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20 May, 2005 

Good morning

A thirteen hour internet outage on Wednesday/Thursday reminded me of how extraordinarily dependent I've become on the internet.  Fortunately the website is hosted remotely and is safe from all but the most extreme of internet problems, but not being able to send or receive email at will was most unpleasant - although the temporary respite from the flood of German spam emails was a definite silver lining.

Our free phone offer is probably now finished - I say probably because there are still a few people who have requested phones but not sent in the shipping for them, and these may still be released in the next few days.  Mobal have couriered an incredible 250 phones and SIMs from their UK office to here; an extraordinarily generous act on their part.

Also nearly finished is Travel Essentials' 30% discount on the Plane Quiet Solitude headphones.  This expires on Sunday - if you still want a set, go to their site and use the discount code MAMA.

A New York Times reporter is researching the topic of luggage pilfering.  Is it becoming more or less prevalent?  Have you had anything taken out of your bags the last few times you've flown?  If you can provide any helpful information on this topic, please send me an email and I'll pass it on.

I've been spending much more time than expected coordinating the distribution of these free phones.  And what have I been doing in the little spare time remaining?  Oh - reviewing and writing about phones.  Which brings me to

This Week's Feature Column :  Motorola's V3 thin flip phone :  The new Razr V3 is distinctive and stylish, but underneath the great looks is an ordinary phone that is not as state of the art as its appearance promises.  Are the omissions important to you?  Or is its new low $99 price the most important consideration?  Read the review to find out.

Dinosaur watching :  Who'd be as stupid as to invest in a two-time loser airline?  Only another airline, it seems.  And the suppliers that are beholden to both airlines.

Yes, the 'merger' between America West and US Airways has now been officially announced, at a press conference on Thursday afternoon.  Smaller airline America West (HP) is getting three times as much of the new airline as is larger airline US Airways, and the new airline will be headquartered in Tempe, AZ, home of HP, and headed by HP's CEO.  Other senior management will be largely from America West.  Sounds more like a buyout than a merger to me.

If looked at from a distance, it makes some sense to merge an airline with a strong west coast route network and an airline with a strong east coast route network.  But, and as discussed before, the devil is in the details and there's no reason to feel positive about the new airline-to-perhaps-be.

The new airline will go by the name of US Airways, and will become the country's sixth largest airline (currently US and HP are 7th and 8th largest, with Southwest being 6th largest).

Although keeping the name of US Airways, I agree with Joe Brancatelli that the new company is better named Air Frankenstein - an ungainly cobbled together creature, unlikely to perform as expected.

The most distinctive thing about the new airline is its plan to bring in $1.5 billion in new capital, from a group of brave investors.  The largest investor is Airbus, who is putting in a $250 million bribe loan in return for the airline agreeing to purchase an unstated number of its new A350 planes.

Next largest investor is Air Wisconsin, with a $125 million bribe investment in return for being given awarded the right to provide regional feeder services.  $75 million is coming from Air Canada, with the probability that AC will be picking up an arrangement to provide international services connecting to the new airline's domestic services.  Two investment groups are bravely stumping up $150 million, so in total that leaves the source of $900 million of the promised $1.5 billion in new investment as yet undisclosed.

Hmmm - is this monster yet fully birthed?

HP will get 45% of the new company, US will get 14%, and new investors will get 41%, which makes for some interesting comparisons.  At close of business Thursday, HP was worth $174 million and US was worth a mere $70 million.  This shows a disparity in valuing the two companies for the merger - looking at stock market valuations, if HP gets 45% for $174 million, US's $70 million should get it 18% rather than the 14% it gets.

The really interesting figure is the other 41%.  If (45 + 14) 59% of the company is worth (170 + 70) $240 million, this implies the other 41% is worth $219 million.

Not all of the $1.5 billion in new funding is equity funding - for example, the $250 from Airbus is a loan.  But, as best I can tell, the $125 from Air Wisconsin is in return for equity, as is the $150 million from the two investment companies.  The Wall St Journal reports that Air Canada's $75 million will probably be in equity too.  We don't know how the mystery remaining $900 million will be obtained.

So at least $350 million and potentially more than $1 billion is being spent to buy 41%, whereas the other 59% cost only $240 million.

It seems the new investors are getting very much less for their dollar than the current HP/US investors.  I wonder why the new investors are pleased with that situation?

The deal still needs to be okayed by US Airways' bankruptcy court judge, but being as how he rarely says no to anything, that can be considered a foregone conclusion.

Shareholders in both companies will also need to agree to the merger, but with my analysis above, there is no reason why they wouldn't.  Approvals are expected to be secured in the fall, with integration evolving from that point forward, although surely this whole deal still remains subject to finding the missing $900 million in needed financing?

As expected, the two frequent flier programs will merge and no-one will lose any miles, although how elite status issues will be handled is anyone's guess.

And what of the employees of the two airlines?  The good news first :  CEO Lakefield of US Airways says the merger will ensure his airline's long-term viability and the security of its employees.  CEO Parker of America West (and designated CEO of the merged airline) is similarly positive when he says 'I don't anticipate any major furloughs over and above' those already occurring.

But look a bit further and the truth starts to get a bit fuzzy.  Parker also said he was not sure how many jobs would be cut if/when the merger goes through.  But he is sure the two airlines will reduce their combined fleet size by 15% by returning 59 jets to their lessors.

If the new airline reduces its fleet by 15%, there absolutely will be further cutbacks in operational staffing levels.  And hopefully the new airline won't need two complete sets of headquarters resources and services, either.

All of which makes one wonder exactly why Jack Stephan, spokesman for the US Airways unit of the Air Line Pilots Association, said his union is 'looking forward to being a part of the creation of the nation's premier low-cost airline.'

Perhaps it is because he knows his members are in line to win any seniority battles with the HP pilots - US Airways is a long established airline with some very long serving pilots, meaning that in the traditional seniority structure, the US pilots will have a massive advantage over the HP pilots.

Words to remember :  CEO Parker said the new airline should generate a profit even if oil remains above $50 a barrel.  Which, of course, it should be - the cost of oil should be no more important to an airline than to any other rational oil consuming service provider.  If costs go up, selling prices should be adjusted to reflect that fact.

The airlines might finally be figuring out this secret of success.  They upped their fares yet again last weekend, generally between $10 - 20 roundtrip, and even the lower cost carriers joined in this time on some fares.  This is the seventh increase in fares since 24 February - pretty soon you'd hope the airlines have caught up on their increased fuel costs.

United may have developed an innovative new way to save money - by eliminating most of their phone reservations staff.  Reader Morris writes

Have you ever tried to buy a United ticket by phone?  I wanted to use a United discount coupon to buy a ticket, and the coupon required me to make the booking through United's phone reservations center.  So, for three days, I tried calling, but could only get busy signals.

I finally gave up and bought a ticket on another airline. How does that help their profit situation?

I've been expressing some exasperation with United's unions and their ineffective public posturing that seems to do nothing to actually protect their members' livelihoods.  But now there is posturing of a different kind.  Five UA flight attendants, aged between 55 - 64, are posing in various states of undress for a calendar designed to highlight their pension plights.  I know you'll want the url for this - www.stewsstripped.com.  You can order the calendar from their website.

I wrote last week about my new favorite airline - and hopefully yours, too - Independence AirGary Leff has a great sweetener to encourage you on to their flights - a 20% discount.  Way to go, Gary!  And thanks for sharing.

Simply book your flights through this webpage - the discount is good through 31 July.

Some interesting statistics :  In the fourth quarter of last year, the seven major airlines posted a 15.8% average loss on their domestic operations.  The seven largest discount carriers posted an 11.5% average loss, although this is a meaningless statistic - do you know or care who the sixth or seventh (or even fifth) largest discount airline might be?  But the seven largest regional airlines posted a domestic operating profit of a massive 10.4%.

The secret to the regional carriers' success?  Probably their high revenue per mile flown.  Which makes sense when you appreciate how you can fly from coast to coast on a major carrier for about the same price as between two nearby small towns on a regional carrier.

How's this for a really stupid idea :  The European Union finance ministers have agreed on a voluntary levy to be applied to air fares.  The levy proceeds will be given as aid to poor countries.

Some countries - Belgium, France and Germany - plan to make the voluntary levy compulsory (a compulsory voluntary levy - sounds frighteningly Orwellian) while others will give passengers the choice of paying the fee or not.  It is expected the fee will be between 1 - 2 ($1.25 - $2.50) per ticket.

I shouldn't criticize.  Taxing airline passengers to fund aid to poor countries makes about as much sense as last year's proposal to tax coffee drinkers in Seattle to fund local education projects.  Happily, my fellow Seattleites voted that levy down, though.

The EU is also considering a tax based on the amount of heat-trapping gases emitted from airplanes.  This would not be voluntary.  Although airplane engines are getting more and more efficient, the growth in overall air traffic is more than making up for the more efficient engines.

The cruise industry continues to boom.  World-wide passenger numbers in 2004 totaled 15.4 million, up 11.1% on last year.  61% of cruisers are American and 27% European.

'Every sector of the travel industry will be up, up, up'.  These happy comments came from Dr Suzanne Cook, the Travel Industry Association of America's Senior VP of Research.  TIA claims that while travel prices are up in the first three months of 2005, 'this will not discourage Americans from taking trips, but they will be looking for deals and ways to economize without giving up their summer vacations.'

But the bad news in this boom :  'Planes will be full this summer as Americans return to the skies' according to Dr. Cook.

The TIA noted that while the number of trips is up, the number of nights away from home continues to decline, from 7.6 nights last summer to 7 nights this summer on people's longest leisure trip. Travelers plan on spending an average of $1,019 on their longest leisure trip this summer, a decrease of 7 percent from summer 2004 ($1,101).

Three out of four Americans plan to visit friends and relatives this summer, two thirds will be at a beach and/or visiting small towns and rural areas. Over a third will be traveling with children, according to TIA.

Talking about shorter and shorter vacations, a new study by Expedia Canada shows how poorly off we in the US are when it comes to vacation time.  The study compared vacations in the US, Canada, Great Britain, France, Germany and the Netherlands.  French people score top, with an average of 39 days a year.  Germans come second with 27 days, then the Netherlands (25) and Britain (23).  Canadians get 21 days, and, at the bottom of the list, Americans get a mere 12 days.

And talking about French people, this article is passed on without comment, other than to wonder if it is envy among the vacation challenged other nations that cause such feelings to be apparently commonplace.

Incestuous competition :  Three airlines are eager to get rights to fly between the US and Australia - Singapore Airlines, Virgin Atlantic (VS) and now Virgin Blue, which sees shareholders competing against each other and against themselves.  Singapore Airlines also owns 49% of VS.  Sir Richard Branson owns the other 51% of VS, and almost a quarter of Virgin Blue.

All three airlines are opposing each other's attempts to get rights to fly the highly profitable and minimally competitive route, most recently with Virgin Blue's CEO Brett Godfrey saying that the route should be treated as an (Australian) national asset and not 'trashed' - ie, by allowing non Australian airlines like SQ or Emirates (or presumably VS) to fly on the route.

Why are no American carriers rushing to fill this opportunity? Several American carriers already have rights to fly this route.

Tsunami Recovery :  Thai Airways expects to double its profit this year, and says traffic is back to normal levels after the December tsunami.  Apparently the cost of jet-fuel is not proving a problem to Thai.

What Tsunami? :  A similar result is being reported by SQ, reporting a record $840 million profit for the 12 months ended 31 March 2005 - all the more amazing for including the tsunami period.  SQ also seems to have solved the expensive fuel problem.

Looking for somewhere different for your wedding?  How about the Concorde now exhibited in Edinburgh's Museum of Flight?  The wedding ceremony is conducted at the front of the cabin while guests relax in the first-class seats.  The bride can walk down the aisle by entering the plane from the rear.  Up to 40 guests can attend the ceremony and the reception can be held in the hangar which accommodate up to 400.

Or maybe you'd like to get hitched on top of the biggest Ferris wheel in the world.  Shanghai plans to build one with a 560 ft diameter, 115ft more than the London Eye, and with the base of the wheel on top of a 16 storey building.

Sometimes it is a good thing to be surrounded by cell phone towers.  A new study suggests/shows the danger from cell phone radiation is greater in rural areas, where there are fewer cell phone transmitters.  Why is this?  Because there are fewer towers, and spaced more widely apart, so both the towers and your cell phone transmits at higher power to compensate for the weaker signals and greater distance.

Rural cell phone users have eight times the risk of developing brain cancer as do urban dwellers.

Even so, you might think the risk of brain cancer is 'in a good cause' due to the value and convenience of cell phones.  Which makes this article about a developing new use of cell phones (hint - adult video) all the more depressing.

With the growing concern about cell phones, one wonders if it is a good thing to read about a new type of battery that could last for 12 years.

This Week's Security Horror Story :  Lighters, part 1 :  We've become almost immune to ridiculous acts by the TSA when they confiscate plastic miniature toy guns from children.  Now that lighters are banned on planes, the TSA is also confiscating objects that look like lighters - in this case, a digital camera fitted into a Zippo lighter shell.

A TSA supervisor in PHL said the miniature camera would be allowed on board, but the totally empty shell of the lighter would be confiscated.  Do you feel safer?

Lighters part 2 :  The TSA has liberalized the rules on carrying lighters in checked baggage.  They are now permitted, but only if empty with no fuel in them.  Does this mean TSA staff hunting through suitcases for lighters, and testing each one to see if it has any fuel in it?

A Japanese businessman has been charged with disrupting an international flight by yelling, spilling water on seats and the floor and bumping a flight attendant while traveling on a Northwest flight from Osaka to Detroit.  He was questioned in Detroit upon landing and allowed to continue to Orlando with his wife and family and their tour group, but was arrested in Detroit on his return to Japan (how's that for a great end of holiday surprise!).

What was it that made him so enraged in the first place?  He found a hair on his blanket.

If it was a domestic flight, you'd expect him to be grateful to find a blanket at all.

Is Bangor, ME the most dangerous place in the US to live?  Or perhaps, the safest?  Have you noticed how all the flights that are diverted from their destination (two flights in the last week that were scheduled to fly to Boston were forced to land at Bangor) seem to end up in Bangor.

These flights are diverted because our omniscient authorities discover passengers with names similar to terrorists on incoming flights, and for some bizarre reason which us ordinary people can only guess at, the terrible danger these people with similar seeming names pose can be avoided only if the plane lands in Bangor rather than at the flight's scheduled destination.

So you want to try out the new company car.  In the dead of night, and without telling your boss, you drive it onto your local freeway and take the car for a spin at speeds of up to 159 mph, and then some highspeed driving on the surface streets around your town for good measure.  Ooops!  You're caught by the local police.

But, never mind.  You see, you too are a policeman, and so your joyride in a new unmarked patrol car gets the judicial nod and the dangerous driving and grossly excessive speeding charges are dropped. Indeed the judge praises you as being among the creme de la creme of police officers.  Don't you wish you were a policeman, too?  Details here.

My story at the end of last week's newsletter brought several comments, including one reader who wrote in to say

Per friends at Pam Am when it still existed, the practice was referred to as 'Bombaying' a bag - and that's where it got sent.

Until next week, please enjoy safe travels and may your bag not end up in BOM

              David M Rowell aka The Travel Insider

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