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Friday, 24 July, 2009

Good morning

And happy birthday (125th) to my faithful traveling companion of many years, the Swiss Army Knife.

Alas, these days the presence of even the smallest bladed Swiss Army Knife means I must check my luggage rather than take it onto the plane, but the multi-purpose functionality of these excellent gadget, albeit very low-tech, is so often invaluable that it is a small sacrifice to make.

Several people have already taken advantage of the Travel Insider exclusive massive savings of up to $1500 per person on selected Amawaterways cruises for the balance of this year.

If you've been thinking about this too, these specials - the most generous I've ever seen - expire next Friday, 31 July, so now would be a really good time to pick and choose your cruise.

If you're curious about what a river cruise is like, and seek an additional opinion over and above my own strong endorsement, here's an interesting article from USA Today that describes a recent cruise their reporter enjoyed.

The $500 per person saving on our Christmas Markets cruise this year is also due to expire, but I've secured a couple more weeks on that.  Nonetheless, the sooner you book, the sooner you can secure the cabin of your choice and start to plan your lovely Christmastime experience.

I remember a few months ago optimistically suggesting that if the Dow were to graze 8500 again, it might be a signal to treat yourself to this cruise.  Well, that was then, this is now, and Thursday saw the Dow close at 9000.  That's 500 more reasons to consider the Christmas cruise!

In introducing the four articles about being bumped off flights released to you last week, I commented on how a chance email from a reader resulted in an idea for one article growing to the four articles that I released last week, with the promise of two more to follow this week.

Well, 'article inflation' struck again this week two, and with the help of lots of useful reader comments about their own bumping experiences (thank you!), what were to be two more articles this week have become another four.

In total, there's now over 10,000 words on the site about bumping, with this week's pages considering what to do if you want to be bumped, what to do if you're going to be bumped and don't want to be bumped, and - perhaps most importantly of all, two pages of how to negotiate the best settlement if you are bumped, be it voluntarily or involuntarily.  Phew!

Buried somewhere within the 10,000 words there's a nugget of information that can be of benefit to all of us, so do skim through the articles, because for sure it is better to read through them in a leisurely manner now, rather than in a panicked fashion at an airport while watching your flight push back from the gate, leaving you behind.  And so :

This Week's Feature Articles :  Four more pages all about being bumped, voluntarily or not; how to make it happen, how to make it not happen, and how to be fairly compensated, both financially and in other ways when it does happen for either reason.

Dinosaur watching :  Airlines are now publishing their results for Q2, and, as always, there's a mix of winners and losers.

Southwest saw a mild return to profit after an unheard of (for them) three consecutive loss making quarters, and posted a modest profit of $54 million.  Notwithstanding their return to profitability, they're far from buoyant about the future.  CEO Gary Kelly said 'I don't think the worst is behind us' and said they can't 'confidently predict' a profit in their third quarter.

Southwest also announced that it would cease printing timetables.  Most other airlines stopped doing this some time ago, and now Southwest has joined them.

For those who still treasure the convenience of a printed timetable, about the only remaining option now is to consider a subscription to the OAG Pocket Flight Guide ($150/year with monthly issues).  Otherwise, there are many different products to put timetables onto your mobile phone (see my lengthy comments on the iPhone and other fully featured phones further down this newsletter).

Two other profitable airlines were Airtran, with a net income of $78.4 million, and Allegiant, with a profit of $23.9 million.

Allegiant in particular is becoming an increasingly interesting airline, with strong growth but a business model that would seem to argue against profitability - it operates MD83 and MD87 planes, both of which are relatively fuel inefficient and costly to operate.  But with revenue growth of 12.5% in its second quarter, and a reduction in expenses of 13.1%, clearly the airline is doing something right, as indicated by its bottom line profit.

Allegiant, founded in 1997, now operates 43 planes and flies only point to point routes.  It does not plan for or offer connecting flights through hubs - it does have some major service concentrations at some airports, but its routes aren't set up for hub and spoke type services.  It is an interesting business model, somewhat reminiscent of early Southwest days, and with a planned 20% growth in capacity this year, it seems they're doing at least some things well.

Also showing a profit was Jetblue, with a $20 million profit, improved from its $9 million loss last year.  Alaska Airlines showed a $29.1 million profit, down from $63.1 million last year.  And US Airways surprised analysts with a $58 million profit, mainly as a result of one-off special items.  Without the one-offs, it would have had a $95 million loss.  Last year it had a $102 million loss.

On the other hand, the world's largest airline - ie Delta - is not doing so well.  It reported a $257 million loss, and said that before accounting for expenses related to its merger with Northwest, it would have lost 'only' $199 million.

So it seems we're still waiting for the financial savings and benefits promised from its merger.

Not quite so large airline American reported an even bigger loss than Delta.  The good news is that the loss is much less than the loss for Q2 of 2008.  But when you consider that last year the airline booked a truly impressive $1.5 billion loss for a mere 90 days of trading in its second quarter ($16.5 million a day) that still leaves plenty of scope for a bad result this year.  Even after saving $910 million on its fuel bill compared to Q2 last year, and collecting some $565 million in revenue from fees, the airline still managed to show a loss of $390 million this quarter.

Continental reported a $213 million loss.  And United Airlines showed a $323 million loss.

Perhaps as a result of their huge losses, both UA and AA were downgraded and put on Creditwatch by Standard & Poors.  Both companies now have below investment grade ratings.

Overall, the month of June was not good for the airlines, with a drop of 26% in revenue compared to last June, and marking the eighth month in a row that revenue has dropped.

Passenger numbers were down 6.5%, the balance of the drop in revenue was caused by lower average fares, which in turn were not so much a result of ordinary normal coach fares dropping as they were a result of fewer passengers buying business and first class type fares.

Now, when a business finds itself confronted with dropping incomes, it can typically consider one of two strategies.  It can either try and grow its way out of its trouble, by selling more product, or it can try to consolidate and sell the reduced volume of product it finds demand for at a higher price.  Neither strategy is for sure always better than the other, and neither strategy carried with it any promise of success.  But most people would instinctively prefer to go for the former approach, trying to build the business and strengthen it; protecting the company's jobs and marketplace position, and providing a more appealing product to its potential marketplace.

So, what do the airlines do?  The opposite - they cut back on flights, and attempt to raise their fares and fees any which way they can.  Ignoring the clear lesson of the market, which suggests 'we don't want to pay more for our tickets than we already are' we're not only seeing a series of air fare increases, but we're also seeing still more increases in fees.

Most of the major airlines are introducing an extra $5 fee on top of the already still comparatively new fees for checking bags if you wish to pay the checkin fee at the airport.

Continental is also adding $5 to the fee it charges you for the privilege of buying a ticket from them, directly through their (800) reservation number (what companies, other than airlines, choose to penalize you and charge more than full retail price when you give them the privilege and 100% profit opportunity inherent in buying their product direct from them?).

One of the big problems for carriers has been the disproportionate collapse in business travel and the loss of the higher fares that business travelers pay.  But what is bad for the airlines is viewed by some as good for the planet as a whole, and the World Wildlife Fund in the UK is saying there should be a 20% reduction in business travel by 2014, so as to help 'save the planet' from the alleged global warming, which in turn is alleged to be caused by carbon emissions, which in turn airline emissions constitute something like 3%.

Yes, it is true that a 20% reduction in a 3% amount represents a mere 0.6% reduction in total carbon emissions, a reduction that will be dwarfed by the increase in emissions from growing economies such as China and India, but the WWF would rather attack western business than focus on countries that are much less receptive to their messages of gloom and doom.

Dismayingly, some of Britain's larger companies, such as retailer Marks & Spencer, are climbing on the WWF bandwagon, which in M&S's case represents just another example of their management underperforming these last few years.  The WWF helpfully advises businesses that less travel would save a company money and make it more profitable, and would bring about productivity improvements in its staff.  Color me unconvinced.

Eco-constraints are being applied to cruise lines (and ships of all types) as well.  After years of being one of the bright spots in the leisure travel industry, the domestic cruise industry is now facing a new requirement expected to be shortly approved that would require all ships sailing within 200 miles of the US and Canadian coastlines to burn a special low sulfur type fuel.

This laudable goal has some associated problems, however, not the least of which is that this new fuel costs twice as much as the bunker diesel currently most commonly used.  A related problem is that there's some doubt that there is enough refining capacity in the US to produce this new grade of fuel.

Doubling their fuel bills is an unappealing thought for the cruise lines, and of course will flow through to us as their passengers.  Does that mean the last few years of rampant growth may be curtailed?  Port authorities, some of whom have recently invested billions in new cruise ship terminals, must surely be hoping not, and in particular, just a couple of days earlier Los Angeles announced plans for a new $1 billion cruise terminal in San Pedro Bay.

British Airways and Virgin Atlantic have had their hands gently slapped in court.  A negotiated settlement sees them refunding one third of the fuel surcharges they imposed on long haul fares between August 2004 and March 2006.  Give BA and/or VS a call if you think you might qualify for a refund.  You have until 31 December 2010 to claim any such entitlements.  More than 211,000 people have claimed already.

BA was also fined 121.5 million by the Office of Fair Trading and $300 million (181 million) by authorities in the US for its role, while Virgin escaped fines after whistleblowing the breaches.  Tsk tsk.

In some good BA news, the airline has announced a wonderful idea to try and get business travel flowing across the Atlantic again (WWF, eat your heart out).  Submit an essay of any length to them on the topic of 'What you could accomplish if you had the chance to have meetings abroad' and you could stand to win one of three planes full of business class trips from the US to the UK.  Full details here.

That's a great and positive way of helping to rebuild the market.  Well done and thank you, BA.

There's some potentially good news for us as passengers.  A Senate Commerce, Science and Transportation Committee has agreed that passengers should be allowed to leave a plane if it is stranded on the ground for more than three hours.  Unsurprisingly, the airlines are fiercely opposed to being required to show a bit of human decency and allow passengers to deplane.

The good news is that very few flights get stuck on the ground for that long, but when things go wrong, they really truly go wrong, with occasional nightmare stories about being held prisoner on a plane in situations that wouldn't be tolerated in a prison, sometimes for as much as eight hours or more.

On average, and based on official statistics collected over the last eight months through May, at least 2.5 flights every day are stuck on the ground for three hours or longer.  Delta had 49 take-off delays of more than three hours after pushing back from the gate so far this year, the most of any airline, according to the bureau's data. It was followed by US Airways Group Inc. with 31 such delays and American with 25.

I purchased an original iPhone not long after they first came out, as much out of curiosity and to be able to report back to you about what was then a much talked about new phenomenon.  I used it only infrequently, and the original iPhone, and its original software, was definitely far from perfect (reviewed here).  For the last couple of years, my preferred phone has alternated between a Blackberry and the T-mobile/Google Android phone, the G1 (reviewed here).  My Blackberry 8800 (its predecessor, the 8700, is reviewed here) continued to suffer from shamefully bad handling of html formatted emails, and the G1 had its own generous share of limitations and issues, too.

Neither phone was a good all rounder, and so I hopefully upgraded my 8800 to a state of the art 8900.  The good news - it handled email very much better than the 8800.  But, the bad news - the Blackberry 8900's display of web pages was almost completely dysfunctional and cripplingly stupid in the extreme, vastly inferior to both the G1 and the iPhone.

I can't start to guess at how it is that a market leader like RIM/Blackberry would make such an incredible mistake in the functionality of its latest/greatest phones.  Apparently it is not only airlines that suffer from some very bad decisionmaking at the highest level.

I was so dismayed by this that I found myself taking another look at the iPhone.  Since the initial release of the original iPhone just over two years ago,  Apple has been steadily enhancing its software, and more and more applications have been coming out for it.

In addition, the phone has had two new generations of hardware released - the iPhone 3G last year (the '3' relates to its ability to use high speed 3G data services, not that it is the third generation of iPhone) and then, just a month ago, the new iPhone 3G S (the 'S' designating that it is faster than the earlier 3G).  After carefully considering the current state of the iPhone, I've eventually had to concede that it now truly is a brilliant phone in almost every respect.

It is a great shame that service is only offered by AT&T, and it is another dismaying feature of the cell phone marketplace that T-mobile's high speed '3G' data service uses a unique frequency band unused by other carriers or their phones, which means that buying a new high speed data capable iPhone forces one into accepting AT&T's service, whether one wishes to or not.

So, that is what I did, and earlier this week, I became the adoring owner of a lovely new iPhone 3G S.  I've yet to experience even a breath of buyer remorse, and while it pains me to turn my back on Blackberry - a company that should know better and do better - and T-mobile, who I've been a satisfied customer with for more than six years, the unavoidable reality is that the iPhone 3G S is the best full featured phone on the market today, and AT&T is the only company that provides service for it (in the US).

I should say that the Android phone operating system, developed principally by Google, and used on the G1 phone, has a great deal of promise, and new phones are being released this year that will use the Android operating system that may have fewer limitations than the G1 currently does.  And for those of you stuck with non GSM carriers such as Verizon, you'll be pleased to know there will be Android phones for you too (even if not iPhones).

So if you're in the market for a phone that can also do a whole bunch of other things, ranging from email to web browsing, from acting as a GPS and compass to a camera and camcorder, from a diary/calendar to a fully fledged PDA, from an eBook reader to a comprehensive music and video player, and just about every other conceivable electronic thing as well, all integrated into one beautifully designed package, you should look no further.  The iPhone is clearly and unassailably your best choice in the market.  There's a reason that each new iPhone model sells even more units than its predecessor - because even now, more than two years since it first arrived on the scene, and notwithstanding the desperate efforts of a formerly somewhat complacent and sleepy bunch of phone manufacturers who seemed largely uninterested in extending their equipment's capabilities and user friendliness, the iPhone maintains its clear lead and superiority over all other phones out there.

AT&T service plans start at $70/month, giving you unlimited data and 450 peak minutes, plus roll-over of unused minutes and lots of offpeak/weekend minutes.  The new iPhone 3G S itself is priced at either $199 for a 16GB version or $299 for a 32GB version.  Older iPhone 3G phones are also available for $99, but you should probably spend a bit more to get a newer model that will remain technologically current for a longer period.

I plan to create a comparison table comparing/contrasting the iPhone with the G1 and the 8900, but this will merely underscore my preceding comments.

A related consideration is Amazon's Kindle eBook reader.  Amazon is finding increasing competition, both in the form of other companies selling (or giving away) book reading devices, or book reading software to run on other hardware, and in the form of a growing number of eBook sellers, most notably the announcement this last week by Barnes & Noble of their plans to get wholeheartedly involved in selling eBooks.

Amazon is even competing with itself, because it now gives away free software that allows you to read their books on an iPhone.  Perhaps this is part of the reason it recently reduced the price of its Kindle reader from $340 to $299.

I'd at first been skeptical about the readability and overall experience of trying to read a book on an iPhone's small screen, but recently I read an entire novel that way and found it as easy and convenient and positive an experience on a small iPhone as on a Kindle.  I withdraw my earlier skepticism, and view this as another reason to choose an iPhone, and a blessed way to save the cost, weight, space, and general hassle of having to buy a dedicated device to only read eBooks with (ie a Kindle).

I suspect that Kindles and other dedicated eBook readers will quickly disappear, being replaced by multipurpose intelligent devices such as cell phones and tiny Netbook style portable computers, in exactly the same way that dedicated PDA units (remember the Palm Pilot and its progeny?) have been vanquished already by the same forces.

Bottom line - the iPhone scores another home run.

This Week's Security Horror Story :  Okay, so the guy was stupid and acted unwisely.  Maybe he even committed a crime; but a terrorist - he surely is not.  In another example of 'mission creep' where draconian laws passed ostensibly to protect us from terrorists are now being turned and used against us for ordinary crimes by ordinary people, a man was arrested on 27 June and has been held in jail ever since, charged with the felony offence of making a terrorist threat.

Apparently he became outraged at the scamming actions of some telemarketers who were trying to trick him into buying an extended warranty for his car, and in a conversation where insults were traded by both sides, he made some silly threats about traveling the considerable distance to wherever the telemarketing company was located, burning down its building, and killing the company's employees and families.  Most people will concede that these were bad things to say, but there's no shred of evidence to suggest that his comments were anything other than the outraged expostulations of a harassed citizen who lost his temper with smart mouthed telemarketing fraudsters.

But he has now spent a month in jail so far, most of it 450 miles from where he lives, and who knows how much it will cost him to defend the terrorist charge brought against him, and what his final sentencing will comprise.  Oh - as for the telemarketers trying to scam him into buying a warranty?  Apparently no charges are pending there.

More details here.

Here's an interesting video that very uncritically shows the TSA at work exploding suitcases in planes and elsewhere in its quest to get better at detecting such explosives.

I wrote last week about a pilot arrested and marched off his plane in handcuffs, for allegedly doing something at a TSA screening location, and causing his flight to be delayed three hours until a replacement pilot was located.  I've a Google tracking request for any further news on him, but so far there's only one small piece of extra news about what he is alleged to have done.  It looks to be one person's word (the TSA screener) against that of the pilot, and a very trivial offense committed, if any at all.  Hardly a reason for the over-reaction that followed.\

Oh - note also, toward the end of the article, the outright lies that the airline (Airtran) told its passengers to explain why the pilot was being removed.  If we're arresting people, how about arresting the people who think they can treat their passengers like mushrooms and tell them complete lies with impunity.

And talking about being arrested, here's a 100% scary story about a scam being played on tourists at Bangkok airport.  With apparent complete police complicity up to the highest levels, there seems to be no easy way to extricate yourself from the clutches of this terrifying scam.

Lastly this week, here's an amusing sign with a Thai twist to it.  With the predatory problems at BKK, I'd make a similar but different comment - Phuket, I won't go.

Until next week please enjoy safe travels

David M Rowell aka The Travel Insider

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