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Friday 24 September, 2004 

Good morning

We've passed the fall (or spring) equinox - northern hemisphere readers now have shorter days than nights, and I'm starting to wish I was back in New Zealand where the days are getting longer and warmer.  Instead, I'm off to northern Scotland in a couple of weeks, where I suspect the days will not be warm and know they won't be long.  I'm researching what will be a tour of Scotland's Islands next May, and hope to be able to advise dates for all our May touring in November.  Keep a week or two (or three!) open for our May 2005 tours.

This week's feature column was difficult to write, because I really couldn't make up my mind whether I liked or disliked the product under review.  It was good in places and not so good in other places.  However, whether or not I like the product ended up being a moot point, because there's a wonderful offer enabling you to try it for yourself and make up your own mind.  And so, I'll largely confine myself to describing the issues :

This Week's Column :  Digital Audio Books :  The convenience of MP3 style audio books means you can listen to them just about anywhere without needing to carry a pile of bulky cassettes or CDs with you.  I point out both the upsides and downsides to this new technology, and you can then try it for yourself.

Dinosaur watching :  You read it here first.  On 30 July I wrote about UA defaulting on its pension plan obligations and said

The issue has potentially massive implications.  Which of the other dinosaurs would wish to continue to be stuck with a comparatively very costly pension funding program if United was able to walk away from its obligations?  Just as the airlines play 'follow the leader' in terms of other salary and benefit related issues, and in terms of marketplace fares and policies, it seems inevitable that one - or all - of the other major legacy carriers would choose to copy United's actions.  To do otherwise would be to leave UA with a massive and definitely unfair cost advantage.

Nearly two months later, on Wednesday this week a Citigroup Smith Barney analyst said

... competitive dynamics will force other carriers to follow suit, potentially requiring bankruptcy in some cases.  We think the domino effect is real ...

Because it is difficult to default on pension plan obligations outside of Chapter 11, this means that American Airlines and Delta, at the very least, may feel it necessary to do a quick Chapter 11 to tidy up their balance sheet and walk away from past mistakes and obligations they no longer wish to honor before emerging as leaner meaner carriers.

In theory this will have little impact on us as passengers, but the labor discontent that will follow may cause service disruptions and who knows what else.

How much money are we talking about?  Current estimates suggest the six dinosaurs have approximately $20.5 billion in underfunded pension liabilities.

You might think that pension plan underfunding is becoming the S&L scandal of the 2000s.

I disagree.

The true scandal of the decade is not the long predicted but largely ignored eruption of pension plan problems, but rather the abuse of Chapter 11 to enable companies to unilaterally rewrite the rules of the game - and reset the score - just at the point where they discover they're losing.  Clearly, past and present employees will suffer substantially.  But the other affected group will be us - the taxpayers who will be called upon to fund the massive shortfall already being experienced by the Pension Guarantee Corp.

If you don't pay the taxes you owe the IRS, you can be sent to prison.  If the company you own and manage doesn't pay its taxes, you again are staring a jail term in the face.  From the point of view of overall money flows, we - the ordinary taxpayers - are cheated just as much if an airline doesn't make its pension plan payments or if it doesn't pay its taxes.  We have to make up the shortfall in both cases.

So let's all write our congressmen and senators - especially those seeking re-election in November - and ask them to rewrite the Pension Guarantee Corp legislation so as to make company officers personally and criminally liable for any shortfalls the PGC has to make up.

And, here's a second suggestion.  Any company that goes into Chapter 11 should be required to sack its top two or three tiers of management.  Plainly they've failed at their jobs, and should lose them.

The only way to prevent the abuse of the PGC and the Chapter 11 process is to make the abusers personally accountable.  At present, they all have 'Get Out of Jail Free' cards - let's change those to 'Go Directly to Jail, Do Not Pass Go, and absolutely Do Not Collect $200' cards.

What do you think?  Please post your opinions on our user forum.

And now, some reassuring news.  US Airways CEO Bruce Lakefield said the US government (ie - us taxpayers) is fully protected if the airline liquidates and can't repay its government guaranteed loan with what cash it might have left.

And now, for some less reassuring news.  He goes on to explain that US Airways' airport assets and frequent flier program are valuable things that could be sold.

I disagree.  Who would want to buy a closed down airline's frequent flier program?  The only 'asset' is the list of names of frequent fliers and their possible future loyalty - but what loyalty would that be if the purchaser didn't then offer a similar set of schedules and routes?  Chances are the most active of the frequent flier program members are already jumping ship and switching their loyalties to one of the several other frequent flier programs they probably belong to.

In addition to this doubtful 'asset', the frequent flier program also has a huge liability - an unknown number of million (or probably billion) miles in members' accounts.

Frequent flier programs have been taken over in the past when another airline takes over a failed airline's routes, but there are plenty of smaller airlines that have closed and been unable to sell their frequent flier plan for anything.

Famous last words from Lakefield :

The taxpayers aren't going to - as they say - get stuck with the bill for the ATSB loan if US Airways fails. The ATSB and the American taxpayer are fully protected.

Whether this is true or not, time will tell.  He also neglects to say who'll get stuck with the bill for any pension plan defaults.

Key future dates for US Airways :  The airline must have $550 million in cash at the end of Friday 1 October.  If not, it will be in default of the re-negotiated ATSB loan guarantee.

The airline next must have $575 million in cash at the end of Friday 8 October, and $585 million at the end of Friday 15 October.

The temporary agreement with the ATSB expires on 15 October.  In theory, the ATSB could trigger the airline's closure at that time.  In practice, this is very unlikely, but some people wonder what will happen after the election.

Increasing cash during a typically slow period will be a difficult challenge for US Airways.  Doubtless this was the reason for a two day sale on Monday and Tuesday this week, when they were selling coast to coast and European roundtrips for as little as $198.  Look for still more super low priced airfare sales designed simply to raise cash, not to generate profits.

Paradoxically, a struggle to meet its cash on hand requirements so as to avoid the ATSB calling in its loan might actually put the airline in a worse true position than if this was not necessary.

United makes a slight tweak to its recovery plan.  After announcing it needed to make an extra $655 million in annual cost cuts, it has now decided that actually it needs to cut even more costs.  How much more?  An extra $500 million.

How is it possible to be so wrong in the amount of cost cutting needed?  Maybe a US Airways executive could answer that question.

The airlines should be celebrating record profits, not openly talking about bankruptcies and defaults.  The first six months of 2004 saw an 8.2% increase in passengers compared to the same time last year, and because passengers were flying a bit further, actual flown miles increased a massive 11.2%.  In total 308 million passengers traveled in the first six months this year, with Southwest carrying the largest share - 40 million (13%).

Accountability, airline style :  Last month BA had to cancel over 100 flights at Heathrow.  BA simply did not have enough counter staff available to check people in fast enough, so they canceled over 100 flights, creating airport chaos and disrupting many thousands of people's travel plans.  BA has since announced the future cancellation of another 966 flights over the next 3 months, primarily due to continuing staff shortages.  BA reduced its employee count by 13,000 over the last three years.

It seems BA is not only short of staff, but short of airplanes too.  It is - barely - understandable how an airline can end up with insufficient staff, but suddenly finding it doesn't have enough planes to fly its planned schedule surely takes a special type of skill.

BA CEO Rod Eddington announced he has reviewed the circumstances of what went wrong, and decided it was not the fault of any one individual, and he doesn't want to carry out a 'witch-hunt'.  So he has decided against firing anyone at all for the disgraceful lack of service and massive loss of revenue and reputation his airline has suffered and is suffering.

Apparently he didn't consider firing more than one person; but perhaps, due to their severe staff shortages, he felt unable to spare even one single high level manager for fear of causing more problems.

BA doesn't realize it, but it has just announced a program that will surely result in BA giving away a large number of first class upgrades to its business class passengers.  They have announced a campaign promising if a business class passenger doesn't rate their in-flight sleep the best they've ever had, they will be upgraded from business to first class on their next flight.

Let's hope not too many of BA's business class travelers have yet sampled the new Virgin Atlantic (VS) Upper Class Suite - the largest fully flat bed in business class of any airline, and by all accounts tangibly better than BA's cramped business class seat and almost certainly offering a better in-flight sleep.

Of course, in reality, BA doesn't lose on this deal - an upgrade to first class costs it little or nothing, and wins some loyalty from its business travelers.  But the savviest passengers have probably already left and are now to be found flying VS.  I'm planning to compare the new VS Upper Class Suite with both BA's business and first class - my guess is that the VS Suite not only trounces BA's business class but also its first class, too.

Talking about BA reminds me of my latest Travelocity experience.  But first I should record my astonishment earlier this week to have my private line ring and discover a Travelocity VP at the other end.  She'd read my comment last week and was unable to understand why their 99.9% always honored guarantee to answer emails in 4 hours had failed for me.  Knowing nothing more than what she read, she uncovered everything relevant - including my unlisted private phone number - and called to explain and apologize.  Very impressive, and made me feel very confident about trying them again.

So I phoned their (800) number, and this time they were immediately accepting calls.  Great.  I spoke with Randy, who had never heard of British Airways' World Traveler Plus class, but researched the issue, and eventually found a way to book it through his system (it remains not bookable directly through their website).  He booked me the flights I asked for on the days I requested, and told me the applicable fare.  I'd already checked availability and price on the BA website ($1495) and hoped the Travelocity price would be the same or perhaps lower.

Travelocity's price?  $3461 (the lower BA direct fare remains available on their site).

But if you do want a good deal, especially on a last minute mini-vacation, Travelocity subsidiary Site59 has just released a major enhancement to their vacation finder service.  Using a type of 'fuzzy logic', when you input in your requirements for where you want to go and when, it returns not only exact matches but also similar matches and different dates.  It even suggests options where you can save substantial money - by staying longer!

This new intelligent search result increases the ease of finding a fun quick break, and is worth a look at.  Site59 offers packages up to 14 days in advance, and tells you everything you need to know about which airlines and hotels are included in the package before you have to commit to it.

While the airlines struggle, the cruise lines seem to be proving more adept at making a profit.  Carnival announced it made a $1.03 billion profit, an increase of 40% from the previous year.  But - no, this is not its annual profit.  This is its profit for just one single quarter.  Higher ticket prices, more onboard revenue, and the strong Euro all contributed to this record result.  Not a word about fuel prices or staff costs or pension plan deferments.  They make it seem so easy.

Wi-Fi's death as a means for travelers accessing the internet advanced a step closer this week with Verizon's announcement that it is rolling out new high speed 3G wireless data service to major cities and, shortly, to at least 20 airports in the US.  Who would want to search for a Wi-Fi hot spot when an entire city or airport offers nearly as fast access through your cell phone?

People on a budget is one possible answer.  Verizon charge $80/month to access the service, whereas T-Mobile Wi-Fi service is only $20-30/month.  But as the other carriers also deploy fast 3G cell phone data networks, these prices will hopefully drop and soon Wi-Fi will be relegated to another footnote in the history of technologies that were obsoleted before even being fully deployed.  Wi-Fi will remain useful in office and home LAN and VPN environments, but not as a public WAN access method.

This Week's Security Horror Story :  A Midwest Airlines flight had to return to the gate in Milwaukee shortly before taking off due to a security scare.  All passengers had to get off, and luggage was rechecked and the aircraft inspected.  Nothing was found, but due to the delays, the flight had to be cancelled and passengers overnighted at nearby hotels.

The cause of the security scare?  An alert passenger noticed that someone had written something in an Arabic style of handwriting on a page of the seat-back in-flight magazine.  No-one knew what the scribble said or meant, but with commendable caution, the pilot aborted the flight and returned to the gate.

You may recall the somewhat similar 'Bob' scare on a United flight two months ago.  Plainly, it doesn't do to doodle on the in-flight magazine.  I wonder if a magazine with pages torn out is also a security problem - perhaps you should point it out next time you're flying somewhere and see what happens...

Spot the difference :

(a)  A 52 year old special education and Sunday School teacher was discovered attempting to travel with a weighted bookmark in her carry-on - a strap with weights at each end to hold pages flat in a book while reading it.  Alert TSA officials immediately recognized this as a potentially dangerous weapon, and weren't fooled by her placid middle class demeanor, and so had her arrested and charged with carrying a concealed weapon.  She was handcuffed, and driven away in a police car, and threatened with a criminal trial followed by up to a $10,000 fine.

(b)  On Thursday evening, an administrator of the LAPD was 'detained briefly' at LAX prior to flying to New York with his family.  He was not on duty at the time, but had a loaded gun in his carry on bag which he omitted to tell the security screeners about.  He was not handcuffed, and has not been threatened with any charges.

We should be impressed that the TSA screeners actually found his loaded gun.  Yet another government report discloses that undercover investigators were able to sneak explosives and weapons past TSA checkpoints at 15 US airports Details here.

Somehow, a dangerous possible terrorist managed to sneak onto a flight from London to Washington on Tuesday.  Although his name was on two different watchlists, he avoided detection at Heathrow by the cunning process of booking his ticket and checking in for his flight using his real name.

It was only several hours later, by which time the flight was well out over the Atlantic, that alert US officials at the US Customs and Border Protection's National Targeting Center noticed this person was on the flight.

The flight made an emergency landing at Bangor, ME - obviously it was too much risk to allow the flight to continue on to the nation's capital with such a dangerous person on board.  The terrorist suspect was taken from the plane, and after questioning, was denied admission to the US on 'national security grounds' and sent back to Britain.

The terrorist suspect was 56 year old Mr Yusuf Islam.  You might know him better by his earlier name, Cat Stevens, singer of haunting ballads such as 'Wild World' and 'Morning has Broken', and whose music featured prominently in my own misspent youth.  A Muslim convert, he has opposed the war in Iran, and his website includes the giveaway text that clearly indicates the extent of his threat to US national security when it says 'Crimes against innocent bystanders taken hostage in any circumstance have no foundation whatsoever in the life of Islam and the model example of Prophet Muhammad, peace be upon him'.  As for 9/11, he earlier was quoted as saying 'No right-thinking follower of Islam could possibly condone such an action: the Koran equates the murder of one innocent person with the murder of the whole of humanity'.

Cunning people, these terrorists, aren't they.  To me, he looks like a harmless and slightly eccentric peacenik.  Mr Islam/Stevens most recently visited the US, legally, in May, to attend a charity event and to promote a new DVD - he has recently re-recorded his 70s hit 'Peace Train'.  I'm sure we can all rest happier tonight knowing that this dangerous terrorist was successfully intercepted and will be unlikely to threaten future flights to the US.

Here's a surprise!  The UK Guardian newspaper reports that French catering unions have admitted having a surliness problem. They concede that staff working in bars and restaurants are 'surly, service-slow and hygiene horrendous'. Customers were right to complain of a 'poor or non-existent welcome, an excessively long wait, and a lack of basic courtesy and reactivity.'  Another union admitted there was room for more training for hospitality workers in France and that 'all too often, the welcome extended to customers does not even reach the basic standards required of a supermarket check-out girl'.

Talking about serving staff, reader Paul advises  that subsequent to the item last week about the traveler being arrested for not leaving a tip, it appears he has now got off on a technicality.  A previous Federal Court decision apparently says that tips are not mandatory, but 'service charges' are.

A different reader wrote in reply to my story about the paper cups on the AA flight to say

Come on, that story about handing our paper cups on AA has to be false. The health hazard it presents, not to mention violation of decency standards would land AA in a world of legal and PR trouble. I doubt it happened as stated, and I am disappointed that you would forward it. Why is it that story didnít make the news anywhere else?

I expect more discretion from you in reporting these horror stories.

Several others also expressed disbelief.  But don't blame me for the major media ignoring this outrage - thank me for compensating for their omission (my own humble version of bloggers outing the CBS/Dan Rather fraud!).  Here's the original story.  It really did happen.

Lastly this week, here's a possible reason why the cruise lines are doing so well (sent in by a travel agent reader) :

There will be no nursing home in my future.........

When I get old and feeble, I am going to get on a Princess Cruise Ship. The average cost for a nursing home is $200 per day. I have checked on reservations at Princess and I can get a long term discount and senior discount price of $135 per day. That leaves $65 a day for :

1. Gratuities which will only be $10 per day.

2. I will have as many as 10 meals a day if I can waddle to the restaurant, or I can have room service (which means breakfast in bed every day of the week).

3. Princess ships have as many as three swimming pools, a workout room, free washers and dryers, and shows every night.

4. They have free toothpaste and razors, and free soap and shampoo.

5. They will even treat you like a customer, not a patient. An extra $5 worth of tips will have the entire staff scrambling to help you.

6. I will get to meet new people every 7 or 14 days.

7. TV broken? Light bulb need changing? Need to have the mattress replaced? No Problem! They will fix everything and apologize for your inconvenience.

8. Clean sheets and towels every day, and you don't even have to ask for them.

9. If you fall in the nursing home and break a hip you are on Medicare. If you fall and break a hip on the Princess ship they will upgrade you to a suite for the rest of your life.

Now hold on for the best! Do you want to see South America, the Panama Canal, Tahiti, Australia, New Zealand, Asia, or name where you want to go? Princess will have a ship ready to go. So don't look for me in a nursing home, just call shore to ship.

P.S. And don't forget, when you die, they just dump you over the side at no charge.

Seriously, some cruise ships do indeed have permanent cruisers (including the QE2).

Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

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