Under the file usually marked "What were they thinking" comes this one.
A UK parliamentary select committee was convened to look at various complaints from local government authorities about the number of newly minted immigrants using resources in the UK regions. The central government of "New" Labour led by the dour Gordon Brown steadfastly refused to admit that the UK had an immigration problem stemming from the expansion of the EU in 2004 onwards.
Turns out those overstretched local authorities were actually right.
So it comes from the way in which estimates are calculated at the Central Government level. So guess what they are using to estimate population?
Well its that good old report that indicates SO WELL (NOT) the true travel patterns of people the IPS - International Passenger Survey. The latter by the way still hasn't figured out that over 50 million Europeans user Ryanair and that countless others (it would appear) use other low cost carriers to get into the UK.
The select committee was not amused!
Existing methods of estimating migration and population figures are not "fit for purpose" say MPs. The International Passenger Survey, designed to provide data for tourism, now plays a central role in migration estimates, the committee of MPs said.
They said it was "not fit for this purpose" and methods of measuring movement in the UK "unsatisfactory".
The committee said new surveys were needed. The Lib Dems said ministers had "totally lost track" of the population. (Understatement of the year!) And of course given the influx of people coming in on LCCs they are not even counting tourism properly.
In its Counting the Population report, the Commons Treasury Committee accepted that the UK was in a period of "significant population change" which made it harder to estimate numbers of people in each area. But it said population estimates were "central to every national system of official statistics", used to estimate funding for local government, the NHS and other public services. Getting them right was therefore "a matter of social responsibility" the report said.
For many years I have held the position that the IPS does not reflect true travel patterns and is a flawed metric. I am glad someone else thinks so!
Cheers
Timothy
24 May 2008
The (Non American) big get bigger
While the USA Airlines are being pounded with high oil prices and an economy that is in far worse shape than the waning Bush Administration seems to understand, the larger EU
Air France KLM Group reported a consolidated net profit of €748 million ($1.17 billion) for the fiscal year ended March 31, a 16% decline from the €891 million earned in the prior year as it booked a €530 million provision to cover possible penalties arising from the ongoing antitrust probe into airline cargo activities. Net profit also benefited by €284 million in disposal gains. Excluding the exceptional items, earnings rose 10.8% to €987 million. Revenue was ahead 5.8% to €24.1 billion and operating costs climbed.
German national airline Lufthansa has revealed a huge increase in profits over 2007, reaping the benefits of a successful takeover and increasing popularity of its flight routes.Net profit for 2007 was claimed to have doubled on the previous year. Combined group traffic surged 30 per cent in January from a year previously, with collective passenger demand for European, American, Middle Eastern and African destinations growing fast. A group total of 62.9 million passengers were handled over the year.
British Airways has reported a 45% rise in annual profits but warned that economic uncertainty and high fuel costs pose challenges. BA made a profit of £883m in the year to 31 March, which BA boss Willie Walsh called an "outstanding" result.
Correspondingly the US airlines all reported significant losses for the quarter and will now face annual losses for the period.
So I am a simple guy. If these guys can make profit why not the US airlines? Do the Europeans have a secret ingredient in the water that doesn’t work in the New World?
I believe that there is a collective set of issues that means that rationally speaking the US airlines need to rethink their business models and take a long hard look at their approach to the market. Fixing the current broken US airline model is obviously no trivial task. However the ability to hold onto margins through such tools as Fuel Surcharges, is both a better extrernal way to handle the current oil crisis and a more honest approach to the market. The unbundling approach and using ancillary revenues to prop up the broken US airline business model is a sure fire way to piss of your customers and indeed assure your brand is devalued. Sadly the approach taken (because of the “fear” of transparency to the customer community ) of failing to raise core prices to accommodate the increase in oil or to split out oil based increases through a fuel surcharge is now soundly demonstrated as a failed strategy. For this the US airlines have only themselves to blame for their predicament.
How can we have any sympathy for this behavior? At the very time that the US airlines should have the consumers (that’s everybody) on their side as victims, they are being reviled by their loyal and unloyal customers alike.
Air France KLM Group reported a consolidated net profit of €748 million ($1.17 billion) for the fiscal year ended March 31, a 16% decline from the €891 million earned in the prior year as it booked a €530 million provision to cover possible penalties arising from the ongoing antitrust probe into airline cargo activities. Net profit also benefited by €284 million in disposal gains. Excluding the exceptional items, earnings rose 10.8% to €987 million. Revenue was ahead 5.8% to €24.1 billion and operating costs climbed.
German national airline Lufthansa has revealed a huge increase in profits over 2007, reaping the benefits of a successful takeover and increasing popularity of its flight routes.Net profit for 2007 was claimed to have doubled on the previous year. Combined group traffic surged 30 per cent in January from a year previously, with collective passenger demand for European, American, Middle Eastern and African destinations growing fast. A group total of 62.9 million passengers were handled over the year.
British Airways has reported a 45% rise in annual profits but warned that economic uncertainty and high fuel costs pose challenges. BA made a profit of £883m in the year to 31 March, which BA boss Willie Walsh called an "outstanding" result.
Correspondingly the US airlines all reported significant losses for the quarter and will now face annual losses for the period.
So I am a simple guy. If these guys can make profit why not the US airlines? Do the Europeans have a secret ingredient in the water that doesn’t work in the New World?
I believe that there is a collective set of issues that means that rationally speaking the US airlines need to rethink their business models and take a long hard look at their approach to the market. Fixing the current broken US airline model is obviously no trivial task. However the ability to hold onto margins through such tools as Fuel Surcharges, is both a better extrernal way to handle the current oil crisis and a more honest approach to the market. The unbundling approach and using ancillary revenues to prop up the broken US airline business model is a sure fire way to piss of your customers and indeed assure your brand is devalued. Sadly the approach taken (because of the “fear” of transparency to the customer community ) of failing to raise core prices to accommodate the increase in oil or to split out oil based increases through a fuel surcharge is now soundly demonstrated as a failed strategy. For this the US airlines have only themselves to blame for their predicament.
How can we have any sympathy for this behavior? At the very time that the US airlines should have the consumers (that’s everybody) on their side as victims, they are being reviled by their loyal and unloyal customers alike.
23 May 2008
Mesa Air Group teetering?
Jonathan Ornstein's Mesa Group appears teetering on the brink of bankruptcy.
Yesterday (May 22) in a formal filing with the US SEC, Mesa Air Group said yesterday that if Delta Air Lines succeeds in ending its service agreement for 34 ERJ-145s, MAG may have to file for Chapter 11 bankruptcy protection as the loss of business and the resulting cash crunch would make it impossible for the regional to continue operations.
Mesa under the somewhat (I seem to recall) reportedly litigious Mr Ornstein has been a thorn in the side of many people. (His company sued Plane Buzz Blog). Mesa's GO! subsidiary was cited both in US Congressional testimony and in various published reports on the Aloha Airlines Bankruptcy of using "Predatory Pricing" tactics to force the 60 year old Inter Island Airline into Chapter 7 for its passenger operations.
Last night Mesa's stock closed down valuing the whole company at approx $12 million.
You can almost hear those lawyers revving up their engines.
Yesterday (May 22) in a formal filing with the US SEC, Mesa Air Group said yesterday that if Delta Air Lines succeeds in ending its service agreement for 34 ERJ-145s, MAG may have to file for Chapter 11 bankruptcy protection as the loss of business and the resulting cash crunch would make it impossible for the regional to continue operations.
Mesa under the somewhat (I seem to recall) reportedly litigious Mr Ornstein has been a thorn in the side of many people. (His company sued Plane Buzz Blog). Mesa's GO! subsidiary was cited both in US Congressional testimony and in various published reports on the Aloha Airlines Bankruptcy of using "Predatory Pricing" tactics to force the 60 year old Inter Island Airline into Chapter 7 for its passenger operations.
Last night Mesa's stock closed down valuing the whole company at approx $12 million.
You can almost hear those lawyers revving up their engines.
BA doesn't like its ultra premium passengers
Over time BA has slowly diluted the value of its ultra-premium travellers. The most coveted of users.
Gold cardholders represent a class of traveller on the "world's favorite airline" that other airlines would kill for. But BA seems to be somewhat indifferent to them.
On a recent morning in May at LHR Terminal 4 the line for First/Gold check-in stretched into the "hoi Polloi" area. The BAA (yes the airport gestapo) determined that normal bags that would pass muster anywhere else in the world would not pass - not even for a BA First Class and Gold member. So the long trek back to the check in (and subsequent second wait) was inevitable. No help from BA there either.
The BA first class lounge looked positively shabby and decidedly full despite a significant reduction in usage from the flights to T5. At least at T4 there still is a dedicated Gold/First lounge.
Over at the new edifice BA's Ultra Premium passengers don't even get a dedicated area. They have to hang out with the likes of Silver and Club Class types in the new "Gallery" lounges, akin to a cattle car in their own right.
Gold cardholders represent a class of traveller on the "world's favorite airline" that other airlines would kill for. But BA seems to be somewhat indifferent to them.
On a recent morning in May at LHR Terminal 4 the line for First/Gold check-in stretched into the "hoi Polloi" area. The BAA (yes the airport gestapo) determined that normal bags that would pass muster anywhere else in the world would not pass - not even for a BA First Class and Gold member. So the long trek back to the check in (and subsequent second wait) was inevitable. No help from BA there either.
The BA first class lounge looked positively shabby and decidedly full despite a significant reduction in usage from the flights to T5. At least at T4 there still is a dedicated Gold/First lounge.
Over at the new edifice BA's Ultra Premium passengers don't even get a dedicated area. They have to hang out with the likes of Silver and Club Class types in the new "Gallery" lounges, akin to a cattle car in their own right.
21 May 2008
AA Downsizes domestic operation drastically
The world's number two airline - AMR's American today announced a dramatic cut back in their domestic operations. They will be axing across the board. Here are the brief details:
Aircraft Culled: A300s, MD80s, over 75. This includes some RJs and Turboprops.
Routes - cutback and schedule frequency reduction.
Total reduction in flown miles represents a cut back of 12% according to the Wall Street Journal.
American will also charge $15 for the first bag and additional charges will be added. American hopes to raise several ".. hundred million dollars.." of additional revenue in this fashion. Given the $100 million UAL said it would raise from $25 for second bag costs - this will be an interesting challenge.
As I have noted before the airlines are going to park some planes. This will be the winter of discontent for travelers but it looks like summer isn't going to be so hot. As Willie Walsh of BA stated earlier - "Kiss low fares goodbye"
Cheers
Timothy
Aircraft Culled: A300s, MD80s, over 75. This includes some RJs and Turboprops.
Routes - cutback and schedule frequency reduction.
Total reduction in flown miles represents a cut back of 12% according to the Wall Street Journal.
American will also charge $15 for the first bag and additional charges will be added. American hopes to raise several ".. hundred million dollars.." of additional revenue in this fashion. Given the $100 million UAL said it would raise from $25 for second bag costs - this will be an interesting challenge.
As I have noted before the airlines are going to park some planes. This will be the winter of discontent for travelers but it looks like summer isn't going to be so hot. As Willie Walsh of BA stated earlier - "Kiss low fares goodbye"
Cheers
Timothy
The Professor is aloft again
I shall be away for the next 10 days. Back June 1st. I will try and blog while I am away.
Cheers
Timothy
Cheers
Timothy
The Herb Show Finally Heads Off To The Bar
From then till now - Herb Kelleher has been the voice and face of Southwest Airlines. Any stunt was a good stunt. But it was always about being different and tweaking the nose of the big guys. Well now his time is up. Herb officially steps down today as Chairman having relinquished the CEO slot a long time ago. His original admin and long time sidekick - Colleen Barratt steps down in July. Both will draw a salary of $400K per year for the next 5 years and remain officially as "employees".
Herb's accomplishments are just too numerous to list. But perhaps the rest of us should be appreciative of one thing. He did his darndest to make flying a better experience. In the end Southwest was very little different from the big boys airlines. Now Southwest flies more passengers than any other US airline. And perhaps that is his legacy. Those who understood that the core metric is the Passenger are winners. Those who stubbornly hang on to Cents Per Mile are born losers.
I only hope one day someone will bring Herb and his nemesis Bob Crandall back for one last performance in the open. They are probably the last characters we have seen in this crazy business called airlines.
Best of luck to Herb and Colleen - you will be missed. I will raise a glass of Bourbon tonight in your honor (not sure if BA carries it!).
CHEERS!!!
Herb's accomplishments are just too numerous to list. But perhaps the rest of us should be appreciative of one thing. He did his darndest to make flying a better experience. In the end Southwest was very little different from the big boys airlines. Now Southwest flies more passengers than any other US airline. And perhaps that is his legacy. Those who understood that the core metric is the Passenger are winners. Those who stubbornly hang on to Cents Per Mile are born losers.
I only hope one day someone will bring Herb and his nemesis Bob Crandall back for one last performance in the open. They are probably the last characters we have seen in this crazy business called airlines.
Best of luck to Herb and Colleen - you will be missed. I will raise a glass of Bourbon tonight in your honor (not sure if BA carries it!).
CHEERS!!!
ASTA says no alternative to ARC feasible.
ASTA the organization that represents a rapidly shrinking breed of animal formerly known as a Travel Agent, has for the past year been trying to espouse an alternative to ARC - the Airlines Reporting Corp, itself a "not for profit" that manages the commercial issuance of neutral airline tickets and clearing. (For our non-US readers the equivalent is BSP - however due to an anti-monopoly decision in the 1970s, ARC replaced ATC as a commercial enterprise).
No where in the world has such an entity ever been created with ONE exception (Russia and the TKP/TCH which is a whole other story). ASTA should have known that there is no power that they have to even indulge in such an exercise. As their very tall ASTA President and CEO Cheryl Hudak, CTC. said "ARC is a monopoly—it has no competition and accordingly there are no options for an integrated airline ticket settlement system. We had hoped to lay the groundwork for an alternative settlement mechanism, but it has become clear to us that without acceptance by the legacy airlines this, for the present, is an exercise in futility."
Perhaps the understatement of the year. Continuing she states:
"Travel agents today face a quandary when it comes to airline ticket settlement in that the current system is untenable and yet there is no viable alternative."
The task force, formed last year in the wake of ARC's announcement that it would be increasing travel agents' annual fees by 172 percent. The task force met three times over the past six months. This fee increase is the first of a series of fee hikes that will increase by 500% through 2011.
There is a bigger issue here. Are neutral tickets needed at all? I have asked this question for many years and no one likes to give me an answer. With eTicket now mandatory from the end of May, why is it necessary to use a neutral clearing house for what is now an electronic good. ARC itself is an anachronism - just like the system it serves. Airlines would save significant individual sums of money if they accepted that tickets themselves are not necessary. The saving of at least $1 per ticket across the board has to be significant. With interline tickets now less than 1% of all those issued, there are cheaper alternatives out there.
I think there will be a lot of people probably not liking this idea at the moment but it is the inevitable march of time and progress.
No where in the world has such an entity ever been created with ONE exception (Russia and the TKP/TCH which is a whole other story). ASTA should have known that there is no power that they have to even indulge in such an exercise. As their very tall ASTA President and CEO Cheryl Hudak, CTC. said "ARC is a monopoly—it has no competition and accordingly there are no options for an integrated airline ticket settlement system. We had hoped to lay the groundwork for an alternative settlement mechanism, but it has become clear to us that without acceptance by the legacy airlines this, for the present, is an exercise in futility."
Perhaps the understatement of the year. Continuing she states:
"Travel agents today face a quandary when it comes to airline ticket settlement in that the current system is untenable and yet there is no viable alternative."
The task force, formed last year in the wake of ARC's announcement that it would be increasing travel agents' annual fees by 172 percent. The task force met three times over the past six months. This fee increase is the first of a series of fee hikes that will increase by 500% through 2011.
There is a bigger issue here. Are neutral tickets needed at all? I have asked this question for many years and no one likes to give me an answer. With eTicket now mandatory from the end of May, why is it necessary to use a neutral clearing house for what is now an electronic good. ARC itself is an anachronism - just like the system it serves. Airlines would save significant individual sums of money if they accepted that tickets themselves are not necessary. The saving of at least $1 per ticket across the board has to be significant. With interline tickets now less than 1% of all those issued, there are cheaper alternatives out there.
I think there will be a lot of people probably not liking this idea at the moment but it is the inevitable march of time and progress.
Plaxo goes to.... Comcast!
Not usually the point for this Blog - but Plaxo and its evil cousin Linked-in are very useful tools for maintaining BUSINESS relationships.
Anyway - Plaxo has been acquired by Comcast. Not quite sure I see the synergy other than LOTS of homes and LOTS of users.
Cheers
Timothy
Anyway - Plaxo has been acquired by Comcast. Not quite sure I see the synergy other than LOTS of homes and LOTS of users.
Cheers
Timothy
20 May 2008
The extent of the problem at T5 shows in the numbers
Traffic figures for the month of April show the impact of the debacle at T5. We knew from anecdotal reports that it was bad and that customers were running away from BA (yes I was one and moved at least one flight away from BA. Now the numbers are in.
LHR was down altogether for the month off by -3.8%. Latest report shows BA passengers down by -7.9% Since BA drives around 50% of the traffic at LHR this is about right. OUCH!!!!
But the UK was off all over the place. Mancheter, Gatwick, Stansted etc etc. Interestingly enough - Ryanair who is STN's largest single airline had an increase of 15% for the month of April indicating they are doing a good job of diversifying the revenue base. Just following on the Southwest model.
Cheers
T
LHR was down altogether for the month off by -3.8%. Latest report shows BA passengers down by -7.9% Since BA drives around 50% of the traffic at LHR this is about right. OUCH!!!!
But the UK was off all over the place. Mancheter, Gatwick, Stansted etc etc. Interestingly enough - Ryanair who is STN's largest single airline had an increase of 15% for the month of April indicating they are doing a good job of diversifying the revenue base. Just following on the Southwest model.
Cheers
T
Farewell Jacques - Welcome the new guy (Italian)
So its a good night from Jacques Barrot. Jacques Barrot is to be complimented on his performance in the job. Best of luck in the new position M. Barrot. He is moving onto bigger and better things. And I have refrained from commenting until now - this is just too good an opportunity to pass up.
So formally, the situation is EU Transport Commissioner, Frenchman Jacques Barrot, is to relinquish his post and formally take on the position he has been temporarily holding, as Commissioner for Justice, Freedom and Security. This is an upgrade as he is now a full commissioner. This results from the resignation of former Justice Commissioner, Franco Frattini, to become Foreign Minister in the new Berlusconi government in Italy. As a consequence, the Italian Government will now appoint a replacement Transport Commissioner, reportedly likely to be Antonio Tajani, a strong Berlusconi supporter and currently a European Parliamentarian.
OK - this is part of the convoluted EU politics. So let's see if I can get this straight without bursting a gut and rolling on the floor laughing.
One of the first tasks of Sr Tajani will be to tackle the issue of illegal state aid to airlines. The ongoing investigation was sparked to urgency by the recent decision by the outgoing Italian Government of Prodi to grant 300 million Euros in continuing state aid to Alitalia.
So the chap who gets to adjudicate and if necessary prosecute the Commission's case against Italy and Alitalia is.... (drum roll please)... an Italian who is best buddy with Berlusconi.
OK - I knew you couldn't keep a straight face either. Even if you are part Italian.
Cheers - I am off for some Grappa.
So formally, the situation is EU Transport Commissioner, Frenchman Jacques Barrot, is to relinquish his post and formally take on the position he has been temporarily holding, as Commissioner for Justice, Freedom and Security. This is an upgrade as he is now a full commissioner. This results from the resignation of former Justice Commissioner, Franco Frattini, to become Foreign Minister in the new Berlusconi government in Italy. As a consequence, the Italian Government will now appoint a replacement Transport Commissioner, reportedly likely to be Antonio Tajani, a strong Berlusconi supporter and currently a European Parliamentarian.
OK - this is part of the convoluted EU politics. So let's see if I can get this straight without bursting a gut and rolling on the floor laughing.
One of the first tasks of Sr Tajani will be to tackle the issue of illegal state aid to airlines. The ongoing investigation was sparked to urgency by the recent decision by the outgoing Italian Government of Prodi to grant 300 million Euros in continuing state aid to Alitalia.
So the chap who gets to adjudicate and if necessary prosecute the Commission's case against Italy and Alitalia is.... (drum roll please)... an Italian who is best buddy with Berlusconi.
OK - I knew you couldn't keep a straight face either. Even if you are part Italian.
Cheers - I am off for some Grappa.
So Willie gives up his bonus
I may have been too hard on the gentleman from Ireland.
He has foresworn the proposed GBP700,000 bonus he would have received this year based on BA's performance.
BA's record profits do not mask however a number of fundamental issues facing BA. The airline as I have noted before faces tough times ahead and much of this of BA's own making and therefore it is Willie's Watch.
The airline faces several immediate challenges. The (in my view) short sighted approach to the new daughter company "OpenSkies" airline is stirring labour unrest at a time when the airline does not need it. The loss of core low cost regional markets with GB Airways and BMED leaving the fold is hurting BA. It is almost to the point of asking yourself what is left of the old BEA?
There will be more blood.
Perhaps the airline should revert back to its old moniker - British OVERSEAS Airways Corp - BOAC.
Cheers
Timothy
He has foresworn the proposed GBP700,000 bonus he would have received this year based on BA's performance.
BA's record profits do not mask however a number of fundamental issues facing BA. The airline as I have noted before faces tough times ahead and much of this of BA's own making and therefore it is Willie's Watch.
The airline faces several immediate challenges. The (in my view) short sighted approach to the new daughter company "OpenSkies" airline is stirring labour unrest at a time when the airline does not need it. The loss of core low cost regional markets with GB Airways and BMED leaving the fold is hurting BA. It is almost to the point of asking yourself what is left of the old BEA?
There will be more blood.
Perhaps the airline should revert back to its old moniker - British OVERSEAS Airways Corp - BOAC.
Cheers
Timothy
Alternative EC GDS Proposal supported by Consumer Groups
Several groups representing users' interests are throwing their weight behind the so called Kirkhope Amendment.
For the uninitiated or newcomers to this blog here are some of the background to the issue.
The European Commission (EC) is proposing to change its current CRS rules. The current regulation: Council Regulation (EEC) No 2299/89 of 24 July 1989 on a code of conduct for computerized reservation systems [Official Journal L 220 of 29.07.1989 can be found at the following URL: http://europa.eu/scadplus/leg/en/lvb/l24080.htm
The EU doesn't like the term GDS Global Distribution System and prefers CRS - Computer Reservation System. The old rules in essence were a different approach to fairness in displays on a travel agency terminal to those taken in the USA. ( For the US regs go here: http://www.dot.gov/affairs/Computer%20Reservations%20System.htm) Over time the importance of the GDS screen has lessened and issues of bias and control have taken on new forms as a result of the growth of the Internet and the global airline Alliances.
The new regulations are somewhat convoluted. But there has been a big issue raised over the definition of control. Essentially the EC has been under pressure from one of the GDS companies to eliminate the requirement for equal representation in all GDS if one of the players has an owner who is an airline. The only player to whom this effectively applies in Europe is Amadeus. Who just happens to be the dominant player in GDS across Europe. They currently have an ownership structure which is approx 44% airline owners (AF-22%, LH-11% and IB 11%) the balance is from two private equity firms. The debate is over the possible control.
Rightly or wrongly it would be a stretch of anyone's imagination to assume that these airlines do NOT exert a significant amount of influence on Amadeus to the benefit of the company. That said - some of the recent behavior demonstrates otherwise.
I fall firmly on the side of the level of ownership indicates a level of control. Consequently the airlines should play fair across the board and the regulations should reflect that. This so called proposed amendment seems to be a reasonable way of addressing the issue. I highly recommend that our readers go and review the current regs and the proposed changes. Get involved in the debate.
You be the judge!
Here is the text of the PR release issued today on the subject.
Travel Groups Support Kirkhope Amendments on CRS Reform
Rejects others that fail to close the Parent Carrier loophole
London, England, 20 May 2008--London, England, 19 May 2008--Ahead of political group meetings in Strasbourg this week to formulate positions within the European Parliament Committee on Transport and Tourism (TRAN) on the Kirkhope report on the CRS Code of Conduct, and in anticipation of a TRAN vote in late May on the report, the International Airline Passengers Association (IAPA), the Institute of Travel Management (ITM) and the Business Travel Coalition (BTC) late last week provided their initial reactions to the key amendments tabled. The letter as transmitted to the MEPs follows.
---
MEP LETTER
15 May 2008
Re: Consumer Organisations Voice Strong Support for Kirkhope Amendments and Urge Rejection of Amendments 44, 46 and 47
Dear Transport Committee Members:
Ahead of the Transport Committee vote on Mr. Kirkhope’s report on the CRS Code of Conduct, the International Airline Passengers Association (IAPA), the Institute of Travel Management (ITM) and the Business Travel Coalition (BTC) (the “Consumer Organisations”) would like to provide their initial reactions to the key amendments tabled. A more complete amendment endorser will follow once full translations have been released.
First and foremost, the Consumer Organisations would like to express their strong endorsement of Mr. Kirkhope’s proposed amendments to the Commission proposal. Of major significance is his solution to address the dangerous legislative loophole exposed in the Commission’s draft under the definition of ‘Parent Carrier’ (Article 2 (g)), by establishing CRS ownership as a fully independent criterion when assessing parent carrier status. The introduction of this test takes into account the incentives for abuse which exist for airlines meaningfully participating in the capital and governance of a CRS and limits the discretion of the Commission which had previously declared its intention to designate parent carriers on a case-by-case basis using ‘effective control’ as the only critical criterion . Mr. Kirkhope has the consumer’s best interests at heart and we heartily commend his approach.
A number of constructive amendments have been submitted calling for full divestiture by airlines with stakes in system vendors over time. Whilst airline divestiture would ultimately be the best solution for the Consumer Organisations, since it would completely eliminate the airline ownership problem that necessitates CRS rules, in the near term Parliament’s priority must be to ensure that any ambiguities are eliminated with respect to the existing Code of Conduct.
Mr. Kirkhope’s amendments in our view represent a significant and workable compromise in this respect. Failure to apply strict ex-ante rules to airline-owners of CRSs immediately will result in the reinforcement and creation of dangerous monopolies in a number of European countries. In our letter to Parliament (with additional signatories) of 3 April 2008 we wrote that since the Commission’s declaration of last November, which made it clear that the CRS Code of Conduct applies to no-one, airline owners have been free to discriminate in favour of the CRSs they own and CRSs have been free to discriminate in favour of their owning airlines. Travellers all across the EU and beyond are, as a result, at risk of being subjected to higher fares, less choice and poorer service.
Given the market conditions described above, we have grave concerns in relation to amendments 46 and 47, which provide the Commission with the continued competence to confer parent carrier status on the basis of ‘effective control’ alone. In a similar vein, amendment 44 eliminates the ownership test entirely, leading us directly back to the status quo and the same flaws exposed within the Commission proposal. These amendments are absolutely the wrong approach, since they disregard the consumer’s voice in order to give a regulatory free hand to a handful of national airlines which are free to abuse their CRS ownership positions. The notion advanced that the CRS rules should be harmonized with the effective control standards in the merger setting misses the point. In the interest of millions of dispersed European travellers, we strongly urge you and members of your group to reject these three amendments.
Our representatives remain at your disposal ahead of Parliamentary deliberations on the report.
Sincerely,
Jonathan French, Industry Affairs Spokesman, International Airline Passengers Association
Paul Tilstone, Executive Director, Institute of Travel Management
Kevin Mitchell, Chairman, Business Travel Coalition
###
CONTACT IAPA || Jonathan French | +44 (0)208 253 5052 | jonathan.french@iapa.co.uk
CONTACT BTC || Kevin Mitchell | 610-341-1850 | mitchell@BusinessTravelCoalition.com
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About IAPA
The International Airline Passengers Association has been representing the interests for frequent travellers for more than 45 years. With offices in Dallas, London and Hong Kong, IAPA speaks for 400,000 travellers throughout the world.
About BTC
Founded in 1994, the mission of the Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to them.
When the Commission Proposal was released on 15 November 2007, a DG TREN spokesperson explained that an airline with an ownership stake in a CRS in their view was not a parent carrier unless it also effectively controls that CRS
For the uninitiated or newcomers to this blog here are some of the background to the issue.
The European Commission (EC) is proposing to change its current CRS rules. The current regulation: Council Regulation (EEC) No 2299/89 of 24 July 1989 on a code of conduct for computerized reservation systems [Official Journal L 220 of 29.07.1989 can be found at the following URL: http://europa.eu/scadplus/leg/en/lvb/l24080.htm
The EU doesn't like the term GDS Global Distribution System and prefers CRS - Computer Reservation System. The old rules in essence were a different approach to fairness in displays on a travel agency terminal to those taken in the USA. ( For the US regs go here: http://www.dot.gov/affairs/Computer%20Reservations%20System.htm) Over time the importance of the GDS screen has lessened and issues of bias and control have taken on new forms as a result of the growth of the Internet and the global airline Alliances.
The new regulations are somewhat convoluted. But there has been a big issue raised over the definition of control. Essentially the EC has been under pressure from one of the GDS companies to eliminate the requirement for equal representation in all GDS if one of the players has an owner who is an airline. The only player to whom this effectively applies in Europe is Amadeus. Who just happens to be the dominant player in GDS across Europe. They currently have an ownership structure which is approx 44% airline owners (AF-22%, LH-11% and IB 11%) the balance is from two private equity firms. The debate is over the possible control.
Rightly or wrongly it would be a stretch of anyone's imagination to assume that these airlines do NOT exert a significant amount of influence on Amadeus to the benefit of the company. That said - some of the recent behavior demonstrates otherwise.
I fall firmly on the side of the level of ownership indicates a level of control. Consequently the airlines should play fair across the board and the regulations should reflect that. This so called proposed amendment seems to be a reasonable way of addressing the issue. I highly recommend that our readers go and review the current regs and the proposed changes. Get involved in the debate.
You be the judge!
Here is the text of the PR release issued today on the subject.
Travel Groups Support Kirkhope Amendments on CRS Reform
Rejects others that fail to close the Parent Carrier loophole
London, England, 20 May 2008--London, England, 19 May 2008--Ahead of political group meetings in Strasbourg this week to formulate positions within the European Parliament Committee on Transport and Tourism (TRAN) on the Kirkhope report on the CRS Code of Conduct, and in anticipation of a TRAN vote in late May on the report, the International Airline Passengers Association (IAPA), the Institute of Travel Management (ITM) and the Business Travel Coalition (BTC) late last week provided their initial reactions to the key amendments tabled. The letter as transmitted to the MEPs follows.
---
MEP LETTER
15 May 2008
Re: Consumer Organisations Voice Strong Support for Kirkhope Amendments and Urge Rejection of Amendments 44, 46 and 47
Dear Transport Committee Members:
Ahead of the Transport Committee vote on Mr. Kirkhope’s report on the CRS Code of Conduct, the International Airline Passengers Association (IAPA), the Institute of Travel Management (ITM) and the Business Travel Coalition (BTC) (the “Consumer Organisations”) would like to provide their initial reactions to the key amendments tabled. A more complete amendment endorser will follow once full translations have been released.
First and foremost, the Consumer Organisations would like to express their strong endorsement of Mr. Kirkhope’s proposed amendments to the Commission proposal. Of major significance is his solution to address the dangerous legislative loophole exposed in the Commission’s draft under the definition of ‘Parent Carrier’ (Article 2 (g)), by establishing CRS ownership as a fully independent criterion when assessing parent carrier status. The introduction of this test takes into account the incentives for abuse which exist for airlines meaningfully participating in the capital and governance of a CRS and limits the discretion of the Commission which had previously declared its intention to designate parent carriers on a case-by-case basis using ‘effective control’ as the only critical criterion . Mr. Kirkhope has the consumer’s best interests at heart and we heartily commend his approach.
A number of constructive amendments have been submitted calling for full divestiture by airlines with stakes in system vendors over time. Whilst airline divestiture would ultimately be the best solution for the Consumer Organisations, since it would completely eliminate the airline ownership problem that necessitates CRS rules, in the near term Parliament’s priority must be to ensure that any ambiguities are eliminated with respect to the existing Code of Conduct.
Mr. Kirkhope’s amendments in our view represent a significant and workable compromise in this respect. Failure to apply strict ex-ante rules to airline-owners of CRSs immediately will result in the reinforcement and creation of dangerous monopolies in a number of European countries. In our letter to Parliament (with additional signatories) of 3 April 2008 we wrote that since the Commission’s declaration of last November, which made it clear that the CRS Code of Conduct applies to no-one, airline owners have been free to discriminate in favour of the CRSs they own and CRSs have been free to discriminate in favour of their owning airlines. Travellers all across the EU and beyond are, as a result, at risk of being subjected to higher fares, less choice and poorer service.
Given the market conditions described above, we have grave concerns in relation to amendments 46 and 47, which provide the Commission with the continued competence to confer parent carrier status on the basis of ‘effective control’ alone. In a similar vein, amendment 44 eliminates the ownership test entirely, leading us directly back to the status quo and the same flaws exposed within the Commission proposal. These amendments are absolutely the wrong approach, since they disregard the consumer’s voice in order to give a regulatory free hand to a handful of national airlines which are free to abuse their CRS ownership positions. The notion advanced that the CRS rules should be harmonized with the effective control standards in the merger setting misses the point. In the interest of millions of dispersed European travellers, we strongly urge you and members of your group to reject these three amendments.
Our representatives remain at your disposal ahead of Parliamentary deliberations on the report.
Sincerely,
Jonathan French, Industry Affairs Spokesman, International Airline Passengers Association
Paul Tilstone, Executive Director, Institute of Travel Management
Kevin Mitchell, Chairman, Business Travel Coalition
###
CONTACT IAPA || Jonathan French | +44 (0)208 253 5052 | jonathan.french@iapa.co.uk
CONTACT BTC || Kevin Mitchell | 610-341-1850 | mitchell@BusinessTravelCoalition.com
---
About IAPA
The International Airline Passengers Association has been representing the interests for frequent travellers for more than 45 years. With offices in Dallas, London and Hong Kong, IAPA speaks for 400,000 travellers throughout the world.
About BTC
Founded in 1994, the mission of the Business Travel Coalition is to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to them.
When the Commission Proposal was released on 15 November 2007, a DG TREN spokesperson explained that an airline with an ownership stake in a CRS in their view was not a parent carrier unless it also effectively controls that CRS
16 May 2008
BA announces record profits - Walsh vows no more low fares
Free Willie no more. Now you pay.
In an interview with BBC after BA announced record profits, the BA CEO announced 'the era of very low fares is over in the short-term’.
He also announced that he intends to stay in the job for the next 10 years.
I think he knows something we don't.
In an interview with BBC after BA announced record profits, the BA CEO announced 'the era of very low fares is over in the short-term’.
He also announced that he intends to stay in the job for the next 10 years.
I think he knows something we don't.
Germany launches Nude Airline.
From the world of bizarre comes the specially covered seats of a charter flight for nudists.
For the story and many comments go here:
http://www.eturbonews.com/1087/nude-airline-take-germany
However I have to saw as someone who flies a lot, I definitely wouldn't want my carefully matured skin anywhere near an airline seat.
Cheers
Timothy
For the story and many comments go here:
http://www.eturbonews.com/1087/nude-airline-take-germany
However I have to saw as someone who flies a lot, I definitely wouldn't want my carefully matured skin anywhere near an airline seat.
Cheers
Timothy
15 May 2008
Multi GDS Desktop - not the smartest idea in the deck
Travelport plonked down a few pennies and salvaged G2's desktop app just before the company shut down. It will be used to replace the Datalex powered Worldspan desktop, the VERY old and creaking Focal point, and help resolve the issues of multiple hosts that the company will not consolidate.
This is probably not the smartest thing to do for client management. Consolidating a smart desktop using desktop apps in the days of SaaS just doesn't seem logical or economical. As its a year away from delivery, this one will have to wait for approval by the market.
As someone who laboured long and hard to bring advanced functionality to the desktop in the 1980s, I believe that this is a major regressive step for Travelport. The UI should be a webtop. Pure and Simple.
Cheers
Timothy
This is probably not the smartest thing to do for client management. Consolidating a smart desktop using desktop apps in the days of SaaS just doesn't seem logical or economical. As its a year away from delivery, this one will have to wait for approval by the market.
As someone who laboured long and hard to bring advanced functionality to the desktop in the 1980s, I believe that this is a major regressive step for Travelport. The UI should be a webtop. Pure and Simple.
Cheers
Timothy
BA's Directors look beyond Willie's flaws and will likely award $1.4million
So the BA board wants to reward Willie for all his faults.
Here you go my son - now run along home with your bag of loot.
Frankly very poor show on behalf of the board for rewarding him this way. As if the fiasco at T5 was not enough (you have seen my previous blog on his follies), today the latest stats show a significant fall in traffic.
The chop came down on Ayling much faster. If Willie has to go - and there are many who believe his performance is adversely affecting the airline - then the Board will have to eat a lot of humble pie.
Here you go my son - now run along home with your bag of loot.
Frankly very poor show on behalf of the board for rewarding him this way. As if the fiasco at T5 was not enough (you have seen my previous blog on his follies), today the latest stats show a significant fall in traffic.
The chop came down on Ayling much faster. If Willie has to go - and there are many who believe his performance is adversely affecting the airline - then the Board will have to eat a lot of humble pie.
14 May 2008
Boeing to Airbus - I feel your plane pain
So it seems the Gremlins have left Everett and moved back into Toulouse. Airbus announced yesterday - formally - that the move to Wave 2 production will be delayed. This will slow the delivery rate until at least 2011 maybe further.
The biggest impact will be felt at Emirates.
For the rest of the customers - this may not be such a bad thing given the current likely over-capacity of the market.
Still it shows, this stuff is REALLY hard. Boeing is feeling the pain too and while things are getting better - the chances of a simple 15 month delay are remote. For some customers the 787 delivery schedule will stretch into a 30 month delay for some of their equipment.
Boeing should seriously consider new build 767-300/400 passenger types. Airbus is purring along with A330 deliveries. If you are desperate they can give you an early slot on A340s.
Cheers
Timothy
The biggest impact will be felt at Emirates.
For the rest of the customers - this may not be such a bad thing given the current likely over-capacity of the market.
Still it shows, this stuff is REALLY hard. Boeing is feeling the pain too and while things are getting better - the chances of a simple 15 month delay are remote. For some customers the 787 delivery schedule will stretch into a 30 month delay for some of their equipment.
Boeing should seriously consider new build 767-300/400 passenger types. Airbus is purring along with A330 deliveries. If you are desperate they can give you an early slot on A340s.
Cheers
Timothy
13 May 2008
The shame of T5
From the outside it is a shining edifice ( a bit grubby with all that glass. I hope someone has remembered that glass needs to be cleaned to look nice). Landing at LHR these days is an impressive sight because T5 dominates the airport. It is a like a well choreographed ballet to watch. I enjoyed today BA’s hospitality for 7 hours between flights. I sampled as much as I could of the fare and facilities. Here are my impressions. Will T5 be able to handle the future volume? Will the $800 million emergency cash injection be enough. Can BAA recover, Will BA recover??? Read on.
1. It reminds me of the New BKK airport. That is not a positive comparison with other new terminals like the those in the Gulf.
2. The T5 design is a mess, I had heard other travelers describe it as good but not great. I will be more critical in saying there are some distinct design flaws and both BAA and BA are at fault
3. It is a very bad flow control airport.
4. The transfer features from T4 (where I landed ) to T5 were bad. However when more traffic is transferred then this should iron itself out.
5. Signage inside the terminal is confusing, the change in methodology will annoy many a frequent traveler, I guess we will have to get over it.
6. The boarding areas are simply too small. They are also WAY too complicated. The two story levels are just not good. Understandably this is due to the lack of space. However who ever came up with this idea should probably be shot. There are many other examples of better designs than this. New USA terminals like Seattle’s do a much better job.
7. Focus on smaller aircraft will come back to bite the airline as LHR continues to be restricted at its home base. Watching several flights board – I believe that BA better start having some flow control people come in and take over because when more Wide Bodies are in place then the airline is going to have a lot of problems.
8. Its too small. WHAT??? Yes it is just too small. Operating at about 50% capacity the terminal is going to have serious problems in the gate areas and other air side areas.
9. BA has abolished the Gold and First Class areas in the New Gallery concept. Gee – I don’t feel special any more. At the moment only the North area is open. If the South doesn’t have it then it wont exist. BA might as well abolish First Class and forget about the top tier of its FF class.
10. There is some VERY expensive and unnecessary kit – specifically the bag screening system is SLOWER than that of the conventional airports. It must have cost a fortune.
11. The entrance to Galleries, is both stupid and insulting. Its in a bad place its got very poor.
12. The quality of the build is clearly – well I could sugar coat it – but its crap. Poor fitting, bad finish, poor selection of materials. It is not going to wear well.
The only bright spot I was able to avoid the BAA Bag Gestapo. The measurement is enforced at security with the new bag screening system. They use the standard IATA size and the bags fit, YEA!!!
I guess you can say that T5 is better than T4. However my verdict? I think that BAA and BA should be chastened over the worst possible implementation of a new airport. However there is one positive thing we can say. Its better than the sewage farm who was the former occupant of the site. If you need to connect in Europe – avoid LHR.
Cheers
Timothy
1. It reminds me of the New BKK airport. That is not a positive comparison with other new terminals like the those in the Gulf.
2. The T5 design is a mess, I had heard other travelers describe it as good but not great. I will be more critical in saying there are some distinct design flaws and both BAA and BA are at fault
3. It is a very bad flow control airport.
4. The transfer features from T4 (where I landed ) to T5 were bad. However when more traffic is transferred then this should iron itself out.
5. Signage inside the terminal is confusing, the change in methodology will annoy many a frequent traveler, I guess we will have to get over it.
6. The boarding areas are simply too small. They are also WAY too complicated. The two story levels are just not good. Understandably this is due to the lack of space. However who ever came up with this idea should probably be shot. There are many other examples of better designs than this. New USA terminals like Seattle’s do a much better job.
7. Focus on smaller aircraft will come back to bite the airline as LHR continues to be restricted at its home base. Watching several flights board – I believe that BA better start having some flow control people come in and take over because when more Wide Bodies are in place then the airline is going to have a lot of problems.
8. Its too small. WHAT??? Yes it is just too small. Operating at about 50% capacity the terminal is going to have serious problems in the gate areas and other air side areas.
9. BA has abolished the Gold and First Class areas in the New Gallery concept. Gee – I don’t feel special any more. At the moment only the North area is open. If the South doesn’t have it then it wont exist. BA might as well abolish First Class and forget about the top tier of its FF class.
10. There is some VERY expensive and unnecessary kit – specifically the bag screening system is SLOWER than that of the conventional airports. It must have cost a fortune.
11. The entrance to Galleries, is both stupid and insulting. Its in a bad place its got very poor.
12. The quality of the build is clearly – well I could sugar coat it – but its crap. Poor fitting, bad finish, poor selection of materials. It is not going to wear well.
The only bright spot I was able to avoid the BAA Bag Gestapo. The measurement is enforced at security with the new bag screening system. They use the standard IATA size and the bags fit, YEA!!!
I guess you can say that T5 is better than T4. However my verdict? I think that BAA and BA should be chastened over the worst possible implementation of a new airport. However there is one positive thing we can say. Its better than the sewage farm who was the former occupant of the site. If you need to connect in Europe – avoid LHR.
Cheers
Timothy
Willie's Follies
Oh to be Willie Walsh. To have your PR department formally issue a statement saying that you are not going must be ignominious at best and soul destroying at worst. At a time when the airline should be on top of its game, Willies Follies are not coming out into public. Let’s enumerate them:
1. Letting BMED go. What a toe stubbing exercise #1
2. Letting GB Airways go. What a toe stubbing exercise #2
3. T5 the calculated risk – UGH (more in the future on T5 as I have just experienced its wonders).
4. Focusing on top end yield and then screwing up the Gold Members (more on this in my T5 story)
5. Refusing to pressure BAA at a time when they should have done to improve LHR
6. OpenSkies. The way to guarantee a fight with the pilots. Bravo Willie
7. A318 service LCY-JFK
8. The cargo scandal
9. Etc etc
As a shareholder and as Gold Card holder, I can tell you I am not happy. The litany of mistakes under Willie’s watch is palpable. The morale among the staff is very poor. So Willie – go back to Ireland. We need someone who can do a man’s job. Come back Jerry – we need you at BA since you did such a good job with Delta. Oh wait – he probably has a non-compete. Then come back Sir Rod…..
1. Letting BMED go. What a toe stubbing exercise #1
2. Letting GB Airways go. What a toe stubbing exercise #2
3. T5 the calculated risk – UGH (more in the future on T5 as I have just experienced its wonders).
4. Focusing on top end yield and then screwing up the Gold Members (more on this in my T5 story)
5. Refusing to pressure BAA at a time when they should have done to improve LHR
6. OpenSkies. The way to guarantee a fight with the pilots. Bravo Willie
7. A318 service LCY-JFK
8. The cargo scandal
9. Etc etc
As a shareholder and as Gold Card holder, I can tell you I am not happy. The litany of mistakes under Willie’s watch is palpable. The morale among the staff is very poor. So Willie – go back to Ireland. We need someone who can do a man’s job. Come back Jerry – we need you at BA since you did such a good job with Delta. Oh wait – he probably has a non-compete. Then come back Sir Rod…..
Yes Virginia there is a recession
Sssshhhh don’t tell George but there is a Recession on and its going to affect the airline travel and tourism industry in the USA.
The impact and depth of the downturn has surprised many. For eCommerce there have been a number of studies on how it affects the market. Frankly we have no real indicators to help us understand. So we will have to wait a little longer until we have seen the hard numbers from multiple sources. Still its not pretty. There will be blood – much more blood, yet to come in the market. Weak airlines as we have written before have several more factors against them, The price of fuel is the obvious one that will drive up the cost of doing business. What is interesting this time round is that the ability to weather the storm in the safety of Chapter 11 is vastly diminished.
So to all those commentators and pundits who say the worst is behind us – I say PHOWEE. This recession will be deeper and longer. The recovery will be slower. The silver lining? This time transformation is inevitable. If you don’t transform the model you will be crushed.
The impact and depth of the downturn has surprised many. For eCommerce there have been a number of studies on how it affects the market. Frankly we have no real indicators to help us understand. So we will have to wait a little longer until we have seen the hard numbers from multiple sources. Still its not pretty. There will be blood – much more blood, yet to come in the market. Weak airlines as we have written before have several more factors against them, The price of fuel is the obvious one that will drive up the cost of doing business. What is interesting this time round is that the ability to weather the storm in the safety of Chapter 11 is vastly diminished.
So to all those commentators and pundits who say the worst is behind us – I say PHOWEE. This recession will be deeper and longer. The recovery will be slower. The silver lining? This time transformation is inevitable. If you don’t transform the model you will be crushed.
T5 Walsh admits it was OK to go ahead even though the staff weren’t ready.
You have to wonder about the arrogance of BA and its CEO. He freely admits in front of a UK parliament Select Committee on Transport that BA was not ready but it took a calculated risk. At the same time he laid the blame of delays on BAA, pointing that their failure to keep to the timetable deprived BA’s staff from completing training. So he was quite happy to take the risk and eat the cost as a delay of 6 months would have been the alternative at a much higher cost (presumably to BA).
You have to wonder why this was allowed to be like that. Perhaps Willie should admit that perhaps his training at Aer Lingus was not quite good enough for his real job at BA.
You can be the judge of that.
You have to wonder why this was allowed to be like that. Perhaps Willie should admit that perhaps his training at Aer Lingus was not quite good enough for his real job at BA.
You can be the judge of that.
Oh dear - another down month in Vegas
Never mind what stays in Vegas... Getting it to Vegas seems to be the problem.
It is visitors and their cash.
THE NUMBER OF VISITORS to Las Vegas declined by 1% in March, according to the Las Vegas Convention and Visitors Authority, the largest drop in more than a year. The total number of passengers traveling through Las Vegas' McCarran Airport in March was down 1.7%.
GAMING REVENUES on the Las Vegas Strip sunk nearly 5% for the month of March, according to the Nevada Gaming Control Board, marking the third straight month that revenues have fallen. The Las Vegas Strip hasn't seen three consecutive months of declining gaming revenues in nearly seven years.
THE MAJOR Las Vegas corporations reported their first quarter earnings last week, and the numbers were down across the board.
Do I hear any bids on the word recession?
Cheers
Timothy
It is visitors and their cash.
THE NUMBER OF VISITORS to Las Vegas declined by 1% in March, according to the Las Vegas Convention and Visitors Authority, the largest drop in more than a year. The total number of passengers traveling through Las Vegas' McCarran Airport in March was down 1.7%.
GAMING REVENUES on the Las Vegas Strip sunk nearly 5% for the month of March, according to the Nevada Gaming Control Board, marking the third straight month that revenues have fallen. The Las Vegas Strip hasn't seen three consecutive months of declining gaming revenues in nearly seven years.
THE MAJOR Las Vegas corporations reported their first quarter earnings last week, and the numbers were down across the board.
Do I hear any bids on the word recession?
Cheers
Timothy
HP Swallows up EDS gets back into Airline Hosting biz
I doubt that the airline biz was deep in their minds when EDS and HP finally got together. Rumours have been swirling on this for weeks. Some of us thought the MS+EDS announcement was the truth, but not so... now the real story.
This is going to incapacitate both companies in the near future if recent history is anything to go by.
You would think that HP had been burned once on the Airline biz with their abysmal management of OpenSkies. But they say that we are all doomed to repeat history.
This puts even more pressure on Sabre as to what they are going to do next.
Cheers
Timothy
This is going to incapacitate both companies in the near future if recent history is anything to go by.
You would think that HP had been burned once on the Airline biz with their abysmal management of OpenSkies. But they say that we are all doomed to repeat history.
This puts even more pressure on Sabre as to what they are going to do next.
Cheers
Timothy
09 May 2008
Sabre adopts T2's definition of Hybrid Value Carriers
Finally recognition!
Sabre's airline solutions team has acknowledged something that we have been saying for a very long time - the basic LCC model has evolved and there is a new kid on the block the HVC - Hybrid Value Carrier.
The core premise is that many other studies in LCCs have blinded concluded that the LCC model was rapidly growing and very large. From our analysis we believe the number of "purist" LCCs is actually quite small. Southwest for example is no longer a true LCC. Neither is EasyJet nor Virgin Blue.
T2 will shortly be publishing our annual LCC study. This year will be more focused on the business model and its evolution.
If you are interested in obtaining a copy of the last year's study based on Travel Trade and the LCCs or you would like a preview of this year's - please give me a ping on email. timothyo@t2impact.com
Cheers
Timothy
Sabre's airline solutions team has acknowledged something that we have been saying for a very long time - the basic LCC model has evolved and there is a new kid on the block the HVC - Hybrid Value Carrier.
The core premise is that many other studies in LCCs have blinded concluded that the LCC model was rapidly growing and very large. From our analysis we believe the number of "purist" LCCs is actually quite small. Southwest for example is no longer a true LCC. Neither is EasyJet nor Virgin Blue.
T2 will shortly be publishing our annual LCC study. This year will be more focused on the business model and its evolution.
If you are interested in obtaining a copy of the last year's study based on Travel Trade and the LCCs or you would like a preview of this year's - please give me a ping on email. timothyo@t2impact.com
Cheers
Timothy
08 May 2008
Sabre and LH - No Full Content Fees in DE and CH
Sabre and Lufthansa have engaged in a little - "let's play pat-a-cake" at Amadeus expense.
In inking a new full content deal - the two have thrown the entire German travel marketplace upside down. So now there are NO fees for Sabre agents booking LH segments whereas Amadeus agents will have to pay the 4.90 Euro (plus VAT) fee for each segment. Hmmm this one is going to court that's for sure.
Here is the full PR blurb
Cheers
Timothy
News Release
Sabre: No surcharge for Lufthansa and SWISS full content fares
Sabre Travel Network expands agreement with Lufthansa and SWISS
LONDON, United Kingdom, 7 May 2008 - Sabre Travel Network today announced that Sabre agents in Germany, Austria and Switzerland who choose to participate in the Lufthansa and SWISS Preferred Fares programs will be able to access and sell all fares and inventory without a fee.
“This is fantastic news for our agency customers who have told us they want to continue booking via the GDS because it's the most efficient and productive way of working,” said Martin Cowley, Senior Vice President for Sabre Travel Network in EMEA.
Commenting on the announcement, Thierry Antinori, Executive Vice President Marketing and Sales, Lufthansa Passenger Airlines said: “Sabre is an important distribution channel and an efficient marketplace for all Lufthansa fares. Thanks to the extension of our agreement, we can now offer our Preferred Fares without any additional fees to participating travel agencies using Sabre.”
Harry Hohmeister, SWISS Chief Network & Distribution Officer said: “Sabre is a key partner in our distribution structure. And for our travel agency partners, Sabre offers a highly efficient means of booking all SWISS and Lufthansa flights and fares. Our extended agreement with Sabre will sharpen SWISS's competitive edge and provide all the travel agencies that use Sabre with access to all SWISS and Lufthansa fares without additional fees.”
Today's announcement between Sabre, Lufthansa and SWISS also gives Sabre subscribers around the world continued access to all published fares and inventory.
“It's our standing philosophy to find solutions that meet the needs of everyone in the industry and today's announcement with Lufthansa and SWISS reinforces our ability to deliver this while highlighting the continued value of the GDS,” said Cowley.
“We're confident today's announcement will be well received by the industry, delivering benefits to our existing agents and new customers we hope to attract as part of our continued expansion in Europe,” he said.
In inking a new full content deal - the two have thrown the entire German travel marketplace upside down. So now there are NO fees for Sabre agents booking LH segments whereas Amadeus agents will have to pay the 4.90 Euro (plus VAT) fee for each segment. Hmmm this one is going to court that's for sure.
Here is the full PR blurb
Cheers
Timothy
News Release
Sabre: No surcharge for Lufthansa and SWISS full content fares
Sabre Travel Network expands agreement with Lufthansa and SWISS
LONDON, United Kingdom, 7 May 2008 - Sabre Travel Network today announced that Sabre agents in Germany, Austria and Switzerland who choose to participate in the Lufthansa and SWISS Preferred Fares programs will be able to access and sell all fares and inventory without a fee.
“This is fantastic news for our agency customers who have told us they want to continue booking via the GDS because it's the most efficient and productive way of working,” said Martin Cowley, Senior Vice President for Sabre Travel Network in EMEA.
Commenting on the announcement, Thierry Antinori, Executive Vice President Marketing and Sales, Lufthansa Passenger Airlines said: “Sabre is an important distribution channel and an efficient marketplace for all Lufthansa fares. Thanks to the extension of our agreement, we can now offer our Preferred Fares without any additional fees to participating travel agencies using Sabre.”
Harry Hohmeister, SWISS Chief Network & Distribution Officer said: “Sabre is a key partner in our distribution structure. And for our travel agency partners, Sabre offers a highly efficient means of booking all SWISS and Lufthansa flights and fares. Our extended agreement with Sabre will sharpen SWISS's competitive edge and provide all the travel agencies that use Sabre with access to all SWISS and Lufthansa fares without additional fees.”
Today's announcement between Sabre, Lufthansa and SWISS also gives Sabre subscribers around the world continued access to all published fares and inventory.
“It's our standing philosophy to find solutions that meet the needs of everyone in the industry and today's announcement with Lufthansa and SWISS reinforces our ability to deliver this while highlighting the continued value of the GDS,” said Cowley.
“We're confident today's announcement will be well received by the industry, delivering benefits to our existing agents and new customers we hope to attract as part of our continued expansion in Europe,” he said.
06 May 2008
eTicketing hassles - Sabre offers vMCO
Sabre has come out with a virtual MCO as a partial solution to the hassles of the eTicketing mandates.
For more details read the press release.
http://phx.corporate-ir.net/phoenix.zhtml?c=73098&p=irol-newsArticle&ID=1139643&highlight=
Will this solve the issues? No - but its a very useful solution for airlines and agencies in this somewhat iffy enforced move.
Cheers
Timothy
For more details read the press release.
http://phx.corporate-ir.net/phoenix.zhtml?c=73098&p=irol-newsArticle&ID=1139643&highlight=
Will this solve the issues? No - but its a very useful solution for airlines and agencies in this somewhat iffy enforced move.
Cheers
Timothy
eTicketing hassles - Sabre offers vMCO
Sabre has come out with a virtual MCO as a partial solution to the hassles of the eTicketing mandates.
For more details read the press release.
http://phx.corporate-ir.net/phoenix.zhtml?c=73098&p=irol-newsArticle&ID=1139643&highlight=
Will this solve the issues? No - but its a very useful solution for airlines and agencies in this somewhat iffy enforced move.
Cheers
Timothy
For more details read the press release.
http://phx.corporate-ir.net/phoenix.zhtml?c=73098&p=irol-newsArticle&ID=1139643&highlight=
Will this solve the issues? No - but its a very useful solution for airlines and agencies in this somewhat iffy enforced move.
Cheers
Timothy
EDS and Microsoft in bed together?
Here is an interesting item that deserves some attention. Air Transport World reports via its ATW Online site a 4 part agreement between EDS and MS.
Citing Jim Dullum the veteran head of the EDS Travel and Transportation unit, ATW reported four key components in the new agreement. The first is that EDS will have access to MS resources dedicated ..."to the building and design and completion of our flight ops systems." The second is that Microsoft will set up a 24/7 help desk to support EDS. The third is "a go-to-market component" under which Microsoft actively will market and sell EDS reservations and flight operations products. Finally, the companies have adopted a commercial arrangement "that gets away from standard software licensing fees. . ."so as our business improves, so does what we pay Microsoft," the EDS spokesman was cited as saying.
This signals a second run at the market. Previously MS was involved in the design and build of Navitaire's "New Skies" Reservation System. For reference from MS go here: http://download.microsoft.com/download/4/c/6/4c600ca6-a041-4aab-9ad4-e74f3089ffec/GEMS14686/Navitaire_Solution_Brief.doc
As the players involved in the Airline IT market struggle to come to terms with a shifting environment and a now very powerful Amadeus, I believe we shall see more similar announcements such as this.
In the mean time - this will perhaps breathe life into the EDS Travel unit which previously has signaled its intention to sunset the old Swissair system ATRAXIS. EDS is also looking to retain Sabre as a customer who is being notably quiet on the subject of what it will do for a next gen Res system. Will EDS try and bring all 3 of its supported systems (SHARES, ATRAXIS and SABRE) into one common set? That would be interesting.
Cheers
Timothy
Citing Jim Dullum the veteran head of the EDS Travel and Transportation unit, ATW reported four key components in the new agreement. The first is that EDS will have access to MS resources dedicated ..."to the building and design and completion of our flight ops systems." The second is that Microsoft will set up a 24/7 help desk to support EDS. The third is "a go-to-market component" under which Microsoft actively will market and sell EDS reservations and flight operations products. Finally, the companies have adopted a commercial arrangement "that gets away from standard software licensing fees. . ."so as our business improves, so does what we pay Microsoft," the EDS spokesman was cited as saying.
This signals a second run at the market. Previously MS was involved in the design and build of Navitaire's "New Skies" Reservation System. For reference from MS go here: http://download.microsoft.com/download/4/c/6/4c600ca6-a041-4aab-9ad4-e74f3089ffec/GEMS14686/Navitaire_Solution_Brief.doc
As the players involved in the Airline IT market struggle to come to terms with a shifting environment and a now very powerful Amadeus, I believe we shall see more similar announcements such as this.
In the mean time - this will perhaps breathe life into the EDS Travel unit which previously has signaled its intention to sunset the old Swissair system ATRAXIS. EDS is also looking to retain Sabre as a customer who is being notably quiet on the subject of what it will do for a next gen Res system. Will EDS try and bring all 3 of its supported systems (SHARES, ATRAXIS and SABRE) into one common set? That would be interesting.
Cheers
Timothy
05 May 2008
BAA - How to make a bad situation worse LHR new carry-on policy
If you thought BAA was just the text book example of how not to do things - think again. They have instituted a new policy at LHR which is bound to drive even more passengers away.
After the debacle at T5 and the previous collapse of the baggage system (actually on going) at T4, one thing you would not want to do is to increase the amount of bags going through the baggage system. Well guess again.
As of this week BAA has implemented a NEW policy of draconian proportions in carry-on bags.
BRAVO BAA! No this is not the UK Dept. of Transportation, No this is not the airlines, YES this IS BAA.
It doesn't matter if you are an economy or premium traveler. What works everywhere else in the world - is no longer allowed at LHR.
If you don't believe me - I do have some nice pictures.
Cheers
Timothy
After the debacle at T5 and the previous collapse of the baggage system (actually on going) at T4, one thing you would not want to do is to increase the amount of bags going through the baggage system. Well guess again.
As of this week BAA has implemented a NEW policy of draconian proportions in carry-on bags.
BRAVO BAA! No this is not the UK Dept. of Transportation, No this is not the airlines, YES this IS BAA.
It doesn't matter if you are an economy or premium traveler. What works everywhere else in the world - is no longer allowed at LHR.
If you don't believe me - I do have some nice pictures.
Cheers
Timothy
04 May 2008
Aloha - I am not dead yet. The Cargo Airline gets a reprieve
Aloha refuses to die gracefully. The original buyer of the cargo operation - Saltchuk (based in Seattle) has reached agreement to acquire the cargo assets.
I am sure this will run and run some more.
Cheers
Timothy
I am sure this will run and run some more.
Cheers
Timothy
The Professor is in Dubai
I shall be at Arabian Travel Mart this week. May 7-9th. If you want to meet - give me a ping on email. timothyo@t2impact.com
Alas this means not many posts this week.
Cheers
Timothy
Alas this means not many posts this week.
Cheers
Timothy
Who said paper tickets are dead? IATA that's who!
So the final countdown has begun. IATA has decreed May 30th will be the last day for using paper tickets. I remain a little skeptical about the whole process. The BTC group are agitating strongly against the deadline and I think with some merit.
There are a number of major problems with ET (Electronic Ticketing). It is not as simplistic as IATA and others would have us believe. Further there is still this nagging feeling that ET is – well too complex. Perhaps we need to consider pure ticketless as a better way forward.
Frankly I don’t believe the IATA statistics that 98%+ of all the BSPs are already issuing all ET. I have this vision of some very unhappy accountants at Travel Agencies (and airlines revenue management departments) in some countries who are desperately figuring out how to get those last people to use ET. And then there will be all those users out there.
Frankly I think it is all a sinister plot. If you are a conspiracy theorist – this is just another form of ancillary revenue. The number of tickets returned under ET is significantly less than was the case under paper tickets. I saw a statistic from 2000 where the number (in the USA) was 2% of all paper tickets were never used but 5% of all electronic tickets were not used and not returned for some value. 3% gross revenue boost is a better number than most airlines make in yields. All for doing nothing!
Still ET is better than paper.
Cheers
There are a number of major problems with ET (Electronic Ticketing). It is not as simplistic as IATA and others would have us believe. Further there is still this nagging feeling that ET is – well too complex. Perhaps we need to consider pure ticketless as a better way forward.
Frankly I don’t believe the IATA statistics that 98%+ of all the BSPs are already issuing all ET. I have this vision of some very unhappy accountants at Travel Agencies (and airlines revenue management departments) in some countries who are desperately figuring out how to get those last people to use ET. And then there will be all those users out there.
Frankly I think it is all a sinister plot. If you are a conspiracy theorist – this is just another form of ancillary revenue. The number of tickets returned under ET is significantly less than was the case under paper tickets. I saw a statistic from 2000 where the number (in the USA) was 2% of all paper tickets were never used but 5% of all electronic tickets were not used and not returned for some value. 3% gross revenue boost is a better number than most airlines make in yields. All for doing nothing!
Still ET is better than paper.
Cheers
02 May 2008
Whither BMI
Another lively podcast moderated by Addison:
http://iagblog.podOmatic.com/entry/eg/2008-05-02T14_32_19-07_00
Couple of points to note.
I am a firm believer that Sir Michael Bishop has a few cards yet to play. If LH thinks this is a done deal then they are sadly mistaken. In the podcast we debate the possibilities. I encourage you to listen. If you wish to comment please feel free.
Regards
Timothy
http://iagblog.podOmatic.com/entry/eg/2008-05-02T14_32_19-07_00
Couple of points to note.
I am a firm believer that Sir Michael Bishop has a few cards yet to play. If LH thinks this is a done deal then they are sadly mistaken. In the podcast we debate the possibilities. I encourage you to listen. If you wish to comment please feel free.
Regards
Timothy
01 May 2008
Its May Day - do you know where your economy is?
So this is supposed to be the day when all workers (I presume that means all the readers of this blog at least) are enjoying the fruits of their sweat and toil.
But as uncertainty clouds everything - here is a survey published today of the state of at least one country- the USA. Remember this is the country that takes the LEAST amount of holidays, i have put in bold the relevant statistic:
Price of Gas, Groceries, Home Heating and Taxes Impacting Budgets
COLUMBUS, OH – 5/1/08 – Thunderstorms remain on the radar for the U.S. economy and consumers continue to feel the pinch. According to the latest American Pulse™ Survey of 4,055 respondents, 61.7% are dining out less, 57.3% are driving less, 47.4% are attending fewer movies, 46.1% are forgoing department stores for discount retailers and 45.3% are cutting back on their vacation budget to cope with the current economic environment.
What is impacting consumer budgets the most (percent of those saying “very much”)?
• 67.9% say gas prices
• 47.2% say groceries
• 46.8% say home heating and cooling costs
• 36.1% say taxes
One way consumers appear to be coping with pressures on the family budget is by learning a new shopping skill – haggling for price. According to the survey, half of Americans (50.3%) report having negotiated for better prices on products other than a home or vehicle in light of the current economic situation. Americans say they haggle the most for better costs on tires/batteries/auto repair (38.6%), followed by appliances (37.3%) and electronics (37.2%).
But as uncertainty clouds everything - here is a survey published today of the state of at least one country- the USA. Remember this is the country that takes the LEAST amount of holidays, i have put in bold the relevant statistic:
Price of Gas, Groceries, Home Heating and Taxes Impacting Budgets
COLUMBUS, OH – 5/1/08 – Thunderstorms remain on the radar for the U.S. economy and consumers continue to feel the pinch. According to the latest American Pulse™ Survey of 4,055 respondents, 61.7% are dining out less, 57.3% are driving less, 47.4% are attending fewer movies, 46.1% are forgoing department stores for discount retailers and 45.3% are cutting back on their vacation budget to cope with the current economic environment.
What is impacting consumer budgets the most (percent of those saying “very much”)?
• 67.9% say gas prices
• 47.2% say groceries
• 46.8% say home heating and cooling costs
• 36.1% say taxes
One way consumers appear to be coping with pressures on the family budget is by learning a new shopping skill – haggling for price. According to the survey, half of Americans (50.3%) report having negotiated for better prices on products other than a home or vehicle in light of the current economic situation. Americans say they haggle the most for better costs on tires/batteries/auto repair (38.6%), followed by appliances (37.3%) and electronics (37.2%).
Gol - Problems mount on Varig and Fuel issues
Call it a little hubris, but the chaps at Gol have stumbled of late on Varig and the market realities.
On Varig - they have changed the model at least 5 times since acquiring the former Brazilian Star. Into London, Into Paris, a Hub in Madrid,etc etc. International route development takes time. Clearly not a lot of patience from the former bus drivers at Gol.
They need to settle down and to let the business run itself for a while.
On Varig - they have changed the model at least 5 times since acquiring the former Brazilian Star. Into London, Into Paris, a Hub in Madrid,etc etc. International route development takes time. Clearly not a lot of patience from the former bus drivers at Gol.
They need to settle down and to let the business run itself for a while.
So We Change Partners..
A new 3 way is being proposed. BA/AA/CO. This far more appropriate than the proposed mergers in our view and is the appropriate response by all 3 players.
Digging beneath the surface - it is interesting to see who wins here. Actually all 3 do.
BA and AA get further into bed. The likelihood is that the US DoT will finally allow the transatlantic version of the Code Shares to take place as a result.
AA gets a long sought after link to CO and protects its base. Fortress Texas! AA has benefited for many years from the withdrawal of DL from the Dallas hub. This has left fares high.
CO probably gets the most immediate value with incremental revenue which should outweigh the loss of the Skyteam business.
BA's shares rose this morning 5% on the news.
Digging beneath the surface - it is interesting to see who wins here. Actually all 3 do.
BA and AA get further into bed. The likelihood is that the US DoT will finally allow the transatlantic version of the Code Shares to take place as a result.
AA gets a long sought after link to CO and protects its base. Fortress Texas! AA has benefited for many years from the withdrawal of DL from the Dallas hub. This has left fares high.
CO probably gets the most immediate value with incremental revenue which should outweigh the loss of the Skyteam business.
BA's shares rose this morning 5% on the news.
30 April 2008
Aloha converts to Chapter 11. Cargo shuts down. State in chaos
Sadly despite best efforts from a number of entities, Aloha's lead creditor GMAC refuse to fund any more time for the carrier and it ran out of cash. The airline has been put out of business and the management and owners as debtors converted the filing to Chapter 7 on Monday night.
Aloha will now cease to exist.
Aloha will now cease to exist.
29 April 2008
Regionals and ACMI operators starting to look a little thin.
The surprise bid by Skywest for ExpressJet over the weekend - and the subsequent speed with which it was rejected is likely to be a harbinger of more upheaval in the market.
ExpressJet has been struggling since former parent CO cut back on its hours. Running a lite operation on its own was perhaps not the smartest move but they are still trying. Best of luck to them. I think they are going to need it. That said their value jumped on Friday and has stayed up on Monday and Tuesday. It means someone is in the hunt.
Republic is looking less than its normal robust self. With warning bells being sounded. Previously it looked like the Commuter ACMI operator could do no wrong. Now some of the aircraft asset owners are getting jittery.
Frankly as we have written before the current ACMI Pay for Play models are going to change which makes the whole sector look less appetizing.
And then there is Mesa. Will someone please put this puppy out of its misery!
ExpressJet has been struggling since former parent CO cut back on its hours. Running a lite operation on its own was perhaps not the smartest move but they are still trying. Best of luck to them. I think they are going to need it. That said their value jumped on Friday and has stayed up on Monday and Tuesday. It means someone is in the hunt.
Republic is looking less than its normal robust self. With warning bells being sounded. Previously it looked like the Commuter ACMI operator could do no wrong. Now some of the aircraft asset owners are getting jittery.
Frankly as we have written before the current ACMI Pay for Play models are going to change which makes the whole sector look less appetizing.
And then there is Mesa. Will someone please put this puppy out of its misery!
Nationwide shuts down. Fuel claims first African Airline in the crisis
This is a post from our sister blog. Sorry - I posted it wrong!
Confirmed - Nationwide has shut down
Efforts will be mounted to restart Nationwide which has a large labor force but prospects look bleak at this point.
The South African HVC was unable to compete with the LCCs in its market - 1Time, Mango and Kulula. Despite making a good run. The delay in resolving the BEE (Black Economic Empowerment) element at a time when cashflow was critical finally crushed the carrier.
Of the 3 LCCs - we believe that Fly Mango (supported by Government funds) with the Orange Planes and Kulula with the lime green ones are well positioned with BEE concluded. 1Time with the red planes is also BEE as required by the aviation charter. However without the support of the ZA government, it has found itself hard pressed with a gas guzzler of a fleet. Still strict adherence to the LCC model is sustaining them.
Labels: 1Time, Comair, Kulula, Mango
Fuel Claims Another Victim - Nationwide South Africa Stops Flying
According to reports coming from South Africa - Nationwide Airlines the low cost airline serving Domestic South Africa main markets, Lusaka in Zambia and a 4x a week JNB-LGW service has stopped flying from mid day today.
As yes these reports are not officially confirmed but you cannot reach their call center.
With a largely old fleet the airline has been severely impacted by the fuel price surge. Last year one of their older planes had an interesting mishap when an engine seperated from the aircraft just after takeoff. The airline was grounded for some time until checks were made.
There have been numerous airlines that have shut down in the last 12 months. Fuel cost has been the largest culprit.
Confirmed - Nationwide has shut down
Efforts will be mounted to restart Nationwide which has a large labor force but prospects look bleak at this point.
The South African HVC was unable to compete with the LCCs in its market - 1Time, Mango and Kulula. Despite making a good run. The delay in resolving the BEE (Black Economic Empowerment) element at a time when cashflow was critical finally crushed the carrier.
Of the 3 LCCs - we believe that Fly Mango (supported by Government funds) with the Orange Planes and Kulula with the lime green ones are well positioned with BEE concluded. 1Time with the red planes is also BEE as required by the aviation charter. However without the support of the ZA government, it has found itself hard pressed with a gas guzzler of a fleet. Still strict adherence to the LCC model is sustaining them.
Labels: 1Time, Comair, Kulula, Mango
Fuel Claims Another Victim - Nationwide South Africa Stops Flying
According to reports coming from South Africa - Nationwide Airlines the low cost airline serving Domestic South Africa main markets, Lusaka in Zambia and a 4x a week JNB-LGW service has stopped flying from mid day today.
As yes these reports are not officially confirmed but you cannot reach their call center.
With a largely old fleet the airline has been severely impacted by the fuel price surge. Last year one of their older planes had an interesting mishap when an engine seperated from the aircraft just after takeoff. The airline was grounded for some time until checks were made.
There have been numerous airlines that have shut down in the last 12 months. Fuel cost has been the largest culprit.
28 April 2008
UK's Airlines will lose under new Taxation Scheme
The old adage in the UK travel industry used to be - "Punters will walk across the street for a quid". For lay or not Brit-speak folks - a Consumer would rather save a pound and walk to another high street travel agency.
Well it seems that the UK's Chancellor of the Exchequer despite having been previously the Minister of Transport had not heard that saying.
Alistair Darling (like his leader a rather dour Scotsman), has significantly elevated the UK Air Duty. Much to the outcry of the industry, the new duty penalizes long haul. Ostensibly for reasons of applying a green tax. However he may come to regret his format.
The tax can only be imposed on the first sector. Therefore the departure tax for a flight connection into Europe could easily save a UK family of 4 up to GBP200 per trip. Thus for example a BA based holiday for 4 to Australia will be 200 pounds more expensive than for the same flight booked via Air France or Lufthansa.
Talk about pound foolish!
At a time when BA's whole business model is under threat because of the appalling infrastructure issues at its main base LHR (on which we have commented frequently). This will just add to BA's woes. It will however badly impact also BMI and Virgin.
Clearly the UK government has no clue about how the airline business works.
Have a nice day.
Well it seems that the UK's Chancellor of the Exchequer despite having been previously the Minister of Transport had not heard that saying.
Alistair Darling (like his leader a rather dour Scotsman), has significantly elevated the UK Air Duty. Much to the outcry of the industry, the new duty penalizes long haul. Ostensibly for reasons of applying a green tax. However he may come to regret his format.
The tax can only be imposed on the first sector. Therefore the departure tax for a flight connection into Europe could easily save a UK family of 4 up to GBP200 per trip. Thus for example a BA based holiday for 4 to Australia will be 200 pounds more expensive than for the same flight booked via Air France or Lufthansa.
Talk about pound foolish!
At a time when BA's whole business model is under threat because of the appalling infrastructure issues at its main base LHR (on which we have commented frequently). This will just add to BA's woes. It will however badly impact also BMI and Virgin.
Clearly the UK government has no clue about how the airline business works.
Have a nice day.
US Airways + United = Insanity
Just say no.
There is no justification of such a merger other than pure desperation. It would be a waste of paint.
Full Stop.
Cheers!
There is no justification of such a merger other than pure desperation. It would be a waste of paint.
Full Stop.
Cheers!
Continental follows Delta in exit from Certified Tours for inhouse Vacation Packages
Earlier this year, Delta Airlines announced its intention to terminate its long term agreement with Certified Tours for in-house Vacation and Tour services. Now Continental is following suit.
Certified actually was founded by Delta staffers and for many years enjoyed a very close relationship with the airline. In recent years that relationship drifted somewhat. Now too it would seem that Continental feels the same way.
The importance of Vacation packaging - especially Dynamic - has been a hot topic for the US and other markets. We believe that, critically speaking, the technology supporting the Tour Operating has not kept pace with the consumer demand for self service. All Tour Operators need to review their technology needs and provide solutions that are easier for the consumer as ultimate user.
While the profitability of Vacation Packages sustains many intermediary businesses, we believe that this will come under pressure in the coming year as Airlines and other suppliers seek to lower costs again.
Certified actually was founded by Delta staffers and for many years enjoyed a very close relationship with the airline. In recent years that relationship drifted somewhat. Now too it would seem that Continental feels the same way.
The importance of Vacation packaging - especially Dynamic - has been a hot topic for the US and other markets. We believe that, critically speaking, the technology supporting the Tour Operating has not kept pace with the consumer demand for self service. All Tour Operators need to review their technology needs and provide solutions that are easier for the consumer as ultimate user.
While the profitability of Vacation Packages sustains many intermediary businesses, we believe that this will come under pressure in the coming year as Airlines and other suppliers seek to lower costs again.
27 April 2008
Hurray! Someone is listening. CO rejects UA and US.
Larry Kellner and the Houston Oilers are to be congratulated - no urge to merge this time around.
Staying independent is now a prudent course. Merging with a bigger United or a sick US Airways might lead to Houston losing another home team.
Let's hope AMR seems this the same way and doesn't pursue either of the ugly sisters.
The WSJ is speculating that AMR will attempt to persuade CO to jump from Skyteam to OneWorld. CO was careful to leave that door very publicly open. Of course Star would benefit enormously if they dumped at least one of the two sick US airlines and replaced them with CO. With two transatlantic hubs (EWR and IAH) CO is a better bet than either UAL or US for Star.
Interesting... curiouser and curiouser.
Staying independent is now a prudent course. Merging with a bigger United or a sick US Airways might lead to Houston losing another home team.
Let's hope AMR seems this the same way and doesn't pursue either of the ugly sisters.
The WSJ is speculating that AMR will attempt to persuade CO to jump from Skyteam to OneWorld. CO was careful to leave that door very publicly open. Of course Star would benefit enormously if they dumped at least one of the two sick US airlines and replaced them with CO. With two transatlantic hubs (EWR and IAH) CO is a better bet than either UAL or US for Star.
Interesting... curiouser and curiouser.
The United Dance - CO vs US
So the rumours continue to swirl with regard to UAL, in our mind the weakest of the US carriers and the most in need of resolving its urge to merge.
Any proposed marriage with United will be a shotgun wedding at best. There is more than one person wielding that firearm too.
I believe that Continental is the best option, a UAL+US would be an unmitigated disaster.
I still firmly believe that these marriages - arranged, shotgun or out of love (sic) are all unsavory and unsuitable unions.
Cheers
Timothy
Any proposed marriage with United will be a shotgun wedding at best. There is more than one person wielding that firearm too.
I believe that Continental is the best option, a UAL+US would be an unmitigated disaster.
I still firmly believe that these marriages - arranged, shotgun or out of love (sic) are all unsavory and unsuitable unions.
Cheers
Timothy
Eos - final dawn
Eos named after the the Greek Goddess of the Dawn failed yesterday and ran its last flights today.
Jack Williams (ex AA, ex RCCL) while having a fine team and doing a good job of making their numbers were unable to come to conclusion with their funding source and shut down.
There are a lot of lessons here. But the one that should resonate with everyone is that the basic airline model is flawed and is not sustainable in today's economic environment.
This was a great business. It can be once again. The economic reality of the depth and breadth of the recession leaves no margin for errors.
Jack Williams (ex AA, ex RCCL) while having a fine team and doing a good job of making their numbers were unable to come to conclusion with their funding source and shut down.
There are a lot of lessons here. But the one that should resonate with everyone is that the basic airline model is flawed and is not sustainable in today's economic environment.
This was a great business. It can be once again. The economic reality of the depth and breadth of the recession leaves no margin for errors.
20 April 2008
The Professor is travelling this week
Dear All
I shall be in UK and DE this week. So not much time to write.
Go back and look at some of our older blogs. Some of them make interesting reading
Cheers and have a good week
Cheers
Timothy
I shall be in UK and DE this week. So not much time to write.
Go back and look at some of our older blogs. Some of them make interesting reading
Cheers and have a good week
Cheers
Timothy
Did Ending Regulation Help Fliers?
This is from a story in the NYTimes
http://www.nytimes.com/2008/04/17/business/17air.html
Check out the cool picture with the story.
Most people would think that deregulation has been a boon to all. I wholeheartedly support that notion. Less Government is more. But lately I have started to look at some of the fundementals of the pricing model for airlines. It is not good. Yield is WAY down. With Fuel prices now being the largest discretionary item of airline cost – there is essentially a new set of people holding the airlines hostage. The airlines face an uncertain future with oil at its current levels. We believe that there is unlikely to be a fall in the price of all of any significance.
So while deregulation helped just about everyone – it has hurt some.
I would argue that there is a case for some regulation coverage for certain types of activity. Now is a good time to think about the economic value of the air transportation system.
Lets hope someone does it soon.
Cheers
Timothy
http://www.nytimes.com/2008/04/17/business/17air.html
Check out the cool picture with the story.
Most people would think that deregulation has been a boon to all. I wholeheartedly support that notion. Less Government is more. But lately I have started to look at some of the fundementals of the pricing model for airlines. It is not good. Yield is WAY down. With Fuel prices now being the largest discretionary item of airline cost – there is essentially a new set of people holding the airlines hostage. The airlines face an uncertain future with oil at its current levels. We believe that there is unlikely to be a fall in the price of all of any significance.
So while deregulation helped just about everyone – it has hurt some.
I would argue that there is a case for some regulation coverage for certain types of activity. Now is a good time to think about the economic value of the air transportation system.
Lets hope someone does it soon.
Cheers
Timothy
Airline IFE – Stop being fancy – make it work
Airline IFE – Stop being fancy – make it work - PLEASE
Having spent many days on aircraft of the commercial variety – I can pretty much tell how good or bad an In Flight system is.
Pretty much the designers think of it as a necessary evil and not necessarily do they think it through.
I cannot count how many times I have watched Delta’s Linux based system reboot. I was even thinking about getting a penguin and dressing him up in a flight attendant’s uniform. The worst example of IFE I ever experienced was on Emirates first version of the A340-500 Biz class. It was just diabolically difficult to use. Wires and crap everywhere. I have been on more flights that needed resets than not. Particularly the power. In seat power should be standard and work fine. As I write this on DL 737-800 it has power working in some ports not all.
So here is some advice for airlines that I hope they heed. If they don’t then I guess I shall be SOL.
1. Fix the equipment. This needs to be hardened and reliable.
2. A big suggestion don’t make a one reset button for the whole system. That is just stupid.
3. Fix the controls. Make them simple. All IFE designers should go back to School. The User Experience is about making it simple and straightforward and easy.
4. There is such a thing as TOO much choice. Virgin America take note.
5. The headset socket combo. How difficult is it to make this work. Sticking the headset jack where it will get knocked all the time is just stupid.
6. Reasonable headsets. An aircraft is noisy. So acknowledge that and sell reasonable ones that work reliability.
7. Good content – this is much improved but still there is just only so much you can deal with.
8. Make it easy for the Flight Attendants to work the thing. All FAs I have ever spoken to believe that this is way more complicated than necessary.
God help us when we have internet access and email on US airlines. I loved Connection and used it on SQ, LH and SK. It was pretty cool using Skype to call friends from the plane – but the quality was good enough for even conference calls.
So pay attention Knuckleheads. IFE has to be easy and useful.
Please fix this.
Thanks
Timothy
Having spent many days on aircraft of the commercial variety – I can pretty much tell how good or bad an In Flight system is.
Pretty much the designers think of it as a necessary evil and not necessarily do they think it through.
I cannot count how many times I have watched Delta’s Linux based system reboot. I was even thinking about getting a penguin and dressing him up in a flight attendant’s uniform. The worst example of IFE I ever experienced was on Emirates first version of the A340-500 Biz class. It was just diabolically difficult to use. Wires and crap everywhere. I have been on more flights that needed resets than not. Particularly the power. In seat power should be standard and work fine. As I write this on DL 737-800 it has power working in some ports not all.
So here is some advice for airlines that I hope they heed. If they don’t then I guess I shall be SOL.
1. Fix the equipment. This needs to be hardened and reliable.
2. A big suggestion don’t make a one reset button for the whole system. That is just stupid.
3. Fix the controls. Make them simple. All IFE designers should go back to School. The User Experience is about making it simple and straightforward and easy.
4. There is such a thing as TOO much choice. Virgin America take note.
5. The headset socket combo. How difficult is it to make this work. Sticking the headset jack where it will get knocked all the time is just stupid.
6. Reasonable headsets. An aircraft is noisy. So acknowledge that and sell reasonable ones that work reliability.
7. Good content – this is much improved but still there is just only so much you can deal with.
8. Make it easy for the Flight Attendants to work the thing. All FAs I have ever spoken to believe that this is way more complicated than necessary.
God help us when we have internet access and email on US airlines. I loved Connection and used it on SQ, LH and SK. It was pretty cool using Skype to call friends from the plane – but the quality was good enough for even conference calls.
So pay attention Knuckleheads. IFE has to be easy and useful.
Please fix this.
Thanks
Timothy
18 April 2008
Now will you stop calling WN a LCC? Southwest to codeshare with International Airlines
I frequently get irked when people call US airlines Low Cost Carriers - LCCs. Such an animal is a rarity in the US market. The only carrier who fulfilled the model was Skybus. Westjet (sort of!).
But let's be clear. Southwest has not been one for many years. Air Tran is not. US Airways definitely is not (despite its stock symbol). Frontier is not. JetBlue is not.
So anyone who says that the US LCC market is approaching 30% (yes that means the Spin Doctors at Delwest) is smoking something.
'Nuff said?
Timothy
But let's be clear. Southwest has not been one for many years. Air Tran is not. US Airways definitely is not (despite its stock symbol). Frontier is not. JetBlue is not.
So anyone who says that the US LCC market is approaching 30% (yes that means the Spin Doctors at Delwest) is smoking something.
'Nuff said?
Timothy
Microsoft gets back into Travel - Buys Farecast
MS still owns a portion of Expedia but its somewhat remote. However, they decided to get back into the Travel game (via their MSN Travel vehicle) and have bought out Farecast.
Congrats to Hugh Cream and his team. This is a good acquisition on both sides and indicates the value of the search proposition now that sector has matured. With Yahoo owning a tool, Kayak and Sidestep as one, the business has the right dynamics.
This may seem to be a conflicting signal with regards to the G2 failure just recently. However I believe that this is just a shifting sands issue.
Underneath all of this is a supply side market that has gone soft. Better distribution and channel management tools are required. Better consumer tools are required. What is missing here is a better infrastructure. Harder problem to solve.
Cheers
Timothy
Congrats to Hugh Cream and his team. This is a good acquisition on both sides and indicates the value of the search proposition now that sector has matured. With Yahoo owning a tool, Kayak and Sidestep as one, the business has the right dynamics.
This may seem to be a conflicting signal with regards to the G2 failure just recently. However I believe that this is just a shifting sands issue.
Underneath all of this is a supply side market that has gone soft. Better distribution and channel management tools are required. Better consumer tools are required. What is missing here is a better infrastructure. Harder problem to solve.
Cheers
Timothy
"I'M NOT DEAD YET" G2Switchworks
Denying reports of its demise as premature - Alex and Co are still in fact working and processing tickets. This is reported today by Travel Weekly.
So despite the similarities from Spamalot, the business is operating with just a skeleton crew.
The core GDS piece is still available for sale. With the benefit of Monday morning hindsight - it is actually a shame that they lost. Alex and crew should be proud of themselves for what they accomplished. However it was an inappropriate decision to develop the tool the way they did.
For a true GNE to emerge it has to challenge the core precepts of the GDS model not recast it. This means that complex things like Automated Refunds should not be a high priority. Rather the system needs to be able to operate profitably at a cost structure below $1 per reservation selling price. At the same time it has to offer the whole package of connectivity and distribution capability. That is not a trivial matter even with the smart crew that Alex has/had around him.
So for the benefit of all - it means:
A fares engine with full pricing
An availability server
A fabulous search engine
A PNR container and management system
A full BI set.
Basically nothing else should be touched.
Ladies and Gents - start your engines and call me when you are ready.
Cheers
Timothy
So despite the similarities from Spamalot, the business is operating with just a skeleton crew.
The core GDS piece is still available for sale. With the benefit of Monday morning hindsight - it is actually a shame that they lost. Alex and crew should be proud of themselves for what they accomplished. However it was an inappropriate decision to develop the tool the way they did.
For a true GNE to emerge it has to challenge the core precepts of the GDS model not recast it. This means that complex things like Automated Refunds should not be a high priority. Rather the system needs to be able to operate profitably at a cost structure below $1 per reservation selling price. At the same time it has to offer the whole package of connectivity and distribution capability. That is not a trivial matter even with the smart crew that Alex has/had around him.
So for the benefit of all - it means:
A fares engine with full pricing
An availability server
A fabulous search engine
A PNR container and management system
A full BI set.
Basically nothing else should be touched.
Ladies and Gents - start your engines and call me when you are ready.
Cheers
Timothy
The Game is ON - Continental Redeems Golden Share
OK - so while I hate this - it looks like the game is afoot.
CO has redeemed its Golden Share back from NWA. So now the consolidation game can commence in earnest. It is no longer about common sense. It is about the cojones of boys and their toys.
I am firmly convinced that the best result here for CO is to take on the bigger fish and become the residual management team of a combined UAL/CO. Tilton seems to have outlasted his welcome in Chicago. Besides the $35 million in cash must be burning a hole in his pocket.
For American- this leaves few options. They definitely don't want to have to rescue US Airways. She who is decidedly the ugliest sister in all of this. But American's ego knows no bounds.
One prize is the shy and distant cousin - Alaska Airlines. She now has a great presence in the West Coast with 3 major hubs (SEA, PDX and LAX). A low cost operation and a great commuter airline - Horizon.
As I have said many times I hate this. This is bad all round.
Cheers
Timothy
CO has redeemed its Golden Share back from NWA. So now the consolidation game can commence in earnest. It is no longer about common sense. It is about the cojones of boys and their toys.
I am firmly convinced that the best result here for CO is to take on the bigger fish and become the residual management team of a combined UAL/CO. Tilton seems to have outlasted his welcome in Chicago. Besides the $35 million in cash must be burning a hole in his pocket.
For American- this leaves few options. They definitely don't want to have to rescue US Airways. She who is decidedly the ugliest sister in all of this. But American's ego knows no bounds.
One prize is the shy and distant cousin - Alaska Airlines. She now has a great presence in the West Coast with 3 major hubs (SEA, PDX and LAX). A low cost operation and a great commuter airline - Horizon.
As I have said many times I hate this. This is bad all round.
Cheers
Timothy
17 April 2008
Regulation - a concept whose time has come?
There is a lot of buzz around the regulation question. Should there be some re-regulation.
Check out today's NY Times on the subject. With attribution there:
Did Ending Regulation Help Fliers?
By MICHELINE MAYNARD
Published: April 17, 2008
Thirty years ago, airline deregulation was supposed to fulfill two main goals: spurring competition and bringing down airfares.
Now the number of airlines may be shrinking, as the planned merger between Delta and Northwest is likely to encourage other big airlines to pair off. Reduced competition will probably mean higher fares, particularly as the airlines shrink their fleets and cut flights to reduce costs.
All of which raises anew the question: Has deregulation really worked out?
By some measures, it has. By others, not so much.
Before the industry was deregulated in 1978, there were 10 big carriers — referred to as trunk lines, they controlled 90 percent of the American market — and 8 smaller regional carriers. The airlines were tightly controlled by the Civil Aeronautics Board, which regulated routes and set fares that guaranteed airlines a 12 percent return on flights that were 55 percent full.
Service was limited. American, for example, flew to only 39 cities, and Continental had to wait eight years for approval to fly from San Diego to Denver. Discounts were rare, too. When some airlines tried to offer cheaper fares in 1974 for charter flights, the president of the Air Transport Association trade group said it would be “the beginning of the end of the nation’s air transportation system as we know it today.”
It is a much different industry today, but not all of it is better.
Flying is less expensive, as fares have fallen steadily, adjusted for inflation, and there are more flights to more cities. The barrier to entry is lower. Over the last 30 years, more than 150 airlines have sought bankruptcy protection or disappeared, but more keep springing up as investors continue to put hope over experience, said Denis O’Connor, managing director with AlixPartners, a restructuring firm.
“People don’t understand how easy it is to start an airline,” Mr. O’Connor said, because of a ready supply of pilots and other employees, as well as used airplanes. “Why would you put capital in something if you can’t make a go of it? Southwest is an example of why you would.”
But the industry incurred losses of more than $30 billion from 2001 to 2006 and has gleaned only scarce profits since then. Persistently high fuel costs are driving airlines into bankruptcy court, or one another’s arms, something proponents of deregulation did not foresee, said Alfred E. Kahn, who led the air board when deregulation took place.
The Delta-Northwest merger plan, announced Monday, may lead to a deal between United and Continental, which would push other leading carriers like American to pursue partners of their own. Meanwhile, smaller carriers like Aloha and Frontier have sought bankruptcy protection in recent weeks.
As anybody who has flown recently knows, the level of comfort and reliability today bears no relation to that of the regulated days.
The naysayers at the time of deregulation predicted that “jobs would be gone, cities would lose service, and customers would pay higher fares,” said Mark H. Rose, a professor of history at Florida Atlantic University and a co-author of “The Best Transportation System in the World,” which examined deregulation of airlines, trucking and railroads.
They were partly right. After a big industry buildup through the 1990s, more than 100,000 jobs have been lost since the beginning of the decade. Former hub airports like Pittsburgh and St. Louis are now far less busy as hometown airlines have merged with other carriers and their replacements have pulled back service. Fares have fallen, on average, but they often rise when an airline leaves a city.
What the architects of deregulation did not predict at the time was the rise of frequent-flier programs and the hub-and-spoke system. Both have the effect of a kind of regulation, since they create incentives for consumers to stick with one airline, rather than shop solely on price. And fortress hubs, as their name implies, were intended to keep competitors at bay, giving the dominant airline in the city more control over pricing.
Alliances between big carriers are meant to offer bigger route networks, but they also provide another reason for travelers to shop around less.
All that would seem to spell less competition, not more.
But Southwest’s transformation from a Texas puddle jumper to the biggest airline in terms of domestic traffic (at least until the Delta-Northwest merger is completed) would not have happened without deregulation.
That airline’s evolution is what some experts point to as the best proof of why deregulation, for all its troubles, ultimately is better than a regulated environment.
“This is the free market at work, and we’re not used to it,” said Mo Garfinkle, a lawyer and a longtime airline industry consultant. “The idea of deregulation was to allow entry, whether it was successful or not.”
Mr. Garfinkle, who has advised many airlines involved in merger talks, says he believes that the industry is only now winding up the first phase of deregulation, in which industry practices had to be established.
Indeed, the federal government still regulates safety and the air traffic control system, and it steps in whenever either seems threatened, as passengers were reminded when American, Southwest and others grounded hundreds of flights this past month to reinspect aircraft.
On Wednesday, the Transportation Department announced two ideas for solving perennial delays at La Guardia Airport. One would call for the government to reduce the number of flights; the other would have airlines rein themselves in by selling some of the slots that give them the right to fly there.
Both ideas, now up for discussion, are meant to encourage growth by new airlines, which might otherwise have a hard time establishing service from La Guardia, said D. J. Gribbin, the department’s general counsel. “If you block out a market, you block out competition,” Mr. Gribbin said. “This benefits new entries.”
Beyond that, the next phase of deregulation will take place when airlines are truly globalized, flying freely inside other countries’ borders as well as their own, Mr. Garfinkle said. The merger between Delta and Northwest would be a major step toward that end, given their broad American network and extensive list of cities in Asia, Europe and elsewhere, he said.
However, the prospect of American carriers trying to compete against healthier foreign airlines, some of them still government-owned, is daunting to James L. Oberstar, Democrat of Minnesota, who heads the House Committee on Transportation and Infrastructure.
“It’s a very bad idea,” said Mr. Oberstar, whose state is home to Northwest’s headquarters. He said he expected “a cascade of carriers finding partners” if the Delta-Northwest combination is allowed to go forward, leading to fewer choices and higher prices for consumers.
Even if that happens, Mr. Garfinkle says he doubts that Congress will take up any serious re-regulation efforts. “You’re not going to re-regulate fares, and you’re not going to re-regulate service,” Mr. Garfinkle said. “It’s not something where you can be half pregnant.”
But Mr. Rose says members of Congress will have to discuss re-regulation, if only to seem as if they are looking out for their constituents’ interests. No city or state with an airline hub wants to see it vanish.
“It’s like losing a major league ball club,” he said. Airline hubs are “the kind of things you need to be major league, for your corporations and for yourself.”
Jeff Bailey contributed reporting.
Check out today's NY Times on the subject. With attribution there:
Did Ending Regulation Help Fliers?
By MICHELINE MAYNARD
Published: April 17, 2008
Thirty years ago, airline deregulation was supposed to fulfill two main goals: spurring competition and bringing down airfares.
Now the number of airlines may be shrinking, as the planned merger between Delta and Northwest is likely to encourage other big airlines to pair off. Reduced competition will probably mean higher fares, particularly as the airlines shrink their fleets and cut flights to reduce costs.
All of which raises anew the question: Has deregulation really worked out?
By some measures, it has. By others, not so much.
Before the industry was deregulated in 1978, there were 10 big carriers — referred to as trunk lines, they controlled 90 percent of the American market — and 8 smaller regional carriers. The airlines were tightly controlled by the Civil Aeronautics Board, which regulated routes and set fares that guaranteed airlines a 12 percent return on flights that were 55 percent full.
Service was limited. American, for example, flew to only 39 cities, and Continental had to wait eight years for approval to fly from San Diego to Denver. Discounts were rare, too. When some airlines tried to offer cheaper fares in 1974 for charter flights, the president of the Air Transport Association trade group said it would be “the beginning of the end of the nation’s air transportation system as we know it today.”
It is a much different industry today, but not all of it is better.
Flying is less expensive, as fares have fallen steadily, adjusted for inflation, and there are more flights to more cities. The barrier to entry is lower. Over the last 30 years, more than 150 airlines have sought bankruptcy protection or disappeared, but more keep springing up as investors continue to put hope over experience, said Denis O’Connor, managing director with AlixPartners, a restructuring firm.
“People don’t understand how easy it is to start an airline,” Mr. O’Connor said, because of a ready supply of pilots and other employees, as well as used airplanes. “Why would you put capital in something if you can’t make a go of it? Southwest is an example of why you would.”
But the industry incurred losses of more than $30 billion from 2001 to 2006 and has gleaned only scarce profits since then. Persistently high fuel costs are driving airlines into bankruptcy court, or one another’s arms, something proponents of deregulation did not foresee, said Alfred E. Kahn, who led the air board when deregulation took place.
The Delta-Northwest merger plan, announced Monday, may lead to a deal between United and Continental, which would push other leading carriers like American to pursue partners of their own. Meanwhile, smaller carriers like Aloha and Frontier have sought bankruptcy protection in recent weeks.
As anybody who has flown recently knows, the level of comfort and reliability today bears no relation to that of the regulated days.
The naysayers at the time of deregulation predicted that “jobs would be gone, cities would lose service, and customers would pay higher fares,” said Mark H. Rose, a professor of history at Florida Atlantic University and a co-author of “The Best Transportation System in the World,” which examined deregulation of airlines, trucking and railroads.
They were partly right. After a big industry buildup through the 1990s, more than 100,000 jobs have been lost since the beginning of the decade. Former hub airports like Pittsburgh and St. Louis are now far less busy as hometown airlines have merged with other carriers and their replacements have pulled back service. Fares have fallen, on average, but they often rise when an airline leaves a city.
What the architects of deregulation did not predict at the time was the rise of frequent-flier programs and the hub-and-spoke system. Both have the effect of a kind of regulation, since they create incentives for consumers to stick with one airline, rather than shop solely on price. And fortress hubs, as their name implies, were intended to keep competitors at bay, giving the dominant airline in the city more control over pricing.
Alliances between big carriers are meant to offer bigger route networks, but they also provide another reason for travelers to shop around less.
All that would seem to spell less competition, not more.
But Southwest’s transformation from a Texas puddle jumper to the biggest airline in terms of domestic traffic (at least until the Delta-Northwest merger is completed) would not have happened without deregulation.
That airline’s evolution is what some experts point to as the best proof of why deregulation, for all its troubles, ultimately is better than a regulated environment.
“This is the free market at work, and we’re not used to it,” said Mo Garfinkle, a lawyer and a longtime airline industry consultant. “The idea of deregulation was to allow entry, whether it was successful or not.”
Mr. Garfinkle, who has advised many airlines involved in merger talks, says he believes that the industry is only now winding up the first phase of deregulation, in which industry practices had to be established.
Indeed, the federal government still regulates safety and the air traffic control system, and it steps in whenever either seems threatened, as passengers were reminded when American, Southwest and others grounded hundreds of flights this past month to reinspect aircraft.
On Wednesday, the Transportation Department announced two ideas for solving perennial delays at La Guardia Airport. One would call for the government to reduce the number of flights; the other would have airlines rein themselves in by selling some of the slots that give them the right to fly there.
Both ideas, now up for discussion, are meant to encourage growth by new airlines, which might otherwise have a hard time establishing service from La Guardia, said D. J. Gribbin, the department’s general counsel. “If you block out a market, you block out competition,” Mr. Gribbin said. “This benefits new entries.”
Beyond that, the next phase of deregulation will take place when airlines are truly globalized, flying freely inside other countries’ borders as well as their own, Mr. Garfinkle said. The merger between Delta and Northwest would be a major step toward that end, given their broad American network and extensive list of cities in Asia, Europe and elsewhere, he said.
However, the prospect of American carriers trying to compete against healthier foreign airlines, some of them still government-owned, is daunting to James L. Oberstar, Democrat of Minnesota, who heads the House Committee on Transportation and Infrastructure.
“It’s a very bad idea,” said Mr. Oberstar, whose state is home to Northwest’s headquarters. He said he expected “a cascade of carriers finding partners” if the Delta-Northwest combination is allowed to go forward, leading to fewer choices and higher prices for consumers.
Even if that happens, Mr. Garfinkle says he doubts that Congress will take up any serious re-regulation efforts. “You’re not going to re-regulate fares, and you’re not going to re-regulate service,” Mr. Garfinkle said. “It’s not something where you can be half pregnant.”
But Mr. Rose says members of Congress will have to discuss re-regulation, if only to seem as if they are looking out for their constituents’ interests. No city or state with an airline hub wants to see it vanish.
“It’s like losing a major league ball club,” he said. Airline hubs are “the kind of things you need to be major league, for your corporations and for yourself.”
Jeff Bailey contributed reporting.
Podcast - The other side of the merger coin
Check out my participation in this podcast from this morning.
Cheer
Timothy
Episode: Mergers & Shotgun Weddings
http://iagblog.podOmatic.com/entry/eg/2008-04-17T09_25_48-07_00
Cheer
Timothy
Episode: Mergers & Shotgun Weddings
http://iagblog.podOmatic.com/entry/eg/2008-04-17T09_25_48-07_00
16 April 2008
Ancillary Revenue - EasyJet making money the good old fashion way.
Pssst want to sell EasyJet Tickets? Have I got a deal for you.
Simply give me 72,000 Euros (a year) and you can sell any ticket you like (as long as I like it;-)
Yes folks that's the deal with EasyJet's direct API. This is not too different than the Navitaire price to the airlines who use that system and want a direct access API.
But this is the first time I have been able to confirm that there is actually a price associated with connecting. While it seems wise - it is just another example of the way Ryanair and Easyjet are going to stay competitive.
Well more to the bottom line I say!!!
Cheers
Timothy
Simply give me 72,000 Euros (a year) and you can sell any ticket you like (as long as I like it;-)
Yes folks that's the deal with EasyJet's direct API. This is not too different than the Navitaire price to the airlines who use that system and want a direct access API.
But this is the first time I have been able to confirm that there is actually a price associated with connecting. While it seems wise - it is just another example of the way Ryanair and Easyjet are going to stay competitive.
Well more to the bottom line I say!!!
Cheers
Timothy
Who says all Chapter 11 Airlines die? Maxjet is back
Interestingly as a charter airline for sports teams.
Check out the website: www.maxjet.com
Cheers
Timothy
PS Thanks Addison
Check out the website: www.maxjet.com
Cheers
Timothy
PS Thanks Addison
United + US Airways - not a good merger candidate
In all the hubbub about mergers, one of the key ones discussed is the United and US Airways. (US Scareways to its friends).
The numbers don't actually look too bad. If you run through the fleets and the attributes - you think its a good mix.
One small detail? The synergies between the carriers on fleet are actually largely all played out. WHAT????
Yes you did not see a misprint. One of the fallacies of the Alliance Game has been the issue of once the airlines are in place and reach a steady state in an Alliance then the value of the Alliance goes away. IE the synergies are a one time benefit.
Thus while individually the airlines would look to be a good combination (although Tilton's stuffed shirts wouldn't last too long and anyway he is OUTTA there), the longer term prognosis is that the synergies in revenue are not as attractive.
You have been warned.
Cheers
Timothy
The numbers don't actually look too bad. If you run through the fleets and the attributes - you think its a good mix.
One small detail? The synergies between the carriers on fleet are actually largely all played out. WHAT????
Yes you did not see a misprint. One of the fallacies of the Alliance Game has been the issue of once the airlines are in place and reach a steady state in an Alliance then the value of the Alliance goes away. IE the synergies are a one time benefit.
Thus while individually the airlines would look to be a good combination (although Tilton's stuffed shirts wouldn't last too long and anyway he is OUTTA there), the longer term prognosis is that the synergies in revenue are not as attractive.
You have been warned.
Cheers
Timothy
New Delta logo already incorporates Northwest
One Expense DelWest wont have to go through is a rebranding exercise for the (I think its) fourth time. The new Delta logo is already pointing er maybe Northwest.
If you see the two tails side by side on the new website: http://www.newglobalairline.com/ you see that the pointy bit is going in the same direction.
Coincidence? I think not
Cheers
Timothy
If you see the two tails side by side on the new website: http://www.newglobalairline.com/ you see that the pointy bit is going in the same direction.
Coincidence? I think not
Cheers
Timothy
15 April 2008
Las Vegas - a good proxy for the US market
Las Vegas has been taking its knocks recently. The market is down. Over the last 4 months gaming revenues have fallen in 3 of them:
November -16.3%
December +4.1%(
January -4.1%
February -4.0%
February masks a probably worse number as it was a leap year so you should add 3.6% for the extra day.
Wall Street seems to agree - marking down several stocks. Major Las Vegas casino operators have seen their stock prices tumble in recent months. Boyd Gaming Corporation is down nearly 68%, the Las Vegas Sands Corporation is down 46%, Wynn Resorts Ltd. has fallen 38% and MGM Mirage stock is down 46%; all from records highs in 2007. Harrah's is running for the hills and changing its name to Caesars ( the second company to adopt the brand name!).
There is an ill here. All the recent development in LV has been at the ultra high end while the loss of rooms is at the low end. Sooner or later that model comes unstuck. I think we are there already. In 2002 the average Las Vegas room was in the $50s and $60s range. Now that number just 6 years later is doubled. This is unsustainable. What Vegas really needs - as in many cases is good value propositions. A value brand for the bulk business. Otherwise what usually happens in Vegas wont be happening at all.
November -16.3%
December +4.1%(
January -4.1%
February -4.0%
February masks a probably worse number as it was a leap year so you should add 3.6% for the extra day.
Wall Street seems to agree - marking down several stocks. Major Las Vegas casino operators have seen their stock prices tumble in recent months. Boyd Gaming Corporation is down nearly 68%, the Las Vegas Sands Corporation is down 46%, Wynn Resorts Ltd. has fallen 38% and MGM Mirage stock is down 46%; all from records highs in 2007. Harrah's is running for the hills and changing its name to Caesars ( the second company to adopt the brand name!).
There is an ill here. All the recent development in LV has been at the ultra high end while the loss of rooms is at the low end. Sooner or later that model comes unstuck. I think we are there already. In 2002 the average Las Vegas room was in the $50s and $60s range. Now that number just 6 years later is doubled. This is unsustainable. What Vegas really needs - as in many cases is good value propositions. A value brand for the bulk business. Otherwise what usually happens in Vegas wont be happening at all.
So the fall guys for the T5 Fiasco are...
Ladies and Gentlemen - the Imperial Majesty of Airlines has spoken. There will be no follow up and the airline "did not have any intention of making any announcements about further departures of BA directors today, nor in the not too distant future."
So there.
Gareth Kirkwood, director of operations, and David Noyes, director of customer services, will be leaving the company.
The airline said the departures follow the airline's move to London Heathrow's new Terminal 5.
The Concorde nose is now leaving from Gate 1 in the up position.
So there.
Gareth Kirkwood, director of operations, and David Noyes, director of customer services, will be leaving the company.
The airline said the departures follow the airline's move to London Heathrow's new Terminal 5.
The Concorde nose is now leaving from Gate 1 in the up position.
GDS bypass 2.0 - It really is about Technology
I have always been fascinated by the apparent cloak of "superior technology" that the GDS companies have wrapped themselves in.
The GNEs when they arrived on the scene also told the same story - superior technology. The idea being to follow the model that Technology was the answer and that only technology from the GDS would address the needs of both the supply chain and the distribution system.
Over time this has increasingly not been the case. So now we are at version 2.0. Enter Multicom in the UK. The first player to overtly espouse the Non-GDS Technology based distribution system. EasyJet is the first Carrier to adopt it - because they own their own Reservation System. They have created a multi-channel distribution system without the same (full) cost models of the GDS. There are MANY other solutions out there that already do this. Some are pure API/XML link/Web Services based solutions. OpenJaw Technologies in Dublin for example was an early proponent of this solution set. The airlines res systems also have had this capability for some time but the cost model didn't work because it was tied to a GDS type cost structure.
We are waiting for a pure version - call it V2.5. In our scenario (actually now technically feasible and deliverable) a front end engine manages the channel services and you have a pure system without resorting to other external systems for connectivity or uber monitors. Built into the reservations environment.
Interested? Contact us for more information.
Cheers
Timothy
The GNEs when they arrived on the scene also told the same story - superior technology. The idea being to follow the model that Technology was the answer and that only technology from the GDS would address the needs of both the supply chain and the distribution system.
Over time this has increasingly not been the case. So now we are at version 2.0. Enter Multicom in the UK. The first player to overtly espouse the Non-GDS Technology based distribution system. EasyJet is the first Carrier to adopt it - because they own their own Reservation System. They have created a multi-channel distribution system without the same (full) cost models of the GDS. There are MANY other solutions out there that already do this. Some are pure API/XML link/Web Services based solutions. OpenJaw Technologies in Dublin for example was an early proponent of this solution set. The airlines res systems also have had this capability for some time but the cost model didn't work because it was tied to a GDS type cost structure.
We are waiting for a pure version - call it V2.5. In our scenario (actually now technically feasible and deliverable) a front end engine manages the channel services and you have a pure system without resorting to other external systems for connectivity or uber monitors. Built into the reservations environment.
Interested? Contact us for more information.
Cheers
Timothy
14 April 2008
So its done - NW+DL = DelWest or Big DL
Welcome to the world’s largest and potentially most troubled airline New Delta
At a time when people should be considering how to reform their models – Delta and Northwest have decided that the world is better off with a large monolithic airline. Frankly this is good news for just about everybody else but Delta+Northwest Passengers and Staff.
For British – the new airline will adopt a moniker of Delboy.
The aim of the new airline is nothing short of worldwide domination with Air France/KLM group taking a stake and the Skyteam Alliance effectively becoming the AFKLDLNW alliance.
The rest of the US market will see rapidly rising air fares. Thanks a lot. So lets speculate a little at what is going to happen in the next year.
Dismantling of the CVG and MEM hubs. Restructuring of the regional business reducing ACMI flying. Bruising competition at certain key markets. The one benefit will be more International service.
Personally I think this will end badly for the stock holders. Sure the Hedge Funds will win in the near term. But the regular stock holders will be looking badly at this in 3 years time.
Could this be the end of Alaska Airlines Independence?
Cheers
T
At a time when people should be considering how to reform their models – Delta and Northwest have decided that the world is better off with a large monolithic airline. Frankly this is good news for just about everybody else but Delta+Northwest Passengers and Staff.
For British – the new airline will adopt a moniker of Delboy.
The aim of the new airline is nothing short of worldwide domination with Air France/KLM group taking a stake and the Skyteam Alliance effectively becoming the AFKLDLNW alliance.
The rest of the US market will see rapidly rising air fares. Thanks a lot. So lets speculate a little at what is going to happen in the next year.
Dismantling of the CVG and MEM hubs. Restructuring of the regional business reducing ACMI flying. Bruising competition at certain key markets. The one benefit will be more International service.
Personally I think this will end badly for the stock holders. Sure the Hedge Funds will win in the near term. But the regular stock holders will be looking badly at this in 3 years time.
Could this be the end of Alaska Airlines Independence?
Cheers
T
T5 Chaos now to stretch out till June.
There used to be a be nice signed around LHR which would advertise "FlightSwitch" This would tell the story of airlines switching terminals. It was broadcast on signs all over the place.
Today those signs would have to change almost by the hour. LHR has been a complete chaos not just for BA but for the other airlines who were similarly waiting for BA to vacate the space.
Well further bad news... it is not going to get better till at least June. Even then the move by BA long haul to T5 will improve BA's life. But there is still going to be a lot of renovations as the other airlines shuffle schedules around to accommodate the BA's revised schedule.
This will continue to enhance LHR as the world's best airport... not.
Today those signs would have to change almost by the hour. LHR has been a complete chaos not just for BA but for the other airlines who were similarly waiting for BA to vacate the space.
Well further bad news... it is not going to get better till at least June. Even then the move by BA long haul to T5 will improve BA's life. But there is still going to be a lot of renovations as the other airlines shuffle schedules around to accommodate the BA's revised schedule.
This will continue to enhance LHR as the world's best airport... not.
13 April 2008
Blog will be a little quiet next week
The Professor has a busy week and wont have a lot of time for the blog.
So apologies in advance.
If I play my cards right - I may end up in HNL
Cheers
Timothy
So apologies in advance.
If I play my cards right - I may end up in HNL
Cheers
Timothy
12 April 2008
State of the State - Airlines are now reeling
The State of the Airline industry particularly in the US market is going to be tough for the next year probably 2. We have a large number of significant problems - structural to the market - that are going to be affecting the commercial environment.
Since we know what a lot of these are - there is probably no point in belaboring the issue. However it is interesting to speculate what will actually be an outcome.
Unlike previous recession cycles - there is very little (if anything) left to cut back. The failure to revolutionize the business model is quite evident now. The Airlines believed they had another full year of strong profits before the down turn. The mortgage mess and the other factors causing the US led recession caught them largely unawares.
Given the large number of chapter 11 failures - there are likely to be more - this means that the industry must reach inside and reform itself. Both individual companies and the industry at large.
There are no easy ways to cut costs. Cutting back flights in the vain hope that you can save yourself to survival is actually bad for the economy. Not letting people fly by pricing the product incorrectly is going to actually exacerbate the recession. Every one dollar that is not spent in direct travel has a knock on effect in the economy. Unlike 9/11 it is not going to be spent at Home Depot and Linens & Things as we are seeing.
I believe ardently that this represents an opportunity for the market to reform and to fix even things that were not fixed during the last round of Chapter 11 filings. In hearings held last week Senator D Inouye (HI) actually postulated that deregulation had not been altogether a good thing.
What an interesting question.
However we cannot indulge in a trip down memory lane. There is a pressing set of issues that needs to be addressed. Regulation is not the cure all. But also complete laissez faire is not good either as the recent events in the Hawaii inter-island market have demonstrated.
The airlines need to take another hard look at what they sell and how they sell it. This requires concerned effort to modify the model to be more efficient. That will not be possible using the old tried and true methods.
There is one fundamental issue that must be addressed. Making the airline revenue match the costs. Perhaps now the notion of a seat mile can be put to rest.
Cheers
Timothy
Since we know what a lot of these are - there is probably no point in belaboring the issue. However it is interesting to speculate what will actually be an outcome.
Unlike previous recession cycles - there is very little (if anything) left to cut back. The failure to revolutionize the business model is quite evident now. The Airlines believed they had another full year of strong profits before the down turn. The mortgage mess and the other factors causing the US led recession caught them largely unawares.
Given the large number of chapter 11 failures - there are likely to be more - this means that the industry must reach inside and reform itself. Both individual companies and the industry at large.
There are no easy ways to cut costs. Cutting back flights in the vain hope that you can save yourself to survival is actually bad for the economy. Not letting people fly by pricing the product incorrectly is going to actually exacerbate the recession. Every one dollar that is not spent in direct travel has a knock on effect in the economy. Unlike 9/11 it is not going to be spent at Home Depot and Linens & Things as we are seeing.
I believe ardently that this represents an opportunity for the market to reform and to fix even things that were not fixed during the last round of Chapter 11 filings. In hearings held last week Senator D Inouye (HI) actually postulated that deregulation had not been altogether a good thing.
What an interesting question.
However we cannot indulge in a trip down memory lane. There is a pressing set of issues that needs to be addressed. Regulation is not the cure all. But also complete laissez faire is not good either as the recent events in the Hawaii inter-island market have demonstrated.
The airlines need to take another hard look at what they sell and how they sell it. This requires concerned effort to modify the model to be more efficient. That will not be possible using the old tried and true methods.
There is one fundamental issue that must be addressed. Making the airline revenue match the costs. Perhaps now the notion of a seat mile can be put to rest.
Cheers
Timothy
10 April 2008
Frontier makes it 6 since March 31st
Frontier Airlines that has been on every one's watch list joined the queue by filing for Chapter 11 late Thursday night.
The credit card processor demanded a substantial increase in hold back to protect its own position which has necessitated the filing.
Frontier with over $150million in cash in the bank was not in imminent danger but there were substantial risk issues in front of the Denver based carrier.
There are other airlines who are being watched. This is not over yet. The knock on effect will spread as other airlines feel the impact and as the industry in general takes into consideration oil at $135/pbl for the bench mark aviation grade crude.
So keep counting - here is the list:
Aloha
ATA
Skybus
Champion
Oasis Hong Kong
Frontier
Cheers
Timothy
The credit card processor demanded a substantial increase in hold back to protect its own position which has necessitated the filing.
Frontier with over $150million in cash in the bank was not in imminent danger but there were substantial risk issues in front of the Denver based carrier.
There are other airlines who are being watched. This is not over yet. The knock on effect will spread as other airlines feel the impact and as the industry in general takes into consideration oil at $135/pbl for the bench mark aviation grade crude.
So keep counting - here is the list:
Aloha
ATA
Skybus
Champion
Oasis Hong Kong
Frontier
Cheers
Timothy
Blogging is being regulated -Perhaps a good idea?
I would not regard myself as a "professional" blogger. The actual business of blogging has come under scrutiny recently and perhaps a good thing. We try to adhere to journalistic standards by separating rumour from fact and fact from opinion. However I am (personally) not a professionally trained journalist. So if we err - we publicly apologize. If we get it wrong then we try and correct the blog where the error has occurred.
It is now an official crime in the UK to publish fake blogs. The UK does not have a 1st Amendment right as the US. So effective May 28th the Sony "All I want for Christmas is a PS3" flog will be illegal. We understand that this would make lonelygirl15 also a crime if there is a commercial element to it. Flogging itself (Fake blogging - gotta love the term) was already outlawed in the European Community effective the first of this month (April) 2008.
There was some stir recently about the adverse health side effects of blogging. Well people need to get over that!
What this shows is that the practise has become so pervasive that it needs to be put under the scrutiny of the legislators. That is not a bad thing. I just hope that the blogging community respond appropriately.
Blogging is not journalism - but it is a valid form of information source. In my case I hope that this leads to enlightenment and that knowledge is gained as a result of what myself and the others of T2Impact have garnered and wish to share.
Cheers
Timothy
PS reminder. The comments expressed here are that of T2Impact who is solely responsible for its content. We promise to deliver as accurate information as we can. We welcome comments. If you wish to use us - please attribute with PRIOR permission. Mostly because I want to make sure that you are fully armed with the appropriate info. We also try not to get on our soap box too often.
It is now an official crime in the UK to publish fake blogs. The UK does not have a 1st Amendment right as the US. So effective May 28th the Sony "All I want for Christmas is a PS3" flog will be illegal. We understand that this would make lonelygirl15 also a crime if there is a commercial element to it. Flogging itself (Fake blogging - gotta love the term) was already outlawed in the European Community effective the first of this month (April) 2008.
There was some stir recently about the adverse health side effects of blogging. Well people need to get over that!
What this shows is that the practise has become so pervasive that it needs to be put under the scrutiny of the legislators. That is not a bad thing. I just hope that the blogging community respond appropriately.
Blogging is not journalism - but it is a valid form of information source. In my case I hope that this leads to enlightenment and that knowledge is gained as a result of what myself and the others of T2Impact have garnered and wish to share.
Cheers
Timothy
PS reminder. The comments expressed here are that of T2Impact who is solely responsible for its content. We promise to deliver as accurate information as we can. We welcome comments. If you wish to use us - please attribute with PRIOR permission. Mostly because I want to make sure that you are fully armed with the appropriate info. We also try not to get on our soap box too often.
HRGs Milky Bar Kid rides off... maybe
Mike Platt is leaving Hoggs - excuse me the HRG Group. After a long and illustrious career in the UK Travel market - he will ride off in the sunset. Most people who have been round long enough will actually remember Mike as the original (I believe) Milky Bar Kid.
Perhaps Mike is getting out at a good time. Last month is was revealed that a sister company controlled by the same owning family as BCD Holdings had grabbed more than 10% of HRG. This could be interpreted as the canny Dutchman JFVV is looking to consolidate again. This may see the reconstruction of BTI. Do remember the last time he took a stake in a competitor it was in Navigant which some say precipitated the tectonic shift in TMCs a few years back.
Mike is coming to join the ranks of the Unemployed (er I mean Consultants) so expect him to start showing up at conferences and the like. Perhaps now he will take the gloves off ;-)
Congrats Mike! Are the Milky Bars still on you?
Cheers
Timothy
Perhaps Mike is getting out at a good time. Last month is was revealed that a sister company controlled by the same owning family as BCD Holdings had grabbed more than 10% of HRG. This could be interpreted as the canny Dutchman JFVV is looking to consolidate again. This may see the reconstruction of BTI. Do remember the last time he took a stake in a competitor it was in Navigant which some say precipitated the tectonic shift in TMCs a few years back.
Mike is coming to join the ranks of the Unemployed (er I mean Consultants) so expect him to start showing up at conferences and the like. Perhaps now he will take the gloves off ;-)
Congrats Mike! Are the Milky Bars still on you?
Cheers
Timothy
09 April 2008
Why did AA cancel so many MD80 FLights?
It may seem to be illogical that only AA the world's largest operator of MD80 series aircraft cancelled such a large number of flights operated by these aging aircraft.
The route cause is probably a clear miscommunication between the FAA and the airline's maintenance people. Sorry chaps this should not be the case. About half of the world's largest airline's fleet is MD82/83s. So you would think by now they would know what the wiring bundle looks like. If my memory serves me right this is about 1/3rd of the total MD80 fleet.
I checked the other operators in the USA - Delta is the next biggest with over 100 and a smattering of the MD90s also but it has the much newer MD88s as its mainstay. No flight cancellations today. None from either Allegiant or Alaska.
Nor in Europe or anywhere else. The next largest operator I think is Alitalia. They also did not report major problems.
American has always marched to its own tune with regard to maintenance. Some of us remember the unorthodox way they removed CF6s of DC10s with a fork lift truck. Fine until one of the engine bolts sheered as a result and the results were disastrous.
The knee jerk response by the FAA to cover its own short comings with these emergency inspections may have an adverse affect. The hard pressed line engineers at AA have had to endure consecutive weeks of long overtime periods while they inspect the planes and get them back in the air.
I hope the FAA has enough inspectors in place to make sure these inspections occur properly. Not good chaps...
Timothy
The route cause is probably a clear miscommunication between the FAA and the airline's maintenance people. Sorry chaps this should not be the case. About half of the world's largest airline's fleet is MD82/83s. So you would think by now they would know what the wiring bundle looks like. If my memory serves me right this is about 1/3rd of the total MD80 fleet.
I checked the other operators in the USA - Delta is the next biggest with over 100 and a smattering of the MD90s also but it has the much newer MD88s as its mainstay. No flight cancellations today. None from either Allegiant or Alaska.
Nor in Europe or anywhere else. The next largest operator I think is Alitalia. They also did not report major problems.
American has always marched to its own tune with regard to maintenance. Some of us remember the unorthodox way they removed CF6s of DC10s with a fork lift truck. Fine until one of the engine bolts sheered as a result and the results were disastrous.
The knee jerk response by the FAA to cover its own short comings with these emergency inspections may have an adverse affect. The hard pressed line engineers at AA have had to endure consecutive weeks of long overtime periods while they inspect the planes and get them back in the air.
I hope the FAA has enough inspectors in place to make sure these inspections occur properly. Not good chaps...
Timothy
Oasis Hong Kong Files for Bankruptcy - stops flying
They just couldn't quite make it.
After a rocky start - the airline built a loyal following but with just 2 routes and the oil price/recession combo - the airline couldn't quite break out of startup mode.
There will be a lot of soul searching this morning as this is the 5 airline in 10 days to bite the dust.
Cheers
Timothy
After a rocky start - the airline built a loyal following but with just 2 routes and the oil price/recession combo - the airline couldn't quite break out of startup mode.
There will be a lot of soul searching this morning as this is the 5 airline in 10 days to bite the dust.
Cheers
Timothy
Its Official - 787 is delayed
They speak in quarters but the truth is - its at least a 6 month delay.
First deliveries are now scheduled for the end of 2009. Symbolically Boeing will try and meet that date.
There will be a lot of unhappy people today who will be lining up outside the Boeing Company's Treasure's door.
Let's hope this comes good now. Realistically the ramp up - as in my note from yesterday will be much slower.
Cheers
Timothy
First deliveries are now scheduled for the end of 2009. Symbolically Boeing will try and meet that date.
There will be a lot of unhappy people today who will be lining up outside the Boeing Company's Treasure's door.
Let's hope this comes good now. Realistically the ramp up - as in my note from yesterday will be much slower.
Cheers
Timothy
08 April 2008
Another 6 Months for 787 possibly longer
Bowing to pressure and reality - Boeing will tomorrow (Wednesday) announce a further delay to the 787 program. The Seattle newspapers are predicting a further 6 months. Unfortunately we think it will be longer.
Boeing's problems with the plane should not detract from the final product but there will continue to be issues during the early build run. Boeing is going to be under a lot of pressure to open up the key milestones to public scrutiny for the 787 program.
Specifically the following issues will be with the program:
1. Fully automated production services will not be effective until long into the first year of production.
2. There will be a slower ramp up of the production line than was anticipated. This BTW is very wise.
3. Boeing will be bringing more and more of the integration services in-house
4. Fabrication issues remain with key parts of the plane. The most noticeable issue is the wingbox strengthening
5. Weight will be a problem restricting range for ultra long haul traffic.
6. 787-3 will be pushed to the background while more -8 and -9s are added. This means a major headache for ANA. The Japanese airline may indeed start looking at Airbus products to replace its aging 767 fleet. It is the leading contender for the A380 in Japan.
7. Design freeze for the -10 model will be pushed back until the existing major version -8 and -9 are stable.
The cost to Boeing will be significant in penalties and delayed revenue. However in the longer term this should not be an overall issue when considered in the overall scheme of things. For short traders they can make money out of Boeing's near term misfortunes.
As a frame of reference the A380 took an 18 month delay. So far (assuming the 787 is delayed 6 months) and I think my calculations are correct - it will be 14 months in total. If I am right and the delay goes a little longer then we will have a similar situation of overall late delivery for both the Airbus and Boeing flagship programs.
There is a lesson here. The 777 was an aberration rather than the pattern for production and delivery timings. Bear that in mind Airbus and Boeing next time you set dates.
Cheers
Timothy
Boeing's problems with the plane should not detract from the final product but there will continue to be issues during the early build run. Boeing is going to be under a lot of pressure to open up the key milestones to public scrutiny for the 787 program.
Specifically the following issues will be with the program:
1. Fully automated production services will not be effective until long into the first year of production.
2. There will be a slower ramp up of the production line than was anticipated. This BTW is very wise.
3. Boeing will be bringing more and more of the integration services in-house
4. Fabrication issues remain with key parts of the plane. The most noticeable issue is the wingbox strengthening
5. Weight will be a problem restricting range for ultra long haul traffic.
6. 787-3 will be pushed to the background while more -8 and -9s are added. This means a major headache for ANA. The Japanese airline may indeed start looking at Airbus products to replace its aging 767 fleet. It is the leading contender for the A380 in Japan.
7. Design freeze for the -10 model will be pushed back until the existing major version -8 and -9 are stable.
The cost to Boeing will be significant in penalties and delayed revenue. However in the longer term this should not be an overall issue when considered in the overall scheme of things. For short traders they can make money out of Boeing's near term misfortunes.
As a frame of reference the A380 took an 18 month delay. So far (assuming the 787 is delayed 6 months) and I think my calculations are correct - it will be 14 months in total. If I am right and the delay goes a little longer then we will have a similar situation of overall late delivery for both the Airbus and Boeing flagship programs.
There is a lesson here. The 777 was an aberration rather than the pattern for production and delivery timings. Bear that in mind Airbus and Boeing next time you set dates.
Cheers
Timothy
07 April 2008
Oops almost missed the Goopedia story
So this came out on April 1st so we can all be forgiven for this one.
This is completely insane to think that Expedia would buy Google. Dara and crew know that the stock of the target is way down already....... wait.... is it the other way round?
OK - so this is Troogle 2.0. It was a stupid idea then and its a stupid idea now. Rich Barton - my former colleague at Expedia is on the record for agreeing:
"Google does such a good job skimming all of the really high margin profits from the travel media business already via paid clicks that I am not sure why they would want to get their hands so dirty just to get another bit of the margin. They just don't need to. They are at the very top of the pyramid of skimming the profits out of the business because they probably get paid on average $3 a click for a hotel, air, a cruise or a package keyword on Google right now and they don't have to do anything.... It doesn't make a tremendous amount of sense to me unless Google is changing strategies to target deep verticals to get into, which they have not done yet to date."
He continues to speculate its some Wall Street shenanigans
"That happens a lot these days. I may be paranoid and seeing the bogey man, but there is a lot of money in hedge funds that thrive off of short term price changes and I think that is what is going on here."
Amen Rich...
Cheers
Timothy
This is completely insane to think that Expedia would buy Google. Dara and crew know that the stock of the target is way down already....... wait.... is it the other way round?
OK - so this is Troogle 2.0. It was a stupid idea then and its a stupid idea now. Rich Barton - my former colleague at Expedia is on the record for agreeing:
"Google does such a good job skimming all of the really high margin profits from the travel media business already via paid clicks that I am not sure why they would want to get their hands so dirty just to get another bit of the margin. They just don't need to. They are at the very top of the pyramid of skimming the profits out of the business because they probably get paid on average $3 a click for a hotel, air, a cruise or a package keyword on Google right now and they don't have to do anything.... It doesn't make a tremendous amount of sense to me unless Google is changing strategies to target deep verticals to get into, which they have not done yet to date."
He continues to speculate its some Wall Street shenanigans
"That happens a lot these days. I may be paranoid and seeing the bogey man, but there is a lot of money in hedge funds that thrive off of short term price changes and I think that is what is going on here."
Amen Rich...
Cheers
Timothy
Empirical Evidence - Q1 was bad - Q2 will be worse
I have just been looking at the airport traffic figures for Q1 2008 and in particular the US market. They provide a somber backdrop to an already falling economy.
Based on the reporting numbers (at least 50%) for the major US airports and airlines - the first quarter of 2008 ended on a down note with a loss (.02%) of total US based traffic. Add to this the boost that should have come from an early Easter - following on from an extra day February and we can still see an ominous downward trend.
But this was only through Monday of last week. With 3 airlines out taking with them a large number of passengers - the month of April will be brutal when the traffic numbers appear.
The rest of the world is not so hot either. While not actually showing a down turn we are seeing softening in EVERY major region. The UK with the loss of at least one whole day of schedules in March from its largest airline (British Airways) is going to be leading the way in bad news for Europe. Should Alitalia fall or Olympic - then additional numbers will be off. We don't believe that there will be a corresponding boost based on the new 18 flights out of LHR to the USA.
Airline stocks will be taking a tumble even further than they have already. Airports in the public arena will also take a hit. The ripple effect across all the major economies will start to be felt way beyond the Aviation, Travel and Tourism sectors. This will only provide more evidence and to magnify the overall global economic slowdown.
Belt tightening time.
Based on the reporting numbers (at least 50%) for the major US airports and airlines - the first quarter of 2008 ended on a down note with a loss (.02%) of total US based traffic. Add to this the boost that should have come from an early Easter - following on from an extra day February and we can still see an ominous downward trend.
But this was only through Monday of last week. With 3 airlines out taking with them a large number of passengers - the month of April will be brutal when the traffic numbers appear.
The rest of the world is not so hot either. While not actually showing a down turn we are seeing softening in EVERY major region. The UK with the loss of at least one whole day of schedules in March from its largest airline (British Airways) is going to be leading the way in bad news for Europe. Should Alitalia fall or Olympic - then additional numbers will be off. We don't believe that there will be a corresponding boost based on the new 18 flights out of LHR to the USA.
Airline stocks will be taking a tumble even further than they have already. Airports in the public arena will also take a hit. The ripple effect across all the major economies will start to be felt way beyond the Aviation, Travel and Tourism sectors. This will only provide more evidence and to magnify the overall global economic slowdown.
Belt tightening time.
BALPA and BA - Its getting very ugly. Are we headed for a summer of discontent?
BA's pilots as represented by BALPA today issued an open letter (see below) questioning the current management of the airline. Without directly calling for Irishman - Willie Walsh's resignation- they are clearly a bunch of unhappy bunnies. Their main beef with BA's management is over OpenSkies (the airline) whch it was announced today will start service in June 2008.
The current sentiment ties the debacle at T5 (still hasn't had a full day) to BA's management and as a symptom not necessarily an accident.
This is going to get ugly before it gets better. Lets hope the two can kiss and make up or else we will have another summer of discontent. Then BA will have a real "Annus horribilis".
Cheers
Timothy
http://www.balpa.org.uk/Media---Pr/Open%20Letter.htm
The current sentiment ties the debacle at T5 (still hasn't had a full day) to BA's management and as a symptom not necessarily an accident.
This is going to get ugly before it gets better. Lets hope the two can kiss and make up or else we will have another summer of discontent. Then BA will have a real "Annus horribilis".
Cheers
Timothy
http://www.balpa.org.uk/Media---Pr/Open%20Letter.htm
Jafri at it again files another patent that will cause grief
NOTE: only read this post if you are a true believer in the US Constitution's First Ammendment protection of Free Speech.
Sometimes it is easy to see how the patent system has become such a mockery of Intellectual Property protection.
The following Patent PCT/US2007/003275 SYSTEM FOR AND METHOD OF PROVIDING TRAVEL-RELATED SERVICES was filed by CFARES in February 2007 - a Jafri Company. It was published in August last year. The public abstract should immediately give you clue as to its intentions: A traveler provides parameters (e.g., origin, destination, price, date, departure time) for purchasing a ticket. The price may be below the established airline price. A calculation is provided of parameters (e.g., prices, dates, time) of flights of airlines traveling between the origin and the destination. A comparison is made between the parameters of the traveler and parameters of the airline flight. When the comparison matches or almost matches, the traveler is notified, and is given a specified time (e.g. 24-hours) to accept the flight The traveler may pay the airline's established price. The traveler receives a coupon or voucher for the price reduction. The traveler redeems this coupon or voucher at an airline ticket office or at agencies identified by the airline.
Someone needs to challenge this as a prime example (in my humble opinion) of the poor manner in which the US patent system is being used. You have been warned.
To see the whole filing use any patent system viewer or go here:
www.freepatentsonline.com/WO2007095030.html
You have been warned.
Sometimes it is easy to see how the patent system has become such a mockery of Intellectual Property protection.
The following Patent PCT/US2007/003275 SYSTEM FOR AND METHOD OF PROVIDING TRAVEL-RELATED SERVICES was filed by CFARES in February 2007 - a Jafri Company. It was published in August last year. The public abstract should immediately give you clue as to its intentions: A traveler provides parameters (e.g., origin, destination, price, date, departure time) for purchasing a ticket. The price may be below the established airline price. A calculation is provided of parameters (e.g., prices, dates, time) of flights of airlines traveling between the origin and the destination. A comparison is made between the parameters of the traveler and parameters of the airline flight. When the comparison matches or almost matches, the traveler is notified, and is given a specified time (e.g. 24-hours) to accept the flight The traveler may pay the airline's established price. The traveler receives a coupon or voucher for the price reduction. The traveler redeems this coupon or voucher at an airline ticket office or at agencies identified by the airline.
Someone needs to challenge this as a prime example (in my humble opinion) of the poor manner in which the US patent system is being used. You have been warned.
To see the whole filing use any patent system viewer or go here:
www.freepatentsonline.com/WO2007095030.html
You have been warned.
Correction - G2 goes to Travelport not Amadeus
Despite earlier rumours to the contrary - my sources were not completely accurate. The deal for G2 which includes winding it up - goes to Travelport. Apparently there was a discussion between Amadeus and G2 but it didn't conclude.
So the G2 workstation will become the standard replacement now for both the Worldspan and Galileo solutions. This represented a significant portion of the development of G2 but much more went into the back end. Sadly this means those assets will likely fall by the way side.
The biz team has been largely dismissed and the tech team will be shrunk. As it is now an asset sale rather than a take over it is unlikely the airlines will see their investment recovered at all. The investors too are unlikely to get anything when the company is wrapped up. For Alex and crew this is sad.
For the Airlines this is even sadder. It shows that they have been thwarted again by the GDS in their efforts to control distribution. I will take a bet that says the total GDS bill for a legacy carrier will actually INCREASE in 2008 over 2007 and prior years.
With 3 of the 4 original GNEs, Patheo, G2 and ITA out of the GNE business - Revelex will still be there for Tour Operating but basically Farelogix is the sole surviving player of the original group.
GNEs RIP 2008
So the G2 workstation will become the standard replacement now for both the Worldspan and Galileo solutions. This represented a significant portion of the development of G2 but much more went into the back end. Sadly this means those assets will likely fall by the way side.
The biz team has been largely dismissed and the tech team will be shrunk. As it is now an asset sale rather than a take over it is unlikely the airlines will see their investment recovered at all. The investors too are unlikely to get anything when the company is wrapped up. For Alex and crew this is sad.
For the Airlines this is even sadder. It shows that they have been thwarted again by the GDS in their efforts to control distribution. I will take a bet that says the total GDS bill for a legacy carrier will actually INCREASE in 2008 over 2007 and prior years.
With 3 of the 4 original GNEs, Patheo, G2 and ITA out of the GNE business - Revelex will still be there for Tour Operating but basically Farelogix is the sole surviving player of the original group.
GNEs RIP 2008
06 April 2008
A comment on Alitalia
With the Italian basket case's losses accelerating there are but days away from either an orderly assumption or a catastrophic failure.
The election on April 13/14 will likely result in a Silvio victory but not with a sweeping mandate. This process often takes weeks to resolve before a viable Italian Government is formed. During this time the airline will continue to bleed red ink.
the options in front of the assembled parties are now pretty stark. As I have noted before the Government cannot put more money into the airline without risking EC sanctions. A full bankruptcy is political suicide. So that leaves the so called "Parmalat" reorg option or a modified version of the AF-KL deal.
It is unlikely that any of the original bidders would be interested - TPG has its hands full elsewhere, Mattelin Patterson is smarting from the grounding of ATA, surely the AirOne guys cannot be serious, and Aeroflot - well its Russian. Lufthansa would be mad to take it on - but it just might. British Airways - not a good time for them right now, esp as they just put a little cash into Iberia. Nope - I think I will stick with the two options above. KL/AF or a modified bankruptcy.
The unions were extremely foolish in holding out this long. It has only made matters worse.
Good luck though!
The election on April 13/14 will likely result in a Silvio victory but not with a sweeping mandate. This process often takes weeks to resolve before a viable Italian Government is formed. During this time the airline will continue to bleed red ink.
the options in front of the assembled parties are now pretty stark. As I have noted before the Government cannot put more money into the airline without risking EC sanctions. A full bankruptcy is political suicide. So that leaves the so called "Parmalat" reorg option or a modified version of the AF-KL deal.
It is unlikely that any of the original bidders would be interested - TPG has its hands full elsewhere, Mattelin Patterson is smarting from the grounding of ATA, surely the AirOne guys cannot be serious, and Aeroflot - well its Russian. Lufthansa would be mad to take it on - but it just might. British Airways - not a good time for them right now, esp as they just put a little cash into Iberia. Nope - I think I will stick with the two options above. KL/AF or a modified bankruptcy.
The unions were extremely foolish in holding out this long. It has only made matters worse.
Good luck though!
05 April 2008
Correction - that's 4 Airlines not 3 - Champion Air to cease service
One of the last of the 1980s startups is finally shutting its doors. Champion Air who began life as first First Air then MGM Grand Air has finally agreed to an orderly shutdown of its business. It will ground its 12 Boeing 727s and exit the business. While not a scheduled carrier - it was one of those airlines that filled a nice niche serving Las Vegas and the charter market. Obviously with only a small operation - it is not going to make a huge dent in the market.
the real killer for them was Allegiant grew too strong. Oil at over $100/pbl also was a killer for the old gas guzzlers.
So whose left in this space? Allegiant is clearly the star here. But OAS - Omni Air Services and the two surviving members of Global - World Airways and North American Air are surviving. The rest are pretty much all gone.
Is this an opportunity one may ask? I think the answer is yes for smart investors and careful seasoned management teams.
Cheers
Timothy
the real killer for them was Allegiant grew too strong. Oil at over $100/pbl also was a killer for the old gas guzzlers.
So whose left in this space? Allegiant is clearly the star here. But OAS - Omni Air Services and the two surviving members of Global - World Airways and North American Air are surviving. The rest are pretty much all gone.
Is this an opportunity one may ask? I think the answer is yes for smart investors and careful seasoned management teams.
Cheers
Timothy
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