Feds To Crackdown On Airline Cheats.

Scott McCartney of the WSJ's Middle Seat column did a great piece this week on the Government finally tracking down on Airlines who fail to adequately compensate passengers for service failures.

Many airlines think that the rules do not apply to them. Customer service (now there is an oxymoron) departments of airlines are actively engaged in campaigns of disinformation on the subject.

I believe that this may be an effort by the Obama Administration to forestall legislation on a passenger bill of rights. At least to get them to smarten up the act of the airlines.

Delta - I hope you read the article because I am still mad at you for

A) Failing to get me to my destination as contracted (not to mention the screwed up alleged recovery)
B) Failing to recognize that you screwed up 3 times in one O&D
C) For being downright insulting in the responses to my perfectly valid requests for legal compensation.

Cheers

Behavioural Targeting - Good or Bad?

I think many of us believe we are being tracked in one way or another on our web activity. Is this a good thing or a bad thing? How are attitudes differing in the USA vs the Rest of the World.

Privacy laws vary dramatically from country to country. The ability to track behavior either for commercial, social or government reasons has been radically enhanced over the past 20 years via the explosion of web tools and services.

We have had a number of studies pointed at us at how effective Behavioural Targeting (BT) is. Personally (living in the USA but traveling frequently across countries - spending a lot of time in Europe) I find that attitudes to this are pretty polarized. In countries with strong privacy laws (e.g. EU stalwarts like Germany) the attitude is negative. In the USA its pretty laissez faire.

Finally some independent studies are beginning to appear.

eMarketer has just put together a little piece which is based on an independent study (when are studies not independent!!!).

It appears that actually many Americans don't like it. Frankly I don't like it and I really think that its bad enough being spammed with a lot of stuff but I find BT somewhat creepy.

I was chatting to an Australian friend of mine this week and he explained how annoying he felt getting "targeted" emails which then when he wants to use them he is told - US residents only.

So this is the other part - BT that is sloppy and the spill goes out to completely non-possible respondents.

So BT should indeed be more careful. You cant have it both ways - IE deliver BT tightly to a group and then not check basic things like their email addresses or any other items that would clearly identify them as "foreigners".

But at the end of the day - I think that BT is here to stay. I just hope the metrics and the use thereof are better than the somewhat poor implementations today. This is definitely a version 1.0 product category.

Cheers

Shock Horror - WN Loses Money - AGAIN!

Using the opportunity to have another bad quarter along with everyone else - WN lost $16 million. Itself an improvement on the $120 million loss from last year's numbers.

It is interesting to note that WN has become more and more like a legacy carrier and less and less like a LCC carrier. Perhaps its profitability is tracking that behavior.

Hmmm that's an interesting thought

Cheers

Air New Zealand's IT "Melt Down" vs Ryanair's "Planned Outage"

Air New Zealand is one of those airlines that has had its fair share of ups and downs. Nearly brought down by the Ansett Failure and a disastrous set of relationships, the carrier in recent years has operated shall we say a more realistic business model.

On Sunday (October 11th) an airline's worst operations nightmare was realized. Their IT systems crashed - specifically check-in went down. Interestingly it happened on the quietest day of the week in a relatively light weekend. The total number of passengers impacted was estimated at 10,000. The outage did not meet the threshold of compensation as the actual outage was less than the mandatory period. So in reality it was not such a huge deal.

The next day the staff of NZ were treated to a blistering memo from CEO Rob Fife. Here is one link from Computerworld which was probably the most prosaic of all the commentaries.

Now this was interesting in two ways and this is the point of my post here.

The press over Ryanair's planned outage during its cutover from OpenSkies to NewSkies was quite moderate in comparison. And the system was actually down for days not a few hours with operational impact that lasted for several weeks after. Even more recently there have been issues reported at Stansted with check-in systems going down. Remember FR is now 100% web or kiosk check in. Ryanair typically moves more than a million passengers per week.

So the setting of expectations and managing the message becomes quite clear. However perhaps more important it illustrates the love hate relationship that Airlines have with IT.

A final point is a demonstration of why I think Ryanair is actually actually behind the scenes a model for a lot of other airlines. The fact that the airline (FR) can revert to running essentially on paper is nothing short of miraculous. The fact that today they are one of the top 5 airlines for branded passenger operations shows that perhaps there is a lot of stuff that other airlines have that is really useless.

Now that is what I call food for thought.

Cheers

Mesa and Mokulele Kiss and Make Up- Competition to Suffer

The giant battle for second place in the Hawaiian intra-island market took a remarkable turn yesterday with the two challengers agreeing to back off and cooperate.

From here on in - Republic - the controlling shareholder of Mokulele will bring its 3 E170s back to the mainland and instead it will become 25% owner of the local lift of the JV.

The two apparently will mix and match routes. Republic, for example, will pull three E-170s it had allocated to Mokulele back to the US mainland to be operated by one of a number of carriers the company owns. Go! will take over the routes that Mokulele operated with those aircraft.

As with all deals - this one is probably an unnatural act. The real winner here is going to stay Hawaiian Airlines the 80% dominant carrier. And of course the big loser (drum roll please) - the consumer.

Cheers

Airlines: Are You Conflicted?

According to the Sabre Airline Study - you just very well might be.

Sabre has released a study In the study highlights there are a number of key findings. I will pick out the ones I think are relevant and while cherry picking is the name of the game here - I think it is important to recognize that while airlines think they know what they are doing - there is an underlying trend that shows they are conflicted. So what do you want - Revenue or Brand Value?

According to the study it is "customer loyalty and retention efforts that are viewed by an overwhelming majority of survey respondents (86 percent) as having the most positive impact on their business."

The study goes on to note the conflict the airlines face: "The importance of developing customer loyalty is part of the unwieldy crisis airlines face today as charging additional fees is viewed by them as one of the top tactics to increase revenues."

Overall customer satisfaction with airlines was down this year, at at time when the fewer passengers on planes should have improved the service. The recent passenger imprisonment examples can't have done a lot for their overall image. But if you look at the recent annual Power's survey, Airline customer satisfaction has fallen to its lowest level in four years.

The decline in satisfaction in this year's survey largely was driven by unfavorable customer perceptions on in-flight services, flight crew and costs and fees, according to the survey of nearly 13,000 passengers who flew on a North American airline between April 2008 and May 2009. Both leisure and business traveler respondents reported overall declines in customer service.In its annual survey, JDP measures customer satisfaction in seven categories: cost and fees, flight crew, inflight services, aircraft, boarding/deplaning/baggage, and check-in and reservations. It awarded Alaska Airlines its highest US airline ranking.

"Unfortunately, any improvements in customer satisfaction are being offset by passenger displeasure with cutbacks on inflight services, increases in fees and issues with the helpfulness and courtesy of flight crews" said Dale Haines, senior director of JDP's travel practice.

Going back to the Sabre study, according to 58 percent of those (airlines) surveyed, merchandising and ancillary revenue will help airlines’ bottom line results. Baggage fees, travel insurance, and vacation packaging were rated among the highest in the survey to generate revenue.

And herein lies the conundrum. Revenue or Brand Value.

The Professor thinks that there is a clear case for the "Brandless" brand such as the LCCs leader Ryanair. Michael O'Leary and his crew don't give a toffee for brand. For them the issue of revenue and thence profit is paramount. For legacy airlines in survival mode - as the Head of IATA constantly reminds us - one would have thought that was also the case. But the legacy airlines tend to revert to type. For example one would have thought that it was a little weird that Qantas in the middle of a recession and in the middle of one of their heaviest periods of losses in recent memory - would be running a very expensive strategic branding campaign.

So let's count the ways the airlines are undermining their brand value:

- Confusing fees
- Unbundling the product IE charging for things that were previously included
- Debasing the currency by "selling" differentiators that the high value frequent flyers have paid for with their loyalty
- Moving ancillaries to the point of departure and not making them available at the point of sale
- Selling frequent flyer miles for cash

I could go on but you get the point. The numbers don't lie. Airlines are surviving because of ancillary revenue not because of the long term brand value.

Other interesting Sabre survey findings:

o Increasing revenue and reducing costs is among the most significant challenges in managing airline profits over the next 18 months, according to 67 percent of those surveyed

o Managing revenues (44 percent) and distribution mix (12 percent) are the top two tactics survey respondents plan to use to increase revenues. Ancillary revenues followed closely behind with 11 percent of those surveyed planning to employ this tactic.

It is the last one that I find most perplexing. Given the sponsorship by Sabre of the study - one would expect it to be brought out. However if the legacy airlines REALLY don't regard distribution as important - then they are missing both the opportunity in lowering costs and increasing revenue by doing the one thing they seem to be failing to do... IE leveraging the value of their relationship with the majority of their distribution namely agents. The obvious way to solve that conundrum is through the deployment of new technology and breaking the Gordian knot of the GDS cost model. But then I guess Sabre is none too keen to bring out that point.

Still there is food for thought here. Are the airlines mortgaging their future value for revenue today? Does that future value of the brand actually matter? Perhaps more to the point are the airlines going to have to finally admit that they really are not in control of their brand. Social Media seems to have done a number on several airline brands - both good and bad?

Ah this is good stuff

Enjoy

Cheers

JAL Pulls Back. Sees Salvation At Home

JAL seems to have gone cold on its need for external support and has slowed the discussions with the OneWorld and the Skyteam opposing teams.

After a certain dance between itself and the new government, it seems that one of them blinked and while the new Japanese government is not promising to fork over large amounts of cash - it does seem that the local financial markets will once again shore up the ailing carrier's balance sheet and cash position, at least for the short term. With the US carriers having taken advantage of the easing credit markets to improve their current positions, the pressure for JAL to do the same thing is becoming acute.

JAL has clearly listened and is starting to cut into the fat. It is pairing routes and frequencies. As the one of the largest 747-400 operators - it can clearly save a lot of money by parking some of those and replacing them with large twins. But the biggest issues remain that the culture within the airline remains a critical obstacle to change and the speed of change.

For that only a new focused management team can actually make the changes necessary for the long term survival of this legacy monolith.

Cheers

Boeing to Scrap first three 787 prototypes

Part of the grand plan with the 787 program was that the development aircraft would be refurbished and put out into the passenger fleet.

It seems that Boeing has had to scrap that idea and indeed it has a $2.5 Billion (in a non cash charge) to write off the first 3 test examples which are not possible to be returned to the pax fleet. Boeing describes the situation that these aircraft are not commercially marketable due to "extensive modification work".

Let's hope that these aircraft don't end up on the scrap heap like these fellows here. I am sure that the Museum of Flight and the Smithsonian Museum will want them

Big US Airlines complete round of refinancing – Airlines Financial Health Improving

With UA restructuring by borrowing $659 million to refinance debt; the US airlines have now completed a round of debt refinancing.
So far we have seen all the US majors (with the exception of WN whose balance sheet is quite healthy thank you). This doesn’t mean that the effort is over. Far from it.

US, UA, CO, DL, AA have all managed to engage in some financial re-engineering over the past 4 months. This is good because it means going into the “bad” winter season - the carriers have bolstered their cash positions and will now emerge next year reasonably healthy. It also shows that the credit markets are indeed loosening up. So the US airlines are now a reasonable bet for the coming months. I think we will see a period of stock declines until the first shoots of spring start to pick up. However – I think we will see only good news on lift numbers. Yield of course will remain depressed.

With the US carriers now with a cleaner financial bill of health – what about the other airlines. BA is in need of some financial help. Irish carrier Aer Lingus is still a basket case. JAL we know is sick. The other airline to watch is Scandinavian. They are struggling. Camping outside Star partner LH is not necessarily the right answer but seems to be the only conventional outcome. Among the other airlines – we see that Malaysian is “accelerating” its restructuring program. There are several other airlines that are in similar situations.

One thing is for certain – the airlines will emerge in 2010 much leaner. Anyone who doesn’t will find themselves somewhat challenged in fighting the competition.

Cheers

Amadeus to German Agents: Free Money!

At the FVW Kongress in Cologne last month, Amadeus offered a hint in a speech that they would be reconsidering the issue of the 4.90 Euros fee that Lufthansa has been leveraging for segments booked on Amadeus for the PFP program.

A quick recap. Last year LH introduced the Private Fares Program which essentially raised all fares 15 Euros each way if the fares were booked without a contract. With a special contract between LH and the agency - the agents could get the lower negotiated rate provided it was booked via a channel that LH designated. Travelport and Sabre signed up for the program and therefore there is no charge for agents from LH for PNRs booked via these GDSs on the PFP fares. The largest GDS in Germany is Amadeus. For the first 6 months or so they picked up the 4.90 fee until they realized how much it would cost them to do so. This "pick up the tab" program ended at the start of February this year. Thus agents who book a PFP fare now pay 4.90 per segment for every ticket issued via Amadeus. Interestingly it is collected via an agent debit memo!

Fast forward to yesterday Amadeus has announced that it will again pick up the tab for the fee - well now its only SOME of the fee. They are offering to pay 3.40 Euros for the LH PFP segments. Leaving just 1.50 to still be funded by the agent.

Battle lines drawn again - clearly there must have been an impact in the German market for Amadeus by defections to the airline direct, to other GDSs and to third party technology solutions such as offered by AER Ticket (the largest consolidator) via the LUTE platform.

One has to ask why? and why now?

The offer by Amadeus states that it will be effective from January 1 2010 for the whole year or until Amadeus and its part owner Lufthansa come to some agreement. This could be very expensive for Amadeus even at the lower fee. So free money for the agents.

Interestingly one has to ask if Lufthansa has become successful at this why don't other airlines propose to do the same? Indeed is this a model for airlines outside of the German market? AF/KL have already tried this with Travelport earlier in 2009 which brought a new level of agreement between the two. So it seems that airlines have found a tool with which to leverage a different contract arrangement between the players.

With the GDSs unbundling their services and appearing (if one can judge from the Travelport financials) to be able to increase their yields from the airlines, it seems only natural that the airlines need to push back. This might be the answer. I leave you all to work out the mathematics on this one.

In our discussions with agencies on the current status of the market for GDS products, my team and I have noticed a trend that (according to multiple agents) in different markets the GDSs are not in fact cutting back the incentives but offering even more in some cases greater incentives than before.

There will be tears....someone is bound not to be happy.

Cheers

Nokia Buys Dopplr - Finally Mobile Gets Travel?

The leading mobile players are the handset guys and the networks.

Up till now they have disdained the travel market plumbing for the sexier applications such as music. However I have always believed that the real deployment of smart handsets would occur when the applications moved into being more generic.

Although there was a link between Dopplr and Nokia before (shall we just say it was family), the move is a smart one for Nokia. They are now staking a claim in the concept that the handset really is a PID - Personal Information Device. This makes the device a serious contender for the user's favorite service. Up till now Blackberry has been leading in this space with the delivery of most applications via the BB service.

The stunning success of Apple and the iphone has changed the paradigm. The vast number of user based applications is great but after a while you are bewildered with the array of choice and the support of these applications makes big demands on the user. Great and fun for now in a social context - but perhaps not so interesting in the "useful" category. I realize that I will be slammed by the faithful for this statement - but bear with me a little. I have watched a lot of iPhone users (from the original to the latest 2 versions) and you can see how the lack of some functionality hurts and the frustration of having too many different apps becomes counter productive. In essence the line "there is an application for that" is now replaced with "how the heck do I manage all that".

The silence of the network providers is stunning in all of this. The profitability of the mobile environment even after forking out all that money for 3G licenses remains almost obscene. However the network providers who have tried so desperately to avoid becoming just a pipe as the internet was for fixed line operators are not necessarily winning the war for the hearts and minds of the user. We are seeing higher churn rates in different countries where the networks have matured. I believe that the applications like Dopplr need to be offered by the networks and that the networks need to be far more involved in the PID services than they have in the past.

So SOME of Mobile gets Travel. When will Mobile really get Travel? I am hoping that it will be sooner rather than later.

So How Much Was/Is BMI Worth?

About 4 and half LHR slots.

Today LH announced buying the remaining 20% of BD for $38 million. That is less than a slot pair price at LHR. Thus the total value of the airline is - well about - 4 and a half LHR slots.

Last time I checked BD is the #2 carrier at LHR.

It also bought BMED for 30 million pounds. With at least 11 slots at LHR. So you do the maths....

Cheers

Timothy

New Numbers from US TIA and UK CAA – Still Not Good

While I think there is a return to optimism (from the downright pessimism) all is not yet right. We are not back to a state of growth if we will ever be back to that same level that existed in say 2007.

The latest data from TIA and the UK's CAA for the month of July shows the 9th consecutive fall of expenditure. Remember that this was the month when traffic started to pick up. With the pound strengthening against the dollar (as the latter falls yet again) we should see some positive signs soon. Given the lag time – we may see traffic uptick in September compared to 9/08 when confidence took a dive.

The positive side is that on time performance has improved.

Yields will continue to be depressed for quite some time. 2010 will be a year of stability. As I predicted at the end of 2008 – we should see some positive signs in September – just based on the drop in the prior year. Bu the emergence from the recession will not be even. The US may emerge faster than say UK. Asia Pacific is still pretty much in the doldrums. LCCs are fairing a LOT better than their networked bretheren.


Let’s hope that things start to improve soon.

Cheers

BFF vs FFF

So I am fascinated by the way that the social networks have dominated much of our thinking and indeed how pervasive they are. Yesterday I attended a family event in France with a large amount of my relatives there were 4 generations represented. It was quite a show.

However the biggest topic of conversation was how we could all continue to maintain our relationships given that we were highly disparate. The family is now spread from Sydney to Seattle and all points in between. Most of us are now connected via Facebook so we will continue to expand that link.

Now it struck me that these are real family and BFFs – we grew up together. A lot of shared experiences. Good or bad they are real.

At the same time – I have become increasingly aware of a new class of person - I call them FFFs or Faux Friend Followers. These are the people who try to link to you and also follow you on Twitter. These are people who actually benefit from being your “friend” and in your “network”. I admit that I have probably linked to people in the past in order to enhance the value of my own network. But I have lately tried to be judicious about this. I am trying to personally ask with a personalized message rather than … link to me….

So I am going to be pretty hard about FFFs. For my personal relationships – I will maintain a tight control. For a public persona – perhaps I wont be quite so picky and choosy. But just because we are linked doesn’t make us BFFs.

So what about your relationships? Is this the same for you?

I might use this as my next poll topic

Cheers

The Professor's Alter Ego Now On TNOOZ

OK so occasionally I will expose my real self (no this is not the naked bike ride). However I am honoured to be part of a new community of contributors in TNOOZ started by Kevin May - he of Travolution fame.

I highly recommend the site because you will get a good group of minds focused on the area we all know and love.

Passion will definitely be there. Analysis - yes. Dissent? Guaranteed.

Just the sort of thing you want to make sense of the fluff, the noise, the laughter and the joy - not to mention the BS and sniffware.

Cheers

Best Cartoon Found This Week

I love the New Yorker. I get so rarely to read it - perhaps I should subscribe.

However this year my family gave me the New Yorker Cartoon one a day calendar. September second's entry can be viewed from the New Yorker website

It really does reflect what I am....

Enjoy it

Cheers

787 - I will be watching VERY carefully which plane I fly

So let's assume that the 787 program will now go smoothly - as we have seen that's a big - very big - assumption. But humour me here for a moment.

Reading FlightBlogger's post on the production schedule it confirms the beliefs that I have harboured for some time.

1. The prototype will be pretty far from the production standard.
2. The early models will have gone through several modifications.

The first one is to be expected.

However the process of modifying the early production aircraft is somewhat drastic. As there are a lot of unknowns in the design and process of Boeing's new integrated supply chain this represents a sea change of activity ranging from the material (composite vs metal) to the production process (disparate vs all in the same place). As Boeing has frequently admitted this was not their finest hour and they still have to get the supply chain monster under control.

I realize that all aircraft are somewhat wonders of integration that get them into the air in the first place. However the element that causes me so much concern is that from the gitgo the process was designed to lead to a high volume production rate with little thought (in my opinion) to the process of incorporating changes. If you want an example of how spectacularly that could fail look no further than the now defunct Eclipse Aviation.

Bottom line for me - I will be avoiding flying on ANA and other early adopters of the 787. I shall be watching for aircraft tail numbers tied into MSN numbers before boarding a 787 commercially. However I wish everyone success in this project. Just let me not be the guinea pig.

Cheers

BIABLT and Innovation

One of the Professor's favorite sayings are:

Because Its Always Been Like That. BIABLT. This week Gerry McGovern picks up on the theme to explain about challenging the status quo.

So what does BIABLT signify? It signifies the reasons why some rather illogical and very often times unnecessary processes, procedures etc exist. it should also be a catalyst to challenge this status quo and find innovative ways around the issue or problem.

Gerry's examples are a bit lame - it is a series of metaphors on Ovens and Pigs - but his point should be well taken. In these days of GFC and challenged budgets, we have to be innovative more than we have ever been. it means that we cannot sit on our hands. It also means that we should NEVER ASSUME anything.

One of my father's favorite expressions was "Opposite of the Obvious". Now that is a lesson we can all learn

Cheers

CAPA and IAG's Airline Dummy's Guide To Social Media

Almost but not quite but a very good (and thorough) piece on Twitter and Blogging with focus as a how to get ahead on Twitter as an airline.

Entitled The Airline Industry and Social Media - A Review & Analysis it is available from CAPA or IAG. Mention The Professor - via a chat link and you will get a 10% discount from IAG. (Because I am a nice person). You can purchase it here. it was prepared as a joint venture from IAG, CAPA and the Travelstrategist.com. (NOTE the Professor does not profit from this discount).

This report is explained in pretty simple and (for a Dummy like me) straightforward.

I recommend this report to any airline considering taking the plunge into the Digital Dysfunctional world.

One caveat. Do it quickly. This information and the background info will age fast. However for now it is a great tool for some guidance. The dos and don'ts are points to be taken by anyone - airline dummy or not.

Cheers

The GFC 101 - Listen Here...

Probably like many people who think they are smart - we really don't understand what created the meltdown we now call the Global Financial Crisis.

This is the suspicion that there was a lot of bad things going on - but exactly what is hard to comprehend.

Well step in NPR (US Public Radio Network) and Ira Glass - This American Life. Episode 390

For a very neat and easy to understand synopsis that really brings home what happened. This is a great piece.

Highly recommended by the Professor.