On any typical morning at Luton the airport bustles with people rushing for flights. However the contrast with say 10 years ago or more is startling. It is the dress of the passengers.
What used to be an almost exclusively for Leisure market with loads of families and couples off to sun destinations now sees a very different crowd. The business person is now more than likely to be that group who occupies the security lines. (Not the check in lines as everyone has previously checked in if they are biz people).
Easyjet deserves a lot of the credit for this. Taking the low cost model to business markets is driving the differentiation between them and Ryanair. It is also driving greater revenue per passenger - but also greater costs. Easyjet is now deploying technology to improve the quality of the checkin process. In a story carried by ABTN, an Easyjet Spokesman commented: "We are evaluating the technology as to how it can speed up the check in process."
"It allows our staff to have more contact with passengers, providing a faster and more informative service.
"We will never get rid of check-in desks like some other airlines have done in the past," he said.
CapGemini in a recent piece on its concept of Mobile Service Partners combining to deliver services to the consumer via any mobile devices estimates that by the year 2030 almost all travel customers will use some sort of mobile Information and Communication (I&C) device to handle their travel arrangements, independent of the larger computing devices such as PCs and laptops. The formal line between the customer and the supplier provider will blur making some of these services less necessary.
Who knows maybe Ryanair will be right in the end. But for now - in the customer service stakes - Easyjet seems to have the ascendancy. So more and more of those Easyjetters will be biz folks.
07 March 2010
04 March 2010
BA Tries New Cost Measures
A great piece in the Beat this week on BA's new compensation program in the USA indicates a different tack by BA in its way to try and reform its business.
Having essentially rolled over on the issue of GDS fees - it is going after - let's call them softer targets. There is a lot of fodder in the battle with the Flight Attendants - who probably have lost the hearts and minds of the consumers. BA in my opinion now has the ascendancy in that battle. So now it is going after a revised compensation plan against the agency community. This time the US TMCs.
Given the importance of the business market to BA's bottom line (particularly after the disastrous 2009) this might be a risky strategy. Given the spring shoots now appearing in the USA - it would seem unwise to stifle the growth and upset this group of people. But perhaps it feels emboldened by the pending BAAAIB alliance approval and the resulting synergies - particularly in the business market to the UK. Given the relatively small footprint by Star on the UK - US market and the paucity of Skyteam flights (just 2 767s a day between LHR and JFK) perhaps they can throw their weight around.
However I do hope someone from the DoT is paying attention. The reduction/absence of competition on the Transatlantic run does seem to allow behavior like this.
This is my opinion and take it for what its worth
Cheers
Having essentially rolled over on the issue of GDS fees - it is going after - let's call them softer targets. There is a lot of fodder in the battle with the Flight Attendants - who probably have lost the hearts and minds of the consumers. BA in my opinion now has the ascendancy in that battle. So now it is going after a revised compensation plan against the agency community. This time the US TMCs.
Given the importance of the business market to BA's bottom line (particularly after the disastrous 2009) this might be a risky strategy. Given the spring shoots now appearing in the USA - it would seem unwise to stifle the growth and upset this group of people. But perhaps it feels emboldened by the pending BAAAIB alliance approval and the resulting synergies - particularly in the business market to the UK. Given the relatively small footprint by Star on the UK - US market and the paucity of Skyteam flights (just 2 767s a day between LHR and JFK) perhaps they can throw their weight around.
However I do hope someone from the DoT is paying attention. The reduction/absence of competition on the Transatlantic run does seem to allow behavior like this.
This is my opinion and take it for what its worth
Cheers
Jetstar Follows Ryanair Model - Attacks Airports
Jetstar which is the low cost airline of the Qantas Group (heck it even says so now on some of its planes like the A330s) has taken a leaf out of the Ryanair playbook in picking on airports.
After its very public spat with Darwin last year - it has now picked on a smaller airport - Rockhampton. Pulling out its big PR guns - the airline is now pulling flights and denouncing the airport pretty much as the devil incarnate.
What is rather funny in all this - as soon as it announced the decision to pull back on the Brisbane to Rockhampton route - its flights were immediately replaced by Tiger Oz. Oh yes and by QantasLink...
Go figure
Cheers
After its very public spat with Darwin last year - it has now picked on a smaller airport - Rockhampton. Pulling out its big PR guns - the airline is now pulling flights and denouncing the airport pretty much as the devil incarnate.
What is rather funny in all this - as soon as it announced the decision to pull back on the Brisbane to Rockhampton route - its flights were immediately replaced by Tiger Oz. Oh yes and by QantasLink...
Go figure
Cheers
IATA finally acknowledges LCC market
Acknowledging that that there is actually a low cost airline model - IATA has (begrudgingly) started to include LCC statistics in its reporting. Don't believe me? I quote directly from IATA's stats:
"As IATA member airlines carry 93% of international traffic measured by RPKs, this change does not make a large difference in the statistics" IATA Jan 2009 Report. I think I bed to differ. The LCC model has a profound effect on airline statistics.
Interestingly IATA seems to only capture those pure LCC airlines. They so far admit that there is only 7% of total traffic being LCC. And this is where there is a pretty fundamental failure of the IATA statistical model. It measures that notional value RPK (RPMs). IE Revenue Passenger Miles. If for no other reason than everyone else uses passengers as a measure of total traffic it is high time that IATA woke up and started publishing some real data on passenger numbers.
IATA claims that LCC traffic is only "7%" of total traffic. Given that the vast majority of LCC passengers are short haul and only a smattering of long haul traffic this is starting to distort the figures. Let me illustrate this.
The total traffic worldwide (using ACI data) is estimated at 4.5 billion passengers these are actual landings and take offs. This number tends to be inflated as it includes and counts each passenger twice. One take off and one landing. So in my opinion there are actually around 2.2 billion actual worldwide passengers. (PSJs - for Passenger Segment Journeys). If we look at just one group - the ELFAA - European Low Fares Airlines Association which comprises: Vueling | easyJet | flybe | Jet2.com | Norwegian | Ryanair | Sky Europe | Sterling | Sverige Flyg | transavia.com | Wizz Air
They carried 162 million pax last year. And this is not all (but it is most) EU carriers. If we were to add back in MENA, Africa, Asia Pac, USA and Latam carriers the numbers would swell by at least double. (WN alone is now more than 100 million pax). So you can see the share of market pax worldwide by true LCCs is higher than the 7% shown using the RPK model.
Interestingly if we look at an apple to orange comparison - according to IATA's numbers total traffic (in RPKs) was down nearly 11% for Europe in 2009. But for ELFAA airlines (passengers flown) it was up 8.7%. Interestingly IATA claims that the impact of LCCs mitigated the annual fall in traffic by one full percentage point. IE LCC growth saved the world from a full percentage drop of 1 %.
For the long term - you have to make the assumption there is a move towards hybrid value carriers - where airlines move away from pure legacy full network service carriers and pure LCC models to hybrids of all types. An apple to apple comparison of say United Airlines revenue models looks remarkably similar to say Easyjet these days.
Now I am sure that some people may pick at my numbers but - the analysis is sound I believe.
Cheers
"As IATA member airlines carry 93% of international traffic measured by RPKs, this change does not make a large difference in the statistics" IATA Jan 2009 Report. I think I bed to differ. The LCC model has a profound effect on airline statistics.
Interestingly IATA seems to only capture those pure LCC airlines. They so far admit that there is only 7% of total traffic being LCC. And this is where there is a pretty fundamental failure of the IATA statistical model. It measures that notional value RPK (RPMs). IE Revenue Passenger Miles. If for no other reason than everyone else uses passengers as a measure of total traffic it is high time that IATA woke up and started publishing some real data on passenger numbers.
IATA claims that LCC traffic is only "7%" of total traffic. Given that the vast majority of LCC passengers are short haul and only a smattering of long haul traffic this is starting to distort the figures. Let me illustrate this.
The total traffic worldwide (using ACI data) is estimated at 4.5 billion passengers these are actual landings and take offs. This number tends to be inflated as it includes and counts each passenger twice. One take off and one landing. So in my opinion there are actually around 2.2 billion actual worldwide passengers. (PSJs - for Passenger Segment Journeys). If we look at just one group - the ELFAA - European Low Fares Airlines Association which comprises: Vueling | easyJet | flybe | Jet2.com | Norwegian | Ryanair | Sky Europe | Sterling | Sverige Flyg | transavia.com | Wizz Air
They carried 162 million pax last year. And this is not all (but it is most) EU carriers. If we were to add back in MENA, Africa, Asia Pac, USA and Latam carriers the numbers would swell by at least double. (WN alone is now more than 100 million pax). So you can see the share of market pax worldwide by true LCCs is higher than the 7% shown using the RPK model.
Interestingly if we look at an apple to orange comparison - according to IATA's numbers total traffic (in RPKs) was down nearly 11% for Europe in 2009. But for ELFAA airlines (passengers flown) it was up 8.7%. Interestingly IATA claims that the impact of LCCs mitigated the annual fall in traffic by one full percentage point. IE LCC growth saved the world from a full percentage drop of 1 %.
For the long term - you have to make the assumption there is a move towards hybrid value carriers - where airlines move away from pure legacy full network service carriers and pure LCC models to hybrids of all types. An apple to apple comparison of say United Airlines revenue models looks remarkably similar to say Easyjet these days.
Now I am sure that some people may pick at my numbers but - the analysis is sound I believe.
Cheers
03 March 2010
Boomers Need Glasses and....
Interesting study out of eMarketer on Smartphone and Mobile Internet usage by Boomers.
Now as I am a (relatively young) boomer despite the pipe and the tweed jacket, I can attest to the real issue which is our fingers are not quite that adept at using the touch screen and we need glasses to read those damn small screens.
Frankly I think there is another influence at work. We are really tired of having to adopt new technology and also its shaky performance. And here hangs a tale that should get all tech bods sitting up and paying attention.
We are now so assailed by "new" functions and capabilities - we have adopted a culture where function exceeds form. We really do need a reset and get back some of the form that is more comfortable to us older types. Just because something is cool and new - doesn't mean we should take it.
I am by no means a Luddite but I do find it tiresome having to learn SO MANY NEW interfaces to applications and devices. I really wish that someone one give me tools that are LESS explicit and more automatic. AND were reliable and trustworthy.
In this research I read that I am not alone. Indeed because of what I do in my day job I have to learn new things every day. (I am told that should keep Alzheimers away!) So I use a lot of new devices and tools and learn new interfaces almost daily. And here is a secret - I have a good crew of people who can help me to learn them and remember the stupid ass codes that my old feeble mind forgets.
So here is an appeal to those hoping to get me excited about a new device. THINK first. Think of my usability issues. Try and find ways to simplify my life rather than adding complexity to it.
On behalf of the Woodstock generation - I thank you.
Peace Man..............
Now as I am a (relatively young) boomer despite the pipe and the tweed jacket, I can attest to the real issue which is our fingers are not quite that adept at using the touch screen and we need glasses to read those damn small screens.
Frankly I think there is another influence at work. We are really tired of having to adopt new technology and also its shaky performance. And here hangs a tale that should get all tech bods sitting up and paying attention.
We are now so assailed by "new" functions and capabilities - we have adopted a culture where function exceeds form. We really do need a reset and get back some of the form that is more comfortable to us older types. Just because something is cool and new - doesn't mean we should take it.
I am by no means a Luddite but I do find it tiresome having to learn SO MANY NEW interfaces to applications and devices. I really wish that someone one give me tools that are LESS explicit and more automatic. AND were reliable and trustworthy.
In this research I read that I am not alone. Indeed because of what I do in my day job I have to learn new things every day. (I am told that should keep Alzheimers away!) So I use a lot of new devices and tools and learn new interfaces almost daily. And here is a secret - I have a good crew of people who can help me to learn them and remember the stupid ass codes that my old feeble mind forgets.
So here is an appeal to those hoping to get me excited about a new device. THINK first. Think of my usability issues. Try and find ways to simplify my life rather than adding complexity to it.
On behalf of the Woodstock generation - I thank you.
Peace Man..............
The Long March Back to 3 Class Seating
Tim Hughes wrote an interesting piece not so long ago on the death and rebirth of first class.
It seems he is spot on. The latest carrier to offer premium economy (with a touch of leg room extra) is CO. Their announcement further aligns them with their new best friend UA.
It does seem to be that the first class is going to die a slow death. A relic of a bygone era. Rather like Concorde.
Still I can say I have flown a couple of times in a decent first class. Its a really great experience. Did I enjoy paying the 4X price for the short duration of the trip? No!
And neither does anyone else. (with few exceptions and you know who you are).
Cheers
It seems he is spot on. The latest carrier to offer premium economy (with a touch of leg room extra) is CO. Their announcement further aligns them with their new best friend UA.
It does seem to be that the first class is going to die a slow death. A relic of a bygone era. Rather like Concorde.
Still I can say I have flown a couple of times in a decent first class. Its a really great experience. Did I enjoy paying the 4X price for the short duration of the trip? No!
And neither does anyone else. (with few exceptions and you know who you are).
Cheers
01 March 2010
Is The Asia Crisis Over Yet?
Good news emanating from Asia this week.
Singapore is usually a pretty stable proxy for the whole region. It is typically imune from the fluctuations that can be dramatic in some of the other markets like Bali or Hong Kong.
After a dramatic drop off in visitors and time spent that began in the latter half of 2008 and reached its lowest point in the first quarter 2009, the market has slowly inch by inch crawled back. In January 2010 - the market occupancy rose above that of a year earlier. While not fully back to the same level of occupancy enjoyed before - the Singapore Government must be happy with the results. Correspondingly SQ must also be happy to see the back of 2009.
While yields are not fully restored yet - we are seeing rises there too.
This is good news all round
Cheers
Singapore is usually a pretty stable proxy for the whole region. It is typically imune from the fluctuations that can be dramatic in some of the other markets like Bali or Hong Kong.
After a dramatic drop off in visitors and time spent that began in the latter half of 2008 and reached its lowest point in the first quarter 2009, the market has slowly inch by inch crawled back. In January 2010 - the market occupancy rose above that of a year earlier. While not fully back to the same level of occupancy enjoyed before - the Singapore Government must be happy with the results. Correspondingly SQ must also be happy to see the back of 2009.
While yields are not fully restored yet - we are seeing rises there too.
This is good news all round
Cheers
28 February 2010
Farewell Cruisematch 2000
I note with a twinge of sadness the passing of Cruisematch 2000. In its time it was revolutionary. Founded in the early 1980s by Pete Arnette (Forgive me if I spelt his name wrong) who started this after leaving Pan Am where he was the Air Sea guy.
Originally a multi-cruiseline engine it was purchased and absorbed into RCCL and became the external reservations system.
Originally an IBM System/38 it went through several iterations.
However effective April 2010 it will lose its Green Screen capability and emerge phoenix like in a next generation mode with much more capability.
Cheers
Originally a multi-cruiseline engine it was purchased and absorbed into RCCL and became the external reservations system.
Originally an IBM System/38 it went through several iterations.
However effective April 2010 it will lose its Green Screen capability and emerge phoenix like in a next generation mode with much more capability.
Cheers
OneWorld, A New Force?
OneWorld has come back from the brink of extinction that so nearly doomed its existence. Now aggression has returned to the team.
So having retained JAL - the team has plugged a hole in their environment by signing Kingfisher as the Indian airline. This leaves as a foregone conclusion that Jet Airways will now partner with Skyteam or risk being left out in the cold. In turn this means that there will be a falling into the ranks by many of the unaligned carriers.
The likely independents are the stalwart holdouts - Emirates and Virgin.
So what's next - I think we will see a fair degree of activity with the Alliances over the next 12 months. With Transpacific and Transatlantic alliances being formed and BA/QF immunity on the Kangaroo route seeing renewal last year - there will be some added complications emerging but things should settle down into a regular pattern. Ultimately I believe that Alliances will reduce the competition. I remain hopeful that independent players will pick up the slack.
Cheers
So having retained JAL - the team has plugged a hole in their environment by signing Kingfisher as the Indian airline. This leaves as a foregone conclusion that Jet Airways will now partner with Skyteam or risk being left out in the cold. In turn this means that there will be a falling into the ranks by many of the unaligned carriers.
The likely independents are the stalwart holdouts - Emirates and Virgin.
So what's next - I think we will see a fair degree of activity with the Alliances over the next 12 months. With Transpacific and Transatlantic alliances being formed and BA/QF immunity on the Kangaroo route seeing renewal last year - there will be some added complications emerging but things should settle down into a regular pattern. Ultimately I believe that Alliances will reduce the competition. I remain hopeful that independent players will pick up the slack.
Cheers
Your Are Not Wrong - The US Airline Industry Is Slimmer
I have been pondering doing a post on the subject of the decline in the airline employment in the USA.
No need ETN did it for me....
So click the link and read the impact.
Since the peak of 2000 employment has fallen by 170,000 or about 25%. That is a lot of people who were directly employed by the US airlines. However while this number should send shivers down the spine of every union rep - there are some places where there are some bright spots.
Outsourcing has risen. So there are a lot more staffers who work for external corporations. But who has hired more than any other entity in the US Transportation System?
Why the TSA of course. They have a federally mandated employment of 43,000 screeners. That translates into about about 7-8K of additional support staff. Yet the staff turnover is still very high.
So if you have been outsourced. Get yourself insourced and go and work for the TSA?
Cheers
No need ETN did it for me....
So click the link and read the impact.
Since the peak of 2000 employment has fallen by 170,000 or about 25%. That is a lot of people who were directly employed by the US airlines. However while this number should send shivers down the spine of every union rep - there are some places where there are some bright spots.
Outsourcing has risen. So there are a lot more staffers who work for external corporations. But who has hired more than any other entity in the US Transportation System?
Why the TSA of course. They have a federally mandated employment of 43,000 screeners. That translates into about about 7-8K of additional support staff. Yet the staff turnover is still very high.
So if you have been outsourced. Get yourself insourced and go and work for the TSA?
Cheers
When Code Share Falls Apart
I had an interesting time this weekend trying to get home. But while there is a story here about the value of persistence - I am really trying to look at the way the alliance between Delta and Air France/KLM should work.
I made a big mistake - failed to book the right day on my flight. OK - it happens. Accepting my fate - i got up at the crack of very early and took my car to the airport in London. (If you want a good tip - DON'T even THINK about trying to use the tube/underground on the weekends in London). But I digress...
So lets start with the process of checking in. I have a DL code share flight number and a DL ticket. So I get the usual email - time to check in. I click on the link. Eventually DL's website sends me to KLM UK. Air France who will operate the flight doesn't want to check me in. I input the data (after calling AF to get the code share correct AF PNR RLOC) nope doesn't work. But it does then send me BACK to Delta with a link... and the process starts all over again. (BTW I copied each web page to prove my point).
I called AF back - no you cannot check in - go to the airport early!
I get to LHR (they said 3 hours before the flight but I was one of the first at 1 hour before departure). I use the automated check in but check with the AF/KL sales rep to see if the frequent flyer number made it into the record. (It doesnt print on the AF Boarding pass nor does it give my status - the Frequent Flyer's nightmare - lack of recognition!) Her comment - I hate these code shares - it confuses us and not to mention the passengers. So I make it through security and board the flight. (Imagine the following is spoken in a very heavy French accent). "Ladies and Gentlemen - Air France regrets to tell you that there is a slight delay of 2 hours due to bad weather in Paris." OK so that means I will miss my connection in CDG for Seattle. So your intrepid traveller heads up the aisle to speak to the purser.
"Absolutement NON! If you want to leave the aircraft then I am sorry but you will have to pay for a new ticket. It will be very expensive. And besides - all flights in CDG are delayed by the same amount." I can assure you - there is no need.
Back to my seat - I pull out my laptop and log onto the network (thank god for 3G dongles... I can surf on the aircraft). So i now have better information than the agent. So yes there are seats available. Back up the aisle to speak to the purser and the agent...
But saith the Professor... "I have a Delta ticket".
"Then it is up to you..."
So I grab my carry on and head up with aisle. I speak to the gate agent (Cobalt) Well I guess. But you are on your own.
I deboard the aircraft - am officially offloaded. So now I have to go all the way through the airport to the Skyteam checkin terminal transfer desk in T4. Its about a mile walk from Gate 25 to there.
Same story (now on its third retelling) "No you can't do that!" ....But I have a Delta ticket....
"Oh yes then you can!"
The Cobalt agent works hard and gets me on the right flight. I end up getting home. And as for the flight from CDG to SEA? AF306 was canceled! I would have been stranded in Paris along with a heck of a lot of other folks.
I think that there is a lot of integration to do. The way Skyteam works is frankly very poor. Star Alliance has had a lot more time to get this right. Their UA+LH interconnection works a lot better.
What is clear - AF's legendary (and not good) customer service is still no better than it ever was. AF is misleading customers with their bad advice. The Cobalt team at LHR really did pull out the stops to get me fixed. I am indebted to them for solving the problem for me.
However - without insisting on the changes to my flight - I would not be back in the good ol' USA.
Moral of the story - avoid booking on AF if you can. Your DL Elite card is worthless to the AF staff. A DL ticket seems to work a lot better. Oh yes and they have a LOT of work yet to do to integrate their operations.
So much for seamless service! Check out this ad in LHR Terminal 4.
Cheers
I made a big mistake - failed to book the right day on my flight. OK - it happens. Accepting my fate - i got up at the crack of very early and took my car to the airport in London. (If you want a good tip - DON'T even THINK about trying to use the tube/underground on the weekends in London). But I digress...
So lets start with the process of checking in. I have a DL code share flight number and a DL ticket. So I get the usual email - time to check in. I click on the link. Eventually DL's website sends me to KLM UK. Air France who will operate the flight doesn't want to check me in. I input the data (after calling AF to get the code share correct AF PNR RLOC) nope doesn't work. But it does then send me BACK to Delta with a link... and the process starts all over again. (BTW I copied each web page to prove my point).
I called AF back - no you cannot check in - go to the airport early!
I get to LHR (they said 3 hours before the flight but I was one of the first at 1 hour before departure). I use the automated check in but check with the AF/KL sales rep to see if the frequent flyer number made it into the record. (It doesnt print on the AF Boarding pass nor does it give my status - the Frequent Flyer's nightmare - lack of recognition!) Her comment - I hate these code shares - it confuses us and not to mention the passengers. So I make it through security and board the flight. (Imagine the following is spoken in a very heavy French accent). "Ladies and Gentlemen - Air France regrets to tell you that there is a slight delay of 2 hours due to bad weather in Paris." OK so that means I will miss my connection in CDG for Seattle. So your intrepid traveller heads up the aisle to speak to the purser.
"Absolutement NON! If you want to leave the aircraft then I am sorry but you will have to pay for a new ticket. It will be very expensive. And besides - all flights in CDG are delayed by the same amount." I can assure you - there is no need.
Back to my seat - I pull out my laptop and log onto the network (thank god for 3G dongles... I can surf on the aircraft). So i now have better information than the agent. So yes there are seats available. Back up the aisle to speak to the purser and the agent...
But saith the Professor... "I have a Delta ticket".
"Then it is up to you..."
So I grab my carry on and head up with aisle. I speak to the gate agent (Cobalt) Well I guess. But you are on your own.
I deboard the aircraft - am officially offloaded. So now I have to go all the way through the airport to the Skyteam checkin terminal transfer desk in T4. Its about a mile walk from Gate 25 to there.
Same story (now on its third retelling) "No you can't do that!" ....But I have a Delta ticket....
"Oh yes then you can!"
The Cobalt agent works hard and gets me on the right flight. I end up getting home. And as for the flight from CDG to SEA? AF306 was canceled! I would have been stranded in Paris along with a heck of a lot of other folks.
I think that there is a lot of integration to do. The way Skyteam works is frankly very poor. Star Alliance has had a lot more time to get this right. Their UA+LH interconnection works a lot better.
What is clear - AF's legendary (and not good) customer service is still no better than it ever was. AF is misleading customers with their bad advice. The Cobalt team at LHR really did pull out the stops to get me fixed. I am indebted to them for solving the problem for me.
However - without insisting on the changes to my flight - I would not be back in the good ol' USA.
Moral of the story - avoid booking on AF if you can. Your DL Elite card is worthless to the AF staff. A DL ticket seems to work a lot better. Oh yes and they have a LOT of work yet to do to integrate their operations.
So much for seamless service! Check out this ad in LHR Terminal 4.
Cheers
21 February 2010
The Great GDS Unbundling - Not Pretty.
Taking a leaf out of their customers' book - the GDS have started to slowly but surely unbundle their pricing. The old one size fits everything model is clearly on the way out.
So let's get the reasons out the way first as to why they are doing this - and why now?
It is simple. The standard GDS model is broken. I realize this may be a shocking revelation to many people - both inside and outside the Travel Distribution arena, but sometimes you have to call it like it is. It is broken because the amount of money (revenue) coming into the GDS via the traditional segment fee model is not sufficient to support the outgoings (especially in Travel Agent Incentives). Further - the legacy GDS companies have a significant technology investment expenditure facing them to significantly change their systems from being EDIFACT based to being XML based. The change in architecture is not just skin deep - it will require radical changes in core architecture to finally kill off the legacy nature of their business.
From the customer side the standard legacy network carrier model is also broken. The vastly better commercial proposition of the LCC airline model has resulted in the emergency of the Hybrid Value Carrier model that I have been writing about for more than 3 years. Legacy carriers going unbundled and LCCs going mainstream
However the biggest issue is not the technology, rather it is the commercial model. For this reason - the conflicts in the various different pricing schemes have finally brought the old legacy segment fee model to its knees.
So is this the Professor just ranting or is there some evidence to support this?
Ehem... plenty!
Two recent articles in The Beat confirm this. Amadeus has formally announced its unbundling. Commenting on this - Amadeus VP Ian Wheeler said:
"Airlines can choose to buy or choose not to buy those, giving more transparency and flexibility in the contract compared with the participating carrier agreement. It's an unbundling of our previously packaged offer. The more complex, scheduled carriers tend to take more of the options."
Amadeus has several models out there already. It has classified its carriers into Pure Altea hosted - pure GDS only and then a host of hybrid options. For example Virgin Blue Navitaire hosted airlines pay Amadeus a fee for routing their GDS traffic through the Amadeus Community Link. Paradoxically the low cost carriers are many times paying higher distribution fees than the traditional carriers.
For quite some time now Travelport has been offering a number of different connection options. Begining in 2008 they aggressively targeted the LCCs by offering almost "free" distribution via their desktop system Go! This was expanded recently to include Galileo offerings. The next generation application agent workstation system - Universal Desktop - will continue this offering. Given their recent IPO failure - they will be under a lot of pressure to boost their revenues and make things look better for the inevitable repeat. Since they have to a large extent (like the other GDSs) mortgaged their future with this low cost GDS deals and high inventive agent arrangements. The ONLY outcome is a difference.
Not to be outdone, in another article in The Beat Sabre is also offering unbundled services. Stung by the loss of their anchor customer American Airlines and the announcement that AA will sunset EDIFACT as the preferred protocol for external distribution communication - The Texas based GDS has announced its first XML connected airline. Easyjet. Commencing April Sabre will launch its new FlexConnect (Not to be confused with the common nomenclature of Farelogix - FLX), service and interestingly it will not be the cheapest of connections.
But the unbundling doesn't stop there. Sabre is currently offering developers its wonderful new contract. And for a mere $1 per booking in support fees - it will allow connection to the Sabre system. This has been met with somewhat of a less than enthusiastic response by the developer community.
Finally the line between Airline IT and GDS which used to be pretty finite has now become blurred. For Amadeus the ascendant player in Airline IT - they are now leveraging lower GDS fees if the airline pumps more GDS based transactions and signs up for the full Altea suite. Thus perpetuating the effective economic DIS-incentive for airlines to move their distribution to direct. In the early days of the web, Amadeus hosted (both pure and System User) airlines actually had to pay MORE money for direct distribution than via the GDS. Airlines are effectively caught between a rock and several hard places with these new unbundling deals.
We have even had one airline group come and explain that while their hosting fees were minimal with their current provider, the cost of providing that link via the GDS distribution channel made the cost prohibitive. To the tune of $8-10 per booking. Thus far outweighing the cost differential in hosting fees. (And BTW that is not the highest cost per GDS hosted booking - we have seen MUCH higher instances).
If the regulators were truly paying attention to what was going on - they would see that the bundling/un-bundling/re-bundling of the Airline IT and GDS services were discriminatory. It would make Microsoft's bundling of Internet Explorer with Windows see tame in comparison.
So the world is changing. The airline bean counters are going to have to pay a lot closer attention to what is going on. The Lawyers too. So what does this do to the airlines who have signed long term contracts? They should start looking deeply at their contracts and will see that there are a LOT of loopholes. I have told our Airline customers that the time for contract words is over. Let's see the invoice first and then we can talk about the terms!!!
And I will leave you with a further thought. If the distribution channel thinks they are immune from the imposition of fees as a result of this unbundling - think again. We have numerous examples of agencies seeing all their incentives eaten up in "charges and fees" - and then some.
You have been warned.
Cheers
So let's get the reasons out the way first as to why they are doing this - and why now?
It is simple. The standard GDS model is broken. I realize this may be a shocking revelation to many people - both inside and outside the Travel Distribution arena, but sometimes you have to call it like it is. It is broken because the amount of money (revenue) coming into the GDS via the traditional segment fee model is not sufficient to support the outgoings (especially in Travel Agent Incentives). Further - the legacy GDS companies have a significant technology investment expenditure facing them to significantly change their systems from being EDIFACT based to being XML based. The change in architecture is not just skin deep - it will require radical changes in core architecture to finally kill off the legacy nature of their business.
From the customer side the standard legacy network carrier model is also broken. The vastly better commercial proposition of the LCC airline model has resulted in the emergency of the Hybrid Value Carrier model that I have been writing about for more than 3 years. Legacy carriers going unbundled and LCCs going mainstream
However the biggest issue is not the technology, rather it is the commercial model. For this reason - the conflicts in the various different pricing schemes have finally brought the old legacy segment fee model to its knees.
So is this the Professor just ranting or is there some evidence to support this?
Ehem... plenty!
Two recent articles in The Beat confirm this. Amadeus has formally announced its unbundling. Commenting on this - Amadeus VP Ian Wheeler said:
"Airlines can choose to buy or choose not to buy those, giving more transparency and flexibility in the contract compared with the participating carrier agreement. It's an unbundling of our previously packaged offer. The more complex, scheduled carriers tend to take more of the options."
Amadeus has several models out there already. It has classified its carriers into Pure Altea hosted - pure GDS only and then a host of hybrid options. For example Virgin Blue Navitaire hosted airlines pay Amadeus a fee for routing their GDS traffic through the Amadeus Community Link. Paradoxically the low cost carriers are many times paying higher distribution fees than the traditional carriers.
For quite some time now Travelport has been offering a number of different connection options. Begining in 2008 they aggressively targeted the LCCs by offering almost "free" distribution via their desktop system Go! This was expanded recently to include Galileo offerings. The next generation application agent workstation system - Universal Desktop - will continue this offering. Given their recent IPO failure - they will be under a lot of pressure to boost their revenues and make things look better for the inevitable repeat. Since they have to a large extent (like the other GDSs) mortgaged their future with this low cost GDS deals and high inventive agent arrangements. The ONLY outcome is a difference.
Not to be outdone, in another article in The Beat Sabre is also offering unbundled services. Stung by the loss of their anchor customer American Airlines and the announcement that AA will sunset EDIFACT as the preferred protocol for external distribution communication - The Texas based GDS has announced its first XML connected airline. Easyjet. Commencing April Sabre will launch its new FlexConnect (Not to be confused with the common nomenclature of Farelogix - FLX), service and interestingly it will not be the cheapest of connections.
But the unbundling doesn't stop there. Sabre is currently offering developers its wonderful new contract. And for a mere $1 per booking in support fees - it will allow connection to the Sabre system. This has been met with somewhat of a less than enthusiastic response by the developer community.
Finally the line between Airline IT and GDS which used to be pretty finite has now become blurred. For Amadeus the ascendant player in Airline IT - they are now leveraging lower GDS fees if the airline pumps more GDS based transactions and signs up for the full Altea suite. Thus perpetuating the effective economic DIS-incentive for airlines to move their distribution to direct. In the early days of the web, Amadeus hosted (both pure and System User) airlines actually had to pay MORE money for direct distribution than via the GDS. Airlines are effectively caught between a rock and several hard places with these new unbundling deals.
We have even had one airline group come and explain that while their hosting fees were minimal with their current provider, the cost of providing that link via the GDS distribution channel made the cost prohibitive. To the tune of $8-10 per booking. Thus far outweighing the cost differential in hosting fees. (And BTW that is not the highest cost per GDS hosted booking - we have seen MUCH higher instances).
If the regulators were truly paying attention to what was going on - they would see that the bundling/un-bundling/re-bundling of the Airline IT and GDS services were discriminatory. It would make Microsoft's bundling of Internet Explorer with Windows see tame in comparison.
So the world is changing. The airline bean counters are going to have to pay a lot closer attention to what is going on. The Lawyers too. So what does this do to the airlines who have signed long term contracts? They should start looking deeply at their contracts and will see that there are a LOT of loopholes. I have told our Airline customers that the time for contract words is over. Let's see the invoice first and then we can talk about the terms!!!
And I will leave you with a further thought. If the distribution channel thinks they are immune from the imposition of fees as a result of this unbundling - think again. We have numerous examples of agencies seeing all their incentives eaten up in "charges and fees" - and then some.
You have been warned.
Cheers
20 February 2010
Bad Service In the Travel Industry
I try to go and visit the ATM - Arabian Travel Mart - every year. My team has done quite a lot of work over the years in the Gulf States (GCC). One of the Leading trade shows is ATM. It is run by Reed Exhibitions who also handle the World Travel Mart in London.
Between the two of them - I have had a relationship with Reed for - well more than 20 years. It somewhat irks me that EVERY YEAR I have to re-register with them. You would think by now they would know who I was (OK no snickers here please). Especially when Reed is off touting their credentials for Social Media.
So this year when it came time to register - I duly received my invitation to register early.
GREAT - they finally got it this year. Even a reasonable facsimile of my name!
I click on the email link... disappointment.
"Your Session has expired" What??? I didn't have a session yet how could it expire?
OK so rather than just abandoning things I thought OK its a simple bug - I hope they have not sent this email to 50,000 people and everyone gets the same response.
So let me tell the webmaster - he will fix things. Right? WRONG!
Here is the error:
:
83.138.169.176 does not like recipient.
Remote host said: 550 sorry, no mailbox here by that name. (#5.7.17)
Giving up on 83.138.169.176.
So moral of the story. If you are in our business then perhaps you should be sure to make things work.
I am sure that we are all guilty of doing silly things but this is a pretty major site and it needs to get fixed.
I hope they remember me after this rant
Cheers
Between the two of them - I have had a relationship with Reed for - well more than 20 years. It somewhat irks me that EVERY YEAR I have to re-register with them. You would think by now they would know who I was (OK no snickers here please). Especially when Reed is off touting their credentials for Social Media.
So this year when it came time to register - I duly received my invitation to register early.
GREAT - they finally got it this year. Even a reasonable facsimile of my name!
I click on the email link... disappointment.
"Your Session has expired" What??? I didn't have a session yet how could it expire?
OK so rather than just abandoning things I thought OK its a simple bug - I hope they have not sent this email to 50,000 people and everyone gets the same response.
So let me tell the webmaster - he will fix things. Right? WRONG!
Here is the error:
83.138.169.176 does not like recipient.
Remote host said: 550 sorry, no mailbox here by that name. (#5.7.17)
Giving up on 83.138.169.176.
So moral of the story. If you are in our business then perhaps you should be sure to make things work.
I am sure that we are all guilty of doing silly things but this is a pretty major site and it needs to get fixed.
I hope they remember me after this rant
Cheers
BA777 Accident Final Report
I finally got to read the report. It makes for some interesting reading.
From the gist of what I have read - despite the knowledge of the dangers of ice in fuel tanks - it had not been deemed enough of a risk for anyone to worry about. Guess again.
I believe that this shows that just about any entity can be subject to a failure in their system of quality. What needs to be done now is to pay close attention to the accident recommendations and swift implementation.
The risk of the issue makes the possibility of a repeat accident greater than was previously imagined. Purity of the fuel and processes for dealing with it should be a hot topic of debate.
With the number of accidents continuing to fall but the resulting survivability of any accident not really changing - one can only imagine the horror of a fully loaded widebody coming down in a residential area close to an airport. In Africa this has actually happened. The last time an aircraft was destroyed in an accident at LHR was G-ARWE the B707 in April 1986 with 5 Fatalities.
We cannot let our vigilance drop
Cheers
From the gist of what I have read - despite the knowledge of the dangers of ice in fuel tanks - it had not been deemed enough of a risk for anyone to worry about. Guess again.
I believe that this shows that just about any entity can be subject to a failure in their system of quality. What needs to be done now is to pay close attention to the accident recommendations and swift implementation.
The risk of the issue makes the possibility of a repeat accident greater than was previously imagined. Purity of the fuel and processes for dealing with it should be a hot topic of debate.
With the number of accidents continuing to fall but the resulting survivability of any accident not really changing - one can only imagine the horror of a fully loaded widebody coming down in a residential area close to an airport. In Africa this has actually happened. The last time an aircraft was destroyed in an accident at LHR was G-ARWE the B707 in April 1986 with 5 Fatalities.
We cannot let our vigilance drop
Cheers
The Long Road Back For US Travel Agencies
Recently ARC (the old Airlines Reporting Corporation) has begin to make some of its vast data more readily available for the marketplace.
I believe that ARC represents a good proxy for the US market and the GDSs in the USA in particular. Well at least for now.
Recently they have made available the breakout of the different types of Travel Agency based transactions. Breaking them into 3 categories - Mega (meaning TMCs) Online and the ubiquitous "Other" category - it is interesting to see how the downturn last year affected the Mega and the OTA categories differently. As a proxy for the future we can see that the worst is definitely now behind us in TRANSACTIONS. However revenue/yield continues to lag and we are not seeing it come back. I believe it will be some time for us to see some significant improvements in yield.
What we see is that the market definitely bottomed out in February 2009. So now we are one year on from there. Yes the OTAs have made inroads. The abolition of fees has made the OTA more attractive to users. However there is still the issue of the legacy GDS based OTAs inability to handle ancillary revenue services such as paying for premium seats and baggage that is so important for the airlines.
If Travel Intermediaries want to make the change and look for new revenue forms - they should really start looking to cooperate with the airlines and try and drive the profitable solutions of ancillary revenue sales.
Cheers
I believe that ARC represents a good proxy for the US market and the GDSs in the USA in particular. Well at least for now.
Recently they have made available the breakout of the different types of Travel Agency based transactions. Breaking them into 3 categories - Mega (meaning TMCs) Online and the ubiquitous "Other" category - it is interesting to see how the downturn last year affected the Mega and the OTA categories differently. As a proxy for the future we can see that the worst is definitely now behind us in TRANSACTIONS. However revenue/yield continues to lag and we are not seeing it come back. I believe it will be some time for us to see some significant improvements in yield.
What we see is that the market definitely bottomed out in February 2009. So now we are one year on from there. Yes the OTAs have made inroads. The abolition of fees has made the OTA more attractive to users. However there is still the issue of the legacy GDS based OTAs inability to handle ancillary revenue services such as paying for premium seats and baggage that is so important for the airlines.
If Travel Intermediaries want to make the change and look for new revenue forms - they should really start looking to cooperate with the airlines and try and drive the profitable solutions of ancillary revenue sales.
Cheers
Founderless ILFC Hits Turbulence
This week I took a little detour and a few days off and went to Arizona. I got to indulge myself with some viewing of the Davis Mothan AFB Boneyard. I also tried to get into the Evergreen maintenance facility aka the aptly named Pinal Air Park but was turned away. I even saw an old Pan Am 707 the USAF had purchased. But I digress...
Without the pioneering spirit of its Hungarian born founder and now former leader, ILFC seems to have hit some turbulence.
At the end of last year citing issues of the leadership and the seeming lack of direction by bailout king AIG, Moody's downgraded AIG's bonds to a very low state. This week Fitch's ratings (yes those people who didn't seem to know what was going on before) downgraded ILFC's bonds to junk (BBB from BB status).
In the mean time Steven Udvar-Hazy seems quite far along the comeback trail. Those private equity and venture funds who backed him for his aborted efforts to buyout ILFC from the insurance giant recognize that there is a value in the marketplace for some "re-ordering" of the assets for aircraft. As I have mentioned before, there is an over stuffing of the supply pipeline at the moment. As a result some existing lessors (usually banks) are seeing to monetize their assets and reduce their exposure to the aircraft market. The aircraft manufacturers need to ensure that more orders come in and that they are not left with white tails.
Stay tuned - there will be more
Without the pioneering spirit of its Hungarian born founder and now former leader, ILFC seems to have hit some turbulence.
At the end of last year citing issues of the leadership and the seeming lack of direction by bailout king AIG, Moody's downgraded AIG's bonds to a very low state. This week Fitch's ratings (yes those people who didn't seem to know what was going on before) downgraded ILFC's bonds to junk (BBB from BB status).
In the mean time Steven Udvar-Hazy seems quite far along the comeback trail. Those private equity and venture funds who backed him for his aborted efforts to buyout ILFC from the insurance giant recognize that there is a value in the marketplace for some "re-ordering" of the assets for aircraft. As I have mentioned before, there is an over stuffing of the supply pipeline at the moment. As a result some existing lessors (usually banks) are seeing to monetize their assets and reduce their exposure to the aircraft market. The aircraft manufacturers need to ensure that more orders come in and that they are not left with white tails.
Stay tuned - there will be more
19 February 2010
QF and Those First Seats - False Economy?
I have noted a few different stories about the QF decision to reduce First Class on all but 12 A380s. I note that the total cost quoted for the removal was $400 million. Lat time I checked that's about the price of a new A380. So let's just assume for a minute that we buy the PR - therefore we have a life span of 5 years for a seat. So should we consider the economic value of the decision. If you look at both aircraft then we would see that the A380 could feasibly double the number of seats from 14 to 28 (replacing first with business). For the 747s also. So we are looking at 2x A380s (net gain 28 seats). For the 747s same thing but there are 30 of them of which 4 are currently 2 class and the rest 4 class. So lets assume 20 of them will get reconfigured net gain 280 seats. (I have heard as few as 9) So the total gain is 308 seats. Hmmm I am not quite sure this is a really compelling economic decision.
So hopefully someone at QF can explain the economics of this.
Thanks
Timothy
So hopefully someone at QF can explain the economics of this.
Thanks
Timothy
14 February 2010
Bad Browser Behaviour. You Know Who You Are!
Its the weekend - its Valentine's Day so my post for today is about how much Travel Sites love their Customers. Sadly its not enough.
My rant is focused today on people who consistently ignore the user community and create bloated websites with poor usability. The "everything and the kitchen sink" approach is something that really bothers me. After 15 years of web + travel we should have developed some good practices usability should be refined and the tools for the consumer should be simple and easy to use. We should have moved beyond the explicit process of having to enter large amounts of data in order to get a simple nugget answer to the question that I asked.
Do we have that? No!!!
What we have is bloatware of the worst order. We have inefficient, confusing and often times broken processes. Because I am a bit of a curmudgeon - I even keep examples of the number of times I have seen broken or illogical even very bad processes.
So to share my love to all the Professor's readers today - I will concentrate on just two aspects. Page Weight and Browser Window size.
There are a lot of people out there who are waiting for great content. The typical user is ADHD. Ten Seconds and you have lost him. For travel ecomm sites the engine is typically going to take about 5-10 seconds to load new content. Cached content can be served a lot faster but then when its cached its out of date data. Lots of things to consider when making a decision. My basic rule of thumb is don't confuse, lie or delay providing information.
So back to my basic two peeves today.
Page Weight - what is the ideal page weight? Today most people are serving up pages in the 100K range. I try to advise people who are outside of the USA to try and bring it in at under 70K. To justify pages that often exceed 150K, the websites try to justify their behaviour to their users by using the quoted speeds of upload/download. Yet the speeds of download range across the board. I use a rule that says take the maximum quoted bandwidth and divide by 4. That gives you the true speed that the user will experience in serving up that home page you spent all that money on. Page Weight is however not the only criteria in loading a page. Consider which bits of information are useful to the consumer. Ajax pages are vile terrible things but quite useful. Flash pages are just vile terrible things. If you can use techniques for speedier loading of the important information first. (For example the commit button shouldn't be the last thing that loads!!!). For a good article on page weights and what you can do about things - go here.
Now my other real peeve is the poor use of real estate. We have now several issues related to screen real estate.
There are a greater number of mobile users. They are not all using the big Dell Notebooks. They are using iphones and crackberries. The proliferation of small PCs is also an issue. They are using very slow 3G connections and a small aka slow processor speed netbook. Even public Wifi is slow - frequently I see 3G speeds and Wifi at the same page serving rate. (That is not because 3G is fast - its because the wifi is slow). if you have not mobilized your site in some way shape or form you are looking out on a lot of users. In many countries there are many times the number of mobile users than fixed users. Bear that in mind when designing your apps.
Also the growth of letter box format screens has advanced significantly. For full stats from the official source (W3C) go to their website for a summary of the formats and browser shares etc. The nice thing is that now you can interpret this data using information from Google Labs (which is analogous to the W3C) data. For this you can load the Browser Size screen template. I am amazed at how many sites fell outside the 90% window. Tsk Tsk. Forcing a user to scroll around your page is a NO-NO!
So treat this as a little Valentine's day card from the Professor to all of you.
Enjoy the day with your loved ones.
Cheers (and Kisses)
My rant is focused today on people who consistently ignore the user community and create bloated websites with poor usability. The "everything and the kitchen sink" approach is something that really bothers me. After 15 years of web + travel we should have developed some good practices usability should be refined and the tools for the consumer should be simple and easy to use. We should have moved beyond the explicit process of having to enter large amounts of data in order to get a simple nugget answer to the question that I asked.
Do we have that? No!!!
What we have is bloatware of the worst order. We have inefficient, confusing and often times broken processes. Because I am a bit of a curmudgeon - I even keep examples of the number of times I have seen broken or illogical even very bad processes.
So to share my love to all the Professor's readers today - I will concentrate on just two aspects. Page Weight and Browser Window size.
There are a lot of people out there who are waiting for great content. The typical user is ADHD. Ten Seconds and you have lost him. For travel ecomm sites the engine is typically going to take about 5-10 seconds to load new content. Cached content can be served a lot faster but then when its cached its out of date data. Lots of things to consider when making a decision. My basic rule of thumb is don't confuse, lie or delay providing information.
So back to my basic two peeves today.
Page Weight - what is the ideal page weight? Today most people are serving up pages in the 100K range. I try to advise people who are outside of the USA to try and bring it in at under 70K. To justify pages that often exceed 150K, the websites try to justify their behaviour to their users by using the quoted speeds of upload/download. Yet the speeds of download range across the board. I use a rule that says take the maximum quoted bandwidth and divide by 4. That gives you the true speed that the user will experience in serving up that home page you spent all that money on. Page Weight is however not the only criteria in loading a page. Consider which bits of information are useful to the consumer. Ajax pages are vile terrible things but quite useful. Flash pages are just vile terrible things. If you can use techniques for speedier loading of the important information first. (For example the commit button shouldn't be the last thing that loads!!!). For a good article on page weights and what you can do about things - go here.
Now my other real peeve is the poor use of real estate. We have now several issues related to screen real estate.
There are a greater number of mobile users. They are not all using the big Dell Notebooks. They are using iphones and crackberries. The proliferation of small PCs is also an issue. They are using very slow 3G connections and a small aka slow processor speed netbook. Even public Wifi is slow - frequently I see 3G speeds and Wifi at the same page serving rate. (That is not because 3G is fast - its because the wifi is slow). if you have not mobilized your site in some way shape or form you are looking out on a lot of users. In many countries there are many times the number of mobile users than fixed users. Bear that in mind when designing your apps.
Also the growth of letter box format screens has advanced significantly. For full stats from the official source (W3C) go to their website for a summary of the formats and browser shares etc. The nice thing is that now you can interpret this data using information from Google Labs (which is analogous to the W3C) data. For this you can load the Browser Size screen template. I am amazed at how many sites fell outside the 90% window. Tsk Tsk. Forcing a user to scroll around your page is a NO-NO!
So treat this as a little Valentine's day card from the Professor to all of you.
Enjoy the day with your loved ones.
Cheers (and Kisses)
13 February 2010
US DoT Tentatively Approves BAAABI. Branson Pissed
For some reason on a Saturday the US Dept. of Transportation has announced its approval of the BA+AA+IB transatlantic alliance. In a continuation of its policy of pro-oligopoly, it demanded only a small concession of 4 slot pairs at LHR be surrendered. Far less than the EC has demanded and far less than its own demands 8 years ago for 16 daily slot pairs to be surrendered.
Virgin Atlantic Chairman Richard Branson is obviously not a happy person.
Already the applause has come from some groups such as BTC who believes that 3 alliances are an inevitability. Given the previous rulings it is unlikely that the EC will impose greater restrictions but it does seem to be a bit of a joke to only ask for 4 slots to be surrendered. A far better arrangement would have been to demand that new slots be made available for new entrant carriers. But the status quo seems to be the protectionism and cronyism that has been a hallmark of the US DoT.
If the competitive authority was truly doing its job then it should open up the market for total freedom. Well we shall see. Next week in Spain the negotiations for the next round of Open Skies between Europe and the USA open up. High on that agenda will be total deregulation and relaxation of sovereignty rules.
Cheers
Recovery? What Recovery….
So the first shoots of spring are around us. Lots of folks are very happy and walking with a new spring in their step. So what about January numbers? Well not so good actually. Yields are still in the toilet and transactions are not as healthy as they could be. We have two sources which should start ringing some alarm bells. OAG reports that capacity is up again for the 6th month in a row. It is continuing to rise at a time when restraint might be a better policy for economic health. And we still see yields in the toilet.
ARC’s numbers show an improvement over 2009. But the numbers are still way down on 2006/7/8. The legacy airlines are feeling the pinch. The LCCs are continuing to grab market share. Total pax numbers are up. More than the percentage of GDS based ARC bookings in the USA.
In looking at these number specifically for the USA we can see that the drop off in 2009 was 19%. For 2010 the drop off from 2008 was still 13%. More worrying should be the yield situation. While transactions are off 2010 vs 2008, revenues are still worse off at 17% when comparing the gross transactions and revenues for 2010 vs 2008. So while traffic is coming back the yield recovery is less. Thus GDSs and transaction model players will be a little happier but those whose livelihood depends on the revenue side of the equation must remain worried. Airlines clearly must think this is going to be a cause for little celebration yet. Long term the numbers tend to confirm the view that there has been a fundamental shift in the market on the revenue types. However there is one factor that ARC’s numbers do not illustrate. The value of the Ancillary Revenue. So if we look at the airlines they can be happy to know that if they are achieving AR revenue boosts of above 4% across the board then they are doing well. What will be interesting is that this is revenue that the Agency channel is missing out on. Perhaps now the agency channel will start to think more seriously at the value of AR to their bottom lines as well.
So this tells us that there is clearly a price being paid by the market and the recovery will be a lot slower than anyone wants. However there are some opportunities to be had if people are smart.
Cheers
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