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17 November, 2006  

Good morning

Some weeks I have to choose between a full sized feature article or a full length newsletter.  Usually the newsletter wins out, but this week I was compelled to give priority to a review that needed to be published as soon as possible - a review of the new Microsoft Zune MP3 player, which ended up a massive 4100 words.

After a great deal of build-up (some might say hype) the Zune went on sale on Tuesday morning.  I went out early that day to buy one, but the first store I visited (Office Depot) said they hadn't even got any into their central warehouse yet.  The second store (Circuit City) was almost sold out at 11am and only had white colored units remaining.

I'd wanted to get one of the strangely colored brown with green edges units, but settled for plain white.  Clearly, at least in the Seattle area, the Zune is proving popular, which is all the more reason to urgently get this review in front of you tonight :

This Week's Feature ColumnZune or Zero?  Microsoft hopes its new Zune MP3 player will triumph over the well established Apple iPod.  What are its chances?  Read my review to find out.

Dinosaur watching :  If you can't beat them, join them.  Or, in the case of the dinosaurs, merge.  The big news this week was US Airways' $8 billion offer to buy Delta.

US Airways (itself the creature of a recent merger between the old, two times bankrupt US Airways and America West) had been twice rebuffed when extending this offer to Delta in private, and so decided to negotiate in public by publishing its latest offer letter for all to see.

It is of course entirely unsurprising that Delta's management would reject the US Airways offer, because for sure, their own jobs would quickly become part of the $1.65 billion in synergies and savings that US Airways said it anticipated if the two airlines were to merge.  And so US Airways felt it needed to go public with an offer that might strongly benefit the traditional losers in an airline Chapter 11 bankruptcy - the unsecured creditors and ordinary shareholders.

Chances are Delta's own reorganization plan will leave these groups with precious little or nothing at all, while, if it follows the United reorganization plan, its senior executives could make a tidy cash killing.  The US Airways buy out would essentially reverse these outcomes, and actually places a premium on the value of Delta stock prior to its entry into Chapter 11 back in September 2005, something that would delight shareholders currently gloomily contemplating losing their entire investment.

What will happen next?  And what will the outcome finally be?  It is entirely possible the public offer by US Airways may excite a competing offer from another airline (most likely United).  With Delta shares no longer being traded, the matter will likely end up, sooner or later in some form, in front of Delta's bankruptcy judge.

Delta's management currently has the exclusive right (recently extended until 15 February) to present a reorganization plan, but if it were to present one massively less favorable than what a buyout would give, it is probable there would be all manner of legal fights, and it could prove difficult for Delta's Board of Directors to claim it was fairly representing the best interests of its shareholders by turning down a buyout offer that would actually give some cash back to current shareholders.

Even if an agreement to merge was reached between Delta and another carrier, it would still need regulatory approval from the Justice Department for the merger to proceed.  That approval is probably more likely than not to be forthcoming, but may require some parts of the merged airline to be sold off.

Now the matter has become public, look for more activity, and one thing is for sure - US Airways' opening offer is unlikely to be their final or best offer.

Various groups have rushed to make comments about the likely impact of the merger, seeking to protect or advance their various special interests.  Perhaps the most poetic turn of phrase came from the Pilots Union, which included this delightful sentence

But like the planes we fly, management's grandiose plans will not take off without the pilots on board.

One thing is for sure.  Delta will find it much harder to get another extension of their time in which to exclusively file a reorganization plan.  All of a sudden, Delta's promise to meet its 15 February deadline looks like it might have to be met.

Meanwhile, bankrupt Delta is actually showing some signs of returning life.  Whether the airline is worth $8 billion is another question entirely, but as a market share grab and way of neutralizing a competitor, it might have more value to another airline than as a standalone going concern.

Delta's third quarter results showed a slim net income of $52 million, although this included some one off gains.  If these were ignored, the actual result would be a $46 million loss.  Either number is an improvement over its $1.2 billion loss in the third quarter of 2005.

And DL will be recalling about 1,000 more flight attendants during 2007, after having already recalled 200 in September.  Currently it has about 11,000 flight attendants, and has still has 3,800 on furlough.

This isn't the only merger being talked up at present.  Not quite a merger is a first-of-its-kind marketing partnership between two low cost carriers.  Frontier and AirTran are entering into an arrangement where they will sell each others flights on their respective websites and through their booking services.  The cooperative arrangement will also see reciprocal rights so that fliers can earn miles in either airline's frequent flier program and redeem miles on either airline.

This is an interesting concept that might help these two smaller airlines present a broader range of services and benefits to their fliers.

And internationally, there is speculation that British Airways may be eyeing Iberia.  BA has just purchased AA's small share of Iberia, lifting its own percentage of ownership to 10%.

But at the same time, there are counter-currents too.  The latest version of a code-share type arrangement between should-be arch-competitors Air New Zealand and Qantas has been refused by Australian regulators, and the airlines claim they're now walking away from further discussions on the concept.  Maybe.

And Ryanair's attempt to buy Aer Lingus seems to be going nowhere.  It currently has just under 20%, but needs 50% and it seems none of the large remaining holders of blocks of Aer Lingus shares are prepared to sell to Ryanair.

Overall, the US airline industry is in very good shape at present,  with one analyst projecting an industry total profit of $2.3 billion this year and $5.6 billion in 2007. 

Southwest is now the number one airline in the US in terms of total system passengers.  In August it carried 8.7 million passengers, beating AA (8.5 million passengers).

For some time Southwest has carried more domestic passengers than any other US airline, but now its exclusively domestic operations carry more passengers than the combined domestic and international operations of other US carriers.  Two million of AA's 8.5 million passengers were on international flights.

Clearly, in domestic passenger only terms, Southwest is miles ahead of its closest competitors.

Atlanta continues to be the busiest airport in the US.

Does the pilot on your next international flight look a bit older?  As from Thanksgiving, the international retirement age for pilots goes up from 60 to 65, with only four countries requiring pilots continue to retire at 60.  These four countries are Columbia, Pakistan, France and the United States.

Within the United States, a morass of vested interests is unable to agree if their various needs are better served by allowing or not allowing this change, and so the system remains paralyzed with no change yet approved.

Isn't it interesting which countries the US regulatory process mimics.

One issue of possible interest to aging pilots - and aging passengers - is the effect of regularly changing time zones, such as with long distance air travel.  A University of Virginia scientist has found that disrupting the normal physiological cycles of test mice increased their mortality, especially in older mice.  A majority of elderly mice put on an advanced-time schedule were dead within eight weeks, while only 17% of similarly aged mice on normal schedules died.

The scientist said the deaths could have come from sleep deprivation or immune system disruption.  The following is a quote from Current Biology

The dramatic differences in morbidity associated with phase advances of the biological clock raise important questions about the safety of rotating shift work and the potential long-term health consequences for airline crews regularly crossing time zones.  Could this mean jet lag is worse than we thought and could shorten our lifetime?

The article concludes with the weak reassurance 'So far there is no proof that sleep deprivation hastens death in humans.'

Meanwhile struggling airline Alitalia has come up with a new initiative that will probably make no difference to its mounting losses.  They have decided to allow their flight attendants to choose between wearing skirts or trousers.

Until now the airline has said it wished its female flight attendants to project 'an image of femininity'.  Progress is a funny thing, isn't it.

Here's an interesting article on a problem which continues to grow - misleading reviews being deliberately posted on public review sites of hotels and other travel products.

While Amtrak continues to stagger from underfunded financial crisis to financial crisis, other countries are spending extraordinary sums on their rail networks, and getting huge passenger traffic as a result.  This article reports on the latest phase of Britain's multi-billion pound upgrading of its Eurostar Chunnel link to Europe.

The latest part of this enormously expensive project shaves a mere 20 minutes off an already fast journey time - London to Paris will reduce from 2 hrs 35 minutes down to 2 hrs 15 minutes - in less time than it takes to travel from London out to Heathrow and checkin for your flight, you can travel from the center of London to the center of Paris.

Here are six more reasons - if you need them - not to buy a Zune, but to choose an iPod instead.  Six airlines announced plans this week to offer seat back recharging and video display hook ups for passengers' iPods.

You'll be able to recharge your iPod and watch its video on your personal video on planes operated by Emirates, KLM, Air France, United, Continental and Delta.  The feature will come available from mid-2007.  Apple also now has deals with twelve different car manufacturers (including both Ford and General Motors) to have iPod compatibility (whatever that means) built into their car audio systems.

Nearly 70 million iPods have been sold since their debut five years ago.

This Week's Security Horror Story :  A passenger was not allowed to travel wearing a t-shirt that had the pink colored rough shape of a pistol on it.  A Customs officer in Birmingham, England first threatened to arrest the passenger claiming they had a gun on their t-shirt (see picture here to appreciate how ridiculous that claim was) and then - perhaps realizing how foolish that was - said the grounds for arrest would be due to the image being offensive.

Most reasonable people would probably view the most offensive part of this experience as being the Customs Officer.  Anyone care to arrest him?

This week's most outrageous lie spoken as if it were the truth award goes to Detective Sergeant Vic Murphy of the Stansted Airport Police.  In supporting the decision of airport based rental car companies to require vehicle hirers to give copies of their fingerprints, he said

It's not intrusive really. It's different - and people need to adjust to it. It's not Big Brother, it's about protecting people's identities.

Yes, Vic would have us believe that giving a copy of our fingerprints is not intrusive and helps us to protect our identity.  Vic also has some bargain priced Arizona oceanfront property you might like to buy from him - cash only, fingerprint required.

Terrorists?  Or just overly amorous lovers?  Southwest Airlines and the FBI would have you believe the former.  Hopefully the judge and jury won't be that stupid.

Well meaning humorist or terrorist?  A Singapore court foolishly decided the latter in this case.

Lastly, with the growing hassles at security screening lines and ridiculous charades and inconsistencies associated with taking liquids on planes, most travelers are sensibly choosing to check as much baggage as possible.  But revealing the lie that is the airline's attitude to checked vs carry on baggage, and explaining why the airlines never police their own rules about how much you can carry on board your flight, here is an interesting comment spotted by reader Tom on the Continental website :

Our Overheads Bins Are Lonely - Take a companion on your next trip your carry-on bag.

When you bring your bag onboard, you save time avoid lines at the check-in counter and waiting at baggage claim so you can ease in and out of the airport.

And with the holidays and airport crowds fast approaching, you'll want to count on the convenience of carry-on baggage.

I may or may not publish next week, it being Thanksgiving.  And in case I don't publish, please accept my wishes for a very happy one.

Until next week - or possibly the week after - please enjoy safe travels.

              David M Rowell aka The Travel Insider

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