people have the ability to separate their sentiments and desires when it comes to making purchases - especially for life-style products such as Travel. Please note I am not criticizing this behavior, merely trying to understand the impact of the core thinking by this class of people who are clearly very important to our market.
I put this down to the ability of the young to multi-task like never before and to compartmentalize their emotions and decision making skills. Both left and right sides of the brain. Would that I had that natural skill or that my own brain was rewired in this way. (Banishment of guilt!!!!)
The challenge of brand building in this environment must be enormous. It is probably more relevant today than at any time in the past when one appreciates how difficult it is to build a long lasting brand in this "noisy" environment and just how quickly it can evaporate.
Think about it... ponder the question. Can loyalty actually exist in today's Social Media?
Comments please at your convenience. And don't worry - I wont shout at you nor attempt a virtual Hook Up!
Cheers
10 June 2009
BA AA IB - last chance? Maybe, Maybe Not...
The guns are drawn the submissions are in and the old protagonists are lined up ready for the great shoot out at the Heathrow Coral.
Could this be the last chance for the BAAABI alliance to get its long sought anti-trust alliance approval?
In my humble opinion - there is no certainty one way or the other.
So lets do a quick review.
BA+IB. This has gone nowhere lately due to the GFC and the impact on the premium business market especially LHR-NYC. IB is feeling the pain but perhaps to a lesser extent that BA how is publicly wearing its hair shirt with Willie Walsh being surprisingly open about the extent of the impact on the former UK Flag Carrier. With the pound's fall against the Euro the value proposition would be hard to make in pure financial terms. Therefore I believe that this part of the deal is dead for now.
The Star and DL/AF alliances have powered ahead and built a considerable legal and commercial framework for Transatlantic service. While the product doesn't match the commercial model yet - and it will take some time to do so - these make a compelling case for equal consideration for BA and AA.
Virgin's unaligned status is perhaps the biggest fly in the ointment for the proposed tie up. Sir Richard is vociferous in his opposition. He knows full well that should the alliance be approved then his position as an independent will become almost if not actually untenable.
On the regulatory front - the Regulators have bowed to airline pressure and suspended some key anti-competitive measures such as the use it or lose it rule at major EU airports.
So will it happen?
My personal opinion is that judging from recent approvals under the current incumbent of the EC's Transportation Czar that their will be tacit approval. However not so fast. The EC has launched investigations into the LH dominance while at the same time approving LH's acquisition of BD. There is no rush on anyone's part at the moment. The sea of red ink - with IATA screaming BASTA - will likely be $9 billion this year. There really is no urgency to get this done. The impatience of BA and AA even if Transportation gives them approval will have to wait for significant anti competitive investigation that frankly could take years.
Like I said at the beginning - this has yet to run its course and while another battle with the old gunslingers shooting at each other doesn't mean the end is in sight.
I think we can rest easy in our beds knowing that there will not be any major casualties and even if someone does get wounded - they are going to get up and fight another day. Wyatt Arpy and Doc Walsh are not going to be the heroes, not today anyway.
Cheers
08 June 2009
WIT Program Focuses on Startups
I have always had a soft spot for start ups. In my career I have probably reviewed hundreds of business plans and heard innumerable pitches of good ideas and frankly some real corkers.
For WIT in Singapore October 20-23 entrepreneurs will be given the chance to pitch to some of the most experienced people in the field and a crack at a 50,000 dollar grant. For full details go here:
http://www.webintravel.com/index.php/newsroom/39-news/492-wit-start-up-pitch-in-full-swing.html
The process starting now will lead up to a chance to pitch in front of a live audience during WIT's 5th anniversary session.
May the best idea win!
Cheers
For WIT in Singapore October 20-23 entrepreneurs will be given the chance to pitch to some of the most experienced people in the field and a crack at a 50,000 dollar grant. For full details go here:
http://www.webintravel.com/index.php/newsroom/39-news/492-wit-start-up-pitch-in-full-swing.html
The process starting now will lead up to a chance to pitch in front of a live audience during WIT's 5th anniversary session.
May the best idea win!
Cheers
The Professor Returns
Dear Readers
I hope you will forgive my silence over the last 3 weeks. I took some urgent time due to the passing of my mother who made it to the grand old age of 98.
I hope to return to regular posting in the coming days.
Thanks for your understanding and all the notes of condolences.
Cheers
I hope you will forgive my silence over the last 3 weeks. I took some urgent time due to the passing of my mother who made it to the grand old age of 98.
I hope to return to regular posting in the coming days.
Thanks for your understanding and all the notes of condolences.
Cheers
15 May 2009
Brits Want It Warm - But Where?
Those nice people at Skyscanner have been happy to share their search data with us.
Here are the list of risers:
Going Up – the biggest rising summer holiday destinations for Brits
1. Bangkok, Thailand (+271%)
2. Los Angeles, USA (+170%)
3. Porto, Portugal (+163%)
4. Dalaman, Turkey (+160%)
5. Orlando, USA (+158%)
6. Istanbul, Turkey (+157%)
7. Sharm El Sheik, Egypt (+156%)
8. Bodrum, Turkey (+153%)
9. Burgas, Bulgaria (+152%)
10. Oslo, Norway (+143%)
And the Biggest Losers?
Going Down – biggest falls in interest of summer holiday destinations for Brits
1. Prague, Czech Republic (-15%)
2. Cork, Republic of Ireland (-13%)
3. Paphos, Cyprus (-11%)
4. Geneva, Switzerland (-6.5%)
5. Palma, Spain (-6%)
6. Pisa, Italy (-5.5%)
7. Nice, France (-5%)
8. Bordeaux, France (-4.5%)
9. Menorca, Spain (-4%)
10. Venice, Italy (-3%)
Biggest rises and losses in flight searches on Skyscanner.net for summer 09 (May 1st-Aug 30th) compared to summer 08. Flights from UK airports.
Interesting - draw your own conclusion. For more details go to www.skyscanner.net
Cheers
Here are the list of risers:
Going Up – the biggest rising summer holiday destinations for Brits
1. Bangkok, Thailand (+271%)
2. Los Angeles, USA (+170%)
3. Porto, Portugal (+163%)
4. Dalaman, Turkey (+160%)
5. Orlando, USA (+158%)
6. Istanbul, Turkey (+157%)
7. Sharm El Sheik, Egypt (+156%)
8. Bodrum, Turkey (+153%)
9. Burgas, Bulgaria (+152%)
10. Oslo, Norway (+143%)
And the Biggest Losers?
Going Down – biggest falls in interest of summer holiday destinations for Brits
1. Prague, Czech Republic (-15%)
2. Cork, Republic of Ireland (-13%)
3. Paphos, Cyprus (-11%)
4. Geneva, Switzerland (-6.5%)
5. Palma, Spain (-6%)
6. Pisa, Italy (-5.5%)
7. Nice, France (-5%)
8. Bordeaux, France (-4.5%)
9. Menorca, Spain (-4%)
10. Venice, Italy (-3%)
Biggest rises and losses in flight searches on Skyscanner.net for summer 09 (May 1st-Aug 30th) compared to summer 08. Flights from UK airports.
Interesting - draw your own conclusion. For more details go to www.skyscanner.net
Cheers
Indaba-2009 - More of the Same
The Professor was not able to go to Indaba in Durban ZA this year... I do hope to next!
So how was it? From a distribution and general sentiment point of view - the optimist in me would say quiet.
The Professor's local spy noted that it was much quieter and wetter than last year, crowds were well down. The opening night beach party was postponed for an hour, but the rain was coming down so hard that not many people went anyway. They do need to think about this in future.
Travelport had a breakfast function and announced nothing (again).
Announcements of a new deal between Travelport and SAA have been imminent for some time but don't hold your breath.
Cheers - there is always next year
So how was it? From a distribution and general sentiment point of view - the optimist in me would say quiet.
The Professor's local spy noted that it was much quieter and wetter than last year, crowds were well down. The opening night beach party was postponed for an hour, but the rain was coming down so hard that not many people went anyway. They do need to think about this in future.
Travelport had a breakfast function and announced nothing (again).
Announcements of a new deal between Travelport and SAA have been imminent for some time but don't hold your breath.
Cheers - there is always next year
US ARC numbers - Getting Better?
Pre-Swine/Pig/Mexican/H1N1 Flu numbers have just been published for Jan-April 2009 for US agency sales.
They may show a little bit of hope - however the possibility has been dashed with the early returns for May as reported by Travelport that show transactions dropping yet again.
Sorry chaps... lets hope for a recovery in June.
Cheers
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