|Friday 28 March, 2003|
Good morning. What an eventful week it has been, and, no, I'm not referring to events in the Middle East.
Back on the home front we have the major airlines mounting a renewed attack on our pocket books, as they mass their lobbying resources for a full frontal assault on Congress. As for myself, I feel both shock and awe at learning how an airline that lost $1.3 billion last year can choose to reward its CEO with bonuses and other compensation totaling $13 million! Wouldn't you like a job with an airline - a job where, no matter how severely the company's profitability is destroyed, you get massive bonuses but no blame.
And now, after showing such an inability to control $13 million of runaway and unnecessary costs in their executive offices, Delta - and their cronies at other major airlines - are seeking a second taxpayer bailout, presumably so they can afford to continue paying themselves extraordinary bonuses from our taxes.
This situation gets worse. At the same time that the major airlines are melodramatically threatening that it will be the end of the civilized world as we know it if they should fail, foreign owned airlines such as Virgin are trying to get permission to operate flights within the US but are not allowed to. Truly our domestic airlines are 'having their cake and eating it too' - they have already received $5 billion in cash and hope to receive as much again, but at the same time, they are protected from foreign competition. The net result for us is we lose twice - we lose by having to pay out of our taxes to subsidize obsolete airlines, and we lose because we have to pay higher fares to these dinosaurs than would be the case if foreign airlines like Virgin were allowed to enter the market and add a breath of fresh air and free competition.
And so, with this as introduction, can you guess what this week's column is about!?
This Week's Column : Another Airline Bailout? Just Say No! : Should the airlines be treated as a special case and given still more cash (after receiving $5 billion in payments just over a year ago)? What would happen to our ability to travel conveniently and affordably if several major airlines went bankrupt? Are there alternatives to simply giving more billions of dollars to the airlines to keep them alive? Click the link to have all these - and more - questions answered, including the most important question of all - what you can personally do to stop this outrage.
Next week will see the second part of my Virgin series that had originally been planned for this week.
Maybe emboldened with the belief that there will be more money coming from the government, the airlines are gleefully cutting back flights in response to the Gulf War. Both Northwest and Delta each announced 12% cuts, the other major carriers announced smaller cuts. I do understand that if I was earning $13 million a year, I too wouldn't really care what a humble travel writer thinks, but just in case anyone, at any airline, does have a remaining element of sensitivity to the marketplace, let me tell them - yet again - that schedule cutbacks are the wrong strategy.
If you stop flying a plane, you still have to make the lease payments on it. You still have to pay all your fixed costs, you even still have to pay the full $13 million in CEO salary and benefits! The actual savings from canceling a series of flights is much less than the percentage reduction in carrying capacity.
The better strategy is to conduct marketplace building activities. In simple words, air fare sales. There are more people out there that will respond positively to an air fare sale (especially if the sale rules allow free changes in the event of problems) than there are 'nervous nellies' sitting at home and refusing to fly under any conditions. Give me a $198 roundtrip coast to coast fare and I'll give the airline my money, any day! What the airline industry needs, most of all, is increased passenger numbers, not fewer flights.
Some airlines understand and are doing exactly that. Domestically, AirTran announced its latest sale earlier this week, and internationally, Qantas has come up with a short term special for travel to Australia, which it explained was designed to boost its short term business.
I asked my former company, Abel Tasman Tours, how their business is doing. Abel Tasman provides travel services for people wishing to go to Australia and New Zealand, and told me that their business, so far this year, is up 50% on last year (which in turn was up on 2001), and that forward bookings are also very strong. If you could be tempted by the thought of a vacation in the friendly welcoming South Pacific, give them a call at (800)727-1626. Tell them David sent you, and they'll include a free Sydney Harbor Cruise as part of any package you buy from them. And, to the travel agents on reading this, Abel Tasman pays very generous uncapped commissions on both air and ground. It is now three years since I sold the company, but I think they're still the best when it comes to arranging South Pacific travel!
If you'd rather not travel all the way to the South Pacific, perhaps a visit to Las Vegas might be a good idea. Be sure to take a bag of quarters with you, and maybe you'll have a chance to repeat the winnings of a young man who won a world record $39 million payout on a slot machine at the Excalibur on one of their 'Megabucks' machines. Not bad for a $3 pull.
And if you're vacationing in my favorite part of the US - Florida, here's a restaurant recommendation for Orlando. I usually find it difficult to find decent restaurants in Orlando - most of them tend to be generic but not very good touristy places. To my surprise, a very ordinary looking place in an ordinary part of the city ended up being a real treasure. Check out the Crazy Grill, at 7048 International Drive, set back about 100 yards from the street (drive into the parking lot next to the mini-mart). They serve wonderful Brazilian barbeque type food - here's a helpful and detailed review.
A thought for everyone currently thinking 'Should I travel or should I stay at home'. Remember that here, at home in the US, we're at Threat Condition Orange - just one short of maximum, and actively at war with Iraq. Surely it is equally dangerous to simply stay at home as it is to travel somewhere else, within the US or overseas! Indeed, the chances of a terrorist deciding to commit an atrocity in (eg) Europe is probably much lower than them choosing to do the same thing here.
Deathwatch Part 1 - United : A travel agent reader writes 'If I remember correctly UA wanted to merge with US a while back. Just think if it would have happened we could rid ourselves of 2 instead of 1! We missed the boat on that one.' United has built up an amazing store of ill-will with the travel agency community - ill-will that is surely not helping them now.
United announced that they lost $367 million in February, up from a loss of $331 million in January. United officials said they were pleased with this result, as it keeps them in compliance with their debtor-in-possession financing. Some people are truly easily pleased, aren't they!
Another sign of United's ongoing problems is a major hotel chain and a dining rewards partner that are no longer allowing customers to exchange United frequent-flier miles for points in their loyalty programs. Hilton Hotels said guests can no longer trade their United Mileage Plus miles for points in its Hilton HHonors reward program, while another loyalty program partner, iDine Rewards Network Inc, has also suspended its frequent-flier agreement with United. Hilton and iDine plainly don't want to find themselves owning Mileage Plus miles that might suddenly become valueless.
United's credit card processor wants to be allowed to stop processing credit card charges for United; or, at the very least, to make some to their agreement (probably to increase their percentage fee and to add a holdback on some of the amounts they are passing through). National Processing Company filed with the bankruptcy court, saying that they believe United has only a 'slight' ability to successfully reorganize. The judge will rule on their request on 14 April.
And, while only a small pinprick in the armor of mighty United, it is probably still a painful one, especially if other agencies copy. A large Minnesota travel agency has started requiring customers who insist on flying with UA to sign a waiver indemnifying the agency in case the airline goes out of business. For a really good laugh, however, read the comment from a UA spokeswoman about this.
She said that travel agencies shouldn't be concerned because federal regulations guarantee that other airlines must provide service for any terminated flights. Based on the outpouring of anguished emails I had the last time an airline declared bankruptcy, the 'guarantees' are ineffectual for most travelers (because the airlines, including United, have narrowly construed them as only extending to passengers prepared to fly standby).
Deathwatch Part 2 - American : A Reuters article on Thursday this week said that American might file for Chapter 11 bankruptcy as early as next week, quoting 'sources familiar with the matter'.
Another source said that American had set itself a deadline of Monday, 31 March, to reach deals with their unions, lessors, and various other groups. The source added 'Timing-wise, that's not going to happen'.
I should say that I don't feel any ill-will towards American. They still have their 'more room in coach' product that gives all coach class passengers appreciably more leg room than any of the other major airlines. All other things being equal, you should preferentially choose to fly with American and enjoy the greater comfort.
Deathwatch Part 3 - Hawaiian Airlines : They declared Chapter 11 bankruptcy last Friday. At present they continue to operate their flights, and from reading the announcement, it seems that a part of their reasoning to file Chapter 11 was as a bargaining lever to reduce the cost of their airplane leases. Maybe I'm just old fashioned and moralistic, but if I, for example, sign a five year lease to rent office space, and then the market rates go down, I don't go to the landlord and threaten him with my bankruptcy if he doesn't drop the rent! Hawaiian had earlier gone through a Chapter 11 in 1993-4.
Don't forget there is another Hawaii based carrier - Aloha Airlines. If you fly coach on Aloha's transpacific flights you will get a complimentary mai tai, chocolate covered macadamia nuts, a hot towel to refresh your face and hands, free headsets and a choice of audio channels, full meals and oven baked chocolate-chip cookies. The airline was awarded the coveted Diamond Award for Airline In-flight Services against airlines around the world. Aloha also received the Publisher's Award of Merit for 'special efforts in onboard services, and a presentation that covered all aspects of an onboard passenger's needs'. Definitely one of the better airlines, with a positive attitude to customer service.
Deathwatch Part 4 - Midwest Express : For many years, this airline was a popular favorite, due to their serving wonderful food (even lobster) and drinks (including champagne) to all passengers. Last November, they fell into the fatal trap of cost cutting. They reduced their super food down to calzones and chicken wraps in the hope of saving $10 million a year. And now they have eliminated food entirely. Their auditors said in a securities filing last week that they have substantial doubt about the airline's ongoing viability due to continuing losses.
We have yet to see a single airline 'save their way' to profitability. Increased revenues should be the objective of every ailing airline. You don't see Southwest and JetBlue talking about cost cutting as if it were the only strategy they have - they're focused on profitable growth, not unprofitable retrenchment, and their profit reflects the success of this strategy.
I've several times lauded Irish discount carrier Ryanair for combining amazingly low priced airfares with solid profits. However, in a comedy of errors this week, a bus load of their passengers ended up not laughing. The bus was delayed in a traffic jam while taking the group to Oslo's Torp airport, and by the time it finally arrived, the Ryanair flight was almost due to take off, and only half the passengers were able to board before the flight departed.
The other passengers were told they would have to buy new tickets for the next flight to London rather than use their existing tickets. They unwillingly did so. And then the incoming flight that they were to take was diverted, due to fog, to Oslo's other airport, more than two hours away. Ryanair refused to bus the waiting passengers to the other airport, and ended up flying its flight empty back to London, due to - surprise surprise - no passengers being at the other airport where the diverted flight actually landed. Not very well handled by Ryanair, who say they are now looking at refunding the cost of the tickets for the twice stranded group.
This Week's Wi-Fi Growth Story : Scandinavian Train operator Linx now offers Wi-Fi broadband internet access on trains between Copenhagen and Gothenburg. High speed internet on a high speed train!
This Week's Security Horror Story : If you're a frequent business traveler, your ultimate goal is to be able to travel without luggage. Now, imagine this. You've flow somewhere for a day of meetings without luggage. All you have is your briefcase. Your teenage daughter stuck an anti-war sticker on it - you've been meaning to remove it, but it is still on the side of your briefcase, which you put on the back seat of the rental car. In the front seat of the rental car, you've got your map of the Seattle area, so you can drive to the downtown building where you have your meeting.
While driving back to the airport, (you don't have much spare time to make your flight home) you're stopped for speeding by the Washington State Patrol. In an attempt to be friendly, and perhaps to justify your speed, you ask about the impact of the Code Orange alert in terms of how long it will take to go through heightened airport security. All of a sudden, the routine traffic stop for speeding goes nasty, because by traveling without luggage, having an anti-government sticker on your briefcase, a map in the car, and asking questions about the security arrangements at the airport, you've just scored positive on four of the State Trooper's eight point checklist to detect potential terrorists! More details here.
Here's an interesting story that doesn't ask the obvious question. After finding a 'suspicious white powder' in a lady's luggage, six LA Guardia airport screeners were decontaminated and part of the terminal evacuated. Needless to say, the white powder was completely harmless, of course. The woman who checked her bag had already boarded her flight before security officials could reach her for questioning. That is a shame, because I'd love to have heard what the questioning actually was - 'Ah, ma'am, can you please explain to us what you are doing trying to check a piece of luggage that has a container of suspicious looking, but actually harmless, white powder in it'?
But the question that should be asked is not of the poor innocent passenger, but of the security managers. How was it possible for the woman to travel without her baggage? What happened to the baggage matching program? If the suspicious looking powder was worrying enough to cause you to close off part of the terminal and decontaminate six employees, shouldn't you also have stopped the woman from boarding her flight?
Anyone that ever flies on any plane knows that most of the people in first class did not pay for their seats. Most are either traveling on free upgrades or free tickets or are airline employees or perhaps they purchased an upgrade at the gate. And then, of course, very occasionally there may be an undercover Sky Marshal as well. However, the airlines are pressuring the Federal Air Marshal Service to move their Sky Marshals back to coach class so that they will have more 'high priced seats to sell' (even if they end up giving most of them away).
The main reason that at least one of the two marshals that might be on board a plane sits up front in first class is so that he can get between the cockpit door and any would be terrorists. Placing both marshals down the back of the plane would obviously interfere with this factor. Could the airlines be putting (a largely non-existent) profit before security?
Meanwhile, in a brilliant display of ignorance, a former twenty year veteran of the Secret Service and former director of security for a major airline said that a couple of pounds of plastic explosive, if in the door panel of a vehicle, 'could take out a whole city block'. This is utter nonsense.
While a couple of pounds of plastic explosive would definitely be enough to disable a plane, remember that at present we are sending Tomahawk cruise missiles - each with a 1000 lb warhead - by the dozen into Baghdad and using them to destroy single buildings, while leaving nearby ones unharmed. To suggest that a mere two pounds of explosive could take out a whole city block is obviously ridiculous. After using this as 'proof' of the danger of terrorist threats, his closing comments were 'Where do you draw the line with security?'. It is advice from ignorant people such as this that is guiding our ever more invasive security restrictions.
More useless 'feel good' security, this time in Los Angeles where Gov Davis has called out the National Guard to patrol the perimeter of LAX in Humvees while we remain at Threat Condition Orange. Neither he nor any other officials have explained how this will improve security on flights in and out of LAX, or even how it will improve security within the terminals themselves. It will, however, add to the costs of a state already grappling with a massive deficit and add one more slight 'fear factor' to our everyday environment.
Apologies if this week's newsletter sounds a bit gloomy. In an effort to close on a more positive note, here are Murphy's Laws for Frequent Flyers :
1. No flight ever leaves on time unless you are running late and need
the delay to make the flight.
Until next week, please enjoy safe travels.
|David M Rowell aka The Travel Insider|
|ps : Don't forget to visit Joe Brancatelli's site for his weekly updates, too.|
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