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2 September, 2005 

Good morning

It has been a harrowing week for many of us and there are times when airline intransigence seems less important than other matters in the world around us.

My request for feedback about your experiences with photo radar/red light cameras brought a few anguished replies from readers castigating me for advocating people should run red lights, and pointing out the criminal foolishness of such behavior.  While such comments were doubtless heartfelt, and sometimes (!) politely phrased, please don't put words in my mouth or leap to conclusions.

More on this topic when the feature article is complete.

Thanks to the many of you who wrote in with more travel tips.  It has taken a lot of time, but all of it has been well spent, and the growing travel tip resource on the website is now up to three pages, with, as promised, the extra two pages being :

This Week's Feature Column :  Packing Tips :  Here are the best of your tips related to how and what to pack, filling two pages of helpful reference resource.  So now you'll have no excuse for that dreadful flash of realization, seconds after it is too late - 'Oh no, I've forgotten the (insert name of essential item here)!'.

If - after reading through the material added this week - you think of more essential items to be taken on one's travels, please let me know.  Quite possibly something listed might prompt you to think of something else.

The youngest reader award has been challenged again.  This time Selena writes in to claim the title, at the precocious age of 12.  I've asked for a photo of her and her mum, holding a sign saying 'I'm Selena, I'm 12, and I'm telling the truth'.  The request is being considered.

Dinosaur watching :  Disappearing Delta :  Delta's stock price continues to drop, and has lost more than half its value in the last four weeks.  Thursday night closes and percentage drops from the previous week are :

Date

Close Price

Drop from previous week

Thurs 1 Sep

  $1.04

23.0%

Thurs 25 Aug

  $1.35

12.3%

Thurs 18 Aug

  $1.54

14.0%

Thurs 11 Aug

  $1.79

20.1%

Thurs 4 Aug

  $2.24

at the time, this was an all time low.  Now it seems impossibly high.


Delta's current market capitalization is $164.5 million.  If every Travel Insider reader bought $10,000 worth of DAL stock today, we'd between us own the entire airline.  Or if we each bought a mere $5,000 worth, we'd have a controlling interest.

But, alas, we'd be stupid to do this.  Their latest balance sheet (30 June - and things have almost certainly got worse since then) shows current assets of $3.8 billion, and property and equipment with a book value of $16.4 billion - a total of just over $20 billion in assets.  Offset against that are current liabilities of $6.9 billion and longer term liabilities of $20.9 billion, a total of almost $28 billion in liabilities.

In other words, Delta's balance sheet, two months ago, showed a negative net worth of about $8 billion.  This suggests if the airline were to be liquidated tomorrow, its creditors could not all be paid from the proceeds of selling off its assets, and there'd be nothing left for the shareholders.

The book value of assets may be high or low, and some liabilities could be negotiated down, and of course, in a Chapter 11, a lot of the liabilities would get written off entirely (which is why companies do this), but as of today, other than arguably as a going concern, and for who knows how many prior months, DL is technically bankrupt.

And so a share price of $1.04 seems too high rather than too low.

The judge who just can't say no has given United yet another extension of their exclusive right to file a reorganization plan.  This time he has given them a generous amount of extra time - all the way through 1 November, while ever-optimistic United says their plan should be filed early this month (September).  So why extend their period through 1 Nov?

Amazingly, Judge Wedoff warned this will be the last extension he grants United.  On the other hand, there's no evidence of other groups eager to take the airline over.

One of the other airlines in bankruptcy - ATA - has also been given another extension of their exclusivity, even though their committee of unsecured creditors objected, saying 'the debtors merely parrot some tired bases from the prior extension motion.'

On the other hand, bankrupt US Airways claimed a net profit of $2.34 million for the month ended July 31.

Last week I commented on the NW/mechanics industrial action, and the lack of support from NW's other unions, who I suggested would be next.  Reader Tom fairly pointed out that most other unions have already given concessions to the airline; but when will NW's management say 'enough' and stop asking for more?  Early this week, NW's pilots revealed the airline wants an additional $322 million in cuts from them, and the flight attendants and ground workers say they will be next.  Details here.

The pilots agreed in December to give NW a 15% pay cut, with a return to the bargaining table either in mid 2006 or 30 days after the airline secured concessions from all other unions.  It is interesting to note that NW's target for total labor savings is $1.1 billion.  Their savings from the mechanics comprises only $176 million of the $1.1 billion.  Plainly there are more cuts to come from the other employee groups.

I'm as uncomfortable as anyone else observing semi-skilled people earning $70,000 a year in positions replete with inefficient work practices, but the reason this came to pass is because, prior to now, the airlines basically rolled over and generally gave their employees almost everything they asked for, secure in the belief that all such costs could simply be passed on to the traveling public in the form of higher airfares.  Now that this assumption has been nixed, there's some massive culture shock all the way through the airline industry by both employers and employees.

And what of the mechanics?  Their strike is rapidly fading from the public consciousness.  In a 29 Aug NY Times article, Micheline Maynard revealed there is starting to be dissention within the membership, and the striking workers are receiving no income at all, because their union doesn't have a strike fund, and their health benefits are about to expire.

How short-sighted of the union.  While the airline's management was preparing for over a year to break the union, the union apparently did nothing in anticipation of what has always threatened to be a high stakes drawn out battle, to say nothing of failing to get the essential support needed from at least one of the other NW unions.

And just in case there were any doubt, on Thursday NW broadcasted its latest public negotiating point to the mechanics (and other labor groups).  It said in an SEC filing it will lose as much as $400 million in the present quarter, and that it has run out of collateral for additional loans.  To make sure the point got across, the airline said time is running out to prevent bankruptcy, and as a final shot, said the mechanics strike has not had a significant impact on revenue.

NW has won this battle.  Decisively.  It only remains to be seen whether the airline will be graceful in victory and toss its mechanics a face saving minor concession, allowing them to return to work with their heads held high, or if the airline will stand its ground and refuse to budge.  At present, and if we're to believe the claim by the mechanics that they made a last minute offer just prior to the strike/lockout starting which largely gave NW almost everything it was demanding, it seems NW is holding firm and demanding complete capitulation.

One last comment on labor costs.  Airline managements are overplaying this card, same as every previous card they've dealt themselves.  Have you noticed (of course you have!) how everything that ails our airlines is always someone else's fault.  It is 9/11.  It is security costs.  It is over-capacity.  It is fuel costs.  It is the high cost of travel agent commissions or web site commissions.  It is labor costs.  About the only remaining aspect of operating an airline which no-one is daring to suggest has any bearing on the problems of certain (but not all) airlines, is management (in)competence.

One of the management skills that separate the profitable airlines from the unprofitable ones is the ability to get good use out of every plane, every hour.  A time-hallowed adage is that a plane should always be 'fueling, flying, or fixing'.

Profitable success story, JetBlue, has a very clever strategy to wring the maximum number of hours utilization out of its planes.  It sends its planes out for trans-continental red-eye flights each night at the end of their regular day's service.  Trans-continental flights are fiercely competitive at present, and by offering these red eye flights on planes that aren't being diverted from their main daily schedules, JetBlue can achieve two goals - it gets some extra top-up revenue, and keeps airfares low, putting more pressure on the major carriers, who obviously have limits on how high they can set their daytime fares when JetBlue has low night fares.

JetBlue's latest redeye service clearly demonstrates this tactic.  A plane leaves Boston at 8.45pm, flies over to Seattle, arriving at midnight, then after a leisurely 55 minute turnaround, flies back to Boston, arriving at 9.10am the next morning, ready for another day of regular service.  Air fares are initially as low as $99 each way.

Another advantage of JetBlue is it has nearly new planes, many still under warranty.  Here's an interesting article on the topic of fleet ages.

I wrote about Malaysian Airlines losing their CEO (as well as $74.5 million for the most recent quarter) last week.  Continuing an extraordinary trend of openness, this week I received an invitation to fly to Kuala Lumpur and even to meet with their Chairman.  This is the second time they've invited me over there.

Only two other airlines have been brave/confident enough to invite me onto their flights and to freely publish a review - Virgin Atlantic and Qantas.  So Malaysia Airlines is placing itself in good company.  Alas, time didn't allow me to accept, but perhaps third time will be a charm.

Temporary taxes?   Yeah, sure, right....  The Dominican Republic has imposed a 'temporary' tax on airline passengers, in addition to its present $10 tourist visa fee (a stamp in your passport) and $20 departure tax.

And stupid taxes.  Chile will join France in levying an airline tax, ostensibly to fight world poverty in the developing world.  Chile will add a $4 tax (in addition to theirexisting $26 airport tax).

Oh - but wait.  Half of this 'world poverty tax' will actually be given to Chile's tourism industry.  The other half goes to a fund vaguely described as fighting poverty and health issues.

Culpability for crashes?  A French judge has issued an international arrest warrant for a Continental Airlines welder who was involved with the replacement of a metal strip on a CO DC-10 which fell off and onto the runway at Charles de Gaulle airport, providing what is claimed to be a direct causal link to the Concorde crash there.  The welder has ignored two summons to appear, and is 'wanted for questioning'.

A similar situation may apply to the British engineer who cleared the takeoff of the Helios jet that crashed a couple of weeks ago.  He says he fears for his safety and has refused to return to Cyprus for questioning.   The engineer, one of three who serviced the plane before takeoff, worked for the carrier and signed off the flight for departure.  He had a temporary contract and chose to return to Britain once his name had been released to the press.   He has not refused to testify and will do so in Britain.

Vive la difference.  Here's an article that reports on a survey of the different uses of cell phones by men and women.  The only thing missing from the survey is any information at all as to if either gender uses their phones to actually, you know, talk on.

Good news for the International Space Station (for a change).  It looks like there may be a replacement for the Space Shuttle, due (some would say, significantly overdue) for retirement in 2010.  But NASA isn't featured in this project, which is a joint venture between Russia, Europe and Japan.  NASA's own shuttle replacement is currently due to launch in 2014.

I've been writing about cabin pressure issues and their impact on pilots and passengers the last few weeks.  Reader Mike writes :

Thanks for bringing the cabin pressurization issue up, as itís a real one on long flights. There are two things that you didnít point out: 1) each aircraft type has a maximum pressurization ratio (i.e. inside pressure / outside pressure), therefore at a given altitude, some planes can be pressurized more than others; and 2) pressurizing burns fuel, so each airline has itís own standard operating procedure on how much to pressurize the cabin.

I recently bought an altitude watch and took it with me on a few long flights from the West Coast to Europe. From this, I know that at  37,000 feet on a Swiss Airlines A340-300 the inside cabin was at 6,300 ft, while on an American Airlines 777 the inside cabin was at 7,200 ft. Guess after which flight I felt better?

I'm ordering one of these watches too, and if it seems accurate and helpful, might urge you to do the same.  This could be a very interesting attribute of flight comfort to monitor, and something the airlines have been able to hide from us until now.

Mobile phones - safe or not?  Readers know I'm pessimistic rather than optimistic about their safety.  Here's a strangely written article with commentary supporting both points of view.

Note also that every time a study finds mobile phones don't cause one specific illness, that does not make them 100% safe.  It is a bit like saying 'smoking doesn't cause cancer of the skin'.  While smoking doesn't cause cancer of the skin, it definitely does cause other ailments; and so too, I fear that although mobile phones may not cause some specific ailments, we have not yet tested every possible scenario.

This Week's Security Horror Story :  It is probably fair to say the worst part of New Orleans' problems occurred after the levees were breached and Lake Ponchartrain flooded in to the city.  Initially small breaches were made worse as the rushing torrent of water swept more of the levee away, and it is only now, with the water level in the city having balanced with that in the lake and the flow of water through the breaches no longer a factor, that it is proving possible to repair the levees.

Fortunately, the city was already largely evacuated and on a flood watch warning.  Although, as we all know, this 'best case scenario' is still registering close to max on anyone's scale of horrific nightmares, and when the final body count comes in, it may well exceed the casualties on 9/11.  The economic costs and general social disruption will be orders of magnitude higher than 9/11.

Now, ask yourself a question - what would have happened on a normal day if someone with a few pounds of dynamite had blown holes in the levees?

While the TSA is obsessing over scissors and nail files, protecting against a very low tech attack on a levee wall in New Orleans - or on various other structures around the country - is being largely ignored.  Do you feel safer?

If you fly First Class on Air Canada you will be happy to hear the airline is bringing back steel knives with which to cut that steak you may be served.  The knives will be back on flights within North America starting September 15.  British Airways brought back steel knives in May.

A Qantas flight was delayed 20 minutes before it could land as scheduled at Australia's capital city of Canberra on Wednesday morning.  The problem?  The duty air traffic controller overslept.  In describing the situation, Richard Dudley from Air Services Australia wins this week's 'describing black as white' award when he said not only that there were no safety issues, but also

There was a normal operation, with the exception of course of the tower not opening at its scheduled time

Not quite so normal - hopefully - was this German flight.

And here is a list of some place names in Britain.  Shame on you if you find them non-normal.

Until next week, please enjoy safe travels.

              David M Rowell aka The Travel Insider

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