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Friday, 27 March, 2009  

Good morning

Are you enjoying our spring?  Not if you're flooded out, for sure, and here in WA there's only the slightest of hints that winter may be behind us.  The thought of travel to warmer climes continues to tempt, and with that in mind, I am eagerly counting down the months, weeks, and days until our June/July European river cruise.

Twenty one of your fellow Travel Insider readers, from places as far away as the UAE, have already chosen to join me and participate on this cruise, and there's still some A, B, D and E cabins available, so if you'd like to perhaps celebrate the Dow breaking through 8000 again, as it currently seems it may do today, please do come join our happy group and share in this lovely cruise/tour through some of the most scenic parts of Germany.

Extending the thought of spring, I've been doing a bit of spring cleaning on the website this last week, in the form of updating articles that need to be kept current.  So we now have revised versions of the truth for the three pages on domestic airline carry on policies, domestic airline checked bag policies, and international airline carry on policies, plus updated pricing data for the London Underground and London Pass pages.

Needless to say, most of the changes to airline bag policies were for the worst, and it is now more common than not to find airlines charging for a first piece of luggage.

On a more positive note, it was interesting to see that even after adding the small fare increases to the London Underground ticket prices, the massive rise in the dollar over the last year has resulted in big net reductions in those costs.  Not that anyone could sensibly call a 4 one way fare a good value, no matter what the exchange rate, but if you follow my advice, you'll be paying no more than 1 per journey (in the central fare zone) and sometimes even traveling for free.

Talking about travel in Britain, I've been promising for a while to write about the five different airports in London, and to compare and contrast them to provide an understanding of which might be the best and worst choices for your travel.  At last, I've now got the first two pages of this project completed, with a possibly interesting overview of the London airport situation as it has been, as it is, and as it may become in the future, plus some comparison tables showing some of the differences between the airports.

I also attempt to choose a best and worst airport, and consider if it even really matters which is best and worst.  And so :

This Week's Feature Column :  All About London's Five Airports : Which is the best and worst of London's five airports, and why? Should you even care? For a comprehensive set of comparisons, and the answers to these questions, visit this two part article.

One further comment about these two new pages.  If you can think of other comparisons and data tables that would be interesting or helpful, please let me know, and I'll see about adding such information to the pages for the benefit of everyone into the future.

Dinosaur watchingFebruary was not a good month for the US airlines.  Passenger revenue dropped by 19% compared to Feb 08, being a combination of 12% fewer passengers and a drop in the average value of fare of 8%.  The Air Transport Association predicted further airline schedule shrinkage as a result, which continues to beg the chicken and egg question I posed in my January article on why airlines are shrinking.  (The question is - are the airline capacity reductions the result of fewer people flying, or are fewer people flying because of fewer flights to take?)

Many airline executives may be feeling the truth of a saying attributed to Sir Adam Thomson, the founder of British Caledonian, an airline subsequently purchased by BA in 1987.  He said

A recession is when you have to tighten your belt.  Depression is when you have no belt to tighten.  When you've lost your trousers - you're in the airline business.

The airlines, of course, love to plead poverty almost as much as they enjoy blaming other people for their problems.  IATA has this week updated its 2009 forecast, and is now saying that the world's airlines will lose, in total, about $4.7 billion this year (their last estimate, in December, projected a $2.5 billion loss).

But all is not gloom and doom, at least for our US airlines.  IATA projects a net overall industry profit for the US carriers, albeit only of $100 million, and such a small number means there'll be a few profitable carriers, earning more than $100 million between them, and then a number of other loss making carriers dragging the total back down to the $100 million.  It doesn't mean all airlines will be profitable.

It is very hard to see how US carriers can not be profitable when one looks at the growing impact of their nickel and diming fees that they hit us with for every possible thing that was formerly free (and with the updating of the baggage fee tables mentioned above fresh in my mind, some of those 'nickel and dime' fees can be way the other side of $100).

This story quotes US Airways' President Scott Kirby, who says that his airline expects to earn an extra $400 - $500 million in revenue from such fees for this year.  Being as how these fees are almost all for things that were formerly provided for free, that revenue flows straight through to the bottom line.  In other words, and in round figures, that is half a billion dollars in extra profit.

Coming back to IATA's 'the sky is falling' prediction of a massive industry loss this year, there's one interesting voice of dissent, at least in the medium term rather than for this current year.  Boeing. They are predicting an acceleration of growth in the airline industry.

Their figures show a compounding annual 4.8% growth in passenger numbers over the last 20 years, which they say occurred even with the negative impacts of two major world recessions, 9/11 and assorted other terrorist acts, the Asian financial crisis of 1997, the severe acute respiratory syndrome (SARS) outbreak in 2003 and two Gulf wars.  For the next 20 years, they are now predicting a compounding annual growth rate of 5%.

The airline industry has quadrupled in size over the last 30 years, driven by several factors - general worldwide economic growth, of course, but also the below-inflation gradual rise in airfares, making air travel increasingly more affordable in inflation adjusted real terms.  And why have air fares been dropping in real terms?  Between 1978 and 2004, air fares dropped by an extraordinary 45% in inflation adjusted terms.

Part of the reason is bigger and more efficient planes with lower costs per passenger mile.  But the biggest reason (and the reason why the industry has been so aggressively seeking more efficient airplanes) is the growth of deregulation of the aviation industry.

A 1997 study suggested annual passenger savings of $19.4 billion a year due to airline deregulation.  That number is presumably massively larger now.

Few of us remember back to the way things were prior to deregulation, which occurred back in 1978 - almost exactly 30 years ago.  Back then, the airlines were protected semi-monopolies, a bit like utility companies.  There was little competition between airlines, and airfares were approved by the government much the way electricity prices are - the airlines would get annual approval to set fare levels based on their operating costs and their need to make a 'fair rate of return' or profit on their business.  The airlines were essentially guaranteed an annual profit by the government, and were simultaneously spared the worry of having to compete, either with each other or with new airlines.

Make no mistake.  Deregulation was and still is the very best thing that ever happened to us, the flying public.  As imperfect as thing are for us as passengers at present, who among us would wish to return back to a regulated environment, with the associated massive leap in airfares that would occur?

Well, we as passengers are generally delighted with the impacts of deregulation, but would it surprise you to learn that airline personnel are less sanguine.  Here's a disgustingly gushy article which seems to show that if you pour a reporter a cup of coffee, that reporter will then appreciatively and uncritically drink in not only your coffee but also any line of bs you wish to drop on them.  In this case, the reporter is shocked - shocked! - that a former CEO of Continental would 'not be opposed' to the government re-regulating the airline industry.

Of course this ex-airline exec, and all other airline execs, would love to see their industry re-regulated, because they'd be returning back to the cozy arrangement that many of them still lovingly remember, where their annual profits were all but guaranteed.

It isn't only airline executives that would love to see a return to regulation.  He might be good at water landings, but he is now showing himself to be short sighted and self centered about other aviation matters.  I'm referring to the nation's favorite hero pilot and instant celebrity, 'Sully', pilot of the plane that successfully landed in the Hudson.

He is now suggesting in Congressional testimony about the safety lessons that can be learned from his water landing that severe pay cuts are forcing experienced pilots and crew out of the cockpits and into other non-aviation jobs.  His implication is that future water landings by less dedicated pilots than himself may be less successful.

As an aside, it sure beats the heck out of me to know what type of non-aviation job that pays something way high of $100,000 a year for working half a month or less a pilot with no other employment history could actually get?  Does such a job exist - and, if it does, do you think I could get one, too, Sully?  Best of all, would it have the same free travel privileges as an airline captain?

Sully further offered the opinion that the industry's problems all date back to de-regulation.

Sure, of course he too would love to see re-regulation occur, and he even gives us the reason why.  Sully told Congress that his pay has been cut 40% over the last few years and his pension terminated.

But does that mean he flies 40% less safely?  Of course it doesn't!  When facing certain death, no pilot thinks 'heck, the airline doesn't pay me well enough' and just passively allows his plane to crash.  Instead, the pilot's first thought is not about his pay, nor even of the passengers behind him on the plane, but of himself.  He'll do whatever it takes to save himself, and being as how he doesn't have a parachute to simply and jump out the window with, saving himself happily means saving his passengers too.

If you want to know how it is that pilots ended up earning such ridiculously high salaries prior to the cuts of the last few years, look no further than the period of regulation.  No-one really cared, in a 'cost plus' situation, what pilots were paid, and with airlines often run by former pilots, pay rates went up and up and up.  Sully, along with many others in the industry, would obviously love to see a return to those 'good old days' and an ability to claw back the unrealistic pay rates of yester-year.

Don't be fooled, folks.  Re-regulating the airline industry would mean the end of cheap airfares for us all.  And if you think airline service is bad now, if re-regulation were permitted, the last remaining shreds of competitive pressure would be removed, and this would surely not cause the airlines to voluntarily improve their service.

Talking about improving airline service, I've suggested that one of the reasons for the disproportionate drop in business and first class travel is due to the airlines having cheapened their product too much, removing much of the reason why people would otherwise choose to pay considerably more for J/P (or C/F if you prefer) travel.  And so it is with considerable interest that I now pass on to you an announcement by AA that they are improving the wine they serve in first class on their 777 and 767-200 flights.  This will be most noticeable in the form of larger wine glasses (and hopefully more wine in the larger glasses); these larger glasses are said to 'allow customers to more easily swirl the wine and enjoy its aromas'.

It is a shame that one's taste buds are somewhat depressed at altitude, but AA is nonetheless to be encouraged for a first baby-step back in the direction of enhancing rather than cheapening their first class product.  Well done, AA.

Talking about pilots, should we feel pity for the poor United Airlines pilot who discovered hidden (oh dear, what euphemism can I use here to avoid tripping stupid anti-spam filters...) ummm, graphic pictures of people without clothes and perhaps engaging in adult activities in the cockpits of planes she was flying?  I'm a bit curious myself about how it was she went looking for such hidden photographic material, but maybe that's beside the point.

Although expected to remain cool calm and collected, no matter what sort of stressful flying situation she might encounter, this pilot developed a severe mental condition that required her to take medication and eventually ground herself as a result.  A simpler solution might have been to stop searching for hidden things.

Happily though, everything has now been resolved, with the pilot apparently now being considerably the wealthier in a confidential out of court settlement with United.  Details here - including some fascinating revelations about the pilot herself.

I wonder what Sully would think about this - would paying this pilot more money mean she wouldn't lose her ability to fly upon encountering some material that, according to United, she already had some personal familiarity with and even used to sell?

And talking about airline lawsuits, here's a story of a type we see once every year or two.  A CO frequent flier is suing the airline for having raised the number of miles needed to earn a free trip, and for charging him a $75 fee to book the flight.

He is alleging CO levied an illegal penalty (the $75 fee for booking a flight within three weeks of travel date - in these days of electronic reservations and ticketing, this is an impossible to justify fee), breach of contract (when he joined the OnePass program he only needed 25,000 miles for a free ticket, now he needed to use 50,000 miles), and unjust enrichment.

He is seeking to have the case given class-action status.  But I'd rate his chances of success as very low - the airlines have generally learned from their past mistakes, and now have their frequent flier program terms and conditions full of legalese giving them the right to change the rules and requirements any which way they choose, any which time they wish.

What do Alitalia and Czech Airlines have in common?  Both have been the target of buy-out offers by Aeroflot.  The Czech government is selling a 91.5% stake in the airline, and one of the bidders is Aeroflot.  Another is believed to be Air France/KLM.

Here's an interesting article that looks at some of the less obvious cost implications of arranging your own travel, rather than paying a generally negligible sum to have a travel agent do it for you.

How'd you like to travel between central London and the heart of Amsterdam in four hours.

Impossible, you say?  Well, actually, it is barely possible, even now, if you fly from lovely London City Airport to AMS.  I've done it, with the flight being on a stomach-churning crampled little Fokker twin-propeller powered plane that bounced its way unhappily through rather than above the weather; not something I'd wish to repeat any time soon.

Soon there'll be a new and vastly improved way to do this, later in the year when high speed train service commences, making use of a new piece of high speed rail line to be opened between Brussels and Amsterdam.

This article lists an amazing list of new high speed rail developments in Europe.  The really extraordinary figure is that by the end of this year, there'll be 3,700 miles of high speed track in Europe, and in the 11 years that follow through to 2020, another 5,300 miles will be added to this.

And what of the US?  Current miles of high speed track?  Maybe a paltry few hundred on the Acela's East coast corridor.  Anticipated miles of high speed track by 2020?  Probably no more.  Best case scenario - perhaps we add 500 miles of extra track in California, and a few patches extra on the Acela East coast corridor.

If we were to match Europe mile for mile of new high speed rail track, by 2020 we'd have a line up and down both the east and west coasts, plus spurs into other high population corridors in the East, the Texas 'triangle', and with enough spare to double track the highest traffic stretches.  But we'll have none of that.

Track development costs are probably higher in Europe than they are in the US.  We've no excuse for being left so far behind by Europe and by China.  It was the massive investment in the federal interstate highway system after WW2 that underpinned the economic advantage and boom of the US for the decades that followed.  Our lack of resolve to once again invest in our infrastructure is harming our competitive abilities in a world that is becoming increasingly globally competitive.

While the airlines are currently blaming global economic conditions for their collapses in passenger numbers and revenue, the cruise lines are quietly smiling to themselves.  While the airlines are cutting back their schedules, the cruise lines continue to buy more and bigger ships.

Most recently, Carnival reported a 10% boost in its first quarter profit compared to the same period last year.  The company earned a net profit of $260 million on revenue of $2.9 billion, a brilliant 9% net profit margin.  In comparison, last year saw a $236 million profit on $3.2 billion in revenue, a 7.4% net profit.

This Week's Security Horror Story :  Still talking about cruising, here's an interesting, albeit somewhat painful and facile list of the world's best cruises from Forbes magazine.  I see they describe Norwegian Cruise Line as having the 'best overall vibe' - whatever that means.

Maybe 'best overall vibe' means 'safest place to commit assault'?  Here's an extraordinary story about NCL's refusal to help a passenger, who was violently assaulted during a cruise, to identify and bring charges against his three assailants.

One has to wonder - who is NCL protecting here, and why?

You probably know of the several companies that offer priority lines at the airport screening areas.  And, of course, first class passengers and elite frequent fliers often have a priority line, too.  So what's not to like about this concept where anyone can access the priority line by simply paying a fee.  Seems fair and sensible to me.

I wrote last week about the apparent duality of standard at Southwest as between the conservative clothing they insist their passengers wear inside their planes but their willingness to adorn the outside of their planes with a ten times life-size picture of this year's Sports Illustrated cover swimsuit girl.  For my part, I didn't find the picture offensive, but I was amused by their double standard.

However, others did seem to genuinely find the illustration offensive - I guess they don't go to the beach much in summer - and while Southwest claimed that the vast preponderance of public opinion was strongly in favor, the interesting fact is that the image has quietly disappeared off the plane again.

Here's a list of bizarre holiday grievances and also of stupid tourist questions, and here's a silly video about Prague's Franz Kafka Airport.  Thanks, Mark, for both links.

Until next week, please enjoy safe travels

David M Rowell aka The Travel Insider

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