Easyjet Shows Boost in Yields But .........From Where?

Easyjet has made a lot of play lately that it is making more money from its GDS revenue. However the recent numbers dont show this.

Indeed an examination of their numbers show that total revenue actually only just rose. Given the troublesome year - this is still quite an achievement.

Total revenue per seat (£) 47.50 45.57 4.2%
Passenger revenue per seat (£) 37.60 36.90 1.9%
Ancillary revenue per seat (£)
Including checked bag charge 9.90 8.68 14.0%
Total revenue per passenger (£) 55.38 54.66 1.3%

So the real driver comes again from the ancillary revenue bucket. With baggage fees definitely helping along.

Ryanair's numbers (in dollar value) are not quite as good but still very healthy.

So there is still a lot of room for growth.

One observation is that clearly the model of being able to get ancillary revenue at the point of sale is going to be a driver for all airlines

Cheers

Europe Shows Its Incompetency Again

The battle royal that is raging at EADS and its troubled military program is sadly yet another example of how Europe has shown itself to be inept in Airframe manufacturing.

The current battle has EADS saying that its A400M customers are responsible for the additional payments required to bring the project under control. He had some uncharacteristically unkind words to describe the political quango that runs the program.

One only has to look at recent years for programs that were viable yet bit the dust.
Fokker
BAe/Avro
Saab

At present Airbus is looking a lot shakier than it did this time last year. It has at least 3 programs that are under threat. The A380 is undergoing yet another rationalization in order to get its Jumbo on track. No one is buying the A340. The A400M is 3 years late. The A350 is facing a cash shortfall.

By now you would think that Europe had got it right... not so.

Oh well - when will they ever learn....

Ryanair Takes Aim At Its Favourite Target Dublin Airport (Again)

Ryanair and its ebullient boss Michael O'Leary - is at it again.

In response to the sharp raising of fees (as high as 40%) approved by the Irish Government for DAA - Dublin Airport Authority, he is cutting back the number of aircraft from 18 to 15 that will be based in the Irish Capital. As a result 150 jobs will go from FR and perhaps up to 10 times that in support jobs outside of FR.

With the collapse last year of Budget Travel the picking will be leaner for Irish low cost bargain hunters. The national airline too has been quietly cutting capacity including slashing its base at London Gatwick. This doesn't make as much sense now that Easyjet is the largest airline at LGW and a much fiercer competitor that others who are there.

As for the Terminal Two - many feel that it was a foolhardy move and quietly applaud MOL's opposition to the new facility. Whether or not it actually opens remains something of a quandary for the government agency. More cuts means even less reason to open it. Clearly DUB is operating at a much lower operating limit that was envisaged by the rather optimistic planners at DAA.

Cheers

A New New Pegasus Team Takes Shape

After another round of cuts at the Dallas based Hotel Switch provider at the end of 2009, new appointees have appeared to lead the company into the next phase.

In total 5 new hire and elevations have taken place.

Pegasus Solutions has promoted Ric Leutwyler to Chief Operating Officer as part of a senior management restructure who expands his current Marketing portfolio to include include COO with responsibility for strategic planning and continuous process improvement. Mark Peacock, who has joined as chief information officer, from Achstone Consulting. Aaron Shepherd moves to the cushy title of Pegasus Fellow, with a focus on the strategic evolution of Pegasus’s next generation CRS.

Three other senior managers have also been appointed. Steve Lapekas becomes Executive VP of corporate business development, Connie Rheams SVP of strategic sales, and finally Mike Montemurro joins as VP of CRS product management.

This is a much slimmer organization than one that existed just two years ago.

Best of luck to the team in Dallas.

Cheers

Security: Live It! Be It!

So yesterday Jan 20th I happened to be at Munich Airport on my way to Berlin.

I had a ticket on LH and then stepped out of the check in process only to walk right into the mess. If you want to understand what happened go here.

So let's deal with two aspects of what happened in Munich yesterday.

1. Is how to provide customer information
2. The response to bad behavior.

In the first area - Munich Airport and Lufthansa lead tenant for Terminal 2 did a lousy job of communicating the issue. They clearly had no clue what to do - down to the inability to use the PA system to deliver pertinent (and useful) information to the people in the halls. Instead individual employees dribbled information to the assembled crowds (at one point probably around two thousand people) verbally using normal speaking voices.

In the second area they acted correctly. Shutting down the whole terminal and clearing it out was the right action. It doesn't matter whose fault it was or how the person managed to breech the security cordon - the fact is that this person did and the correct response was to shut down the terminal no matter what the cost.

However what this shows is that there is not enough empowerment at the security gates for security guards to actually handle security. This same charge can be leveled against Newark Airport in the incident over New Year. That says to me that after all this time - some authorities still have a poor impression of what their role is in security.

Finally the spin machine was completely out of line...

In an official statement - it just shows either the police were out to lunch or trying too much to put spin on it. Either way this is not acceptable and here is the quote:

The impression of officials was that "the passenger likely was in a bit of a hurry, grabbed his luggage and headed off," federal police spokesman Albert Poerschke said.

I rest my case.

I will say again. We ALL have a role in security. We all have to be constantly vigilant. Security is not something that other people do.

Cheers

UK Based Apartments Abroad Goes Belly Up - Market Too Crowded or Too Soft?

UK accommodation specialist Apartments Abroad has gone into voluntary liquidation today.

This sad situation should give pause to thought that the somewhat rosy picture that has been painted about the homes rental market may not be quite so wonderful after all.

With the very high valuation price placed on such online sites as Home and Away - some investors will be getting a little nervous that the space is a little crowded.

The UK market managed in the main to survive the downturn with two notable bankruptcies XL Airways in 2008 and FlyGlobespan in 2009 - both linked to the credit card clearer eClear itself now wound up after it couldn't produce the cash it was allegedly holding for clients who had paid for trips on these two airlines.

So clearly the market needs to be looking carefully at some of the risk factors associated with Travel based businesses.

Cheers

Tom Klein Takes President's Post At Sabre Holdings

Tom Klein a long time Sabre staffer has been elevated to the position of Sabre Holdings President.

This is an indication that more could be in store for him.

With Amadeus recently firming up its succession plans as part of the process for IPO - this leaves and even Travelport's recent elevation of Gordon Wilson - the die should be cast for the IPO gang of three to go to market.

It would seem logical that Amadeus is going to appear on the Madrid exchange, Travelport now slated for the London market so Sabre will likely go to the US exchange. Which one will it be - tech heavy Nasdaq or the tony exchange on Wall Street?

Congrats to Tom.

Cheers

JAL: Gloves vs. Honey from OneWorld

So having tried to sweeten the pot to (by some reports) nearly $2Billion, the OneWorld group are now resorting to some subtle and not so subtle threats if JAL moves to rival alliance Skyteam.

According to Aviator.Aero:

American Airlines warns alliance partner Japan Airlines JAL of lengthy and messy fight if it switches allegiance to Delta Air Lines.

Ouch

Cheers

Are The GDSs Buying Business?

I have been doing a straw poll among some of our clients and friends to see what their segment incentive fees are from the GDSs. A disclaimer here is that this is from a non-representative sample of agencies. However I don't think they are atypical. The sample size was from a mixture of major and non-major travel markets worldwide. The reason for doing the poll was because an associate quoted a number of one of his clients to me that I thought was somewhat high. Boy was I wrong.

Without disclosing confidential details I can assure you of two things.

1. The Segment Incentive Fees are rising - markets across the globe report this.
2. The Airlines are supposedly signing deals that should either cap the segment fees or eliminate them altogether.

I was shocked to hear that in the last quarter in many markets the segment fees quoted by our clients and friends exceeded an average of $3 per segment. These companies are not all mega agencies or OTAs and these numbers were not isolated examples they were average numbers. In several cases in 3 markets the amounts quoted by these people as being paid were $4 and above. I had to speak to more than one agency to make sure it was not a clear single aberration for "strategic" reasons.

If one follows that the average GDS fee collected from the airline (using publicly available data from Travelport as the base) of $6 (rough average), then something is not right.

So one can conclude that with the sudden rise in these incentive fees can be tied into either a war between the GDSs or some other reason like making the numbers look good prior to an IPO. Further one can conclude that to pay for these increased segment fees that the GDSs are either becoming more efficient in extracting cost from their businesses or they have found ways to increase revenue - my analysis of the Travelport data would indicate that the benefits of the integration have now been fully washed out. So I have to conclude that there is a strong possibility of the legacy GDSs buying business. (As an aside - my friends at Travelport get unhappy when I use data from their financials. So I want to be clear the reason I am using Travelport's numbers is that they are the only comprehensive public information sources that are out there).

All this in a year that saw significant declines in transactions.

I am sure that writing this piece is like poking a hornets nest. But in my travels around - I find it hard to comprehend why this raising of the incentive fees is occurring at a time when it should be decreasing. Indeed perhaps the core question to be asked "Is this sustainable?"

This is welcome news for agencies who have come to depend on the GDS segment fee as a critical part of their revenue mix. However it probably wont be so welcomed by agencies who are not getting these numbers or the airlines who ultimately have to pay the freight.

Am I missing something here or is something rotten in the State of Denmark? Is this an series of unnatural acts? Someone will have to pay the piper (I love mixed metaphors). Let's just hope the Singapore Government and other institutional investors who are looking at the coming IPOs do their sums right and due diligence.

Cheers - I think I had better look under my car tonight when I drive home....

ARC Drafting Error To Affect Number Of US Agents

While the actual extent of the "drafting error" has yet to be fully determined, initial reports indicate it could be a large number.

Hopefully the number of instances will be small but it has upset the agency community.

The actual error was not clear at time of writing. ARC has admitted the issue and will reimburse agents for ARC based charges.

Cheers

Tomorrow (19th) Will Be The New Dawn For JAL

JAL's new business plan and structure will be announced tomorrow.

Stay tuned

Is Clickfraud Getting Smarter

I have often thought that click fraud is one of the rather insidious sides of the web. Over time people have come to accept it rather than address it in a comprehensive manner. Why? Because the biggest player(s) actually benefit from it.

So let's look at the latest version that is going the rounds. The hidden spam bot.

For a detailed view of this rather nasty behavior go and read Professor Ben Edelman's blog. It is a very detailed explanation of the issue. I cannot independently verify it because I am not an expert in this area but it seems credible to me.

At this point I think the more people that know about this stuff the better.

Clearly Google needs to step up its game and work harder. It also needs to be a lot more transparent to the whole community about its efforts. I recognize that this may not be what everybody wants but in the end the web is about transparency.

Couple of points. If you want to know a company who (it is alleged) are some of the perpetrators of this particular type of bad behavior then according to Ben's blog it is a company called Trafficsolar.

There are two side bits to this. McAfee and several other spyware/malware companies have given Trafficsolar a good bill of health. Ben Edelman has previously been associated with Microsoft.

All that aside I think it is very important that websters should have an appreciation of the nature of this new form of clickfraud.

Cheers

JAL To Ditch 747 Fleet and 1/3 Work Force

In the restructuring plan - JAL plans to drop it gas guzzlers and focus on a much smaller fleet. Dropping 37 (current numbers) of the 4 engine planes. At one stage JAL operated the world's largest 747 fleet.

As noted I believe they will also drop the A300s left over from JAS but that has not yet been confirmed

They now have a noted leader in Dr. Kazuo Inamori. He founded Kyocera, DDI (now KDDI) His website also lists his founding of numerous other enterprises, and he established the Inamori Foundation and created the Kyoto Prize, a prestigious international award. He also serves as president of Seiwajyuku, a business leadership association dedicated to nurturing business owners and entrepreneurs. This website introduces Kazuo Inamori and his wide range of ongoing activities.

He is well known both inside Japan and outside.

He now has the task of restructuring the national icon. He will carry the necessary support of the Government and of course his prestige will be very important in order to effect the level of changes necessary.

Things are looking good for the program - however the battle for the international partnership remains an undecided element. With the old CEO Haruka Nishimatsu gracefully bowing out the deal will be re-evaluated.

The OneWorld alliance has sweetened the pot now valued at up to $2billion and at last Qantas and CX have joined AA and BA. However the numbers do not look good for OneWorld. The benefits of a DL/Skyteam alliance far outweigh in traffic terms the value of the OneWorlders in my opinion.

With the contentious issue of the pensions out the way and the banks in line - the way is now paved for a smooth court arranged administration trip through bankruptcy.

So down to the wire, but it is looking much healthier for a leaner JAL. Will it be smarter? Let's see and hope it happens.

Cheers

The Annual Professor Sabena Promise and Disclaimer

I was reading Siew Hoon's Blog and it jogged my memory (as well as other recent events) that I should remind the readership about the conditions of use of the blog and certain other - well smart things.

Firstly this is a blog. It is a place for opinion and reporting. I try when ever possible to the best of my ability to make it clear which is opinion and which is fact. Usage of the blog is for personal information and intellectual stimulation only. Your use of the site and reading the blog is on the STRICT understanding that you read this for your own purposes.

So here are the disclaimers and promises I make:

1. I promise to do the best I can to provide information and comment that is valuable
2. I promise to report facts and where possible to provide access to the source material if it is publicly available
3. I promise not to attack people personally.
4. If I point out something that I think is stupid - I reserve the right to highlight this behaviour.
5. I will act ethically in the grand old tradition of newspapers - however I am not a trained journalist (as you can tell by my terrible grammar and atrocious spelling. I also apologize in advance for my puerile punctuation).
6. I will publish all comments provided they are not overtly commercial, are relevant and also adhere to the same standards herein.
7. I promise to respond to most private emails - please address them to professorsabena@gmail.com.
8. I provide a limited use onward license with prior express permission required from me.
9. I promise to try to keep you amused. Hopefully to keep stimulating you to think.
10. I promise to celebrate the great business of Travel.

What do you promise?

1. Not to sue me this is a condition of use of this blog
2. Acknowledge the blog if you republish and give credit
3. Note to be abusive to other readers
4. Comment when you feel strongly about something
5. THINK!


Thanks for reading and have a nice day.

The Professor Sabena Security Solution

Oh Best Beloved

I have decided to give the world the benefit of my wisdom on the subject of security. This is a tiresome subject and we need to bite the bullet and provide a solution that cannot be beaten.

I have commented on body scanners. However I recently had a briefing on the cost of these things. Man they are not cheap. For a medical scanner which has a fully loaded and then some cost attached to it the commercial cost of a scan is $600-$3000. Let's say its a cool grand a pop. So we can safely assume that the body scan is AT LEAST the commercial cost (this is the Government after all. And further that there are about 750 million US travellers. So that means the cost to provide scanning is 750 Billion per year. (Remember this is for scanning alone).

So I have a better idea. Lets all travel naked. Let's face it we all undress in front of each other every day when we travel. I think this has distinct advantages.

1. No further need for those embarassing pat downs - that should reduce the number of TSA employees by about 50%.
2. Further as there will no longer need for a sex offender check for TSA employees it will reduce the cost of certifying each TSA employee by a significant amount. True the current certification process might still let through other offender types but this is a cost saving.
3. There will be a significant saving in latex gloves which is both cheaper and better for the environment.
3. We can simply the scanners required.
4. Only cavity searches as a secondary search criteria will be require. Since more will be possible - the cost per cavity per search will also fall.
5. The airlines will be required to provide hygienic seats which will improve the quality of air travel.
6. Being naked will reduce the inhibitions between passengers who will now be able to talk freely between each other which will reduce the need for expensive In Flight Entertainment systems (IFE) which in turn will reduce reduce payload weight(along with the nearly one ton of clothing each plane carries each trip) thus saving the planet and reducing our dependence on foreign oil
7. Flight attendants will be happy because they dont have to worry about keeping passengers in line.

So I think you can see the Professors idea is a really good one. So if you like it - its my idea alone. If you hate it then its not really my idea but that of the American Association for Nude Recreation for whom this post is a public service. With special thanks to the Dutch Blog And Then Some For the opportunity to bring this to your attention.


Thank you for your attention.

Growth Not Just Shoots - But What Level?

ARC has just published its December numbers allowing us to get a view of the full 2009 picture. There are a number of interesting trends that can be deduced from looking at the numbers.

Go the website and check out the numbers for yourself (what you think I work for free!!!).

Here are some trends that I would like to draw your attention to:

1. Intermediary traffic actually increased from the middle of the year. The clear trend turn occurred in about July when we saw the numbers finally bottom out.

2. Yields are also showing positive. In fact all ARC numbers were up in December. (Year on Year). Admittedly from a low base. Percentage wise it was the strongest December in a very long time.

3. My spies report that January in some markets has come out swinging. New budgets on the corporate side and a general improvement in outlook is resulting in positive activity on both sides of the Atlantic and its pretty broad. Asia remains a little less steady though.

Finally the upturn has FINALLY spread to the shipping market. Transpac spot rates on surface shipping rose by 10% in one week this month.

While for most people who read this blog this may not seem to be important - just remember that Shipping leads air freight and air freight leads passenger numbers.

IATA (those kill joys) are saying that the recovery will be slow. I believe that they are right. However they are toning down their most recent projects to lower numbers than any one would like. One thing is for sure - surplus capacity will not likely to be used as a tool in this recovery.

(Allegiant and Ryanair exempted!!!)

Cheers

JAL Stock Almost Worthless, BA Steps Up Noise

BA is offering benefits to JAL valued at between $164-240 Million - surprisingly roughly what the DL arrangement will deliver. However examination of the deal shows that it contains something that JAL doesn't really want. Not that BA has a lot of cash to dole out anyway given its pension deficit.

For example slots at LHR. Especially since JAL canceled one of its flights to LHR in 2009 to save money - so it already has a daily slot available!!!

Still the offers are getting tempting. With the cash deal now gone, OneWorld partners are scrambling to secure the ailing (see stock charts!!!) carrier. However noticeably quiet in all of the conversations has been Cathay Pacific. Actually the Hong Kong based carrier stands to gain if JAL exits the alliance.

So the battle continues. But I stand by my prediction that DL will win bar some last minute squeaking. And there does seem to be a lot of it...

Cheers

Changing of Old Guard at Amadeus c. 2011.

David Jones has signaled his (second attempt) at retiring.

He has set 2011 as the date for him to leave Amadeus and ride off into the sunset at the end of a long and some might say illustrious career.

He will be replaced by the current deputy CEO Luis Maroto who will become the 4th 1A CEO and in keeping with tradition adds another nationality to the list of CEOs. (Dierter Farber was German, Jose Tazon a citizen of Mexico and David is clearly British!)

An anointed one from the Night of the Long Knives when the team of King and Marshall re-crafted British Airways as a modern carrier - he has held a number of senior positions inside the Travel Industry.

Maroto has been with Amadeus for more than 10 years joining as Director of Marketing Finance. He came to the Madrid based GDS from Bertelsmann. He was promoted to CFO in 2003 and last year when David replaced Jose Tazon he was elevated to the Deputy slot. He holds a degree in Law from the Complutense University, Madrid, an MBA from the IESE Business School/University of Navarra and further postgraduate qualifications from HBS and Stanford.

Jones of course has much to do before he heads out. There is the small matter of the IPO. This time it looks like the timing is right. The Stock Markets are looking favorably on this type of business. HOWEVER the storm clouds on the horizon are not insignificant. There are challenges aplenty for the cash cow GDS business and the other lines of business are not achieving their financial goals. Clearly the appointment of Maroto will be focused on cleaning up the balance sheet and putting a little lipstick on in prep for the next trip to the public markets due this year. The early decision of Jones's retirement is a clear signal to the financial community.


Best wishes to both of them

Cheers

Its All Over Bar The Shouting

So the die is cast for JAL. The rather less than public wringing of hands by their CEO has not stopped the inevitable filing which is now expected in days for an organized Bankruptcy for the venerable Japanese carrier.

The likely impact.

Parking of the A300s and likely some of the 747s will happen in my opinion. Whether the MD80/90s survive will be debatable. Frequencies will be paired initially on some key routes. Look for Japan Europe to get a significant ax. Non-Tokyo international Services will also see an ax. Cargo will take yet another hit. Other candidates include the 767-200s.

The pairing of the staff numbers will likely cause a strong reaction among the staff but an acceptance of the issues will emerge pretty quickly. The latest numbers being discussed is approx 16,000 or one third of the current work force. Look for swinging cuts in the HQ areas. The current CEO will likely step down with a formal turnaround artist brought in - possibly a non-Japanese.

The new Alliance will likely follow pretty quickly especially now the cash issue is off the table - Delta and Skyteam look like a shoe in now.

JAL is going to great lengths to brief their corporate customers to keep them happy. Until the uncertainty is resolved any contention will be a cause for booking away from JAL - we could see plating away from the direct 131 code in the near term.

Cheers

In Case You Missed - US Opinion on Scanners

So which do you prefer - the pat down or the body scanner?

The overwhelming percentage of people according to a USA Today/Gallup poll believe that a Body Scanner is appropriate. When asked for the preference between Body Scanners and Pat Downs - there is again no contest.

To read the paper's story go here. I urge you to read the comments - they are coming fast and furious.

The poll was based on people who have flown at least 2x in last year.

So perhaps we can now put this debate to bed and concentrate on fixing what is clearly broken.

The Republicans are likely to hold up candidate TSA Administrator Souther. So the Obama Administration needs to get another candidate and press for resolution of the leadership of the front line of security defense. Security is not a political football. We need leadership and decisions now to improve the security that in my view is systemically broken in the USA.

Last week in my first trip of the year - I watched the spot check pat down by the TSA at a gate. I was not singled out but others were. Frankly the issue of profiling by race alone cannot work but other forms of profiling can and should be deployed. And yes - people should be subject to a clothing search if there is the potential for such an act.

Pat downs alone are not adequate clearly!

Yours in fear..............