|Friday 9 May, 2003|
Good morning, with me very pleased to be back in Seattle again. Although everything I read talks about the slowdown in travel, both my BA flights (and on offpeak days) were absolutely full in all cabins - obviously a lot of people are still traveling.
The response to the special Qantas airfares has been amazing, with Abel Tasman Tours telling me that at this rate they'll have to charter extra Sydney harbor ferry tours just to squeeze everyone on! From what some of my other travel agent sources tell me, travel is picking up more or less across the board.
But one of the problems with travel is that you're in an unfamiliar place and more 'vulnerable' if something goes wrong. This week's column is the first in a two part series that talks about some of the very worst things that can go wrong.
This Week's Column : Protect Yourself Against Loss of Documents : What would you do if, in a foreign city, you suddenly had your wallet and all the vital documents inside it stolen? Imagine yourself - suddenly with no cash, no ID, no credit cards and no passport. This week I list 30 different types of documents you need to protect; next week I'll offer 19 different strategies for how to minimize the impacts of any unavoidable loss.
Deathwatch Part 1 - United : UA have now revealed their first quarter result - a $1.3 billion loss, and their second worst ever. This is also worse than Delta and American, both of whom lost just over $1 billion. It is interesting to look at United's last five quarters :
2003: -$1.3 billion
In total, United has lost almost $4.6 billion dollars since the beginning of 2002.
UA said booking trends have improved since the first quarter ended and that it will show dramatic savings in labor costs from the new contracts that took effect last week.
Amazingly, UA's share price rose after they announced their results (analysts had been expecting an even worse figure) and grazed the $2 mark on Tuesday this week, after having been trading below $1 as recently as late April. Its share price closed at $1.50 on Thursday afternoon.
United also announced its April traffic results on Wednesday. Traffic was down 13.4% compared to April 2002, and its planes were flying emptier (71.4% full instead of 72.0% last year).
This small seeming decline in load factor might seem trivial, but it is actually significant in the extreme. A mere 1% or 2% shift in load factor makes the difference between an airline losing or making money.
Deathwatch Part 2 - American : Last week saw AA disclose their April traffic figures. The bad news - traffic was down 4.8% compared to April 2002. The good news - AA's load factor increased 1.2% up to 71%.
May 1 saw the implementation of AA's new union contracts. Pilots are losing up to 30% and in extreme cases up to 40% of their earnings, making them the hardest hit of the three unions - most employees are giving back between 15%-23% of their earnings.
Deathwatch Part 3 - US Airways : April traffic for US Airways dropped a massive 14.1% compared to last year, with load factor remaining almost unchanged at 74.1%. Their Allegheny Airlines, Piedmont Airlines and PSA units reported an even larger drop of 23.3% in traffic, and a load factor drop of 2% down to 53.5%. Ouch.
Remember all the fuss caused by AA's special retention bonuses for its senior executives. While not (yet) asking for the same sort of staff givebacks, Continental has now disclosed a 'Special Bonus Program for Key Management in 2003' - enabling senior execs to receive more than double their base pay. This was explained as an incentive to retain key management - CO already had a bonus program in place, but because it seemed unlikely that any bonus payments would be earned this year under the existing bonus scheme, they felt the need to introduce a second bonus plan, too.
On the face of it, the bonus scheme is fair - for example if the company has two profitable quarters, executives get 125% of their base pay. But be careful of how CO defines 'profit' - it sure isn't what you or I (or our bank managers) would understand profit.
They are using an EBITDAR figure for profit - that is, the profit before taking off interest payments (and that is for sure a sizeable and essential cost item!), taxes, depreciation (another sizeable and essential cost item if they ever plan to replace their existing planes and other equipment), amortization (more depreciation type expense) and - wait for it - aircraft rent as well!
To show the farcical nature of this calculation, in 2002, CO advised a true loss of $451 million, while their EBITDAR result was a profit of $1.05 billion! Seems like two profitable quarters - and a 125% bonus - are pretty much in the bag for CO's senior managers, doesn't it.
Meanwhile CO's April passenger traffic dropped 8.4%.
Showing that not everyone is reporting a bad April, no matter what might have been happening with SARS and Iraq, AirTran reported a 22.6% increase in passenger traffic, with an increase in load factor, too. Well done, AirTran.
And wonderful JetBlue proudly reported an 81% increase in its April traffic compared to last year, with a slight increase in load factor up to an incredible 82.1%. They said that they could buy as many as 115 additional Airbus planes in the next few years to help them continue their growth.
The biggest of the new breed of airlines also reported an increase for April. Southwest showed a 5.5% increase in passenger traffic. Their load factor remained almost unchanged at 63.6%.
While airline fortunes twist and turn, spare a thought for the other parts of the travel industry. Hoteliers are having a very difficult time, having laid off a massive 130,000 workers subsequent to 9/11, and having seen their profits drop two years in a row (the first time this has happened in 20 years). Amount of government support to the hotel industry : $0.00.
This Week's SARS report : A new report published in Britain's authoritative Lancet medical journal estimates that the SARS death rate is now up to 20%. The problem with earlier (lower) estimates was simply that patients hadn't yet been given enough time to die! If you're over 60, you have as high as a 50% chance of death according to some reports, and if you're under 60, your chance reduces down to 'only' 13% (yes, one published report used the word 'only' alongside the 13% figure - a very inappropriate use of the word 'only' in my opinion!).
Would you like some SARS good news? According to an International Air Transport Association report, it has been advised by WHO that fewer than 5 out of the 200 million passengers that have flown since SARS became an issue have actually caught SARS on board their flight. On the other hand, the SARS virus can survive up to two days on plastic surfaces at room temperature, and the cleaning agents used by airlines have not been proven effective at killing SARS virus.
My SARS advisor and MD advises that the SARS incubation time is typically about ten days, but he says people start to feel generally somewhat unwell prior to the end of the ten days. His recommendation - if you think you may have potentially been exposed to SARS and are feeling not your normal self, if you decide to see a doctor, don't just turn up in the doctor's office unannounced. Call ahead so that they can take precautions to ensure you don't potentially transmit the virus on to other people during your visit.
This week's Virgin/Concorde news : Fresh from announcing a projected $16 million pre-tax profit in their financial year ended 30 April (well done), Virgin Atlantic Airways - in the form of their Chairman, Sir Richard Branson, continues to chase after BA's Concordes. It seems that he now wants both the BA and the Air France Concordes, too. Perhaps in recognition of this increased request, a recent report quoted him as now offering £2 (up from the earlier offer of £1) for the combined fleet of 14 aircraft!
Sir Richard accused BA of being "incredibly obstructive" over the affair, saying 'I think that they would be concerned about Virgin (their airline code is VS and I'll use the code for the rest of this article so as not to upset any anti-spam filters seeing the 'V' word appearing too often!) making a success of it, having decided to close it down.' He added 'We are extremely determined to see Concorde continue to fly. We believe it has potential and as much as 20 to 25 years of good flying life left in it.'
Intriguingly, he is suggesting that it should be adapted to a two class cabin. In theory, this would allow more seats in the plane, and lower fares (for the second class section), but I'm not sure how very many more seats could be squeezed into the tiny cabin (it holds 100 seats in 25 rows of four seats - two on either side of the aisle - at present).
A rebuff from the British Government's Trade and Industry Secretary to his appeal for help in dealing with BA has Sir Richard now resolving to approach Tony Blair in his quest for support. Question - who has more lobbying power with the British Government - BA or VS? I guess we'll find out soon enough when Tony Blair responds to Branson's appeal.
Still more VS news. Subsequent to a liberalization in the UK laws relating to allowing cats and dogs to travel from the US to the UK, VS is to become the first airline that flies pets between the US and UK. Amazingly, VS will offer frequent flier miles to animals as well as people.
Britain (and Europe in general) is a dog-lover's paradise. Dogs are allowed many more places than in the US, and now VS's service (even over the summer) makes it practical for dog owners to think about taking their dogs with them to Britain. This website has a lot more information on how to take your dog to Britain and Europe.
Lastly about VS, one of their planes became the first non-military plane to arrive into Iraq since 1990. They flew a mercy flight with 60 tonnes of medical supplies and a volunteer medical team into Basra several days ago.
The comments about Swiss International Airlines last week provoked a lot of response. Several travel agents wrote in to defend Swiss - it being one of the few airlines that still has accessible Sales Representatives to work with travel agents and their clients, and also being an airline that still pays agent commissions.
Two other agents pointed out that, whenever anyone is buying any type of international air fare, the very worst place to buy that ticket is direct from an airline's call center. Commonly you'll find a travel agent can get the same ticket for less money through a consolidator. While consolidation is uncommon on discounted domestic tickets, it is very common with international fares and for this reason you should always be sure to comparison shop with an agent if you're traveling internationally.
Several people also provided a url for a page on the Swiss site that has a US phone number - although the way this page is written is counter-intuitive in the extreme.
Reader Ken writes that he traveled four flights on Swiss over the last week with no problems and good service. He also finds Zurich a much more pleasant airport to hub through than many other European mega-hubs, and reports that Swiss has excellent on-time performance. But reader David says that he has just returned from a lecture tour in Lausanne and Leysin where disparaging comments about Swiss were commonly being volunteered.
So, what is the underlying truth? Who knows. But one thing certain is their announcement that they are cutting management salaries (by 14%) and spinning off regional services into (how unoriginal) a low cost subsidiary. The airline's CEO publicly demanded lower taxes, insurance premiums, and airport charges, combined with more support from the Swiss government and banks, but the government said that further support will not be forthcoming.
This Week's Security Horror Story : As I was about to board my flight from Heathrow back to Seattle on Tuesday, I was pulled out of line for a 'random' security search. I was thoroughly patted down, and my carry-on bag was searched.
Except that, it wasn't really searched at all. My big carry on bag, weighing about 20 lbs, was bulging in all directions from everything that I'd crammed inside it, ranging from a laptop computer to a bottle of whisky, many other electronic items, reading materials, and other bits and pieces. My bag has six main zip-up compartments and various sub-compartments within these six main compartments. The screener opened up one of the six compartments, looked at the mess of stuff in it, asked me what was in an opaque plastic bag, poked at the outline of the laptop in another compartment, then passed the bag back to me, without having actually sighted a single item.
What is the use of this type of screening? He didn't even look at anything!
Reader Wayne has a comment about random searches. He says that he very rarely gets randomly searched, but his brother gets searched almost every time he flies. His brother's name - Jordan!
An interesting subtext to the British suicide bombers in Israel last week is a hint that they might have used a type of explosive that is not detected by typical explosive detecting equipment. If this is true, that will have major impacts on airline safety.
Do you feel safer knowing that the Anti-Terrorism Unit at Boston's Logan Airport has now been equipped with fully automatic MP-5 submachine guns? They are the only airport security staff to have such awesome firepower - I'm sure if they find themselves in a 'fire-fight' with another group of terrorists armed with box cutters, they'll now be able to safely over-power them!
Some of the duties of this group include surveillance, intelligence gathering, and passenger behavior pattern recognition - I suspect they'll surely recognize a change in passenger behavior when they start brandishing their new MP-5s about the place. But if an officer should accidentally fire off his whole 30 round magazine in excitement, it might interfere with a surveillance or intelligence gathering operation!
While I'm a weapons enthusiast and both law enforcement and Second Amendment supporter, I see no sense whatsoever in over-arming a bunch of glorified airport 'rent-a-cops' against a threat that requires guile not guns to combat and defeat.
Reader Randy makes a very good point in response to my criticism last week of the foolish girl who wrote anonymous threatening letters to try and divert her cruise ship. He says
This week's Good Deed Award goes to the Sandals and Beaches resorts in the Caribbean. They are offering a free three night all expenses stay (including food, drink, lodging, golf, diving and transfers) to US troops. Details on their websites.
Travel Agent Anise liked my jokes last week, and offers this as the closing thought for this week.
Until next week, please enjoy safe travels and remember that things aren't always as they seem.
|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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