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Friday 7 January, 2005 

Good morning

Memories of the Christmas and New Year holidays are quickly fading, and it is back to life as usual once more.  Or, for me, not too usual; I'm currently in Las Vegas for the massive Consumer Electronics Show.  135,000+ participants make for an awful experience every which way, starting off with almost a one hour wait for a cab from the airport, and the threat of massive delays leaving on Sunday (last year it took up to five hours for some people to get through security when leaving Vegas).

Looking back, 2004 was a wonderful year for The Travel Insider.  On the website, daily visitors increased by 465% and daily page views increased by 527%.  Ranking.com rates us as the 41,744th most popular site on the internet, and Alexa rates us at 47,298.  Ranking.com also suggests there are 602 other websites that link to The Travel Insider, and Google scores us in the top ten for many common keyword searches, keeping the site very active.

Newsletter growth was more moderate, but with a 40% increase in readers during the year, still excellent.  Regrettably we lost our major funnel for bringing new people to the newsletter during the year, however the increased numbers of site visitors are providing an ongoing steady stream of new signups.

2005 promises further exciting developments for The Travel Insider, and for you, our valued reader.

One such thing might possibly be our NZ Winter Home concept.  We've now had a chance to read through and analyze all responses to our NZ Winter Home survey.  Responses were generally pleasingly positive, and even the negative comments were very helpful - it is as valuable to know why people would not be interested in the idea as it is to know why people are interested in the idea.

It was interesting to see the spread of responses and perceptions.  For example, some people wanted to live in the countryside, but expected public transport to be conveniently available and local shopping nearby.  That just doesn't happen, unfortunately, any more in NZ than it does in the US.

Condos were slightly preferred to houses, but many of the reasons people gave for preferring condos (ie easier property maintenance and easier to rent out) can apply with equal strength to managed individual housing and indeed local NZers would much prefer to rent a holiday house rather than a holiday condo.

There was a good level of interest in a central city Auckland location, but we'll probably respond instead to the greater number of people who expressed a preference for a town or country location, and we're currently talking to realtors about potential sites.  This is not as easy as it might seem.  NZ has very restrictive zoning and development regulations so as to protect the integrity of their 'clean green' image.

We are sufficiently encouraged, however, as to continue our research some more, and of course will report back when we have a more definite description of how such a concept could work.  We did find a stunning 750 acre property, offering breathtakingly beautiful scenery along with excellent location and just about everything else one could hope for.  Developing it (up to a theoretical maximum of less than 96 houses) would however be both expensive and time consuming and not something I could do alone.

If you'd like to participate in a bit of NZ property development, please let me know.

I still suffer from occasionally misjudging the charge in my cell phone, and finding myself with a dead phone battery, with hours to go before I can get to my recharger.  I've reviewed two solutions in the past - the Cellboost batteries and Sidewinder hand crank chargers, but both are imperfect.  The Cellboosts are expensive single-use devices, and the Sidewinder is bulky and a hassle.  I think I've now found the ideal solution, but to my surprise, could not find anyone in the US selling them.  So I've imported a supply direct from the Chinese manufacturer, and can now offer to you :

This Week's Column :  Emergency Cell Phone Battery Recharger : Never have your cell phone battery die on you again. Here is a small device that uses standard AAA batteries to recharge a dead cell phone battery. My testing shows that a set of 4 AAAs gives you up to two full recharges.  A must have item for everyone with a cell phone.

Dinosaur watching :  We're only one week into the year, and already we're facing a very different airline environment than we were a week ago.  I'm now putting US Airways on a death watch, and believe there is little hope it will emerge from bankruptcy, for several reasons.

The first reason has yet to be widely reported on.  Southwest Airlines is moving into Pittsburgh, starting operations in May.  While US Airways has massively cut back on its Pittsburgh operations, there can be no doubt that having Southwest (WN) now moving to Pittsburgh, in addition to already being in Philadelphia, is going to add to the stress on US Airways and reduce still further the opportunities for US to operate any flights at high margins.

WN's announcement that it will move into Pittsburgh should have people reading between the lines.  Why choose Pittsburgh?  One possible explanation is that WN itself foresees the demise of US in the near future, and so wants to be in place and able to respond to the opportunities that may arise when US stops flying.  Another explanation could be that WN sees US as vulnerable and so wishes to increase the pressure and hasten US' demise.

The second reason links in with the really big news this week - Delta's restructuring (ie lowering and simplifying) of all its fares.  Anywhere US completes with DL, it will find itself having to drop its fares down to DL's new levels, reducing still further the routes on which US can hope to generate any profit.

The third reason is a combination of what has happened and what may happen.  US' massive Christmas mess-up has to have cost them passenger good-will with some of their better business passengers choosing to now switch loyalties.

And with the threat of strike action from the airline's Machinists Union, this could be the final nail in its coffin.  At US Airways' request, their bankruptcy judge canceled the contract between the airline and the machinists, and the machinists are now threatening to strike - an action which US says would be illegal.  The machinists will vote on 21 January whether to accept the airline's best offer; if they don't then the judge's ruling immediately comes into effect.  The other unions at US have all accepted new lower contracts.

Add to this no clear evidence of any likely turnaround, and US' chances get slimmer and slimmer.

I'd earlier discounted its major creditor, GE Capital, choosing to play hardball, but GE Capital's perspective is broader than just 'protecting' its investment in US Airways.  GE Capital has lent money to most of the dinosaurs, and maybe someone at GE Capital might decide it is better to sacrifice US Airways in the hope of seeing the other airlines return to profit than it is to risk their loans with all the dinosaurs.  US Airways has its deals with both GE Capital and the ATSB coming up for renewal this time next week, with the unresolved situation with its machinists still hanging over its head.

Aloha Airlines didn't quite survive 2004.  The airline went into Chapter 11 on 30 December, while proclaiming that it will be 'business as usual' while it restructures itself.  Aloha had already taken some strong steps such as reducing senior management by 36%, but this was not enough.  Their filing means both Hawaiian carriers are currently in Chapter 11 - Hawaiian Airlines went into Ch 11 (for the second time) in March 03 and has yet to emerge.

Aloha received a $45 million ATSB loan, and has already paid about half back.

As I discussed last week, the Pension Benefit Guaranty Corp will be saving the United Airlines pilots' pension plan, spending $1.4 billion of taxpayer's money in the process.  Without their intercession, the 14,000 pilots affected would each be $100,000 the worse off.

So what do the pilots say?  Instead of saying 'thank you very much', they complain they have been singled out for 'punitive and vindictive treatment'.  A $100,000 taxpayer gift is punitive and vindictive???

The pilots, you see, very clearly understand that, although there's no money to pay them, their theoretical entitlements will increase by another $10,000 per person in May.  They'd rather the PBGC pretend there's no problem with the pension plan at present, and wait until there's an even bigger problem.

Question to United's pilots :  Your fuel gauge is reading almost empty, and you're two hours flying time from your destination.  What do you do?  Cross your fingers and continue on course, or urgently divert to a nearby airport before your engines flame out and your plane turns into a glider?

The biggest news this week was Delta changing its entire fare structure, capping most walk-up fares at no more than $499 one way, and scrapping the need for Saturday night stays to qualify for their lowest fares.  Discounted fares must be purchased more than 21, 14, 7 or 3 days prior to departure, and there is now a minimum stay of one night (any night, not just Saturday) except for full fares. Discounted fares are nonrefundable.

Overall, the biggest discounts go to business passengers who will find their unrestricted fares have dropped massively.  There's an interesting subtlety to this.  If DL can get more business passengers flying with them at 'only' $998 roundtrip, then its average fare might actually increase rather than decrease, because it may have more $998 fares on a given flight than before, and of course, each seat sold at $998 is one less seat to sell at $198.

What does this mean to the industry as a whole?  Even before DL had filed its new fares, NW announced that the new fares would be 'revenue negative' - meaning the airlines would generate less ticket revenue and therefore profit with the lower fares.  On the face of it, this would seem obvious, and indeed a major brokerage firm quickly followed NW's proclamation by calculating how many tens or hundreds of millions of dollars in revenue and profit each major carrier would lose if they all adopted the new DL pricing.

Regrettably, these calculations are based on the exact same nonsense assumptions that the airlines used in the past to justify their fare increases.  Increasing fares too far pushed some airlines into bankruptcy, and left the others struggling.  The basic error which the dinosaurs made was to believe that people will continue to travel, virtually unchanged, no matter how expensive airfares become.  They thought they could increase fares as much as they liked, and people would accept the increased costs of travel without changing their travel patterns.

Well, that assumption was proved spectacularly wrong.  Too high airfares forced some people to reduce their travel, or to work within the rules for discounted fares rather than buying overly priced unrestricted fares.  Other people switched from dinosaur airlines to lower fare airlines such as JetBlue and Southwest.

So what did the dinosaurs do?  They cut back on their airfares.  What did the traveling public do?  Started flying more.  The dinosaurs have now been shown - both ways - the error of their logic.  It is really very simple.  You increase airfares - fewer people travel.  You decrease airfares - more people travel.

Notwithstanding this simple equation, the dinosaur carriers seem to be saying that if they all adopt DL's new lower fare model, the same number of people will travel the same number of times, and pay less money in the process.

This has been proven wrong many times before, most recently with America West, an airline that transformed itself from a dinosaur to a low cost carrier, and which possibly managed to save itself in the process.

Delta is clearly hoping for one of three scenarios.  The first scenario is that the other dinosaurs take so long to respond to DL's new lower fares that DL not only has its own passengers traveling more but also steals market share from the other dinosaurs.  This would be a very positive outcome for DL.

The second outcome would be that the other dinosaurs match DL, and the lower simpler fares encourage more people to travel more frequently, thereby giving the airlines more passengers and more flights over which to spread their massive fixed costs, and enabling DL (and probably the other dinosaurs too) to become profitable, even if their average ticket selling price reduces.

There's a third outcome that wouldn't displease DL either.  It may take a while for travel patterns to pick up after the fares have been lowered.  There could be a period during which the airlines do indeed experience a temporary drop in revenues.  This period - probably fairly short - might still be long enough to push one or two of the bankrupt carriers such as US or UA 'over the edge' and into liquidation.

American has already partially matched DL and NW and US have done so on routes they compete with DL on.

Southwest has announced its passenger data for December and for 2004 in total.  All numbers were up (of course), and for the year, WN reported an 11.4% increase in revenue passenger miles flown with a 2004 total of 53.4 billion RPMs, and a load factor increasing from 66.8% in 2003 to 69.5% in 2004.  Great results, and so it is unsurprising that five of their senior executives earned bonuses for 2004.

Some dinosaurs like to pay multi-million dollar bonuses to their executives after a year of horrific losses, using the specious reasoning either that if it wasn't for their executive talents, the losses could have been worse, or that if they didn't pay the bonuses, their executives would leave and seek better jobs in other companies.  Southwest, in contrast, is not only the most consistently profitable airline in the country, but is paying bonuses ranging up to a maximum of only $338,120.

Southwest made a profit of $258 million in the first nine months, so it can clearly afford these bonuses.

Another not so profitable airline is hinting about the 'B' word.  In its latest SEC filing, Continental said if it failed to cut $500 million in annual wages by February 28, it would be in danger of having 'inadequate liquidity'. It would lose hundreds of millions of dollars under current conditions without cuts and would be forced to reduce its fleet and lay off employees.

Talking about being forced to reduce its fleet, don't forget this is the same airline that gave Boeing a highly conditional 'for show' order for some 7E7s just last week.  And in a more positive announcement this week, CO trumpeted its achievement at having retired its last MD-80, reducing its fleet to just three aircraft types - the 777, 767/757, and 737, which it says is the result of a ten year effort to eliminate complexity and expense.

As I said last week, adding a mere ten 7E7s will bring new complexity and expense that would seem to outweigh the small benefits from having so few of a totally new airplane type in their 348 plane fleet.

Here's an interesting survey of Blogging in the US.  It is fascinating to compare these numbers with the results of our Travel Insider reader survey on blogging a few weeks ago.  Only 38% of Americans, on average, even know what a blog is.  In comparison, almost exactly twice as many Travel Insider readers know what a blog is.  As I said at the time, only the best people read this newsletter!

There are a lot of strange new devices being offered at the Consumer Electronic Show in Las Vegas at present, usually by strange new companies.  But here's a new product offered by Motorola - a cell phone built into a ski jacket!

Here's a story with an interesting 'bottom line'.  Fresno Airport is creating a new passenger information system, but instead of relaying information from the airlines about when their flights are scheduled to arrive, the airport is linking in to an independent radar system that tells it, for real, where planes actually are, and, by implication, when they're expected to arrive.  In other words, Fresno Airport finds airline projected arrival data no more reliable than we do, and has decided to do something about it.  Well done, Fresno.

Kudos also to Las Vegas Airport.  They have deployed free Wi-Fi throughout all their passenger terminals.  I quickly tried it while waiting for my bag on Wednesday - it seems easy to connect to and definitely free.

This represents another reason why I don't hold out much hope for the various commercial Wi-Fi networks being deployed around the country.  The underlying cost of offering Wi-Fi is close to zero for any organization that already has an internet feed and LAN, and so - hopefully - we'll increasingly see free networks displacing the commercial networks.

I didn't send many Christmas cards in 2004, but didn't think to do what apparently many Australians chose to do.  In a pre-Christmas survey, 50% of 16-34 yr olds in Australia said they'd prefer a fun holiday SMS to a paper card, and 70% planned to send holiday text messages in lieu of Christmas cards.

The City of Los Angeles is suing internet hotel booking sites.  As I've disclosed before, these hotel booking sites typically show a hotel room rate and then add taxes and fees on top of the room rate.  Say, for example, the room tax is 20%, and the website is selling rooms for $100.  It will collect an extra $20 from you as room tax.  But it might only pay $80 to the hotel for the room - the rest is its profit.  And, guess what?  The 20% tax is paid on the $80 actually received by the hotel for its room - ie, $16.  What happens to the other $4?  At present, the internet site simply keeps it.  Los Angeles doesn't think this fair, as this article reports.

This Week's Security Horror Story :  The newspapers remained full of new incidents of laser beams 'tracking' airplanes in the early part of the week, with at least eight incidents being reported in the last ten days.  But rather than terrorists using special equipment to blind pilots, the reality has turned out to be exactly as I predicted last week.  The FBI now says these incidents have been the result of casual pranks or accidental flashings of lasers in the air.

But this hasn't stopped them arresting one man who was playing with a cheap laser pointer.  The man is currently on $100,000 bail pending charges of reckless disregard for safety (and making false statements to the FBI).  If convicted, he could face up to 20 years in jail - more than many murderers get.

He may end up as part of a proposed new tourist attraction.  Westchester County in New York State wants to encourage tourists to come 'up the river' by establishing a a new museum.  The museum would be located at the still functioning Sing Sing Prison and would feature the original cellblock which has been restored.  It can be reached by a walkway above the prison's stone walls and razor-wire fences. The county also wants to acquire the prison's electric chair for the museum - the chair is currently 'in storage'.

Oh, if you want to get one of these powerful green laser pointers, they're readily available in many stores.  But note these have a maximum power output of less than 5 mW - five thousandths of a watt - not much, but enough to risk 20 years in jail.  I saw, at the CES show today, heavy duty lasers for sale that are used to cut through wood and metal, and they have a power 5,000 times greater (25 W).  Hmmm - a laser that can cut through metal.  Now that truly could be used for bad purposes by a terrorist, couldn't it.

Radiation of a different sort could be your worry if you're traveling through Baltimore Airport in the future.  The TSA will be trialing two new machines that can search for explosives on people.  One type of machine is totally safe - it 'sniffs' you to see if it can detect the typical 'smell' of explosives.  This is a great type of machine that should be immediately deployed throughout the country.

But the other type of machine is potentially a danger to very frequent fliers.  It shoots X-rays at people to see whatever is underneath their clothes (including, ahem, an anatomically correct portrayal of your naked body).  If you've had a chest or even dental X-ray, you know how the staff giving you the X-ray don't hang around while you're being irradiated, because they know that repeated exposure to even low doses of radiation is a very bad thing.  While these machines give you no more radiation than perhaps one thousandth of the dose you'd get with a chest X-ray, how many times a year do you get chest X-rays and how many times a year do you go through airport security?

I've been admiring some lovely new GPS units at CES, unaware of the potential danger that the new units which speak directions to you may pose.  A 78-year-old motorist in France is claiming itís not his fault that he crashed into another car after he made a U-turn while driving on a freeway - he was only following the instructions from his carís onboard GPS navigation unit.

If you're particular about personal hygiene in public conveniences, this story might please you.  But while our greatest minds have applied themselves to this problem, it seems some less intelligent people were worried about the potential dangers inherent in misusing toilet brushes.

Until next week, please enjoy safe and hygienic travels

              David M Rowell aka The Travel Insider

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