AA Lays Out Business As Usual... For Now

As expected American Airlines has petitioned the court in its Chapter 11 pleadings to pay its obligations to the distribution channels.

For now that means its business as usual.

AA is quite far along in building an independent distribution infrastructure that supports direct and indirect distribution services. Rather than relying on a single channel for its revenue management - it is already one of the most diversified of the major network carriers.

It is unlikely that AA is going to change that strategy mid stream. Even with Tom Horton at the controls - the company would be ill advised to place most of its eggs back into the GDS only basket.

The company has invested much time and effort in building a multi-functional and advanced capability network of services. While it still depends 65% (from court filings) on the agency marketplace, the company has built a number of new bridges into the channel.

Many have mistakenly assumed that its drive to Direct Connect was to eliminate the Agency from the mix. Nothing could be farther from the truth. AA has embraced the agency community and is not going to walk away or do anything that will undermine that relationship. However it does not mean that the distribution channel systems can ride on the back of this relationship. AA has made it clear it believes that it needs to control the product offerings and the holistic nature of its pricing.

Many legacy airlines have yet to focus on the issue of consolidated pricing of the air fare products. AA has grasped that nettle and is moving to ensure that it will  deploy the necessary technology to deliver that end. Its new Jetstream reservation system being developed on the HP Agilaire platform will incorporate several ITA Software innovations. Check out the case story of the Boombox implementation.

Anyone who thinks that AA is going to back off from its ultimate goal of controlling its distribution has not understood the animal. In my view the company will emerge stronger and more competitive from Chapter 11. And whatever it takes to ensure that it can deliver its products in a cost efficient manner - it is going to pursue.

After the make nice period is over, we are going to see AA implementing the necessary processes and structures to ensure that it remains competitive. If not why go through this Chapter 11 process.

Cheers

The Good Lord Giveth, And He Taketh Away. Travelport Introduces Fees For Agency Subscribers to Green Screens

With declining revenues from airlines and a falling marketshare the legacy GDS model has been under threat from a number of sources of late.

In many markets around the world the agency community has benefited from increased user incentive fees driven higher by competition and by legacy GDSs who fear their model is under fundamental attack.

While some of the GDSs make reasonable amounts of money from the subscribers - in general the model has been to pass on significant cash from the airline segment fees to the agents in the form of these incentives. But this effort has angered the airlines who resent seeing a large part of their distribution fees used in this fashion.

Each of the 3 legacy GDS companies derives its revenue in increasingly different ways. Amadeus for example has offloaded its Hospitality and OTA businesses. Of the 4 lines of traditional revenue only Sabre now plays fully in each:

Airline IT
Distribution
Hospitality
OTA

Travelport divested itself of its GTA Hospitality business to Kuoni early this year leaving it with essentially only the distribution revenue stream.

Travelport now has the lowest yields of all the three companies and has struggled with a very high debt load. It also pays out the highest rates of agency incentives.

For some time Travelport has been hinting that it will be relying increasingly on technology as opposed to paying additional incentives. Read Gordon Wilson's interview here.

At the same time with two failed IPO attempts behind it - there has been a continued rumour that the company is gearing up again for another run at the public markets. Some have said as early as 18 months time if not sooner.

Now Travelport has introduced a new fee structure that includes charging the agents for the use of green screens. (Actually in the case of Travelport these are mostly blue!).

With such a large number of screens still in existance (even with the move to more API/XML based links), the company is clearly hoping to make up for the shortfall in revenues that it has suffered in recent months by slapping a tax on the long suffering agents.

The revenue shortfall that has to be made up comes from another part of the business. My analysis shows that this is to make up for the loss of their few remaining airline IT revenue streams. United Airlines will terminate its hosting agreement at the end of March 2012 and Delta is moving its online fares and pricing to another provider. (Being the only major North American carrier who is not using Google/ITA for online search/shopping, that choice would be rather obvious).

However there is considerable risk in this strategy. Taxing the screen using agents with an annual fee of $300/screen might not seem to be that much. Should agents choose to use this manoeuvre to exit the business (as many are already doing), reduce the number of screens or move to another GDS - in my estimation a loss of between 5-10% of screens would not be unrealistic. However losing that same amount of revenue generating capacity could easily come back and bite Travelport badly. Such a loss of revenue would more than wipe out the advantages of this new agent tax. Especially when considered that the larger agents have negotiation ability and will likely not be hit as hard as the smaller agents.

Travelport may have shot itself in the foot. Taxing the smaller agents in this manner will clearly not win them any favours in the vocal agency communities. As all three Travelport brands have a higher proportion of smaller agencies in their portfolios - this will affect the smaller agents disproportionally in my view.

While there is upside for Travelport in its quest for the IPO gold ring, this is not an automatic win and comes with a very high potential cost. This could end up being a pyrrhic victory for the company.

Time will tell.

Cheers

Aussies Face Economic Reality: Staycation - A New Word

From our friends over at Crossman Communications there is a new survey out. They were interested to see how global and local economies are affecting the Great Aussie Summer Vacation which is about to start down under.

And its not a pretty sight. Things are not looking very positive. The mood in the country is not a happy one.

For a summary - read the PR release from the survey results. I was able to get an actual copy of the complete results and compared to other markets in the Asia Pacific region they make for sobering reading.

As a comparison - check out deal site Getflight. Their Australian site (based on Sydney) compared with their Singapore site illustrate just how far your travel dollars will take you. If this doesn't give you travel envy - I don't know what will.

There is a clear lesson here. Those selling travel products have priced themselves out of the market and the Crossman Newspoll provides a dose of reality about how competitive the pricing is in Australia vs the rest of the region.

Tiger and Qantas's woes - in fact the woes of all the airlines in Australia - illustrate the depth and breadth of the problem. With the Australian Dollar at near all time highs the ability of the local population to take advantage of the natural resource powered prosperity boom seems to be very muted. This survey should also give some credence to Alan Joyce's crusade to get lower costs for Qantas mainline brand. The costs have to come down. As the cost of the aircraft are in US dollars (IE relatively lower) - the local controllable costs are the issue for all airlines.

Check out the Aussie Dollar 5 year currency history compared to three other major currencies (Pegged to the US dollar - the Aussie Dollar vs The Euro and the British Pound.


With the Gillard government that is existing on a single vote seat majority in parliament - they should pay attention to keeping their constituents happy. Happiness is a state of mind.

And there is a lesson in this for all of us. (er hmmm US Congress are you paying attention!)

Cheers

Research in WSEAS and New Plenary Speakers. WSEAS do not give any extension in the conferences. The deadlines are the deadlines on our site and do not change for any reason

Dear Colleagues,

You can upload your papers for the WSEAS/NAUN conferences
(Vouliagmeni Beach, Athens, Greece, March 7-9, 2012
(Sponsored and Supported by Universita degli Studi di Genova, Italy and Technical Univ. of Sofia, Bulgaria)) strictly until DECEMBER 7, 2011

www.wseas.org    www.naun.org  www.europment.org

So, after the great number of papers (that were uploaded for the WSEAS Conferences in  Cambridge (UK) and Harvard until November 25, 2011), you can upload new papers strictly until DECEMBER 7, 2011  for the WSEAS/NAUN Conferences in Vouliagmeni Beach, Athens, Greece,March 7-9, 2012 (Sponsored and Supported by Universita degli Studi di Genova, Italy and Technical Univ. of Sofia, Bulgaria)

Delegates attending WSEAS and NAUN 2012 will be invited to submit an extended version of their paper for publication in the following journals indexed by SCOPUS, Elsevier, IET (IEE), Engineering Village, ACM, AMS, ACS, Zentrablatt, Crossref, PubMed, British Library, Ulrich's Periodicals Directory, Chemical Abstracts Service, EEVL, TUBITAK-ULAKBIM, Thomson-Gale, Cambridge Scientific Abstracts (CSA), EBSCO Database, INTUTE, DEST, DOAJ and DBLP

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INTERNATIONAL JOURNAL OF BIOLOGY AND BIOMEDICAL ENGINEERING
 
INTERNATIONAL JOURNAL OF ENERGY AND ENVIRONMENT

Sad News: Prof. D.H . Staelin at MIT www.mit.edu that was two times Plenary Speakers in WSEAS passed away in November 10. So after Caro Lucas and Ladislav Kohout, we lose one more great personality that helped WSEAS very much with his Plenary Lectures.

We will not give any extended deadline to any of these conferences and for any reason. For every WSEAS conference we have at least 2 university teams in collaboration.

Announcement of acceptance or rejection for any paper in less than 40 days for any WSEAS Conference and in less than 60 days for any WSEAS Journal and WSEAS Book is strictly prohibited. All papers are sent to 5 independent reviewers by the WSEAS Organizers, Editors etc, but even if the comments of them are available, the WSEAS entities will not announce the result of the reviews before the aforementioned time frames. This policy also applies to any Conference where WSEAS is the main sponsor-organizer or simply a co-sponsor. The submission forms are taken down on the exact date announced in the respective conference pages, at 23:59 Greenwich time, and no extensions is given.

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Plenary Speakers cannot upload plenary lectures after the expiration of the deadline.

RECENT SPEAKERS in WSEAS meetings:
Lotfi Zadeh, Dimitri Bertsekas, Sunil Das, Bimal K. Bose, Janusz Kacprzyk, Leonid Kazovsky, Rao Kamissety, Ronald Yager, Narsingh Deo, Sidney Burrus, Biswa N. Datta, Mihai Putinar, Stamatios Kartalopoulos, David Staelin, A. Bers, Athanasios Manikas, Wlodzislaw Duch, George Giannakis, Nikos Markatos, Wasfy B Mikhael, Valeri Mladenov, Panos Pardalos, George Tsamasphyros, Tadeusz Kaczorek, Leon Chua, Irwin W. Sandberg, Constantin Udriste, Andris Buikis ,Metin Demiralp , Michael N. Katehakis, Imre J. Rudas, Brian A. Barsky, Dimitris Kazakos, Alexey L Sadovski, Amedeo Andreotti, Ion Carstea, Sudip Misra, Victor-Emil Neagoe, Panos M. Pardalos, Hamid Abachi, Ryszard S. Choras, Hamido Fujita, Miroslav Begovic, Josef Boercsoek, Dumitru Cazacu, Costas G. Helmis, Zhixin Wang, Sankar K. Pal, Ulrich Albrecht, Jim Cunningham, Dorian Cojocaru, Andrzej Ordys, Fumiaki Imado, Milan Stork, Remi Leandre, Kleanthis Psarris, Kinshuk, Moustapha Diaby, Brian McCartin, Patrick Wang, Costin Cepisca, Charles Long, Gabriela Bognar, Angel Kuri-Morales, Jiancheng Guan, and many others .... See: http://www.worldses.org/ feedback.htm and http://www.wseas.org/reports/

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Impact: See also the importance of these conferences can be proved by the impact  of these conferences in previous years: See, please http://www.wseas.org/reports
 

Other Important Benefits:
1) A very strong and important feature is that the NAUN and WSEAS is going to give you a new username and password WITHOUT EXPIRY DATE for on-line access in the WSEAS Conference proceedings FOR EVER.

2) Rich cultural and social part as usual. The importance of these conferences can be also proved by the impact of these conferences in all the previous years, 1996 -- 2008: See, please http://www.wseas.org/reports/
 

What did the Previous Plenary and Other Invited Speakers say for the NAUN and WSEAS Conferences:

" I was in the Secretariat Desk of the WSEAS Conference (December 2009, in Tenerife) and
I saw the catalogue of the conference participants. It was amazing the high rejection rate of the papers. I estimate that for every 10 papers, 4 were accepted and 6 were rejected.
That means that the WSEAS Conferences are very prestigious"

Many Thanks
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Is This The Way Forward for P2P Accomodation?

Regular readers and followers of the Professor's Wisdom knows that I am not a fan of the aggregated P2P accomodation business of Airbnb. In my view there is a lot of risk and lack of regulatory adherence hurts consumers. Their somewhat cavalier attitude to the consumer got them into a lot of hot water this past summer. And rightly so.

Part of the problem in P2P accomodation services is that there are a wide number of disconnects between the needs and wants of the people who own the property and those of the consumers. This is not new. However when someone steps into the middle to connect the two there has to be a clear set of roles. Either you have a marketplace where P2P can take place or you are an agent acting for one side or the other.

In the case of the former - this is just like Criag's List. So anyone doing this in an ad model can do so provided they understand their responsiblity to ensure that the ad is genuine. Classified Newspapers around the world have been doing this for years. Its fine. Caveat emptor applies.

In the case of the latter if you step into the middle of the relationship even if its just to collect the money they you become something called an AGENT. In this case they you take on a series of responsibilities. This is the flaw (fatal in my opinion) that companies such as Airbnb failed to comprehend in their pitch to investors.

At last week's PhocusWright in Fort Lauderdale Florida, Bob Sharples CEO of HomeAway was interviewed. Having put a significant ring fence around his business - he was able to demonstrate that the process of renting is not like that of fixed products such as an airline ticket or a car. He made the point that much of the value of HmeAway is not to facilitate automated booking but rather to enable a converesation between the owner/manager of the property and the consumer.

Indeed I have always felt that accomodation by definition drives more customer service questions than an airline ticket. If you are dealing with something that has more unknowns such as a private condo vs a fixed and predictable product such as a hotel room, then naturally you want to get some better sense of it. Having used HomeAway (successfully) and tried to use Airbnb (unsuccesfully so far) I can assure you that Bob's point about the conversational element of his business is spot on.

Last week, DepositGuard put forward a survey which highlights some of these issues. Clearly DepositGuard wants to promote its services, however they have a valid point and seem to be addressing the need. The survey demonstrates that there is a clear missing component in the P2P process that needs an honest broker to solve. Given Airbnb's troubles in this area, both renter and property owner need to ensure that they are dealing in a safe and secure fashion. Ideally there should be regulatory controls in place that address this - and their are - however compliance is almost non-existent.

P2P accomodation services are addressing a need that has long existed in the market. I recall when my team launched Expedia UK that we had Home Exchanges as a lead facility. Personally I hate the impersonal nature of hotels and prefer to stay with friends or take the extra space that condo type accomodation provides. The concept that Airbnb proposed is very attractive to me personally. But do I trust them. Nope I don't. Perhaps this this is the answer.

Think about it

Cheers

Are South African Travel Agents Ripping Off Clients?

It seems that there has been a bit of a storm in a teacup going on in South Africa.

Travelstart the local OTA there commissioned a survey and had cold calls to agents asking them for prices. That the agents gave different results is not in of itself shocking. The disparity of the results however was a bit of an eye opener. The story hit the press this week and has upset the local Travel Agents Association. Here is the original article.

Clearly Travelstart had its own reasons for the survey and that would largely be to demonstrate that inconsistencies exist. And that Online Travel is transparent. However in nice cozy markets where there is not a huge amount of competition - the results tend to vary because the agents dont work as hard as they need to. I want to be clear that there are good agents and bad agents. Any one who claims that all agents are good and vice versa are clearly not giving the whole picture.

So why are there discrepancies?

There are lots of reasons. These range from lack of familiarity by some agents to laziness by others. Whether there is malicious intent is open to interpretation. IE do agents deliberately rip people off? In general I think that would be unlikely. However the ability of the agent to find the lowest fare and communicate that to the consumer remains difficult. The enormous complexity of finding the lowest fare when the request seems so simple can be attributed to the desire of the airlines to obfuscate the true market fare.

What should be a lesson for all concerned is that the lack of a true reference price that consumers can rely on is a problem that affects all outlets irrespective of geographies.

Consumers are forced to jump through a lot of hoops to get a best price. And this is not their fault and not really the fault of the travel agents. Having a deep skilled agent handle your travel has to be tempered with their performance and how it suits you. Most agents surviving today are skilled. But not all. That the airline price can vary based on so many factors should be a lesson to all. Sadly that means that the consumer generates massive amounts of unnecessary searches that are increasing at a time when actual purchases remain flat.

Will this get better? No... because the true players involved - the GDSs and the airlines are not tackling it. Some airlines have had enough and are doing something about it. But the current infrastructure and systems in place do not help.

Cheers

Are Hotels Being Stupid? Are Travel Agents?

When will the ever learn? When will they ever learn.... lines from that old Pete Seeger song we all learned in school.

When it comes to hotels and indeed a large number of other location owners such as convention halls and meeting rooms - it seems never. The number of companies who STILL charge for WiFi is appalling.

I know many organizations who are now insisting on it as a condition of a convention space and meeting hotels. At the ABTA conference this week this message was delivered loud and clear. In a post in e-Tid,  David Rowan, editor of Wired UK, told the ABTA Travel Convention that it was like charging for bath water to ask for basic wi-fi, then akin to charging more for hot water if the customer wanted to upgrade to a faster rate of wi-fi access.

‘It is foolish for a hotel to charge for basic wi-fi. It looks like a rip-off especially when you can get it for free in Starbucks or McDonalds,’ he told the event in Palma.

‘I have called for a boycott of hotels doing this. We expect to be online, we expect wi-fi.’We know that Gen Y people dont waste time complaining - they just move on elsewhere. In a post in  US Travel Weekly - the Luddites seem to be seizing on a DECLINE in internet usage.

Richard Turen thought it was one of the most interesting trends. However I think he is missing something. That the pool of conventional users of brick and mortar agents is shrinking and those that are left are now those who are less and less likely to use the web for Travel Planning.

I divide those who dont use the web for Travel planning and/or buying into two camps. Those that refuse and those that are (still) scared or unable to. The deciding factor is whether the behaviour is wilful or not.

For those who are waiting and holding onto this notion - please get over it. Sure there will be a niche for these people. But they (and those who depend on them) will die out.

Then we will be asking - where have all the Travel Agents gone? I sincerely hope this doesnt happen. But every year the number of agents falls.

Sadly

Now Will You Believe Me Social Media AD Revenues to top $10 Billion by 2013

Holy smokes Batman.

I was a late convert to Social Media. Mostly because in the early days I could not see the Media part of it. Now I do (OK - I am old so that's my excuse).

But now we are seeing dramatic rises in the total revenues from Advertising. With many of the Ad vehicles not yet fleshed out - this tells me we are going to have a hard time understanding how we interact with these tools and more importantly how we deal with them and integrate them.

eMarketer is reporting that global ad revenues for Social Media will top $10 Billion by 2013.

Today sadly it was reported that AC Nielsen JR has passed away. It is interesting to note that we see the world changed forever. A world where he presided as king - now we have a new world. Are we using the right metrics. Now that is a good question.

Cheers

iPad Browsers Killing Others Online

So while Android is doing a great job in working through the pack and like other Google powered monsters - its like PacMan it destroys everything in its path.

Not so in Browser shares on mobile devices. As you can see from the latest Browser share trends, the iPad is clearly a better device for browsers. We know its a better device for Apps based on App numbers and usage.

Sadly Opera Mini the little browser that could is being replaced in people's hearts and is headed south after blazing a trail of browsers on small aperture devices. So much for being first! And having used it vs the Safari browser I much prefer the simplicity of the Opera Browser.

So iOS5 is coming. Let's see what happens next.

And you all thought it would be a new iPhone (me included) although I did speculate that it would be kind of a ho hum release. Seems I was right

Cheers

Farewell Andy Rooney: "Just Let Me Eat My Dinner".

Andy Rooney has been a fixture on American TV for more than half a century. The last 33 years as a commentator on 60 Minutes. Last night he signed off for the last time with a memorable line.

So read about the old curmudgeon. He will however still be writing. And so we can still appreciate that from him

Go to the CBS website to learn more.

Farewell Andy - I will miss you.

cheers

Service Really Is A Differentiator - And Are You REALLY Surprised?

A great post today by Gerry McGovern. I love his posts because they cause me to think about how thing work and what makes things tick.

The really obvious thing to me - and it should be to everyone - is that service matters. Too bad service is such a nebulous concept.

I know many people who hate Ryanair. I like the airline. They fly places I want to go or at least they can fly there. Then their service is consistent. I know just what to expect for my average 100 Euro fare. Yes that is the amount on average I spend with Ryanair. Southwest is also an airline that I like. It gives me a consistency that I appreciate. However they dont fly enough places that I want to fly and therefore I need to rationalize my flying to be on airlines that give me something. So I am a point hound!

I have a very low opinion of service. I dont it expect it and I am rarely disappointed. However every now and then I get surprised by individual personalized service where someone will go that extra mile. I am talking about someone making a difference. There are many hotels who try to force this thought process on their customers via the staff who have not the faintest notion of why they do something. I recall staying at a hotel where they rolled out a corporate credo using a particular word. The word was "surprising". It was AWFUL I challenged a member of staff who( the operator) as to why she had used it 9 times with me and she spilled the beans. Sadly it made everyone uncomfortable. Fortunately within 2 weeks it had been abandoned. 

You cannot force service - you can enable it. And then it must be up to you and your fellow operativess to deliver against it. In online this is really important. Let me give you an example.

I am a member of the Global Entry system - I was an early adopter. This year it will roll out to high level frequent flyers in the elite classes of all US Carriers programs. The service structure is typical government. A system designed by a committee. However I was impressed that the agent at the border recommended - from her own volition what I could do to enhance my experience. That was someone who didnt need to do something going out of their way to help.

So humour me with my rant today. I do see that there are new customer service technologies that are improving the service proposition across the board. However sadly in my experience even in those organizations that adopt them - they are never used properly. What really kills me is that whoever is responsible for these implementations must never walk through their own process. This allows me to indulge in something where  I take a perverse pleasure in breaking systems and processes. It is SO freekin' easy.So what are you doing about


SHAME ON YOU!

So here is a request. GO and think hard about your service. Then WALK through your website. Call your call centre. And then see what I mean. Be difficult. I would be happy to provide anyone who is interested with some use cases to enable you to do this.

YES I MEAN YOU! Your service sucks and it doesnt have to.Please go and fix it

Thank you for your attention - now you can go back to reading your email and updating Facebook... that was what you were doing wasn't it?

Cheers

Twitter Misses Ad Targets - But Outlook Bullish

So Twitter is still struggling to get its revenue model off the ground but it is making headway. In the early days of Twitter I was highly critical of the value of the service. Now that it has matured and we have tools and processes to weed out the Twitterhea - I think the business is a useful tool.

eMarketer is reporting that their initial revenue projections for 2011 will be missed. However they remain upbeat on the future

Check out the article for a full analysis on where Twitter's revenue is going. Twitter has no where near the revenue potential of Facebook. And actually not getting spammed is one of the nice things about Twitter.

In my view - I believe that there is plenty of opportunity to MAKE money via the Twitter platform. Indeed way more than can be had through the restrictive practices of the big 3 F.A.G. gatekeepers.

That indeed counts for something

Cheers

Mobile Maturing - Are You really Ready?

Is 2011 the year of Mobile? This is a question that so many people ask. I have to say I am not quite convinced on either side. In fact I think the question has become rather irrelevant.

Mobile and Social are already here. We are however still struggling to get good at both of them. And good we must get. There is a nice series in WIT drawn from a series of discussions between Siew Hoon and Gerry Samuels Doing it "Bloody Well" and understand who wins - Supplier or Intermediary - are great discussion pieces. If WIT is not on your regular reading list - you are missing a treat.

Getting good at Mobile is not a trivial exercise. There is a lot of infrastructure that is frankly not in place to make it easy. Therefore early providers are having to bootstrap solutions to get the end to end services running. Regulatory and service level functions are scant and frankly the performance of the networks and devices together SUCK. Publishers are complaining that they dont find it easy. For sure they are not adopting fast enough.

One key issue that is decidedly a constraint on Mobile Commerce are the payment systems. There is a plethora of options and the market is just beginning to pick up.  The battle for the mobile wallet is a royal one.

There is the huge battle going on between the OS systems on the small aperture devices.  You have Android split into Pure and Honeycomb. You have the Apple with its iOS. You have a bunch of also ran players - Microsoft, Nokia (now moving with MS), RIM (About to exit the tablet space by slashing the price of the Playbook), HP (not sure if they are in or out at the moment). Let's not forget the App vs Browser battle.  An  astonishing statistic is from HP who projects there will be 25 million apps by 2020.

Underneath it all there is a multi-billion dollar battle over patents. This is enough to make ones head spin.

But allow me to put a little perspective on things. While I think it is a bit premature to declare victory for mobile, there is a very interesting trend. The Gen Y/Millenials are not worrying about the problems of infrastructure. It either works or it doesn't. Unlike the Baby Boomers (like me!) who struggle with the small apperture of the devices concerned - they are quite comfortable in using their mobiles to do a wide number of things concurrently.

My conclusion on this? Mobile is darn hard. The traditional gatekeepers in travel commerce are nowhere near prepared for mobile. The suppliers need to break free and stop using traditional processes to address mobile solutions. AND most importantly you have to use every trick in the book to get the consumers to start pulling through adoption. Traditional ways of pushing products into the marketplace and hoping for the best frankly are useless. If I hear one more person scream that their investment in mobile has been wasted - I think I will eat my hat. It's the adoption not the features stupid!!!

Airlines to DoT - You Can't Count

The US airlines in general think that the US Dept of Transportation's bean counters are not that good.

A cabal of them - representing the Big 4 Network Carriers - US, UA/CO, DL, AA have filed a complaint with the DoT over the issues of the reporting of the Ancillary Revenues.

As reported in the Wall Street Journal the airlines say that the $150,000 figure for the whole industry in extra admin costs are way off what the airlines calculate will cost the average airline $1,000,000 per regulation per average airline. That would be a whopping cost. I bet that some of that is going to be charged by the GDSs!!!

I have to say whether I agree with the DoT or the airlines on the actual numbers. I can assure you that the admin costs that will be spread across the industry in additional costs will be significant. it will hit all sectors of the supply and distribution chain.

Those who argued long and hard for this as a way to put a break on the Airlines revenue aspirations may be happy. But those who thought that this was a way for the GDSs to win a battle in their war with the airlines may rue the day. The legacy GDSs have now been handed a carte blanche ability to charge the airlines an extra set of fees for compliance. And poor travel agents will be picking up much of this tab in both extra costs (through lower incentives) and for sure extra work.

As I say frequently - be careful what you wish for... you just might get it.

Cheers

The Professor's 2300 Posts

Dear Readers - Just a BIG thank you for keeping us going. We have just passed 2300 posts and counting.

I had a wander through some of the prognostications and predictions I have made over the past 5 years. There is a heck of a lot of content here. So I encourage you to read through some of my thoughts. There is a lot of entertainment. Laugh, cry and be entertained but mostly be better informed. I have a lot of opinions on a lot of subjects but I hope that you will see that I try to do this with honesty and thought. If I fail let me know.

Every week hundreds of you come and visit this little site. Thank you and thank you again for doing that.

I know that I am not the world's best writer and also have a strong propensity to typos and some really bad grammar.

However I get loads of emails from you and comments. It takes a lot to keep this site going (no I am not appealing for money) but I will continue to do this as long as you come and read it.

Please do spread the word. And  again a very big...

Cheers

Don;t Be Blue At A Failed Relationship

Most breakups are lets face it less than amicable. People don't just wake up one morning and say "Rationalizing our relationship is not working let's just be friends"

I understand that breakups can now be handled by a wide variety of media. Text (there is even a lame website called TextBreakup), Tweets, and of course the true sign you have been ditched is when your paramour changes her/his status on facebook back to SINGLE AND LOOKING.

In business some of the best laid plans of a business relationship can just fall afoul of the realities of the business environment.


Germany's biggest airline, Deutsche Lufthansa AG, in December 2007 paid $300 million for a 19 percent stake in JetBlue Airways Corp. There were big plans for feeding via JFK and the other points where the 2 airlines intersect. For the smaller airline it was a precursor to a number of deals that have seen them also tie up with some time rival American Airlines who also is in a rival Alliance. 

But to be frank there has been little execution of the grand vision and Lufthansa seems to be pulling in its horns across the board. The German airline's plans for world domination included at the time expansion into the German speaking market and a bold run at different markets like USA (JetBlue), UK (British Midland) and the oft rumoured but never consummated take over of SAS.  With a few bad quarters under their belts - and a general softening of traffic in the markets where its most heavily vested - LH seems to be pulling back. Its put the for sale sign out at Castle Donnington (the English Chateau that doubles as the HQ for BD), now the The Wall Street Journal  is reporting that LH is looking to exit out of its relationship with JetBlue. 

JetBlue and Alaska are the largest unaligned airlines (Southwest should be excluded from this list). Both of them have resisted combining with other larger airlines. AS has a slew of partnerships and has a strong feed as a result while shoring up a fortress on the North South Routes. Effectively AS has conquered the West Coast markets and solved that perennial problem of Mexico vs Hawaii by straddling both effectively.  JutBlue has built a series of very nice hubs in Boston and JFK as well as a number of smaller ones across the country. 

Perhaps what we are seeing is the precursor to a merger between these two feisty and mostly profitable strong regional airlines.

Now there's a thought.

Cheers
 

What Happens When Exclusivity Clauses Collide. The Impact of Exclusivity Clauses on Competition and Consumers

This is a musing on the impact of the Air Asia and Malaysian Airlines agreement with an extension into the overall issue of exclusivity clauses and the impact on the consumer.

Air Asia and Malaysian Air System (MAS) have entered into a cross shareholding agreement. In this agreement - the two airlines will cooperate essentially to carve up the market for Malaysian based traffic. IE traffic INTO and OUT of Malaysia. Effectively the airlines will avoid direct competition where feasible. This will result in a certain reduction in competitive services for consumers. Thus prices will undoubtedly rise in certain thinner markets. 

This is to be expected and will cause a number of people to complain and moan about it. Fair enough. But there is ANOTHER agreement that has some serious impact on the consumer. That is the exclusive agreement between Expedia and the Air Asia Group. In this agreement Expedia and the JVs between Air Asia and Expedia are the EXCLUSIVE distributors of content from these two parent organizations.For intermediaries who may have happily been distributing MAS product in some cases for many many years and in others exclusively, all of a sudden their product has been pulled out from under them when MAS abandons routes in favour of Air Asia. And they will lose their rights.

I raise this issue because JVs and exclusivity has become a new staple of the airline and GDS worlds. Thus creating restrictions on open commercial agreements. So let's dive into that a bit deeper.

Full Content (FCA) GDS agreements are very restrictive. As such FCA contracts will have an overriding pressure to raise prices and reduce consumer choice. An airline who signs the standard FCA agreements will find that it cannot distribute its own content when and where it pleases. This is a relatively new consideration and that has only just started to dawn on the airlines who have signed these agreements. While the original intent of the FCA agreements was to prevent competitors from entering the market for GDS type services - what we are now seeing is an unintended consequence - at least from the airlines sides. The ultimate loser in all of this is the consumer. Less choice = less competition = higher prices. As the legacy GDSs love to trumpet to the vendor community -the highest yielding channels are the GDS based ones. Now perhaps it should dawn on everyone concerned that this results in higher prices for the consumer.

That normally should be positive for the airlines and hotels. However as they have seen the real end result is that they have not only delegated their pricing capability but now also delegated channel management control to the GDSs. And in whose interest do the GDS operate?

Think about it, I wonder if the regulators have been thinking about this problem. What started out as an equal agreement to reduce cost of distribution and ensure wide distribution of airline content has in fact has an opposite effect.

Good or Bad? that depends. Today it means that scaling the fortress tower is going to be that much harder. Believe me when I tell you that this is not a happy realization for a whole host of parties.

Cheers

Travelport Gets A Get Out of Jail Free Card. Probation May Be Rather Costly

Travelport at the 11th hour managed to avoid a pre-packaged Chapter 11 restructuring by getting the approval of all of its Lien Holders on its PIK to allow the $715 million PIK to be repaid by December 2016 instead of March 2012.

However the price is going to be very high. A quick flip through the issues now confronting Travelport Holdings (Parent company to Travelport Inc) are as follows:

1. There is a large group of unhappy bondholders.  A group representing 25% of the bond holders filed on September 23rd a formal complaint to the company which was then submitted in regulatory filings to the SEC.
2. Travelport is now paying a 2011 record interest rate of approx 13% to the lien holders for the revised debt swap however this is a somewhat fictitious amount as the agreement allows the company to use debt rather than cash to pay the dividends.
3. Travelport's ability to raise funds for new activities will now be limited.
4. Travelport may have restructured its immediate debt but it is still creaking under a very heavy debt burden that would discourage any IPO offering.

The level of machinations required to complete the transaction is almost mind-boggling. I have waded through the SEC filings along with analysts briefing on the topic. In my view the long term financial health of the company will be in doubt irrespective of its actual performance. It still has to restructure the overall debt to remain in compliance with the obligations of the different forms of the debt. It has already sounded warning bells of the loss of the United Airlines (Apollo) Hosting contract that must end before April 2012. There are other issues that face the company.

It seems I am not alone in my concern about the [parent company's (Travelport Holdings) health.

The unhappy note holders representing 25% of the outstanding PIK hired Dewey & LeBoeuf to denounce the restructuring. In their September 22nd letter to the company they stated  “The noteholders demand that Holdings (parent company) and its affiliates (presumably including Blackstone)  cease and desist from taking any steps to document or consummate the restructuring,”Their efforts failed. So highly likely there was some smoky backroom deal was made but the resentment is still there. This letter found its way to filings to the SEC the following day.

The initial PIK loan, from the early days of March 2007, was used to finance a dividend to Blackstone and affiliated equity owners, according to the September 22nd letter.  And this has been a pattern all along for Blackstone to cover its own position preferentially at the expense of the other debt holders. Remember that when the original deal to acquire Cendant was done in 2006 - Blackstone was a private company. Today following its IPO it falls under a much tighter regulatory environment.

Travelport Holdings bond values have been falling for some time. Since August the value of the bonds has plummeted over 40 %. Two of the debt rating agencies downgraded the debt first Moody's on 16th August then S&P earlier this month on 13th Sept. This came after the first warning was fired by S&P in February of this year with a caution. By September 23rd the yield on the bonds was 39%, The company’s $247.2 million of 11.875 percent senior unsecured bonds due September 2016 rose 3 cents to 42.5 cents on the dollar that morning and has been very volatile since then. When trading starts again this morning with the immediate debt crisis over - the bonds will likely settle down. That discount shows just how far the debt value has fallen since the notes were first issued in 2007. There is a large amount of this debt out there in the market. There has been a significant amount of trading going on in this debt especially during the last 9 months. 

Long term - this is unhealthy.

Cheers

NOTE Thanks to Bloomberg and the Debt agencies for the information in this story. Thank goodness we have EDGAR to help us navigate the maze of SEC filings.

How Many Is Too Many Apps?

OK Own up... how many Apps on your smartphone or Tablet.

Full disclosure I have way too many devices. I have 2 smartphones, an iTouch and an iPad. The most is on my iPad - 136. I have only paid for 2 of them BTW, looking at my usage. The WSJ, Tetris, Spider Solitaire and Skype are the most frequently used apps. Add in the Settings page and the broswer and that comprises about 98% of all my usage.

And are there any definitive statistics on the Apps use on tablets? Yes there is - our old friends at eMarketer have put out a compendium of surveys on the topic. 

How one finds Apps is also interesting. I talk to a lot of users about their iPad usage. I want to know who has the best apps.

At the moment I am seriously considering how to do presentations from my iPad and also how to use the iPad as an external screen for my laptop. (Just to deal with my ADHD!). I love how all the images of the iPad today only show a few apps on the screen. Mine is just like my desktop on my PC - chock full of icons. "Just in case I might need them".

With more and more Apps coming - I love the quote from HP that there will be 25 MILLION apps in a few years. We can only wonder how we are going to cope with the ability to select and manage them

Cheers

Yes There Is A Slowdown In Passenger Traffic

There is a general view that when cargo goes soft - so does passenger traffic in about 4-6 months immediately following.

I don't want to be a doomsday person but I believe we are going to see a reduction in passenger traffic particularly in TC1, TC2 and between the two coming shortly. Further among the other areas of robust growth I believe we are going to see moderation of that in GCC and Latam traffic.The only area where I believe we will see a continuing growth will be in Asia Pacific. But don't take my word for it. Check out these learned folks:


CAPA
WTTC
The latest IATA numbers have revised upwards the airline profitability. BUT I tend to look at the transactions (e.g. number of passengers and number of flights rather than the financials.

Folks you have been warned. Tighten your belts. The airlines have already started to do this by cutting surgically flights from their schedules. Unlike the traditional slash and burn we have seen in the past these cuts are much more subtle. Less nonstops. Axing of daily frequencies in favour of only several times a week (particularly in International flights). And of course more codeshares.

What is rather interesting is that the DoT should be looking more carefully at the results of its allowance of the JV Alliances and to see what the economic impact has been on the markets. The fundemental question of whether the Alliances benefited the travelling public through lower fares deserves full analysis.

Cheers