Seismic Shift in UK Airlines

Several events in the UK have come together to change the way that the airline product is bought and sold in the market. Thomson has announced that effective November 1st it is cutting commission on flight only sales to 0.1% from the old standard 10%. It is thus just retaining the ability to pay commissions. At the same time it is ending is ATOL bonding of the flight only product.

"This decision has not been taken lightly but in making the amendment, we recognise the flight only landscape has altered greatly in recent years and Thomson Airways is competing with both traditional charter airlines and also other scheduled carriers," said the airline.

The challenge to the ATOL bonding was a battle the CAA who manages the scheme for the UK Government apparently lost a few weeks ago in the UK High Court. The now landmark case the CAA brought against Travel Republic (the UK Supreme Court refused to hear the appeal on July 29th), has effectively ended the traditional Tour Operator coverage for Flight Only sales. The longer term effect is that the charter seat only business is dead and replaced by a more normalized approach to the sale of flights. The distinction has been moot for a long time anyway. The former seat only carriers such as Thomson, Monarch and Thomas Cook with their respective airline brands are now free to compete directly with the LCCs and conventional airlines.

What is not clear is how the non-carrier seat only operators like KISS will be able to operate. That remains unclear.

The long term impact will be that these airlines will now operate a hybrid model but will look much more like a true LCC operator. In turn this will open up competition in the market which will be good for the consumer.

So the storied history of the seat operator market in the UK is no more.

An interesting side note is that this will be welcomed by the US companies such as Expedia who have been sniffing around the tour operators and remaining VTO players in both the UK and Germany. ATOL bonding and their airline operations have always made them nervous.

Finally this will put pressure on the UK government and the CAA for the whole bonding coverage. In light of other activities it may just be time for Her Majesty's Government to get out of the insurance business and return to regulatory activities.

Cheers







With thanks to widebodies.nl for the picture.

Geolocation Doesn't Worry the Young

The recent stories on security concerns with Geolocation software attached to your phone doesn't seem to worry the young as much as older women.

The value of Geolocation services make the context of the offers and your ability to extend your wired life to a 7x24 always on environment has great attraction.

Emarketer has just done a piece on assessing the attitudes based on Forrester's Research. Frankly while it scares me a bit - the future looks pretty bright because the younger users dont worry.

Lord help us when we start to see real mobile spam...

Yuk!

Cheers

4 For 4. Delta Shows Wifi In flight Is here To Stay

On my first trip back from my holiday - I took a connecting flight itinerary. 4 flights in 3 days all on Delta.

And yes every flight had Wifi and it was all great.

So I feel the time has come for the world to just accept that InFlight Wifi does work. My seat mates were also connected. The equipment ranged from Blackberries to iPhones to iPads and of course various brands of laptops.

Yup we are now connected in the air. Now if only they can make money out of it.

Cheers

Blackberry Standoff - Who Will Win? Are They Right? How About a Solution?

In a world where information flows freely and access to content has never been easier we should all be concerned at those governments who seek to demand free access to our data and information.

So the standoff between RIM vs UAE, KSA and India over the access to the encryptions standards of RIM is a very worrying trend. At the heart of the matter is the ability to encrypt data traffic and protect data.

Most smartphones like Apple and Android devices have very poor encryption and as a result anyone sending messages from these devices can have their data and text messages hacked. AND their location easily made available. If you want to read a sobering report on the subject go here.

With recent reports of the easy (and low cost) methods of hacking cell phone traffic becoming more prevalent - the need for secure services like Blackberry grow.

I sign a lot of NDAs and keep a lot of information confidential. I use my email smartphone - a Blackberry - to communicate under the terms of those agreements. If I am forced to use unprotected communication I will be in violation of the said agreement. This is unacceptable to me and to the people who trust me.

In my view Blackberry is right to keep the data secure.

So here is an idea and thought for resolving the problem. If RIM and the respective governments agree to a private data viewing capability under strict control and with full cognizance of the individuals who are using the service then I am OK with letting the respective governments see what I have. I will of course be very careful not to let those governments see data I don't want them to see.

So here is a challenge to the governments who are asking for open access to Blackberrys just like they can to iPhones and Android devices. I'll let you see my data so that you can be assured I am not doing anything bad. But you have to assure me that you can monitor your own people and protect my data once you have it.

Deal or No Deal?

Cheers

C'mon Gimme Some....

USA TODAY(August 5th) came out with an interesting perspective that addresses the Ancillaries view.

SmartBrief - the ASTA (American Society for Travel Agents) daily newsletter had a slightly interesting spin by stating "Travel agents push for share of fees". And this there is nothing wrong with that. I think the revenue should be shared. If the agents are doing some work - then let them get compensated... but by whom? Currently the airlines are not paying the agents formally for issuing tickets. The agents are getting compensated by their clients. Except the OTAs stopped charging fees for handling flights. A fact they trumpet and have had great success in doing so. The share of booking processed by Online Agents has actually risen in no small measure because of the no fees policies.

At present this seems to indicate that the OTAs are doing just fine with the model and so does the consumer. While we all know that the process is not necessarily pleasant the amount of information out there is clearly not impeding the purchase of travel.

So a part of the debate must be whether it is actually necessary to go for detailed disclosure or all information or rather if the disclosure process currently in place is sufficient.

There just seem to be a large number of people complaining about the issue and not all of them making complete sense. This applies to politicians and industry players alike.

So if I can quote a little Hamlet:

Hamlet: Madam, how like you this play?
Queen: The lady doth protest too much, methinks.
Hamlet Act 3, scene 2, 222–230

Cheers

Cathay and Emirates Aircraft Choices

Same aircraft different reasons. Both are big purchasers of 777-300ER and the A350-900.

In the recent pronouncements from Tim Clark - he has opined that Boeing need not fear from the (as yet) not launched A350XWB-1000 and that it needs a new 777-300ER replacement.

Cathay's Tony Tyler in announcing their big order for the A350-900s praised the aircraft as being ideal for CX implying that the aircraft will eventually become the mid size mainstay of its fleet.

So this is interesting. Clearly the battle lines are drawn. Will Boeing listen hard to Mr Clark as they have in the past - will Airbus go a little further with a A350-1100?

What a conundrum for Toulouse and Chicago.

If BTC Regulated the Sale of Airline Provided Paint

DISCLAIMER THIS IS INTENDED AS HUMOUR.

Background: BTC (Business Travel Coalition) and others have been demanding that the airlines are forced to disclose their ancillary services and fees structures in all channels equally. So the Professor has imagined what would happen if BTC was in charge of consumer regulation when airlines sold paint.

With thanks to Charlie Leocha for reprinting the oldie but goodie original joke “If Airlines Sold Paint”. http://www.consumertraveler.com/today/if-airlines-sold-paint/

Opening Scene. A small local paint shop in main street USA. Man goes the Shop opens the door…. Outside the store are disclaimer signs in 6 point type warning you to the safety and pricing policies of paint. There is also a HUGE video display in the shop window not with attractive paint cans or uses for paint but with rolling rather stern dire warning information scrolling across the screen. It gives the consumer specific instructions on how to buy paint in online and offline. There are a list of places with maps and URLs showing where you can buy paint and the prices of paint at each place. There is so much information the board takes 5 mins to scroll the info which is illegible anyway. There is a Federal watchdog email address and website address prominently displayed on the signs outside the door, on the door and displayed throughout the store. On each paint can is a big warning like a cigarette pack health warning. Attached to each paint can is a 4 page booklet.

Man (looking a little bewildered) approaches a smiling Shop Clerk. The Previous customer storms out looking very angry dragging a balling kid behind her.

Customer asks: can I buy some….

Clerk: Before you say anything sir – I am obliged to tell you that you can buy paint online and offline. Before I can tell you anything about the paint please sign here that you understand that I am going to tell you about paint and that you understand I may forget to tell you everything about paint so this absolves me from making a mistake and my boss from taking the cost of the paint out of my paycheck… Please sign here (Handing customer a clip board with a 2 page disclaimer, man signs it without reading it)….. thank you.

Clerk: Now how can I help you on this truly fabulous day?

Customer: Hi. How much is your paint?

Clerk: Well sir, that depends on a lot of things and the government makes me tell you that there are possible surcharges here is a list of them (Handing a 4 page booklet). Please read this….

Customer: (Mutters under his breath – this is ridiculous) – out loud says: Can’t you give me an approximate price?

Clerk: Our lowest price is our introductory special at $12 a gallon. After that we have dozens of different prices up to $199. Plus the ancillary services fees based on how you use the paint that the government makes me warn you about beforehand.

Customer: What’s the difference in the quality of the paint?

Clerk: Oh, there’s no difference. It’s all exactly the same stuff. But as you can see the cans are very different. Don’t you like the way the paint can sparkles?

Customer: Well, in that case I’ll take your $12 paint.

Clerk: Well actually the $12 variety is only available on our website. If you want to buy it here at the store you’ll be charged an additional $20 Customer Convenience Fee. Plus the ancillary services based on how you use the paint that the government makes me warn you about beforehand.

Customer: So if I go home and get it off the website, its only $12?

Clerk: That’s correct sir – plus a Credit Card Usage Fee of $6 and then there’s standard Shipping and Handling of $15. Plus the ancillary services based on how you use the paint that the government makes me warn you about beforehand.

Customer: What? So in other words buying online would cost me almost exactly the same as what I’d have to pay here in the store?

Clerk: I suppose so, but if you buy it here you get to use it immediately. Online purchases take ten business days to get to you – unless you pay the optional $25 Express My Paint Fee. Plus the ancillary services fees based on how you use the paint that the government makes me warn you about beforehand.

Customer: You’ve got to be kidding me!

Clerk: Well no sir, but it’s academic anyway as right now the $12 paint is completely sold out in both places.

Customer: That’s BS. I’m looking at shelves full of the stuff!

Clerk: Ah, but that doesn’t mean it’s available for sale. We sell only a certain number of introductory priced cans on any given day. Hang on a second let me look it up, (Clerk looks at his computer and then smiles broadly) YES look at that! It just became available again – at $17.50. You can do the same search yourself Sir. Plus the ancillary services fees based on how you use the paint that the government makes me warn you about beforehand.

Customer: C’mon! You mean to say it went up while I’m standing here?!

Clerk: (looking sympathetic) ‘Fraid so. Inventory control changes our prices all the time. I would actually like to sell you the paint but the Government says I have to wait till everybody has been told what the new price is. I strongly recommend you purchase your paint as soon as possible as it could go up again, but it’s also possible that it could go down and even not be available again. Finally the government might not let me sell it to you until everyone has been informed of whether the paint price has been checked by this mysterious organization called the BTC. How many gallons do you want?

Customer: Well, maybe three gallons. No, make that four, I don’t want to run out. I assume I can return anything I don’t open?

Clerk: Certainly sir. The $17.50 paint is non-refundable, but if you return it within 48 hours you will be entitled to a $5 credit towards the future purchase of another gallon of the same color at the same or higher price. Plus the final price may change because of the ancillary services based on how you use the paint that the government makes me warn you about beforehand.

Customer: That’s crazy. In that case I’ll just give any unopened cans to my brother as he’s planning to repaint his home soon.

Clerk: Sorry sir, no-CAN-do! Our terms and CANditions – that’s a little in-house joke – prohibit paint transfer. It is strictly for the use of the original purchaser. Also the Government doesn’t like competition they need to know where you use the paint so that they can tell everyone in your street that you bought the paint and have used it.

Customer: But wait a minute, I hadn’t spotted those “Paint Sale – $9.99* a Can” signs over there? They are hidden behind all these notices, it makes it so difficult to see an actual price off... That sounds like a much better deal.

Clerk: Ah yes, that’s from our low cost paint division. The Government doesn't actually want to let me tell you about that as it would take too long to explain but we won court case and so we can no have the sign up. However i have to disclose a different set of rules, the asterisk denotes that the cans are actually half-gallons and the price is based on a minimum purchase of two. There is also an additional Environmental Fee of $5 per can – this is required because we use that nice sparkly resin to make the paint cans look nice – we have to pay a special fee because its made of red lead, a non-refundable Can Deposit of $3.50, a Paint Facility Charge of $5 and if you want more than one color, the second has a $25 surcharge and the third is $50 extra. Plus….

Customer: Yes – I know … Plus the ancillary services based on how you use the paint that the government makes me warn you about beforehand……This is utterly ridiculous. To hell with this! I’ll buy what I need somewhere else! Now at least I know I can buy it elsewhere – see here it says so in the booklet you handed me earlier.

Clerk: Well sir, you may be able to buy paint for some rooms from another store, but you won’t be able to find paint for your connecting hall and stairway anywhere but here. And I should also point out that if you want Uni-Directional paint it is priced at $249 a gallon. But that paint is special – you don’t have to tell the Government what you want to use it for.

Customer: I thought your most expensive paint was $199!

Clerk: That’s only if you paint non-stop all the way around the room and back to the point at which you started. Stairways and hallways are considered one-way exceptions to the rule. Plus you must notify the government when you move from one room to the other.

Customer: So, if I buy the $199 paint and use it in my hallway what are you going to do about it – send some goons in to paint over it?

Clerk: Wow, You are WAY smarter than the last guy who came in, I believe you’re getting it now sir. But no, please, that would be plain silly. We’ll simply charge you a Direction Adjustment Fee plus the difference to $249 on your next purchase. Then the government would have to come and inspect it. You cannot use the room until they do. I should tell you that after consultation with their consumer panel which would be your neighbors and the inspector – this process may take about 3 months.

Customer: Next purchase? No way! I’m out ‘a here

Clerk: At Skyhigh Paints we never forget you have a choice, so thanks for shopping with us. Have a nice day! And Sir please mind your step as you pass by the disclaimer signs we had a guy in here yesterday who tripped on it and wants to sue us for it…..

Travelport to Announce IPO Soon?

Ok the rumours are already flying... Travelport will make its announcement probably this week with their Q2 results. The announcement will come if its going to during the results call, scheduled for Thursday August 5th at 11AM EST.

In the past few days it has been ramping up its PR as a way to get some positive news into the market. This morning's mail box revealed a mailer for Travel Agents trumpeting the Continental Full Content Extension and on the website UA and TP announced their extension.

All this points to the announcement on Thursday. It first surfaced as a rumour on June 25th after the rather embarrassing pull back of its initial offering in London earlier this year. Amadeus got away nicely in Madrid so the stars should be aligned for Travelport.

Or maybe not...

Travelport still has some significant challenges. UDT - its star new product also called Universal Desktop now nearly 3 years late in deployment is not there yet. Early adopters trying to implement additional content are finding the interface and the data structures challenging. Its airline hosting business fails to excite and this is an essential part of a long term survival strategy for the core reservations based business. Its Orbitz partner/sibling/customer is also not setting the world on fire being squeezed out by the rise of Priceline.

The spin meisters will be working overtime to make the animal look good. But the investor community remains guarded. Enthusiasm for the deal was decidedly less than stellar with a strong set of issues on multiple levels that caused the collapse at the Feb 2010 IPO attempt in London. The fundementals of these issues have not gone away. The City Gnomes are not known for their forgiveness nor short term memory loss.

Greece (one of the reasons cited for the pull back) is just as sick if not worse. The retail climate is not as hot - retail sales failed to ignite the US market. But the investment climate is definitely better in the USA. Is that enough?

For investors who are still very weary of get rich quick schemes - they will be looking hard at what Travelport intends to do with the proceeds. If they are going for just debt retirement that will not be viewed positively. Savvy followers of the sector realize that there is a growing investment curve driven by the needs of the market for distribution of the unbundled airline products. Travelport has several areas that need investment such as its fare products as well as support of ancillaries. These are not trivial investments. With little airline reservation revenue supporting it - Travelport faces challenges.

Also worrying must be the amount of incentives and the resulting pressures on yields from increased marketing costs which are long term in nature. This was already highlighted in the Q1 results. The ability of some airlines to drive lower costs from their "Full Content" deals means that Travelport is more vulnerable to distribution pressures than Amadeus and Sabre are.

Of course the emergence of Google/ITA and new players such as Everbread in fare search systems challenge at a core level the concept of the legacy GDS that is the centerpiece of Travelport's business.

Travelport is therefore a riskier investment than its class members.

So this is definitely a story that will be interesting to watch. Let's see if the Professor is right.

Cheers

Mexicana And Mexico - A Case For Treatment

Seems that the problems in Mexico are growing rapidly.

Hot on the heels of Mexico being downgraded to a Category 2 country by the FAA, Mexicana pulled the plug on the largest Mexico travel market today - California. The LA Times reported the details.

Mexicana's owners the hotel group Posadas clearly have run out of patience with the reforms they feel are necessary. But that is not the only thing affecting Mexico's largest airline. The on-off again potential marriage with their some time sibling Aeromexico is another issue. But now the big threat is coming from the emergence of Volaris as a strong market force. Volaris is fast growing and resonating with the market. its support from Mexico's richest man - Carlos Slim - is not to be underestimated. Will MX file Chapter 11? this is being discussed in detail between the powers that be.

Mexico of course has been hurt by a number of internal and external factors. The global economy recession hit them hard. But the drug wars and bad publicity have further exacerbated issues for the country the #2 market in Latin America.

Let's hope they can get this sorted quickly.

Kicking The Crackberry Habit?

Those who know the Professor personally know how much I love my Blackberry.

I was an early adopter and am very dependent on it. It works and its marvelous in its simplicity. It is also VERY secure as the UAE has determined it doesn't like.

These days I love the email and I love the camera and of course BBM is great with my team. But JUST a little lately I have started to wonder if I am being a little out of touch by not having an iPhone or an Android machine. Actually a bunch of Crackberry users feel the same way. And its not just a few. Check out this article.

I tried a Nexus One. It was HORRID. Just awful. Sorry Google you suck. HTC's machine(s) is/are very elegant and work(s) much better but I have to say I have problems with the way the touch screen works. There is too little precision in using it for the prime reason which is email. Cool stuff is just not that interesting.

A few friends are members of the dark side - the iPhone black turtle neck groups - you know who you are.

So here are my issues before I change.

I want to avoid spending large sums of money when roaming...
I want decent functionality
I want simple and easy email and the ability to read and write
I want those nice functional applets
I want the sexy dual gesture touch screen
I want a working phone one that I can use to understand the person on the other end.
I want security of encrypted data
I want a decent web browser
I want a non-payable GPS
I want to be able to type accurately
I want a messaging system that is secure and status enabled.
I want to not have iPhone envy
I want not to have to fumble with the UX

So in looking at all the options I think I am fine with Blackberry 6 and the new device 9800 Torch.

Let me see if that works. But I am open to options. Also I am looking to replace my trusty SonyEricsson C902 which I loved as a simple fone. I am looking at the Xperia Mini.

Cheers

Why Do This? Another LCC for Thailand

Seems that there are not enough LCCs in IndoChina. So Thai Airways who already has a wholly owned and operated LCC business called NOK Air is now partnering with Tiger to create Tiger Thailand (try saying that after a few martinis).

You have to ask yourself why do this?

There are already a whole host of players in the market. Directly we have so many and then because BKK and HKT amongst others are so popular there are many additional players coming in.

So what gives... is this to prevent another squeeze play that has happened to Virgin Blue in Oz?

Gotta think this is not a smart move - but then who am I?

Cheers

How Big Ancillaries?

Depends who you ask.

According to the US government (GAO) - figures for 2009 come to at least $3 billion. But the DOT reports as quoted by PCW come to over $7.8 Billion Ideaworks and Amadeus say its going to be over $13 billion in 2010.

PhocusWright says as noted above - $7.8 of which nearly $3 billion are bags alone.

Anyway you cut it the numbers are getting bigger. If we take the Global flight revenues to be approx $500 Billion in 2009 - these numbers are starting to become serious contenders. According to ATW's annual survey of airlines - annual US average cost per ticket (pure air ticket revenue) fell to $227 in the fourth quarter. Down from $300 in 2000. With average ancillaries now making up averages of $50 plus per ticket - they are replacing airline tix revenue as a source of income for the airlines.

When distribution costs are factored in - then there is a pretty strong correlation between the cost to distribute a ticket and the additional revenues per ticket achieved. Coincidence?

Definitely this is a story that will play a long time. Organizations such as Charlie Leocha's and Kevin Mitchell's will continue to belly ache about it - even while supporting the airlines' need for additional revenues. While we all personally hate it - I think we as consumers will begrudgingly continue to accept it.

Cheers

2011 Growth Moderating

CAPA has done an analysis using a variety of different parameters but basing things on the 2010 ICAO estimates. This is broader than the IATA studies which tend to be focused on legacy carriers.

Anyway check it out.

Cheers

2009 A Bad Year For Airlines

Well so the numbers would seem to point out.

Both Flight Global and Air Transport World have pushed out their annual rankings.

The former used Seabury for much of its data - the latter used Ascend.

There are some really clear result trends that have emerged. I will pick on a few and will continue to explore them.

1. Airlines can make money out of Ancillaries.
2. Capacity restraint is key to maintaining profitability
3. Decline of the US market - domestic ASMs fell consistently.
4. Market volatility remains but seems to have reduced the amount of volatility.
5. Cargo has come back with a big bang
6. Premium Traffic is returning although yields remain a problem all round
7. Beware Emirates
8. Low Cost model is very healthy thank you
9. Reformation of the basic cost model is still lagging.

There are a lot of changes coming.

Cheers

Who Tweets?

After a nice long time away from home on a re-invigorating but not necessarily relaxing time in Europe - I have been catching up on some oldies and goodies stuffed in my inbox.

One question that keeps bugging me is who are the Twits (aka those who Tweet a lot)? And with apologies to Roald Dahl, there are some interesting stats to determine this. I am going to bias you a little by telling you who I think are the Twits.

In my view Tweeting is not a completely bad thing - but it definitely is not a great thing.

What bugs me is that there is no ability to determine on my part what I get. Actually that is not completely true - I can use Tweetdeck or something else as that tool. But my gripe is that I cannot filter the stream of trash that people Tweet on. And that may be both its beauty as well as its Achilles Heel.

HBR published some research by one of Havard's students last year on the topic. While the study was looking at the trend of who follows - the final statement was interesting from my perspective.

" In other words, the pattern of contributions on Twitter is more concentrated among the few top users .... This implies that Twitter's resembles more of a one-way, one-to-many publishing service more than a two-way, peer-to-peer communication network."

In my view the value is that you can reach a lot of people with the tool. However what goes into the message and who reads it becomes almost impossible to filter. Indeed in that case it is more like a conventional media outlet than a 2 way communication. Little wonder then that it has endeared itself to either sycophants and their followers or commercial entities.

For a more indepth view of Who Tweets Arbitron and Edison Research click on this link.

You have to register but the report is free.

There are some great fun facts. 40% of Twits are seriously sad people with at least 3 working PCs in their home. And their top 3 TV programs are"

American Idol
Glee
Teen Choice Awards

Therefore I can conclude that most Tweets come from zit emboldened male teens who spend way too much time on their computers.

But you be the judge... its all a bit too weird for me.

Cheers

Mexico Gets Downgrade - On Air Safety Standards

The Obama Administration has downgraded Mexico to Category 2. According to Reuters, The downgrade from Category 1 to Category 2 is not based on any safety practices at a specific airline. Category 2 typically means that aviation authorities have fallen short on technical expertise, personnel, record-keeping or inspection procedures.

So just watch out when flying to Mexico. And also watch out for some of the weasel words that will be used.

Cheers

Yes We Should Read The WikiLeaks Piece

I am an advocate for freedom of information. However the sheer volume of data in the Iraq WikiLeaks dossier is enough to turn anyone several shades lighter,

I do not condone the theft of information nor do I condone the bad acts and poor decisions that contributed to this mess. Worse is the cover up that occurred.

I first read about WikiLeaks in the New Yorker a few months back. Then I was introduced to Mr Assange. Its a balanced piece and obviously designed by the media savvy Mr Assange as part of his assault to get his story out.

So my exhortation to you is to read some of the dossier and draw your own conclusions. Its heady stuff. It makes for unsavory reading. However you understand that fighting the 21st century war is a very hard thing to do. And no you cannot do it in the public eye but you better be prepared for it when it gets out - as it always will.

Remember in the Internet EVERYONE can hear you scream...

Cheers

Passenger's Advocate Comes Under Fire

It is not often that you read a piece that essentially demolishes someone's credibility. And 3 web pages devoted to it at that. However it seems that the crusade of Kate Hanni is being impugned.

Travel Weekly which I love to read as my retro reading did a decent job of explaining the battle in the Hanni camp.

Personally I was rooting for her, I thought she had a good momentum. But it seems that she has somewhat blotted her copy book. One of the allegations against her is that she targeted Keith Mitchell. While the latter and I do not see eye to eye on just about anything - I do agree that the US should have passenger rights legislation. And so did Kate.

Let's hope there is a win here rather than a putting one person down to get the credit.

Cheers

The New Category: The Un-Fan

There is a certain legacy feel to life sometimes. Call them Luddites or just call them overwhelmed. But there is a large percentage of the population who just dont want to be your fan. And connect with you on Facebook. Nor do they want you to spam them with countless other messages.

I wrote about this earlier this month - I found another study that confirms my sentiment. This time eConsultancy has picked up the same theme. Check out this article from WebPro News. The eConsultancy piece examines the motivations and habits of consumers. Sorry but you have to pay for it... but its a good piece.

So I have created a new category called the un-fan. He/She has a pride place on my dart board and he makes me think of how to reach him and his colleagues.

You should too...

Cheers

ARC Data Shows Continued Slowing/Flat Growth

After the initial surge in bookings in the early months Jan till March, the US market appears to be stagnating. The Y/Y growth has slowed and actually in 2 of the 3 months declined. Much of this can be attributed to the activity of 2009. Check out ARC's data (you have to register).

But one thing is for sure, That capacity growth sure is not happening and the airlines are maintaining some significant control.

Will corporate travel come back in September... certainly I am anticipating a bump in traffic to occur from the business side. So too are the airlines it would seam. This time last year - according to my activity counter - we were deluged with offers from all airlines for Q3 deals. So far this time round, there is a significant quiet and lack of promos coming from the US airlines for the 3rd Quarter.

Cheers

Will They Or Wont They: Google and Travel Transactions

The debate over whether or not Google gets into the Travel Transaction business seems to haunt a lot of people. In my view - the issue is moot.

At the official news conference for the ITA acquisition, Chairman Eric Schmidt REFUSED to be deny that Google will not be in the Transaction business. The Charm offensive (that seems to be failing) studiously has the Google Acolytes saying no we are not going to get into the transaction business.

When I was at Expedia and we started our own charm offensive with the rest of the World - we (as then Microsoft) could not avoid the issue. But we downplayed the threat to the traditional agents. Internally of course we saw that the traditional agency channel was not that smart and therefore we could grab market share easily. That has been proven with the demise of the smaller agent and the rise of the OTA mega intermediary. The distribution pyramid looks dramatically different today than in 1996.

So my point about the issue being moot - is that Google doesn't have to be in the Transaction business. AT LEAST not in the conventional sense. I do agree that Google wont be manning call centers any time soon. But processing squillions of transactions in their cloud. Well don't say I didn't warn you.

Cheers

Airline Demand Strong, Now What?

This summer the airlines have shown a strong demand from the leisure sector. This has significantly reduced the availability of cheap seats and dramatically raised the pricing - at least in theory.

In practice that oh so subtle move towards ancillary revenues is beginning to pay off. Judging by Q2 profit announcements - the carriers doing not so well are few and far between. The ancillaries are powering many carriers - particularly the US and LCCs to greater profitability.

The weakest areas?

Asia Pacific with both JAL and ANA reporting losses is a prime example. But Chinese carriers are doing very nicely thank you.

And then there are BA and LH. LH has several carriers it is doing a good job on to reform. SN, OS, LX, BD. The core LH mainline we believe is doing better but a long way to go yet. LH still refuses to move at Ancillaries preferring to call itself a Premium Carrier. But still it has hedged its bets with control of German Wings. BA on the other hand is more of a basket case and Heathrow is increasingly becoming irrelevant. While the village of Sipson might be celebrating, the Gnomes of Whitehall must be fretting about how to avoid losing market share of International Traffic.

IF you take a peak at who has what - you have to think that the order books from Farnborough went largely to the lessors. Many of these guys must be betting that the US airlines will need to order new kit soon. But the long haul planes hardly took in any orders. Still 32+58 A380s flying around in EKs colours should scare the pants of just about any network planner.

Cheers

Air Berlin + OneWorld = What?

Like many other people, I went "Hub?" with the announcement of Air Berlin joining Oneworld.

I recognize that many people think that AB is a LCC carrier but it has been Hybrid for a long time and fails the classic categorizations - FF Program, Connections, GDS Participation, Full Service Flights, Premium Service etc etc. It does indeed operate 3 separate business models:
LCC like,
Regular/network services,
Charter carrier.

For a detailed look - go to Anan.Aero who has done a nice job in assessing the move.

So I can only think of two reasons.

Reason A - OneWorld wants a PR story as its a lite news week after Farnborough.

Reason B - OneWorld wants to tweak the nose of the Kaiser (aka LH).

Let me know if you can think of another reason

Cheers

The Phony War is Over. Google's Charm Offensive Fails

Yes Folks that nice gentlemanly manner of talking about the Google/ITA acquisition like its all OK boys seems to have ended. The real war (of words) is just starting and its not going to be nice.

In the one corner you have Google's Travel team out telling the world - don't worry be happy - its all good and we are not out for world domination. On the other hand you have the very clear picture that Google IS out to change the world, and those people who think its their world are none too happy about it.

Down Under Claire Hatton - Google's point person in Asia Pac for travel was quoted today in the Australian Edition of Travel Weekly with:

"Google: we won’t take on agents".

Yet at the same time in the Expedia (arguably the world's largest Travel Agent) Q2 results - Head man Dara was issuing dire warnings about the impact of the deal. On TNooz today:

Expedia CEO Dara Khosrowshahi told analysts during the company’s Q2 2010 earnings call late yesterday that the Google-ITA Software deal could have “very significant consequences” on the sector. Highlighting Google’s “considerable market power”, Khosrowshahi said one of the main areas which Expedia will be monitoring is whether the search giant favours its own content and results over those of existing advertising partners, “whether it’s algorithmic, inside their system or hard coded”.

So boys and girls there you have it. And its not blunderbusses at dawn - its all out war - there will be casualties and of course there will be collateral damage - that is going to affect a heck of a lot of people.

Dara did add that he was all right Jack: (Also from the same TNooz piece) “We’re very happy, especially with Google buying ITA, that we’ve got the BFS team and makes us worry a bit (sic) less about what the potential consequences of that transaction could be, at least for us.”

Let's see if his technology team really are up to the battle. Will Expedia create a coalition to combat this dire threat? Or if they will have to import some external help from say Eastern Europe to keep the dreaded Hun at bay?

This, my friends means that it is time to batten down the hatches and prepare for a long and arduous conflict for all of us.

Cheers

Reporting From Berlin - The Professor will be back to normal and full time next week.

The End of Airline Multi-Culturalism

One of the joys of working in and around the airline business was always the multi-cultural nature of its people. People who worked in an airline could come from different countries. In years gone by the airline personell in a particular country were often seen as the ambassador unofficial of that country. In many cases the airline’s local commercial and operational staff were pioneers and became a help to anyone – especially those visiting that country for the first time. Rumours used to abound that local staffers of Pan Am, TWA and Northwest were often secretly operatives of the CIA. BOAC local staffers were viewed as part of the Empire. And Air France local agents could be secret agents of the Sûreté.

The reverse was also often true, multi-culturalism spread from the remote offices to the head office. A local who wanted to climb hirer in the organization could only do so by transferring to the Head Office. Thus within an airline frequently you would find people of different cultures and countries of origin.

However the emergence of the Global Alliances has in effect ended this golden age of airline cultural exchange.

Now as each airline withdraws its ex-pat staffers back home and the local country staff are managed often by that country's local staff of the home airline – those days have come to an end. Now Germans serve United customers in Frankfurt, Air France people service Delta customers in Paris, and Japanese JAL employees service British Airways passengers.

From a customer service point of view – I see this as a very bad thing. How many times have I been told by an Air France person that my Delta status is worth nothing when it comes to a problem. And in the USA United personnel look at me as if I am from out of space when I try to use my LH credentials.

Overall I think this is sad that we are losing one of those little quirks of the airline business. It also means that an overseas posting is now unlikely for an airline manager. Thus I believe the airline business as a whole will lose some of its attraction to the brighter stars of the next generation. So Global Alliances homogenize everything to the lowest common denominator. What you get - if you like - is the airline equivalent of Beige Boxes. More Silos!

So farewell good people. And thanks for the ride. It has been a lot of fun.

Cheers

So OneWorld makes 3 across the Atlantic.

So the homogenization of the airline world is almost complete. With now more than 90% of the traffic across the Atlantic under the control of the 3 Alliances the airline world has become something of a boring place.

From a strategic perspective I believe that the creation of this risk sharing – mergers in all but name – alliances create as many issues as they solve. From a user’s perspective – IE the flyer, and as speaking as a frequent flyer, I cannot say that the rewards of the so called “seamless” experience are that great. Frankly I believe they are still a myth in the mind of the airline marketing departments. Let me illustrate this with a simple pair of examples from Star/Atlantic Alliance Plus:

Star Alliance – Transatlantic Alliance A++ AC,CO, LH UA. LH has first class as does UA. CO and AC do not. UA and CO have premium economy, AC and LH do not.

An itinerary NUE-FRA-YYZ-IAH-CCS-IAD-FRA-NUE should be (logically) possible all on A++ carriers and Transatlantic. Not so – the CCS legs are outside of the alliance and therefore have to be either added as a separate flight or as one ways. Any solution would up the price significantly.

I use these to illustrate the issue not to pick on Star/A++ specifically. I believe that the airlines have a long way to go to make the experience truly hassle free. However I think it is getting better. But it takes a very long time and the hype decidedly does not live up to the delivery. I hope that the regulators are paying close attention to the issue. When these alliances anti trust immunity comes up for renewal. I hope that they look at the issues for the customer. In my view the benefits to the customer should be considered as follows:

1. Better choice of schedules – ie more not less flights
2. Lower fares or at least no comparative increase in fares. I also think that the consideration of Frequent Flyer miles should be added to the equation, so that the currency of FF miles be considered as part of the cost equation.
3. Ease of use – to get from A to B should not be harder. Therefore in considering the value of an alliance – the customer issue of nonstop vs connections should also be considered. For example did the alliance reduce the number of nonstop routes in the broader market?
4. The hassle factor. Did the Alliance truly reduce the amount of trip hassle for the customer – of all types not just premium traffic.

If we are truly to regard this as a benefit then a truly objective and transparent mechanism for assessing Alliances should be put in place. I believe that players have the right to set their own standards in an open market. However when the marketplace is restricted to only 3 major players with such a large percentage of the market – then the standards of care and customer value must be put at a high premium. This includes the ability of the governments to force the players to undo their arrangements. Currently these standards are not in place and all that seems to have happened is a lot of talking without consumer consideration. Given how much money the airlines are going to make this year as a result of their oligopoly power – I think this should be a consideration. And with OneWorld now the third man in – we have to be very careful.

Cheers

Is Skype No Longer Real Time?

I think we all love Skype (if you are not a Skype user then you really should be!) But lately I have noticed that Skype is a little slow in delivering messages.

It used to be that Skype would hold a message if you were not logged on until you were there - then it would update. But lately I have noticed that some times it doesn't do this for DAYS!

I hope this is just an aberration because I really do love to use the application for leaving messages.

I would hate to see those chaps at eBay start to mess with Skype and that I have to defect to another service. The utility value of Skype I place WAY above Facebook and Linked in.

Cheers

Nexus One = Boat Anchor. What Lessons?

I like the nautical themes since I am at the seaside this week. As I type this I am listening to the sound of the Atlantic pounding some rocks.

Quietly on Apple's big iPhone day - Google pulled the plug on Nexus One. Here is an article from InfoWorld

Now I wonder what does this tell us about Google's ability to provide a consumer facing product? Is there a lesson for the Google/ITA acquisition?

Hmmm now that's a thought!

Cheers

A Free Case For Your (i4) Boat Anchor

Steve – aka the Dark Lord – has come out fighting on the issue of the iPhone 4’s er connection issue.

He says it has been blown out of proportion and that the media is to blame (sound like anyone else we know?).

Well Steve – this is life. Suck it up.

Apple has like almost every tech company – including many that I have been with – had its share of misfortunes. It is part of the way technology is. What works for some doesn’t work for others. Users expect computers to be infallible. To know the perfect answer. An iPhone is a work of beauty but it has to work as a basic function. Namely it has to work as a telephone. The issue of the antenna – which is among several other issues is that it needs to work normally. I believe from several iPhone 4 users I have spoken to – that the issue is sporadic. For one old time iPhone user – he explained he is as frustrated with the problem as when the iPhone 1 first came out and would disconnect in mid call when moving between towers. The Apple faithful have flamed me a few times for making an issue of the iPhone. Just the facts ma’am. For an empirical assessment of the iPhone from Consumer Reports which confirmed the issue – please visit their website.

I think the iPhone is a work of art and a marvelous thing. I hope Apple gets it right. My objection to it remains the business model and the fact that it is a license to print money. Given the money Apple is making from the iPhone – I believe they have an obligation to get it right.

So through the end of September you can have a case for your iPhone boat anchor. Hopefully after that the next batch will have a better antenna. I should point out that some analysts are reporting more issues with the iphone. But you can figure this stuff out for yourself.

Cheers

So What’s The Real Problem and What’s The Real Answer?

The launch of Open Axis as the standards group for Airlines in Ancillary Services and Direct Connections last week caused a bit of a stir. It has definitely miffed a lot of people. The Legacy GDSs and those who depend on them are good examples of that camp. Indeed also last week at the same time that the Open Axis group was holding its inaugural press conference – in Washington there were hearings where outraged players were moaning that the airlines were not playing ball and providing the Ancillary Services information to the GDSs. I never thought I would see the day when a Hearing in the US Capitol would be held to support the GDSs!

In sifting through the responses over the past few days – I was enjoying a degree of reading how different groups want to see it play out. There is a very good article by Ian Tunncliffe in Travel Technology Update. (Sorry this is by subscription only). So I will give you the essence. Travel Industry Technology needs to get a life and the debate over standards is irrelevant to a market where a vendor can deploy a solution such as an iPad and get traction of thousands of Apps and users without paying any attention to such standard. (OK so this was my interpretation of the piece but I am sure Ian will forgive me for this latitude).

What’s more he is right.

The Professor definitely believes that standards help and has already put his money where his mouth is by endorsing the Open Axis standard (via my alter ego). I am also a great advocate of the Open Travel Alliance and I really hope that the two bodies come to an accommodation if nothing else.

So are these views inconsistent?

Actually not in my view and here is why. I have for a long time believed that the rigid structure of the legacy GDS controlled travel workflow restrained innovation not to mention the free flow of commerce. In the early 1980s it was very useful for piggy back technologies such as Lanyon Boards. In the 1990s the standards enabled the OTAs to come into being. However the real Travel 2.0 the one we all use didn’t want to be constrained. In the past 5 years new businesses in search and itinerary management emerged and have done a very good job. Much better than the GDSs did. So the footprint of the legacy GDS shrank further and further inwards. Having worked in extensively in the OTA world I have witnessed all the major functions of the GDS have been replicated and indeed far exceeded bar one. To wit:

Fare Search – OTAs do better – and Meta Search does just as well particularly in combining fares and availability
Availability – OTAs do better in presentation
File Management/Itinerary – OTAs do better – and Itinerary management services do even better
Customer Management – OTAs do better
Supply Chain access – GDSs do better.

Then add Web 2.0 with the Social components to it and there is no way for the legacy GDSs to hope to match that capability. Even in the interaction of their customer users they have abandoned their dedicated networks in favour of web based solutions.

With the commercial model being driven by the supply chain component – it was only natural that for both commercial and technical reasons (as well as a host of others) that the suppliers would want to tap into the broader market where innovation and customers live. This meant that there was an inevitability about the Supply side wanting to open up access to the general market. (I need not elaborate for my readers that the restraint of the GDS so called “incentives” to users is an evil thing in my view.)
And this is not just theory of the world being a happy place where the GDS model alone addresses distribution to the open market. The legacy GDS global market share of airline traffic has been falling steadily for years. Eroded by both the emergence of LCCs and the greater direct distribution by the Full Service Network Carriers.

Returning to my questions… The real problem has been that the bootstrapping of airline and travel IT to extend the old GDS based model has reached the end of its life cycle. And yes – a new world where Apps can be built and deployed in hours vs years in a far less rigid world has become the de facto standard. Open Access by what ever name has become the norm. The real answer is that we have to now go back to the core reservations systems providers – the PSS vendors – and start beating the drum of revolution. Now is the time for the IT infrastructure to become open and decidedly more nimble. I can imagine that the airlines will not like this. Decidedly the big hosting companies – Amadeus, Sabre and HP/EDS will hate it. The GDSs who have depended on this closed architecture for years are going to be very unhappy. But in my view they have no choice but to change and reform. Then we can stop having IT get in the way of business.

So what are we waiting for?

Disclosure Of Fees and Charges - Ancillary Revenues

Heads up everyone - the bun fight has started.

last month in Washington - Mr Oberstar held hearings on the subject of Airline Fees.

There are several issues - taxes charged, the amount of fees and the type, the manner of charge and exceptions etc etc.

What some want - such as Kevin Mitchell - is a full disclosure and an easy way to buy the products and services equally in all channels. This challenges the core precept that airline pricing is designed to be as complex and obfuscated as possible.

This seems to have been lost in the warring factions.

In my view the way that a product is charged should be at the decision of the person who sells the product subject to things like lying and dishonesty.

At stake is a lot of money but there is clearly a set of influences at work.

So here is my view on the subject. I feel strongly that the consumer should be able to see what he is buying. But in travel he has been lied to for so long as to what the product is and what the price really is as to have been accepted as being clear.

So what do you think?

Cheers

Here It Comes - Spanish Fly

OK so the headline is a bit hokey but BA and Iberia have had their merger blessed. So now we have definitely have airlines in Europe who are part of a cabal and have not airlines who are - well have not players.

The big 3 groupings of legacy carriers are the expected players -

BA (OneWorld)
AF (Skyteam)
LH (Star)

Their partners cover almost all of Europe. However and in my view this is a good thing - the total pie they control is much less than say in the USA. Ryanair, Easyjet Air Berlin and Wizz all represent a sizeable chunk of the EU market. With North America pretty much aligned and Europe the same - there really is little opportunity for choice amongst consumers other than from just 3 group choices.

In my view this is going to finally dawn on the consumer that he has only 3 options plus a few minor ones when ever he is looking to buy airline seats.

did someone say pork?

Cheers

Millenials Turn Away From Facebook

Lately as regular readers of this blog will know - I have been spending time with younger users. Millenials who will represent the next generation of users. Their parents are my generation and some of them are both colleagues and students.

In speaking particularly to teachers I have found that there is a greater awareness of the lack of attention with the distractions available to teens and recent adults. I am not criticizing them in any way. This is a fact of life. This will have a major impact on their interaction with the products and services we create in Travel.

eMarketer cites several studies in a recent piece on defections. What is particularly worrying as to how many just find it boring with generally the high abandonment rates.We are approaching a problem I have long suspected exists. We actually have too many shiny objects to cope with. As a result we lose interest and move onto the next thing. And if we - (in my case as a Boomer) - lose interest quickly just think how difficult it is to maintain the interest of a Millenial?

In my opinion we need to start to engage differently with the emerging user generation(s). That means we have to do a better job of providing access to the services.

Key amongst these will be:

A social component.
Individual content
more implicit interaction (ie a direct opposite to the current explicit interaction required).
Engaging and maintaining interest by constant refreshing.

it is the last one that makes me cringe because keeping things fresh is always hard. For the travel industry - that has been assumed to be fresh content - new products and promotions. But in my view it has to be deeper. Don't please ask me how yet - I am just coming to grips with the issue.

I do know however that if we don't then the abandonment rates for travel products and services on the web will rise. And travel sites will become as yesterday's news as Second Life and Myspace.

Cheers

"Who Do You Love?" Or Trust...

That old Bo Diddly song was stuck in my head the other day. Actually the Geoerge Thorogood version. And I have been thinking more and more about the essence of Trust. It just amazes me in Travel how much consumers are expected to trust and are constantly let down.

And then I read two stories from emarketer. Both related to Trust. The first one related to consumers perspectives with regard to trusting Facebook. Interestingly they were more concerned with the commercialization than the abuse of their personal data.

The second item from the same day by emarketer was on the acceptance of mobile marketing messages. Today we are bombarded with the "year of the mobile" messages from interested parties. Yet the first truly mobile commerce generate - the Millenials are none to happy about being marketed/spammed via their mobile devices.

This doesn't bode well for people expecting to make squillions of dollars by sending messages (unsolicited) to mobiles - smart or dumb.

So dear friends - think very carefully about what you are doing before you go down that path...

Cheers

Apple to Face EU Probe

Seems like its the Government's turn to focus a little this week. It also seems like someone was listening or they are just plain smart. I will take either!

The EU is going to launch a probe into Apple’s iPhone business practices. Specifically they are going to investigate two of the 4 revenue streams and possibly the others as well.

The App Store is one, the other is the interoperability of iPhone and other phone systems. This is likely to extend into the Admob/iPhone dispute.

For a detailed read – go here:

Click here to read full story...

Cheers

What Level of Scrutiny on Google + ITA, (aka Troogle)?

This was not going to be a quick and short post as I could use all my Professor skills to analyze the issue. However in starting to do some research on the subject I went back and visited some of my old posts on the subject. I have long felt that Google was already a monopoly in Travel before the acquisition. Troogle has a hot topic in 2008 and 2009. Then the chatter died down. So I reprint here for your edification and reading pleasure a post I did last year on the subject on what I think the Obama Administration is planning to use as a frame of reference on Google’s activities in travel.

Here are a few salient points.

1. I believe that the review time will take more than Admob. In the case of Admob – there are a large number of different options and it is a nascent business too early in its cycle to say that there will be a single business who can dominate.
2. Travel is a more defined category and the tentacles of the dark side that Google has become stretch far and deep and wide.
3. US law will prevail and US law is very specific in this area of what defines monopoly and how it can impact the transaction. (see below)

But – I want to be clear that I do not necessarily believe that Troogle will be bad for the industry. There are now clear winners and losers who will be impacted by the transaction. The world of GDS dominated distribution for one is probably headed for the sunset. The cost structure of meta-search on both the supply side and the seller side will be seriously impacted to the point where meta search may become irrelevant.

So what do you think? Let me know directly or privately.

Cheers

REPRINT POST August 31st 2009:

[Professor Sabena's Blog] Is Google A Monopoly?

I have this uneasy feeling about Google. The power they wield is significant. Fine if they don't abuse it - or is it? And what if they do actually use their power and abuse it?

I have written columns on this going back to 2006, here are two of my older posts on the subject:

http://t2impact.blogspot.com/2006/10/that-giant-sucking-sound-is-google.html
http://t2impact.blogspot.com/2009/08/is-google-new-evil-face-of-it.html

It seems that the Seattle Times and other Media outlets have started to feel the same way too. Today's editorial was somewhat less than subtle. The Times (a right wing paper in my view since it crushed the old Seattle PI), is calling for Google to be investigated for being in violation of the Sherman Act.

http://seattletimes.nwsource.com/html/editorials/2009766680_edit31google.html

A quote from the Obama Administration assistant attorney general for antitrust, Christine Varney, as saying that Google was America's most obvious antitrust problem — Microsoft was "so last century" she said... ouch.

The editorial called for an investigation of Google under the Sherman Act. Section 2 which says:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony...

That has been the law of the United States since 1890. All it requires (per the Seattle Times) is that the Justice Department pick it up and use it.

Should we accept that Google is being altruistic all the time or is there something more sinister about Google? It seems that Google's hand has to be forced sometimes - hardly the behavior of a good global citizen.

For my own part - I am happy to use the Google search engine but I remain leery of Google's force in the market. It is downright scary the amount of power they have.

So what do you think?

Cheers

--
Posted By Professor Sabena to Professor Sabena's Blog at 8/31/2009 12:36:00 PM

Why Troogle Google?

With the Google + ITA acquisition now public, we can now evaluate how this will impact the world of travel. As I wrote in the 3 part series on search,(INSERT LINKS HERE) I have long felt that search was akin to an unnatural act and one that left the customer un-satisfied. I also opined that failure of the travel industry in its own right to address its deficiencies in search would open the world to Google coming in and changing the way search is addressed. But I regarded that while not necessarily as a bad thing for the consumer – it would change the dynamics of the Travel Industry Sector.

In the 3 part series I wanted to evangelize the concept of natural search. This did not mean that navigation to specific elements of travel was a bad thing, but the overly explicit nature of search in travel has long been too constrained by – in my opinion – a GDS like constrained process.

In my view the convergence of some key factors would drive change in from conventional search to natural search.

• The consumer-facing conventions make it possible
• Loosely coupled technology through mash-ups breaks the bonds of the supply controllers who held sway far too long over travel
• It also makes it far easier to make everything work – less dependency on making sure the tightly choreographed ballet of interlocking pieces actually function. Banish the word “seamlessly”. But don’t drop the word fast.
• Geo-location – mapping is finally ubiquitous.
• The line between mobile and fixed position makes the definition between the two largely irrelevant
• The supply side has better infrastructure and processes (not to mention better technology) to support Natural Search.
• The Cult of Individualism is a natural state and a natural act.

Over time the GDS based model has shown itself to be a false profit for the consumer’s need for access to information. As a result the GDS imposed workflows in search/shop became the highly constrained standard because it was necessary in order to get access to the final mile of the transaction namely the price/book/ticket.

Search and Shop outside of the GDS model suffered from a lack of trust. The various attempts by Meta search companies such as Kayak etc resulted in a permanent time delay of salient information. Thus you, the consumer could never shop in a trusted mode. And suppliers wondered why consumers didn’t have loyalty and trust??? With Troogle there are now several of these elements consistent and the results can be very different and trustworthy. This in my view is what the Google management team meant when they said they were “… building something that the industry has never seen before."

At WIT this year – I will expound on this subject and illustrate what I believe will be a way to address this.

But I think I made it abundantly clear that if Google had a mind to they would use some of their clout (and considerable cash pile) to address the subject and hurry the process along.

Commercially you have to ask why would Google plonk down $700 million in cash for ITA.
• Could it be for their revenue and commercial basis? If that was the case then the transaction would be up there with Sabre’s purchase of GetThere at $757 million at the height of the Internet Boom. So no not that alone – but over time Sabre was able to dominate a sector.
• If it was for the technology alone – I am sure that someone could replicate this for a lot less money. And indeed in my opinion at least one company has.
• Could it be for their Intellectual Property? ITA has a considerable number of important patents that I have previously stated could be very tough for the industry to challenge. Not that they should not be challenged but that the clout of Google and its legal team would make the relative minnows in travel hard to stomp up the cash for a protracted legal challenge.
• Could it be for their Hotel and/or Needlebase technology? Hardly try and play with it. It’s nice but hardly makes a dent in $1-2 million let alone that number of zeros.
• Could it be for their customer base? Very important – but not perhaps in the way you may think. ITA provides assured access backed by both technical and commercial service agreements that ensure that the data they provide is current. With Virgin Atlantic now joining the group of QPX users – the spread of Full Service carriers is broadening considerably. Yes there is a nice value to this one.
• Could it be the value of disintermediating several players in travel? Ah now you are talking. Consider the annual revenues for legacy GDSs and that number is big and very fat and ripe for diverting Google’s way.
• Could it be for eliminating meta search players with better solutions? This is an obvious answer. Yes but not the prime one.
• Could it be for filling the holes in some Machiavellian plan to dominate the Travel Industry? Hmmmm time will tell the answer to that question. Does it match Google’s vision of the world. Absolutely!

But are these enough? The correct answer is of course all of the above, and many more I have not outlined here.

Now the challenge is how to deal with the whole notion of the travel process from ideation through to sale. The world just changed and you and I have to change with it.


Cheers

Did You Miss This - Woot

I love Woot. It is a hark back to the glorious days of a single but extremely focused application.

One product each day. It is addictive to watch it. Surprising then is that Amazon has plonked down a bunch of cash to acquire the irreverent site.

Check out their sarcastic comments here

Now just imagine for Travel that there was a singular "Best Deals" site.

Now that's a thought.

Cheers

What Level of Scrutiny on Google+ITA (aka Troogle)?

This was not going to be a quick and short post as I could use all my Professor skills to analyze the issue. However in starting to do some research on the subject I went back and visited some of my old posts on the subject. I have long felt that Google was already a monopoly in Travel before the acquisition. Troogle has a hot topic in 2008 and 2009. Then the chatter died down. So I reprint here for your edification and reading pleasure a post I did last year on the subject on what I think the Obama Administration is planning to use as a frame of reference on Google’s activities in travel.

Here are a few salient points.

1. I believe that the review time will take more than Admob. In the case of Admob – there are a large number of different options and it is a nascent business too early in its cycle to say that there will be a single business who can dominate.
2. Travel is a more defined category and the tentacles of the dark side that Google has become stretch far and deep and wide.
3. US law will prevail and US law is very specific in this area of what defines monopoly and how it can impact the transaction. (see below)

But – I want to be clear that I do not necessarily believe that Troogle will be bad for the industry. There are now clear winners and losers who will be impacted by the transaction. The world of GDS dominated distribution for one is probably headed for the sunset. The cost structure of meta-search on both the supply side and the seller side will be seriously impacted to the point where meta search may become irrelevant.

So what do you think? Let me know directly or privately.

Cheers

POST August 31st 2009:

[Professor Sabena's Blog] Is Google A Monopoly?

I have this uneasy feeling about Google. The power they wield is significant. Fine if they don't abuse it - or is it? And what if they do actually use their power and abuse it?

I have written columns on this going back to 2006, here are two of my older posts on the subject:

http://t2impact.blogspot.com/2006/10/that-giant-sucking-sound-is-google.html
http://t2impact.blogspot.com/2009/08/is-google-new-evil-face-of-it.html

It seems that the Seattle Times and other Media outlets have started to feel the same way too. Today's editorial was somewhat less than subtle. The Times (a right wing paper in my view since it crushed the old Seattle PI), is calling for Google to be investigated for being in violation of the Sherman Act.

http://seattletimes.nwsource.com/html/editorials/2009766680_edit31google.html

A quote from the Obama Administration assistant attorney general for antitrust, Christine Varney, as saying that Google was America's most obvious antitrust problem — Microsoft was "so last century" she said... ouch.

The editorial called for an investigation of Google under the Sherman Act. Section 2 which says:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony...

That has been the law of the United States since 1890. All it requires (per the Seattle Times) is that the Justice Department pick it up and use it.

Should we accept that Google is being altruistic all the time or is there something more sinister about Google? It seems that Google's hand has to be forced sometimes - hardly the behavior of a good global citizen.

For my own part - I am happy to use the Google search engine but I remain leery of Google's force in the market. It is downright scary the amount of power they have.

So what do you think?

Cheers

--
Posted By Professor Sabena to Professor Sabena's Blog at 8/31/2009 12:36:00 PM

Occasional Flashes of Brilliance... and Fear

Today was not a good day for the South American Football Teams. The passion and the sheer drive of the Latins were sadly no match for the methodical onslaught of the Europeans. Well at least that's how the German's played - wearing down Maradonna's mob.

And so it would seem to be for some of the traditional power houses of travel. Google's onslaught puts them now in a very commanding position in sector that will be hard to unseat them - or avoid the long shadow they now cast. As I noted in the TNooz panel - the ITA purchase puts them in a commanding position in many facets of the travel ideation through purchase.

As PhocusWright noted "they claim to be building something that the industry has never seen before." And this is because they are now in a commanding position with more fingers in more pies than any other player - end to end.

But perhaps one of the biggest elements as far as I am concerned is that they have the ability to fundamentally change the rules as far as data quality and assured price offers. The veneer of "its good enough" has now changed and this is where the the old model will expire in the face of better technology as well as a solid business model.

So let me leave you with one thought. If you examine who has been making more money out of travel over the past 5 years 0 the fattest cats are the GDSs. Followed closely by Google. Those large EBITDAs quoted for Amadeus are now in the cross hairs of the boy wonders.

If anyone doubts that the GDS revenue stream was not one of the driving forces for Google - then they are clearly naive. So correctly the meta search players - as distinct from those who are active in real search and the legacy GDS players are to me the most vulnerable.

The formation of the OpenAxis group and the announcement of its formation on the day that Google announced its acquisition of ITA can hardly be seen as disconnected.

Be afraid - be very afraid if that is the game you are in.

Cheers

So Apple Steps up and Acknowledges Too Fast Too Soon... But....

The iPhone has suffered what could be seen as a pretty hefty hit to its credibility. And for once the Professor didn’t have to harp on about it.

The complexity of the system integration causes it to – well become pretty useless as a device for which its primary purpose is – er – communication. I have been somewhat aghast at the poor quality of Smart Phones. I am a Crackberry user but in general do not like using the device as a phone. My preferred mobile is very much a phone but the swapping of sim cards and having to be very careful about how I use it drives me nuts.

In Apple’s case it’s highly oiled black turtle necked spin machine could not stop the huge groundswell about the set of problems that users had with the new device. As one new (and very unhappy) user told me – it was an interesting small desktop computer.

If it’s all the same to you – I will pass.

Cheers

Greece Finds a Home For the A340s

Having been parked somewhat forlornly at ATH, the Greek Government is due to receive a large reward for its patience. Greece expects US$122 million from sale of four ex-Olympic Airlines A340-300s.It acquired them as part of the overall deal when it sold off Olympic to a banker.
These aircraft have been parted for the better part of a year at ATH. See the picture captured by the Professor last month
Now what to do with those 737s and the ATRs.

Will the States Get Greedy And Use New Legislation to Tax Ancillary Services?

Just as a new standards group called OpenAxis emerges from the group aligned with Farelogix - there are a few clouds on the horizon.

The first was the hissy fit that Mike Premo of ARC had earlier this week on the slow adoption of EMD.

The other is the looming issue of taxation.

A new bill has just been introduced into the US Congress. The “Main Street Fairness Act” was formally introduced in the U.S. House of Representatives on July 1st 2010. If passed into law, it would require e-commerce companies to collect sales taxes, and thereby undoing judicial rulings and previous Administrations promises that exempted Internet and catalog retailers from collecting sales taxes in states where they do not have a physical presence. Sponsored by Massachusetts Congressman William Delahunt, the legislation ostensibly is in response to increasing pressure from state and local governments to increase tax revenues. As Ancillary Revenues are clearly subject to such taxation regimes it would cement the how a local jurisdictions could indeed demand tax.
If it is enacted, i expect a ripple out effect. The vast majority of e-commerce sites will begin collecting sales taxes, thereby reducing the perceived price advantage of shopping online.
Legislation would require sales tax collections on B2C Internet sales that are not exempt or otherwise accounted for.. The proposed legislation would require almost all online retailers to collect sales taxes in the states that adopt the Streamlined Sales Tax Project, an effort to simplify disparate tax laws and ease compliance. However it is safe to assume that there will be a period of time for adoption and their eminences (the judiciary ) will want to exert some form of stamp on this.

Interesting twist… stay tuned

Now Will FIFA Reform?

Earlier this year the FIFA mafia came down hard on the South African Airline Kulula. For a tongue in cheek advert.

All through the World Cup so far - FIFA has presented itself as the holier than though position. After the appalling decisions of the referee, Uruguayan Jorge Larrionda. The mistake by the officials will heighten the demand for goal-line technology – an ideology currently opposed by FIFA president Sepp Blatter. There is no way that nationality and history do not play a part. Perhaps it would have been more appropriate for FIFA to conveniently forget history and appoint such an official. Why not a Mexican or Brazilian official?

Now is the time for the entire FIFA KGB like organization to be frog marched off and replaced by a more modern open management. At the very least they should be transparent. So let's talk about Mr Blatter. According to Wikipedia (yes friends I dont make this stuff up)... "Blatter was elected president of the World Society of Friends of Suspenders, an organisation who tried to stop women replacing suspender belts with pantyhose".

Sure Germany was the better side in the end but to deny England its moment is surely something that will haunt the country for another 4 years at least.

Your disgustedly...

Monetizing Social Media

OK I admit it – the Professor is decidedly skeptical when it comes to the economic value of Social Media. I have a hard time figuring out if there is anything actually good about Social Media other than it is the ultimate thief of time. Sucking out our lifeblood like a leech – a resource that is unrecoverable. Somehow on my holiday here in Greece where I am writing this post – no one among the locals seem to care about Social Media. I haven’t heard one Greek talk about Facebook. Actually other than the odd smattering of Brits and French few have been talking about it. Even under probing – few here in this little Cretan village seems to care.

So I was pleasantly surprised that someone has actually tried to put a value on this phenomena. Digital consulting firm Syncapse and research company Hotspex have come up with an empirical formula that puts an average value of $136.38 on the Facebook fans of the site’s 20 biggest corporate brands. I feel very uncomfortable about becoming a “fan” of anything. According to one of the online dictionaries a fan is” An ardent devotee; an enthusiast” Sorry but I don’t think I buy the whole “ardent “thing here.

Here are the results as presented by eMarketer.

Do I really think this is a valid formula – well I will keep my sense of skepticism for now thank you. For now I will just say that we are too early in the cycle to say if this will be the ultimate trend. I definitely think that one doesn’t need research to tell you some common sense things like the ground is hard. Monetizing the value of “loyalty” for example is a far harder thing to quantify. I would say consistently that is impossible.

Still this is pointing to some interesting ways we can evaluate things. But for now let me just say – I am happy being unquantified. Pass the Raki!

Cheers

Growth in UAE and EK in particular starts to worry some.

Today (June 27th) the world’s newest airport opens. Dubai World Central-Al Maktoum International. Last week Dubai World had its first test flight. An Emirates 777 Freighter conducted the first flight of a commercial type operation into the new facility.

The statistics are staggering:

Phase 1 of the airport will feature one A380 capable runway, 64 remote stands, one cargo terminal with annual capacity for 250,000 tonnes of cargo and a passenger terminal building designed to accommodate five million passengers per year.

When completed, Dubai World Central-Al Maktoum International will be the largest airport in the world with five runways, four terminal buildings and capacity for 160 million passengers and 12 million tonnes of cargo.

In the short term Dubai World Central-Al Maktoum International will increase the airport capacity of Dubai to accommodate the 48% increase in cargo volumes from 1.9 million to the 3 million tonnes anticipated by 2015.

In the long term it will serve as a multi-modal logistics hub for 12 million tonnes of freight and a global gateway for the 150 million passengers per annum that are expected to pass through Dubai by 2030.

So now you know how EK is going to support the ground portion of that nice fat order of planes becomes obvious.

But don’t expect things to be smooth sailing. A number of airlines are getting restless and so too are their governments. If EK starts to capture significant traffic then we can expect governments to also get involved. Already we are hearing noises from the French. The new UK government should be paying a lot of attention to their actions. With the 3rd runway cancelled at LHR, the 2nd runways at LGW and STN non-starters for a long while, that just means the UK’s loss will be Dubai’s gain.

Cheers

Air Asia – Winners and Losers in the Seats.

Air Asia X is on a roll. Publicizing its new “lie flat seats” (I say that because perhaps the seats are not horizontal) it is really a great move. But let me just throw a little cold water on all the enthusiasm. The new seat configuration reduces the number of premium seats from 30 to 16. It might be seen that this lowers gross revenue because to pay for this change – the airline would have to raise revenues in premium class by a similar amount. But let’s look at the back of the bus. The new configuration adds a total 53 seats. That makes a whopping 21% increase in Y seat capacity – very cosy. Overall the total number of seats on the A340 configuration goes from 286 to 327 for altogether an increase of 14%..

Cheers

About that A380 Order

It was a mega surprise of a mega order. But scratch beneath the surface and you start to see that the EK order is rational.

No doubt EK got a sweetheart of a deal. But have a look at the numbers. EK’s current fleet sits at 141 aircraft. It has almost the same number (168) on order through the end of 2017. By my calculation that is 84 months. Effectively 2 aircraft a month without a surge in capacity would seem to be a prudent process. Some of those aircraft will undoubtedly replace earlier models. The A350s will add growth as well as replace the A340s, the A330s and some smaller 777s. The 777-300ERs will be churning out replacing the earlier models as well as growth. The A380s can be used to replace smaller double dip flights but that strategy doesn’t necessarily play well. Frequency always trumps size for the passenger.

So what of the other possibilities – The GCC market is not necessarily built on the best economics. EK does seem to make money – its fellows in the region don’t fare as well. For Airbus they can now point to a full order book for the biggest pax plane and that can actually help them cover more sales. It’s a big blow to Boeing who thought that they could persuade the Dubai based carrier to load up on the 787-I. Bang there goes that market. It also means that Boeing will be trying to get a substantial sale to a GCC carrier. Saudi Arabian must be on the cards as their trump airline given their size and previous propensity for the aircraft and the fact that they don’t have the A380 on their order books.

Still – the EK order was definitely an eye opener. I wonder if anyone on Atlanta, Singapore, London, or Frankfurt or indeed any other major home city for the world’s airlines are thinking along the same lines. They should be. And did I say anything about Cargo? I think we can bet that a portion of those planes will be Cargo specific thus reviving the A380F that was cancelled by Fedex and UPS earlier.

Cheers

Can They Survive Without Merging?

Travel Weekly USA posited in Friday June 25th email that the fate of the merger hung on survivability. The recent hearings in Washington DC over the proposed merger are showing a harder time for the parties than the Delta/Northwest merger had under the Bush Administration. There are lots of reasons for this but there was a less than veiled threat put out by the airlines themselves which is – Let us merge or we fail and cause havoc. The dilemma was succinctly outlined in the Senate version of the hearings by its Chairman: "If this merger is approved, our passenger aviation system will have one less global network carrier, and I am not certain if this is good or bad, but it is increasingly clear that the current structure is not financially sustainable," Senate Commerce, Science and Transportation Committee Chairman Jay Rockefeller (D-W.V.) said at the start of his committee’s hearing earlier this month on the merger.

This is potentially true, but only part of the story.

As far as the overall ability of the two airlines to better compete – there is little duplication. For United Airlines the situation is more precarious than Continental. UA has mortgaged just about everything including some of its international routes. Its planes are old and even the announced order of 787 and A350s wont be on the flight line pool for many years. For what was for many years the largest US airline (indeed the largest by pax and flown miles worldwide for a while), the situation is not that great. For CO the situation is not precarious. It is healthy and so regarded on Wall Street. It has a relatively young fleet. It has good labour relations and a sensible route structure.

The labour relations have not started out well. The two Pilot Unions have failed to come to terms on “non-monetary” issues. Most likely seniority. The UA guys are so old that they would trump CO’s guys. The issue of seniority among pilots has been messy before. It still is over at US Airways with HP and US pilots still battling it out in court. I have flown more than a few DL flights this year where the crews have thanked me for “Flying Northwest”

But where I have the most trouble is in the competition area. The DoT seems hell bent on supporting the merger because they buy the argument of survival. The DoJ seems not to agree. The doctrine of bigger is better is not in the consumer’s best interests. As I have raised before the argument of “too big to fail” seems to be creating a monster no matter what the underlying arguments might be. Is that in the best interests of the US government which in essence would be agreeing to underwrite the ultimate commercial viability of the nation’s possibly soon to be largest airline. I think it comes down to the consumer’s best interests. In the more than 30 years of deregulation in the USA – the consumer on the whole has benefitted. It is not the government’s responsibility to police the stupidity of investors and managers. To return to a controlled oligopoly market either through mergers or regulation that must ensue, in my opinion, is not in the interests of the consumer. The basic economic argument points to a significant rising price to the consumer.

The better question is probably – do we need New United? If we take the worst case scenario that current UA fails, the impact across the board would be that the industry could accommodate such a failure. But both carriers are arguing they are vulnerable. CO’s Smisek and UA’s Tilton said, as standalone carriers they would not be able to weather the next big economic or industry "shock." The argument that one or both carriers could end up in Chapter 11 is being trumpeted. A new entrant however would possibly (I would say likely)emerge to challenge the status quo and offer low cost services domestically. The other carriers would be the stronger for it.

A challenging question. So what do you think?

Cheers