The Travelport IPO Debacle. Investor Payback?

Despite some generous concessions at the last minute by the Travelport team on their feather beds and parachutes and reduction in the initial offer price, the “London deal of the year” has fallen apart and so there is to be no IPO for TP for at least another 6 months probably not now until 2011. A spin and a brave face allowed the announcement of the cancellation as follows: “We will consider bringing it back to the market at a future date, when equity market conditions are more favorable."

I have spoken to several people who have been on the periphery of the deal and spent the last few days chatting with some investment analysts who have familiarity with Travelports IPO Book. Based on these conversations I would like to give some analysis which I hope will put the failed IPO in perspective. I think we have to look at things through three criteria. For this IPO to work – the general economic climate had to be good, IE the market had to receptive to the type of deal, the specifics of Blackstone and its partners in being able to pre-sell the deal and then for the market herd to either accept or not the package. Finally the critical assessment of Travelport – its recent performance, its model and the prognosis need to be microscopically examined.

It was clear that the climate for IPOs has not been great. Greece and Portugal’s troubles are making headline news in the recent weeks. Of the 62 IPOs launched since December 1 2009 globally, 32 were shelved -- 15 in the U.S., 7 in Europe and 10 in Asia.
The global market upswing that was clear from the end of the year in investment confidence has not translated a market for those mega IPO deals that were a hallmark of the early to mid 2000s. We also have to bear in mind that the market is much chastened and is still seeking real value and future growth rather than just cashing put “Venture Vultures”. But the global debt loading that went on last year to save the somewhat broken financial markets has eventually to be paid. So the climate was perhaps something a contributing factor to this failure. If the climate was overall bad then it would have affected other plays. However it wasn’t bad enough to halt everything. Indeed one of Amadeus’s two VC backers managed to get one of their IPOs away this week. Thus the market’s ability to absorb a large deal like Travelport’s IPO reputed to be one of the largest in London this year was still a viable/possible proposition.

For Blackstone in particular, there has been a certain market resentment against the huge debt mountain that they have in their portfolio. The specific failure of Blackstone in the mega PHH deal at the end of 2007 was an early harbinger of the troubles that would beset the VC market for the next 2 years. And some influential people have not forgotten that. Just ask the guys at GE. Boy were they pissed! I do believe that there is a general negativity towards deals that are straight cash outs for the Venture chaps. As one UK fund manager put it: "Investors in the quoted market are not really enthusiastic about being the buyer of last resort for these ‘used’ private equity investments." (Source Reuters). We have to call a spade a spade. Blackstone has already taken its money out so why should the markets reward them for a bad or mistimed early risk. We should remember that over the past several years the Travelport debt has been widely traded and much of that debt has been heavily discounted. In some transactions that discount over face value was a very high number. Thus there is a significant discount already in the market on that debt that Blackstone is seeking to retire. Those debt holders include many of them who are now tertiary or further removed investors. These chaps are in general bottom feeders and hedge funds. For the general market to essentially become the buyer of last resort was in my opinion the biggest single downer factor for the deal itself. The Tamasek deal also set a bar for a concessions and discounts that meant someone would still need to foot the bill. Well it became clear that the traditional money guys were not keen to cover others’ benefits.

Let’s look at the focus of the company and its risks. As I have written previously Travelport has been very aggressive in the market offering deals on both the supply and the distribution side. BTW they are not alone. Within the user community, Travelport has been offering deals of $4 per segment. Thus the market for segment overrides has been really hot from the middle of 2009 until now. Travelport has been crowing about its “Significant Recent Wins”. But on the airline side, Travelport has been offering full content and opt in arrangements that have lowered the gross revenue from segments. That my friends has the smell of something rotten. Lowered gross and raised incentives to customers for the same or falling transaction numbers has to be accounted for sooner or later. While Travelport bills itself "a strong company with an attractive financial model and great momentum, as demonstrated by recent contract wins,” these need to be put into perspective. A cynical person might have a different opinion of who was coining it if ” …The business remains on track to continue delivering outstanding value for its shareholders.” (Reuters). Further in the case of Travelport (as compared to Sabre and Amadeus) a close examination shows they don’t have the strength in the other 3 lines of business. Its investment in the online market space had to be bolstered last year with a cash infusion from TP to Orbitz (Travelport is the largest owner of Orbitz stock). Similarly last year Travelport took a big goodwill write down in their GTA part of the business that has been tanking in recent years. As we know Travelport is the smallest of the big three in the Airline IT space. Indeed in effect it has lost a major customer with the shuttering of Northwest at the end of last month. Thus its tony PARS airline reservation service now has only minor airline customers.

We cannot discount the fact that their core business has risk, clearly the institutional investors saw that and demanded significant concessions and discounts. The emergence of real alternatives to distribution on both the direct side and via new channels represented by Farelogix and Lute amongst others creates a whole series of risks that were not there when Blackstone took Travelport (aka Galileo) off the market. The emergence of Ancillary Revenue as a major importance for the airlines and the general infrastructure demands point to a requirement for significant technology investment spend in the coming years starting almost immediately. This comes at the very time when Travelport had reduced its R&D budget to a fraction of what it once was in absolute and in percentage terms. Travelport also doesn’t have the ability to point to future savings. It already has discounted and implemented those savings from the merger of Galileo and Worldspan. In fact Travelport has some significant inefficiencies as it supports many different hosts: 3 GDSs (Agency Apollo, Galileo and Worldspan) and three separate airline hosts (PARS, Deltamatic and United Apollo) in two data centers. Nor is there any fat in the Travelport organization that will result in magically creating more book value through cost cutting.

So now we know that the deal failed. In future posts I will examine what the future can hold for Travelport. I will also be looking at the impact on Amadeus and Sabre. While they (IE all GDSs) have a good cash flow and there is no immediate risk for the business, the halcyon days of high value for Travelport might just seem not to be here anymore. Happy Days are just not there in Langley, Atlanta or the Blackstone offices. The next effort (if and when it happens) will have to be substantially different. If the same deal was to arrive on desks in say 6 months it will hit the same opposition and same environment. For Tamesek and its proposed part of the package this could also create a long term issue of finding a way to meet the terms of that agreement without essentially robbing Peter to pay Paul. Jeff Clarke and his team clearly have their work cut out for them to salvage something from this wreckage.

Cheers

And Sabre Makes 3 . Multi-GDS Access

In no surprise to anyone - Sabre has announced that its next generation agent tool will be multi-GDS. Thus making all 3 legacy GDS companies now offering to link to each others' hosts.

This marks a full entry of the GDS players into the agent desktop market. AmadeusOne followed Galileo's as yet undeployed Universal Desktop. The new Sabre tool will ultimately replace MySabre. The new tool is described as a "merchandising platform" in a clear nod to the importance that merchandising will play in the future of travel agent tools.

There will be quite an interesting battle now emerging from the traditional players as they try to figure out how to develop hybrid functionality to access not just basic GDS host based functions but remote XML and even EDIFACT based services. In what must now be an admission that the days of host centric computing are over for the GDS world - the services are going to come from a wide array of sources. For the IPO bound GDSs the investment in technology to catch up to the rest of the world in computing capability will be significant. How this will be paid for remains an open question.

Next generation products from companies like Farelogix and LUTE Technologies are already beginning to appear in the market place.

Cheers

OneWorld Breathes a Sigh of Relief

JAL Stays with OneWorld and announces AA as its "new" partner.

In what the WSJ called a "come from behind" victory for AA - it would seem the legal risks became the big issue.

Anti competitive restrictions could have been pretty intense. There were 2 challenges. AMR had already threatened a protracted legal battle if Delta teamed up with JAL. And the other issue would have been a potential anti-competitive challenge.

So OneWorld can breathe a sigh of relief. However does this make JAL better or (more correctly in y opinion) more viable? The jury will be out for a while on this one.

Cheers

Blackberry 9700 Not Compatible with Office 2010

OOPS

Someone screwed up - or rather we are all a little too premature.

So there is a current incompatibility between the Crackberry BOLD 9700 and the latest iteration of office -Beta 2010.

It SHOULD be fixed sometime soon but in the mean time watch out for it.

For more information on the problem head over to Blackberry.com

http://www.blackberry.com/btsc/search.do?cmd=displayKC&docType=kc&externalId=KB15564&sliceId=1&docTypeID=DT_SUPPORTISSUE_1_1&dialogID=282117039&stateId=0%200%20282115660

As a temp fix here is what you can do.

1. Synchronize all of your data on your old BB device.
2. Back up everything
3. synchronize the information by backing up your calender to a iCalc or some other device.
4. Back up your local addresses to local media (like a SD card)
Restore from these places.

The fix should be in - probably in about 1 month.

Cheers

The Professor - This week And A Request

This week I shall be at the TNooz tcamp2 in London on Tuesday Feb 9th.

So come along and rub shoulders with a must-attend gathering of travel tech journalists, bloggers, entrepreneurs, executives, technicians, engineers and thought leaders. I am just a hanger on but will be there anyway.

So my request?

This week I will surpass 1500 blog entries for the Professor. If you would like to share some comments or give me a suggestion for the 1500th entry - then please send away to professorsabena@gmail.com

Cheers and have a great week

BA vs FR and U2

The January Traffic numbers are in and the numbers are impressive.

Ryanair is now officially more than twice the passenger size of BA. Easyjet is nearly than 50% larger in terms of number of passengers carried. Both of the LCCs are generating better yields than the former national carrier.

So here are the comparisons in January:

Ryanair 4.44m passengers , up 9% year-on-year, Load factor 70%
easyJet, 3.14m passengers up 10.7% Load factor 79.3%,
British Airways, 2.14m passengers dropped 8. Load factor 74.2%.

No need to speculate on the financial impact of these numbers.

However this does indicate that the hybrid model is gaining traction. It will be interesting to see how well FR's numbers look this quarter in comparison to U2.

Cheers

So What Will He Do Next?

He is not fooling anyway. Steven Udvar-Hazy has now left his baby and officially retired from ILFC.

But we all know he wont be out of the market for long before he is back in the leasing business.

So I will speculate that given his current non-compete will not be that long. There is just too much opportunity out there for him to sit on the sidelines. Specifically there is a hole in the market now for someone to manage the short term distressed production slots.

Let's see where he re-emerges from the jungle

Cheers

Update on Aegean's and Olympic's Websites

So there is good news here.

Aegean's website is back up to full speed. They have restored all air fares into the system to all 4 seat buckets are now operational on the website. It still has some glitches and you can break it easily.

And I owe a bit of an apology to Olympic for giving them a hard time over their website being down. Well turns out its not. its still there - just darn hard to find.

So while I will apologize for this (the English website for Olympic can be found here) I will slam them for not doing enough to ensure that their own website shows up in search engines (er like Google and Bing). Further they really should do something about the 2 dot com websites Olympicairways.com and olympicairlines.com. Both of these are registered at Deutsche Telekom but have no data available.

Cheers

Hotel Points Get Nasty

There is a general debasing of the currency out there. The airlines have slowly found sneaky ways to reduce your FF value. I understand from several people that Frequent Flyer Miles are now the biggest currency in the world.

The incredible overhang of that liability is just mind boggling. However consumer behaviour being what it is. People tend to hoard their points. While people are prepared to go to debt on their credit cards - they dont use up their FF miles. And yes I am guilty of this. (not the credit card debt thing BTW).

Anyway - Hilton and IHG are getting into it. IHG's Priority Club is going after the devaluation of HHONORs points by about 20%. They are offering you at least 1000 points in return for giving them the status on your position with HH. So I did just that. Its a bit sneaky but for a free 1000 points and a chance at 2 million - why not?

Frankly it wasn't enough really but I wanted to see what they would do for me.

From my point of view I was already ticked off at Hilton and therefore I stopped using them this year. My "disloyalty" is not that religious. I always chose a hotel based on location. Only if they are directly competitive (rates and location) does FF miles and points ever really make a difference to me.

So tell me what you think

Cheers

Should I Go To The Dark Side (iPhone?)

My contract is up and I am sorely tempted....

To move to the iPhone when I have been a dedicated Crackberry user from the early days of the Mobitex network and rare connectivity. From the machine that was really a glorified Beeper to the advanced tool Millions know and rely on and of course are addicted to.

I actually spent a personal day out of the office yesterday - I went up to Canada with some friends and had a great time enjoying the Olympic pre-activities. If you are going anytime in the next 4 weeks - Vancouver is a blast. But I digress.

I counted the number of times I actually looked at the blackberry. I have it set to buzz when new mails or texts arrive. I am not a huge fan of the voice side of the device but accept it. Also I broke the back of the machine (a Bold 9000) within weeks of getting it. I also had the people I was with count me. We did several checks during the day - it became a bit of a game. I was astonished that by the time I arrived back home here are the statistics.

Inbound Calls - 8
Outbound Calls - 10 (plus 4 that the others needed to use because their voice plans didn't support calls from Canada).
Inbound emails 170
Photos taken - 85 (with Blackberry only - many more with my other camera).
Outbound new mails 10
Outbound replies 30
Number of times looked (from 0700-2400) 142. (Give or take about 5%)

I guess this makes me very sad or addicted or probably both.

So returning to whether or not I should move to the Dark Side and get the iPhone. I know a lot of people who love it. However there is the real darkside to it. The cost.
Data Roaming charges are frankly appalling. $15 per MEGAByte. So I asked a colleague to show me his data usage for the iPhone in the USA. On average he was using for apps and email about 200MB a day. Extracting about 80% for the email. (My BB data usage is about 250MB for the emails a day and I rarely use if for surfing). So at that level 20MB a day it would cost me $600 per day in roaming charges. OUCH!!!! And this is just for Canada.

The numbers for Europe and Asia are also pretty hard.

So I considered alternatives. Getting Pay as You Go iPhone agreements in different countries. I am regularly in 4 countries (UK, FR, DE and US) it becomes too hard. The sheer laziness of me (and others I am sure) to swap out SIM cards (and of course its not exactly easy) makes it just too hard for benefit.

Thus since there is no data plan that works for me anywhere on this planet - i am left with very few options. t-Mobile has a great plan for international roaming for BB. $59 all you can eat email. AT&T is $10 more.


So this is where I will sit for now - I am not going to be going to the iPhone.

So today - I will be off to get a new Blackberry Bold 9700.

I will just have to carry on eying with a degree of envy those cool apps on the iPhone....

Cheers

Quick Reminder On Comments

Dear readers and fellow professors. Please note that I cannot accommodate non-English comments. While I wish that I could, the chosen language for this blog is English and therefore the comments need to be made in that language.

If you wish to republish the post in another language, may I ask that you contact me directly.

Thanks

The US Government Has Spoken

Way back when Ancillary Revenue charges were new, I opined that there was an issue of taxation. I argued that if the original bundled ticket was taxed then the unbundled elements should also be taxed.

Well the US Government in the form of the IRS has now spoken. And guess what - the charges are not taxable.

Specifically below you will find what is and what is not taxable according to the IRS. So I have pleasure in presenting the potted version of the rules below. However this is likely to send the Congress rushing to the legislation table. if last year $2Billion was generated in these fees by US airlines and this year projected to rise to $10 Billion - all without tax - then the government is going to find that WAY to easy a target to ignore.

So for the formal Air Transportation Excise Tax - Audit Technique Guide click on the link.

Per the IRS, the following services and fees are not taxable:

• Assistance in making travel plans, purchasing tickets and requesting seat assignments, either in person or on the telephone (as opposed to on carrier’s website).
• Applying the fare paid for an unused nonrefundable ticket to a new ticket.
• Standby fees
• In-flight purchase of food, alcoholic beverages and headsets.
• Checked-bag fees, including overweight and oversized baggage.
• Purchase of airport lounge access, on daily or annual basis.
• Purchase of nonrefundable gift cards.
• Optional custodial services to children traveling without an adult.
• Fee for transference of miles to another account.
• Extending the expiration date of miles in a member’s account.
• Fee for redeeming miles for the purchase of air transportation.
• Fee for canceling and changing a ticket purchased with redeemed miles.
• Purchase of elite status in a loyalty program.
• Providing a printout of account details to a member or third party.
• Providing password protection for account inquiries made by telephone.
• Providing personalized luggage tags.

But the following services and fees are taxable:

• Enabling the purchase of upgrades that are paid for at check-in at automated kiosks.
• Enabling the purchase of upgrades to a higher class of service, at check-in or in advance, with money or miles.
• Fuel surcharges added at the time a customer purchases tickets or acquires tickets by redeeming miles.
• Mandatory custodial services to children traveling without an adult.
• A member's purchase of frequent-flyer miles for his or her frequent-flyer account or another member's account.
• A member's purchase of bonus miles for his or her account.

The government however likes to leave itself a little wiggle room.

Here is the disclaimer which means that they can change their mind...

"NOTE: This document is not an official pronouncement of the law or the position of the Service and can not be used, cited, or relied upon as such. This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date."

And this is off IRS.GOV!!!!

Cheers

CORRECTION: Aegean Website Upgrade

Dear fellow professors

I stand before you admonished in not accurately checking my facts. Mea culpa. The information I gave you on the Aegean Airlines (A3) website is incorrect.

Right airline - wrong vendor.

Aegean has migrated AWAY from the SITA IBE to the Amadeus IBE. So the problem is with the cutover to Amadeus's IBE.

Thanks to Professor Tony for setting me straight. And yes its still giving me bad results that raised the price by 48 Euros per segment!!!!

Cheers

Farewell PARS and NWA.com

With effect of the new month - Delta has retired 2 icons. NWA.com now goes to Delta.com and the old PARS reservations system is all but gone with all flights now in Deltamatic. There are other airlines still in PARS but these are fairly minor. Travelport still manages the infrastructure for the DL data center along with the Worldspan, Apollo and Galileo hosts.

So a brief tear for 2 icons.

Cheers

A New World Order - Asia Rising

There is clearly a sea change occurring in air travel. The move to LCC has been a phoenomen that has largely passed the USA by. Europe and Asia have adopted the so called "Southwest" model extensively and extended it. The next gen Hybrid Value Carriers (HVCs) such as Easyjet, Air Asia and Jetstar are not to be found in the USA market.

And now we see that the legacy network based airlines are feeling the pinch. IATA coming off the worst year in its history no longer fully reflects air travel. Rather the new generation of these airlines represent where air travel is going. And consumers are lapping it up.

Two recent pronouncements out of IATA confirm this. Firstly the Asia market has now overtaken the US as the world's largest market. And then there is the news that IATA thinks it is going to take three years for the market to recover.

Right in time for the next recession.

Yes the world is definitely changing....

Cheers

SITA's New IBE costs More Money

I happened to be working on a project looking at IBEs. Over the weekend SITA's new IBE went live (after being down for more than 36 hours). On its return the availability of fares dropped a whole class. It went from 4 to 3. As a result there are now a lot of people who thought they could buy tickets at the lower fare which has now disappeared.

It is clear there are going to be a few teething problems with the implementation of the new IBE. However its all under SITA's control - they have the pricing, the IBE and the back end Res System

So let's hope it settles down.

I will be watching!!!

Cheers

CO To Boost LHR Flights

CO is boosting its daily schedule from LHR to 7 come the October schedule. This includes 5 to NYC and 2 to IAH. With some slots acquired recently (presumably from BD who disposed of a few) this puts CO at a distinct advantage for the New York Market. With at least 3 of its services with the larger 777-200 planes, DL has no match with just 2 767-400s on its schedule.

You have to wonder if DL is playing a game here. Forcing the EC to hold BA and AA into a corner by not upping its schedule. The proposed BA-AA alliance has 13 nonstops this summer. Don't forget that CO also has access to the 4 Virgin flights.

Ah gotta love politics

Cheers

BA Looses 1 Billion Pounds. Red Ink Continues

BA is reported to be losing more than $2 Million per day. When most other players seem to have got their costs under control and started on the road to recovery - BA is not having a good time yet. it is slated to report losses in the most recent quarter of 151 million pounds.

BA is already a very lean carrier. However it has all the issues of a legacy carrier infrastructure that results in costs being too high. For the airline to survive it needs some radical thinking. Here is where I believe that strategy of bigger is better tends to fall apart.

Case in point - their merger with Iberia. IB is a smaller airline and it has higher labour costs. They have totally incompatible long haul fleets (IB is A340s and Boeing 777s and 747s.). Their products are also pretty dissimilar. Thus the benefits of synergy that come from scale will take a long time to impact the bottom line. BA needs a new plan now. Oh yes and how about that pension overhang. On the recent flight from Madrid to London on BA connecting - I had to go through a frankly awful connecting process that took longer than one hour. If this is supposed to be the way IB and BA are to cooperate - they have a very long way to go. (At least till April 2011 when the C concourse opens up at T5).

Thus in my humble opinion - BA needs to look a lot closer to home and fixing its internal issues before venturing out into the wide world. Is it time for Willie to go?

Cheers

UGC All Good or Not?

I have always felt that the hoopla on User Generated Content was way over played. In recent weeks a few things have come home to reinforce my view.

First I do want to say that User Generated Content is valuable. However it should not be considered a panacea for failing to do your own job. Further how you use the content so generated is as critical as the content itself. Data can be garbage or valuable information depending on how its managed.

Substituting UGC for well written content is a fatally flawed strategy. Assuming reliable UGC therefore falls into the same category.

Recently I have been working on a group vacation and have had the pleasure of using some of the accommodation/rental home sites. As an aside here - I really think after working with the different sites in US and Europe that there is a rather overblown expectation and decided over valuation applied to these businesses. But no matter. I digress. The UGC I see there is pretty useless. Often there is scarcely enough of it. So one or two reviews is pretty useless. For these long tailed businesses - I think that you are somewhat between a rock and a hard place. The over-enthusiastic supplier generated prose fails while the UGC is suspect and thin.

On a less prosaic point - I have written before about Seat Guru part of the Expedia Empire. After my last post - one of their nice people immediately sent me an email about complaining I was being a bit harsh on them. However - I duly followed up and every time I would find a mistake or a missing airline - I would send it in. However the amount of errors and the scale of the missing content is rather large. For example there are no Airbus aircraft on the DL fleet side. Given that Delta is the largest carrier in the world this would seem to be a rather important omission. My point on SeatGuru is that they have come to rely on the users to provide the information. FATAL MISTAKE. Sadly it means that my trust in SeatGuru has fallen to an all time low. I keep finding mistakes and missing content. (Note to Expedia - have someone take a long hard look at the entire site content and then do it on a regular basis!)

The mushroom defense doesn't work here. If you are providing a website service then you really need to be the one pushing for the correct content. Users can be used (if you will pardon the expression) for fact checking and corrections.

So I remain the UGC skeptic. Just because there are lots of them doesn't make them right!

Cheers

Greek Airlines Booking Engines Down

Both the Olympic Airlines (formerly known as Olympic Airways) and the Aegean Airlines website booking engines have been down for more than 24 hours.

In the case of Olympic the whole site is down. In the case of Aegean it is the IBE.

I do hope no one is trying to use these sites other than me!

Different messages are coming from the sites. Olympic's says:

The server is under maintenance, please apologize any inconvenience...

For Aegean we have seen several messages. Here they all are:

Air NZ "SkyCouch"

I have been thinking about the Air NZ Skycouch idea. Really cool in concept. However now I have seen the pictures - I think its not quite there.

The long haul flights will benefit for those willing to pay for it. (However the longest haul NZ flight YVR-AKL) will not likely see it for a long while.

I just dont think its that useful. The couple in this picture look decidedly uncomfortable. Not that I have ever seen anyone comfortable in Y.

So I am going to wait until someone comes up with something better. I hope the DL seats have better luck when/if they get implemented.

Cheers

Shock Horror - BAAABI Starts To Negotiate

Seeing their proposed Transatlantic Alliance going no-where fast and with the scrutiny of the European competition authorities being more and more aggressive (unlike their US DoT counterparts), it looks like the airlines are prepared to deal. Bloomberg and WSJ both reported on Friday that the three airlines (and presumably an army of lawyers) had opened up discussions on the surrender of slots at LHR. Long a bone of contention and with expressions like "Over my dead body" they are now indeed talking about that.

The 3 airlines (and occasionally joined by RJ - Royal Jordanian Airlines) have a great (sic) website with the title MORE TRAVEL CHOICES.COM to put their case against Virgin mostly but the other 2 existing Transatlantic Immunity groups - AF/KL+BL and A++ (LH, AC, UA, CO).

The Professor has opined that the ONLY way this alliance was going to get any chance of success was if the 3 players agreed to surrender slots at LHR.

At about $40 million per slot pair this represents a significant amount. Currently BA alone has 41% of the slots. LH quietly dumped a few to help pay for its take over of BD.

This battle will play for a while. And we know that BA is happy to surrender slots at LHR because it was offering several to JAL as part of the failed deal to keep them in the fold.

In my own opinion the EC and the US authorities have got themselves into a bit of a pickle. They can hardly hammer on these three having let the other 2 alliances gain immunity. So we are really condemned to LESS Travel Choices. Let's hope Sir Richard continues his battle.

Cheers

Consolidation In LATAM

Slowly but surely cross border consolidation is occuring in LATAM

With LAN extending its reach with named subsidiaries across several markets (Argentina, Peru etc) it was only a matter of time before cross border merger or alliance activity was to occur. Initially the "national" interest didn't deem it quite the right thing to do. But rampant commercialism has broken out across the Continent. With liberalized air agreements with 4th and 5th freedom rights in effect a reality across many markets some form of alliance relationship was inevitable.

Last year TACA and Avianca announced a merger. TACA and even GOL participated in the start up of Volaris in 2007.

Speculation has been rampant for months since the Administration in Chile announced that it was considering putting its shares in LAN up for sale.

Well now there is a buyer. News reports are coming in that TAM will purchase 18% of LAN thus creating the most powerful airline combination across LATAM. This is likely to spur other alliances/mergers across the region with a strong possibility that the two Mexican carriers will be seeking to be a part of this.

Cheers

For The Geek In You - 787 Flights

Boeing has launched a dedicated Website to the 787 Flight Tests.

Stung by all the issues of secrecy and snafus during the lead up to the first flight - this is the "new" Boeing being a lot more open.

Cheers chaps

http://787flighttest.com/

The Rehabilitation Of Mike Bair and The 737

The guy who took the fall for the first set of 787 delays - Mike Bair - is now coming back to lead the effort to solve the most important decision for Boeing. What to do with the 737 - Boeing's cash cow.

The Boeing 737 is the most successful airliner in history. While its a relatively simple design - it has stood the test of time and has shown itself to be an eminently flexible product. It has taken the place of its larger sibling at birth (727) and the larger plane's own child - the 757. It has been used for all forms of different applications, all with the same basic design.

Boeing has decided to not mess with success and has clearly laid out that it will not support a brand new design. So the Bair led effort already has a simple mission. New engine and probably a new or upgraded wing.

It is also likely that the 737 will get a little bit of a stretch given that the 787-3 has been abandoned. Raked wing tips vs Winglets will also be reviewed.

If I was to speculate - I believe that Boeing will use the time to also create baseline designs and some options for the 737 replacement aircraft. Why? To counter anything else that Airbus may do. While the European subsidiary of EADS has no money to even countenance a major redesign of the A320 it is a newer airframe design and has the potential for a lot more activity and upgrades. One key benefit is the engine position and the higher undercarriage. The 737 has suffered from this issue since the CFM's were installed.

The battle for engine supremacy has taken a major turn. In the last round of engine decisions P&W was the big loser. This time round the P&W seems to be leading the charge.

So Bair has his work cut out for him. Clearly he is back in the fold.

Cheers

Its Offical - JAL Defects To Skyteam

Well Not Quite Official but on Monday according to many sources in Japan it will be.

So let's look beyond the headline and consider the impact. For JAL its not business as usual no matter what happens. The airline is in deep trouble and the lifeline it has now is not without limits - least of which will be time.

OneWorld will take a major blow as a result of the defection. American is not likely to take this lying down so we can expect there will be some legal knots to work out. This will take some significant amount of time.

Skyteam like Star is developing a two tier membership. JAL and DL will develop a formal Transpacific Immunity Pact that will mirror the ANA-UAL pact and indeed it will resemble the Trans Atlantic Immunity requests that have resulted in pacts on the Transatlantic such as A++ (LH, UA, AC and CO) and the Skyteam version (DL, AF/KL).

The obvious strengthening ties between the various hubs will occur however perhaps we can peer beyond this and look at the impact on lesser members of the Alliances. If OneWorld is to remain viable AA and BA have to get closer. Also they have to find another Asian Partner. KAL and CA are interesting possibilities. If Air China can tolerate Eva Air the surely CX can coexist with either KAL or CA. However QF may emerge as a powerful force not through mainline but through the footprint of JetStar.

There is going to be a lot of shuttle diplomacy over the next few months as the carriers jockey for position in their respective relationships.

With the opening up of markets in Asia - indeed Open Skies coming to the ASEAN nations - we can expect competition to emerge and indeed start to make a lot more sense with the lowering of tariffs and freedom of movement improving.

It will be interesting. For now - let's sit back and watch the battle for Japan play out.

Cheers

BTC+ITM Try to Rally Standards on AR

Normally I am a huge fan of standards. However I ALWAYS caveat it with "provided they don't get in the way."

BTC based in the USA and the UK's ITM are trying to rally the business user community to support an approach for standards in Ancillary Revenue (AR).

Ancilliary Revenues are clearly important to the supply side. There are too many moving parts for this to be left to standard's people. This is for the bold to take and run with it. However that said most of the major moving parts are pretty standardized.

- A piece of baggage is a piece of baggage. It has sizes and weights... there are standards for that.
- The financial fulfillment is set - MPD become EMD-A or EMD-S.
- ARC is ready
- BSP??? Hello????
- Credit Cards - well not quite - but increasingly so. Some already support the detail however most Visa and MC do not.
- GDS ready? Hardly
- Agencies ready - actually yes. Many of them already sell LCC carriers and this is not new news. Agencies who rely on GDS based solutions alone have seen share shift to those who are already deploying solutions where LCC carriers can be booked.
- Booking Tools - definitely not quite ready. So this is a challenge. But there are a lot of aid tools (for example Sabre has one) that have made the process a lot easier. Frankly you can find most things on the web.

From my point of view, trying to mandate standards - admirable as the effort is, can be something akin to a reader of books trying to tell Apple what should be in the iPad based on how people print books. (OK a little harsh but you get my point).

This is a major advancement in functionality. The sellers must just get used to it and start to service the customers accordingly. This is not new, it is now the scale of adoption on the supply side that will cause the agency community to have to sit up and pay attention and do something.

Failure is not an option. For the $25-$50 that corporations are paying for a manual booking - the agency needs to solve this. Self booking tools are hard at work to address the issue. Legacy GDSs are adopting the wait and see approach - much to the chagrin of the corporate execs who are having to do everything themselves.

Recently I spoke to a group of Corporate Execs on a delayed flight - 20 or so chaps sitting in the lounge chatting together. There was an interesting element that I had not considered before. The amount of post reservation work the corp traveler is doing on his own because either his booking tool or his agency is not providing the service. All 20 of them (different nationalities and different companies in the main with 6 different agencies between them) agreed with this. Not one said she/he DIDN'T do this and was happy with the service and everything was done for him. Actually one guy but he was a Chairman of a business and he didn't use a PC so he said - he had his admin do it for him!

That shocked me because while I knew that the corp traveller has to fend for himself, I didn't realize how little value the exec placed on the corp travel service provided. Agreed this is bar stool research but still - its an issue perhaps the Corp Travel providers need to consider further.

Failure is not an option here. Recently I have heard of several corporations who have fired their agencies and inside travel departments and let the budget control mechanism determine how travel is bought and sold. I would love to see if this is a trend and if not why not? Apparently the travellers love it... go figure.

Perhaps I just don't belong in the printing press business after all

Cheers

Second Life: "I'm Not Dead Yet!"

Personally the whole virtual thing was a fun game for a while but not what I would call important in the big picture scheme of things.

Well it seems I may not be so hip after all (OK so you all knew that - the Tweed Jacket and Pipe is a bit of a giveaway).

Anyway - I was really surprised to learn that there has been a bit of resurgence of late. Secondlife's star seems to be not quite so dim. According to recent data released by the company - users grew, time spent and amount spent in the second life "Virtual Economy" grew significantly, 15%, 21% and 65% respectively.

I bounced over to Alexa and saw that from the low point of Feb (the worst part of the US recession) the bounceback has been significant.

Go figure....


Cheers

Mea Culpa - I Got It Wrong - it's iPad

So the little puppy got to go out for a walk today.

Bravo Apple.

Its very cool - and you knew it would be. A few surprises but in general its as expected only in the usual case better. However its also VERY pricey.

But i probably will abandon my efforts to buy a color Kindle and go for the 64GB Wifi+3G version...

But I wont be doing it in too much of a hurry.

BTW could this spell the end of the iPod Classic?

Cheers

iTablet or iSlate?

In a few hours Steve will get up and announce one of the worst kept secrets - Apple's Slate/Tablet.

We know a few things from this morning's press reports.

1. Its going to be based on the iPhone OS - thus ensuring a wide number of Apps to be supported on day 1.
2. It comes with an eReader
3. its going to be called the iTablet (OK so I was right the first time).
4. Steve WILL announce it today.

Am I right... check in tomorrow or look at the news reports

Cheers

Who Is In Charge Of ILFC?

We are getting conflicting reports of the goings on in the top echelon of the MGM Tower in Century City. So who is running ILFC?

Rumours have been swirling that Udvar-Hazy is leaving the ship. AIG Director Doug Steenland (former NW Chairman) is now the named non-Exec Chairman of ILFC replacing Udvar-Hazy in that role.

Today S&P downgraded ILFC's credit rating to BBB-.

So we wait....

Cheers

Good Vs Bad Ancillary Revenue Behaviour

I am on a bit of a focus on the AR side of life.

My team is busy investigating AR - it is definitely a challenge. The biggest challenge seems to be how to create some way to make shopping and searching in this complex environment work.

There remains a lot of confusion of what AR comprises. Even the process of AR seems to be the subject of myth and speculation. Chris Elliott seems to be on a Jihad about it. Others too. Even Rudi Maxa is hitting the airwaves with a rail or two.

I will be writing some more about the concept of AR and how it can best be implemented. I hope to rope in some talented folks to help us out with our evaluations. If I can appeal to the Professor's friends and yes even those of you who secretly read this and then wipe your cookie out of your browsers... I want to hear from you. I may start to run some joint stories if there is interest enough.

So pay attention to the surveys on the right and respond when you can

Cheers

jetBlue to Shut Res Functions This Weekend

In good behaviour (in my humble opinion), jetBlue is taking no chances and will shut down its reservations functions during the cutover from Navitaire to Sabre.

So far they are not predicting an actual return time. It just says "Saturday Afternoon"

Best of luck to them...

Cheers

High Noon At ILFC - Founder To Exit This Week?

According to the Wall Street Journal - ILFC's founder and current CEO Steven Udvar-Hazy will exit the world's largest aircraft lessor (with over 1000 aircraft in its portfolio). Thus ending a storied relationship perhaps as early as this week.

At a time when the dismemberment of the AIG empire of which ILFC was seen as a jewel is having quite a lot of trouble this could not have occurred at a worst time. In December Moody's lowered ILFC's status to effectively junk status.

The company has seen a battle going on behind the scenes with two potential suitors Allied Aviation Services and Udvar-Hazy himself. In recent months, Udvar-Hazy, 63, has been trying to line up financial partners to buy a small part of ILFC's vast aircraft assets.

Udvar-Hazy has been rumoured to acquire about 10% of ILFC's aircraft portfolio for approximately $4 billion with backing from private equity players Onex Partners and Greenbriar Equity.

With the troubles at ILFC above and the general difficulties for the world's airlines, the market for aircraft is not looking too rosy at the moment. With troubles at Airbus becoming more serious it has several programs in trouble. For Boeing the issue of subsidies may come back to bite it. It would be a very interesting proposition if both Boeing and Airbus were disqualified from bidding on the KC135 replacement contract. Could we see IL76s in USAF colours... nah... but I got you thinking....

Cheers

EzRez Dumps CEO Fitch

Despite some high profile wins of AA Vacations, Delta Skymiles and United Mileage Plus in recent years - things are not necessarily going well at EzRez the Online Travel Technology supplier now based in California.

Tina Fitch who has helmed the company for several years has been ousted and Karen Vergura - has been named Interim CEO while retaining as Vice President, the Finance portfolio. With venture capital funding to the tune of $15 million raised in 2007 one can only assume that things are not going well for the company to cause a change in leadership.

In conjunction with the 2007 funding, Canaan General Partner John Balen and Azure Capital Partners' founder Cameron Lester joined the EzRez Board of Directors. At the same time the company relocated from Honolulu to the Bay Area. Veteran GDS and Travel Industry figure Kathy Misunas also sits on the Board at EzRez.

Three Times A Charm? jetBlue Cutover This Weekend

The last 3 major cutovers have not gone well for the major players involved. Despite the success of the SITA cutover of the Malaysian Airlines new res system, the next two have been rocky at best.

So while I hope not to jinx the next one - let's hope that the Sabre cutover of jetBlue from Navitaire to SabreSonic goes well.

For jetBlue it represents a closing of the Neeleman chapter in its history. David Neeleman brought Navitaire to jetBlue as part of the startup process as he had been the founder of the OpenSkies product. To be candid the Neeleman connection landed jetBlue a better support than some of Navitaire's other customers. Sometimes to their chagrin.

For Navitaire this represents another major loss for them with the most recent defection being Volaris the highly successful Mexican startup. 3 major losses in one year represents quite a blow for the Accenture subsidiary. Fortunately they still have one Tiger on their side - Tiger Airways remains a customer.

So best of luck chaps on both sides of the fence. I will be crossing my fingers for you.

Cheers

Internet Filtering By Governments Is Insidious Behaviour

I am not a radical advocate but I do believe that the Internet must be beyond the reach of the government to filter content IE censor content on the web.

However this is behaviour we normally associate with repressive regimes like Iran and North Korea. I think we all accept that Governments are monitoring activity on the web. Yes - it can be expected that Governments spy on their own citizens for a wide variety of reasons. Frankly while I don't like it - passive monitoring doesn't interfere with what I do. However when Government behaviour does start getting in the way - then it is failing its citizens and frankly its a pain. It is at this point that we are Netizens need to do something about it.

So I was shocked to see from one of my fellow TNOOZ nodes Professor Tim Hughes that he is joining a protest against this form of behaviour by the Australian Government.

WHAT AUSTRALIA????

Yes. It appears that the Oz government wants to ensure purity for its society by engaging in a form of Internet Filtering.

I suggest that everyone should get familiar with the issue and register their complaints.

Here is a good resource in Wikipedia.

Both personally and my company have been a victim of blacklisting for SPAM. Now it would appear that I could be blacklisted for content. I hope not.

Carry on - normal service will be resumed

Cheers

Ancillary Revenue - BREATHE IN..... Now.....

There is a lot of talk about merchandising and Airline based ancillary revenue. If you hear some people talk (like me for example) it could be considered the second coming.

I am a huge fan of it from a commercial perspective and absolutely despise it from the user side. Mostly because of the poor way it is implemented. So I am on a personal crusade to improve this.

In one of the discussions Martin Collings and I had over that excellent Rioja on Friday, we discussed the issue of what defines Ancillary Revenue. He too has been a strong advocate of the greater precision in definition. At least he gets to talk about this in his day job over at 1A.

So I would like to try and draw a clear line of separation between the different types of Ancillary Revenue.

For me the most important element is to distinguish between TRIP related ancillary revenue and additional revenue streams for airlines. If we believe CAPA - the total category is worth $58 billion (The link is to a good article over there BTW). However I suspect the direct airline TRIP related revenue is at a run rate closer to $10 billion.

The differential is due to the high value items that have become staples for airlines such as frequent flyer miles. So deals like the Delta Airlines $2Billion arrangement in 2008 with American Express does not fall into the TRIP related revenue category.

In the coming weeks and months I will be writing more and more about the mechanics of Ancillary Revenue. Let me be clear about one thing though. Anyone who believes that Ancillary Revenue will wait for laborious process of standards does rate the desire - call that lust if you like - of the airlines who by necessity must drive ancillary revenue from the closed points of service delivery and the airlines websites into the general sales channels. Legacy GDSs have been saying that they will have to wait. However when challenged in public - it seems that Q5 2009 was the favoured date. That is not soon enough. I too believe that faster and more aggressive adoptions are required.

Now you can breathe out..... for now.

Cheers

iPhone & Android Creep Into The Enterprise

In what can only be assumed to be a full frontal attack on the Crackberry dominance for the Enterprise - both iPhone and Google's Android OS are making headway into the corporate enterprise. IBM and Lotus Notes (remember them - yes they are still out there) have already released a secure version of a remote tool for integration called IBM Traveler (note the spelling!!!) for iPhone users. eWeek is now reporting that IBM will release an Android version for the future in likely "2H 2010".

For the remote application market this is interesting but you have to think that the functionality for products like TripIt et al have already provided a secure solution and that native apps on these remote devices for email make them unnecessary.

I agree that there is an issue of security but eventually how much do we really have to do in order to remain secure. Or is the "Security" issue here a bogey man conjured up by big System Software companies like IBM, Oracle and Microsoft?

Well you have fun with that one

Cheers

Mystery Guy in MUC - False Alarm

It seems that the chap who caused the alarm in MUC last week was a hapless traveller who did not realize that he had caused the alarm. It is highly likely he was not a German speaker so did not understand what was said to him. According to news reports German authorities have concluded that a man whose laptop triggered a security scare at Munich airport last week was a harmless passenger.

Part of a terminal was closed for hours Wednesday after the man left a screening area with his laptop, which had triggered an alert for possible explosives, without waiting for officials to check it again.

The regional government said Sunday that video footage showed him wandering from the screening area to a duty-free shop. It said he apparently didn't know he caused the alert. He was evacuated along with other passengers and then went through security again -- this time without trouble -- several hours later. The scare embarrassed authorities. Germany's interior minister has promised a thorough investigation.

I will say again that the decision to empty the terminal when the security people "lost" the passenger was the right one. However the handling of the situation shows that more care and thought needs to go into the process.

In security management there is a constant battle of finding the bad guys with "false positives". The notion of false positives - ie how many good guys do you capture along with the bad guys makes the process of identification pretty tough. When new security or heightened security measures are introduced they typically are panic driven addressing the latest threat(s). Just like some of the really stupid ideas post the Christmas Underwear Bomber.

We have all been lulled into sense of "security" that there are so many layers that it must be impossible to breach them. So in effect the focus has shifted from smart thinking to efficient execution. This is VERY DANGEROUS. We need to be smarter than the bad guys. So far we have not demonstrated that. And we need to do a better job.

Remember we retain a degree success only because the other chaps have not been smart enough. It shows however that there is no perfect solution and more importantly there there is no fixed or permanent solution.

Remember - Security is dependent on all of us.

Cheers

2010 Bug - And You Thought I Was Joking

I made a reference to the 2010 bug in an earlier post at the end of 2009.

Well actually it appears I was not wrong. The bug actually did exist. AND it was pretty serious. The days after the turn of the decade, a large percentage of the German population (and we also understand other countries) with the Chip embedded credit and debit cards suffered.

It was not pleasant. It is estimated that nearly 30 million Germans - about 1/3 of the population was affected.

For more information read the English version of the story in the Grauniad.

So next time ... pay attention when I tell you stuff ;-)

Cheers

Crisis? What Crisis - Capacity Grows Again in 2009

In general we have seen a strong discipline in the deployment of capacity by the world's airlines.

The recent 2009 December study by OAG is pretty predictable. Despite some extensive cutting in certain markets - but the time the end of the year rolled around - the total number of seats once again grew topping the previous biggest year for seats which was 2007.

There are a number of trends we can point out - but I think you should go and download the report directly:
http://www.oagaviation.com/aviation-reports/reports-facts-1209.htm

This represents both good and bad news.

it would seem that the airlines are not necessarily cutting the capacity that they need to in order to regain yields. It also indicates that (using other data from Ascend) that the new aircraft are still coming online pretty fast. Further this is being used for replacement services. HOWEVER there are a large number of viable aircraft heading to the desert. While I was at LHR this week about 5 white tail 757s were parked at the BA Facilities on the east side of the airport.

Delta interestingly came out and stated that dollar for dollar the MD88/90 family of aircraft represent greater value to the airline than the newer and more efficient B737NGs that Delta is taking from Boeing.

With equipment and operations numbers falling it indicates that there are a surplus of smaller size capacity aircraft. The number of 2000 early model and smaller RJs which have been pointed to as surplus with many leaving the fleets would be a confirmation of this fact - and of course the downsizing of Mesa is a further indicator.

At the top end of the scale the big twins - currently 777s and A330s are replacing 747s. We are also seeing the end of the A340 as a viable production aircraft. 4 for long haul slogan that Virgin advocated a few years back seems hollow as even VS is taking A330s - its first big twin.

So in general we are seeing a rationalization and a true shift. After the last short recession at the beginning of the Oughts we didn't see a big return of older model planes to inventory. The price of fuel put paid to that. However we are now seeing a significant number of middling aged aircraft heading to the desert and other storage facilities which do have viability. So MD80s and 737 CFM powered classics are readily available. For long haul a large number of 747s particularly -400s are available. This makes for an interesting dynamic. And lets not forget 767-300s (still scarce) and 757s are in pretty plentiful supply. The chance of a low entrant coming in and taking these and starting new businesses cannot be discounted.

Food for thought?

Cheers

Psst Want A Bit Of US106?

So here are some definitive stats on the slightly water damaged US106 plane.

First Factual:

Announcement Regarding Flight #1549: Information on Aircraft
Involved in Accident
Jan. 16, 2009
Type: Airbus A320-214
Built: June 15, 1999
Length of Service with US Airways: Nine years (Aug. 2, 1999) - Delivered to US Airways from new.
Aircraft Lessor: Wells Fargo Bank Northwest, National Association as Owner Trustee
Previous Operator: N/A
Number of Cycles (a cycle equals one take-off and one landing): 16,299
Number of Flight Hours: 25,241.08
Aircraft Checks:
Date of last A-Check (maintenance inspection performed every 550 flight hours) –
Dec. 6, 2008
Date of last C-Check (annual, comprehensive aircraft inspection):
April 19, 2008
Engines: CFM56-5B4/P
Installation Date Total Flight Hours
Engine 1 (left): Jan. 15, 2008 19,182.10
Engine 2 (right): May 28, 2006 26,466.08

The insurer was Chantis. Actually this is the old AIG Insurance unit that has been placed into a special vehicle while the US Government bails out AIG.

The aircraft has been offered for sale as scrap. And lots of people are interested.

So go here to see the pictures and then you can even register to bid.

Chantis/AIG have had so much interest in the plane that they have even put up a little notice to that effect.

http://www.aigaviation.com/aviationsalvage/management/newsdocs/N106US.pdf


Cheers

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

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

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

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

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

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

So there is still a lot of room for growth.

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

Cheers

Europe Shows Its Incompetency Again

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

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

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

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

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

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

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

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

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

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

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

Cheers

A New New Pegasus Team Takes Shape

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

In total 5 new hire and elevations have taken place.

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

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

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

Best of luck to the team in Dallas.

Cheers

Security: Live It! Be It!

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

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

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

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

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

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

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

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

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

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

I rest my case.

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

Cheers

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

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

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

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

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

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

Cheers

Tom Klein Takes President's Post At Sabre Holdings

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

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

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

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

Congrats to Tom.

Cheers

JAL: Gloves vs. Honey from OneWorld

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

According to Aviator.Aero:

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

Ouch

Cheers

Are The GDSs Buying Business?

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

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

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

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

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

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

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

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

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

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

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

ARC Drafting Error To Affect Number Of US Agents

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

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

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

Cheers

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

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

Stay tuned

Is Clickfraud Getting Smarter

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

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

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

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

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

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

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

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

Cheers

JAL To Ditch 747 Fleet and 1/3 Work Force

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

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

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

He is well known both inside Japan and outside.

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

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

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

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

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

Cheers

The Annual Professor Sabena Promise and Disclaimer

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

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

So here are the disclaimers and promises I make:

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

What do you promise?

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


Thanks for reading and have a nice day.

The Professor Sabena Security Solution

Oh Best Beloved

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

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

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

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

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


Thank you for your attention.

Growth Not Just Shoots - But What Level?

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

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

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

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

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

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

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

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

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

(Allegiant and Ryanair exempted!!!)

Cheers

JAL Stock Almost Worthless, BA Steps Up Noise

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

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

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

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

Cheers

Changing of Old Guard at Amadeus c. 2011.

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

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

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

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

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

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


Best wishes to both of them

Cheers

Its All Over Bar The Shouting

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

The likely impact.

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

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

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

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

Cheers

In Case You Missed - US Opinion on Scanners

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

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

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

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

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

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

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

Pat downs alone are not adequate clearly!

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

Are US Airlines Cheating?

After 9/11 the US Administration brought in its now famous code system for security threats.

The code level has never been raised more than Orange. Which is where it currently sits for Air Travel and Yellow for all other alerts.

After the implementation of the original code at yellow for air - it was raised to orange. When this happened the airlines instituted a policy that allowed a customer who felt that his/her security was in danger they could change their travel plans without penalty.

Well here we are more than 8 years later and the threat level is still stuck at ... Orange. I am not questioning the threat level.

However the airlines are refusing to allow changes to an itinerary if a customer feels threatened? I phoned each of the main US airlines for a domestic US trip and all the bit 6 said they would not let me change.

Are they being just a tad naughty and cheating now?

You be the judge....

Cheers

AAPA Takes Another Body Blow - Too Much?

AAPA may need to rebrand itself. Air NZ has just joined QF in announcing its exit from the organization.

Currently there are 17 airlines in the Association of Asia Pacific Airlines comprising the following carriers:

Air New Zealand
All Nippon Airways
Asiana Airlines ·
Cathay Pacific Airways ·
China Airlines ·
Dragonair ·
EVA Airways ·
Garuda Indonesia ·
Japan Airlines ·
Korean Air ·
Malaysia Airlines ·
Philippine Airlines ·
Qantas Airways ·
Royal Brunei Airlines ·
Singapore Airlines ·
Thai Airways International ·
Vietnam Airlines

As of now there are two defections QF and NZ meaning it can only be called Asian Airlines. With no representation from the sub-continent or China - it is not a really representative body. However its current head - Andy Herdman is a skilled operator. He also was head of Abacus for a while outside of his roles inside Swire/CX.

Let's hope that they get their house in order and bring in a more representative regional body.

It will be an uphill struggle. Politics is usually at stake here. The website states that the latest statistical data is from 2006!

Cheers

Rant For The Day - Twitter Again

OK so this is not really a rant its more of a rant-ette...

I have not had a good rant(ettte) about Twitter lately. However it does irk me that almost every time I try to use it - the system is down. Over capacity etc etc.

On my usual round of talking to friends colleagues etc etc I have been subtly asking about how people think. Oh yes there are a lot of zealots out there and probably an even greater number of Twitter Luddites. However I do get a sense that Twitter is a small but occasionally necessary evil. It can have good value but on the other hand it just adds up to more digital noise and useless junk.

So I started to think about how other people think about it. I came across a very good article in Webpronews which is a pretty reasoned article.

I think its time we put Twitter in its place. Conventions come and go. But if we are to take advantage of Twitter then Twitter itself needs to step up and police it better than it does today.

So my suggestion of the week is a Tweet-o-meter. If someone doesn't like a Tweet then they can flame it by hitting the Tweet-o-meter. This will then be added up that if this person gets constantly flagged with bad tweet-o-meter hits then the ability to push Tweets becomes restricted. The more Tweet-o-meter hits negative the more restrictive the use by the offending party. This in my view will instill a sense of discipline into Tweeters. Once they pass the threshold they become a Twit because he or she has become (–noun Informal) "an insignificant or bothersome person."

And of course no one wants to be labelled a Twit... do they....

Cheers