Version of Newsletter] [Newsletter
Archives] [Advertising Info] [Website Home Page] [Please Donate Here]
Friday, 6 November, 2009
My weekly happy-making celebration first :
another nine readers became Travel Insider supporters
last week, including two more extravagantly generous 'Platinum Elite'
members - Peter K, and Mario R.
We now have 877 current supporters for 2009.
So close to what was initially unthinkable - 1,000....
This continued outpouring of positivism is
encouraging me to come up with some new things for all readers, and the
supporters are helping me develop an exciting new concept that I'll tell
you more about in the weeks to come. Supporters also received yet
another exclusive special offer this week.
If you'd like to join this elite coterie of
readers, simply click here to become a
supporter yourself. Maybe we can find 123 more readers to bring us
to 1000 reader/supporters for the year?
Of course, everyone else is also much
appreciated as a reader too, and long time Travel Insider supporter,
Magellan's, wants to ensure that no-one feels left out, and so they're
offering a 'Beat the Christmas Rush' discount - for two weeks only, you
get a 10% discount off everything they sell in their enormously varied
and comprehensive online store.
Magellan's has built up an enviable reputation in the industry for
being very careful and selective in the products they sell, and for
backing everything you buy from them up with their own personal 100%
satisfaction guarantee. So why not have a wander through the
'aisles' of their website and see if you can find anything that might be
good for yourself, or for friends/family this upcoming Christmas.
When ordering, please use the discount code GANTRN to get the 10%
Talking about discounts, here's a heads-up :
This weekend marks the kick-off of a special one week instore promotion
at Walmart - a pre-Thanksgiving sale, with some crazy discounts.
These include mouth watering deals on Sharp 1080p HDTVs (costing $498,
$698 and $898), a 46" plasma HDTV from Panasonic for $788, a Windows 7
equipped HP notebook computer for $298 (wow - I'm going to have to take
a look at that one myself), a Sony Blu-ray player for $148 and an Xbox
360 Arcade Console for $199.
Continuing the Christmas shopping theme (aaagh
- we're talking about Christmas already?) I've put together a 2009
version of my annual (well, not quite every year) list of interesting
and unusual gifts and gadgets to consider buying for yourself or
friends/family this Christmas. Basing the list on products I've
reviewed in the last year, they'll hopefully help you win kudos for
coming up with interesting gifts this year.
This Week's Feature Column :
2009 Christmas Gift Giving Guide
: Sometimes quirky and sometimes curious, here are my suggestions for
high value and low priced gifts to make travel more pleasant.
There's sure to be something on this list for all the 'hard to buy for'
people on your Christmas list.
Dinosaur watching : Ryanair, the
airline everyone loves to hate - but apparently still flies on,
anyway - has just announced a massive 80% increase in their half year
profit, rising to €387 million, on revenues of €1.8 billion. That
is a stunning 21.5% net profit, a level of profit that is unimaginable
in the US.
Not bad when you consider that the airline's
average fare was €37 - okay, so there are plenty of surcharges and extra
costs to be added to the fare itself, but even so, it is an
extraordinarily positive result, and contrasts with British Airways
being in what they call a struggle for their own financial survival.
It seems that in Europe the low cost
carriers are having even more of an impact on the European dinosaurs
- airlines that have generally enjoyed a much more protected life than
have our own US dinosaurs (subsequent to deregulation in 1979). An
interesting statistic in
this article compares the staffing costs at Air France (31% of
sales), Iberia (23%) and Lufthansa (21%) with the staffing cost at
easyJet - a mere 14%. It is no wonder some of Europe's flag
carriers are having difficult times, which the lower cost carriers are
eating their lunches.
Another great financial result was
announced by Emirates, with a $205 million net profit for the first
half of its financial year, up massively from $77 million for the same
period last year. Total revenue was $5.4 billion, so their net
profit was a much more realistic (but still wonderful) 3.8% (compared to
the extraordinary 21.5% net profit at Ryanair.
So - two very different airlines - one
proves you can make huge amounts of money by treating your passengers
unusually badly, and the other proves you can make great profits
by treating your passengers unusually well.
What to conclude from these totally opposite
Something we haven't heard a lot of recently
is talk about more airline mergers. But just when the
silence was becoming deafening, the topic comes up again, with
Continental's President and soon to be CEO Jeff Smisek
being quoted as saying that if the merged DL/NW airline becomes too
tough a competitor, he'll run to United and restart the merger talks
that Continental called off last year.
How sad it is when these massively paid
airline executives can not think of any way to compete against each
other, except to merge into fewer and fewer airlines. Is that the
finest expression of American business practice and competition?
Besides which, if you look at airline
profits, you'll see very little correlation between airline size and
airline profit. The 'bigger is better' mantra, mindlessly
echoed by airline executives and industry analysts, is a very weakly
supported claim, and probably has more truth in the unstated part of the
concept 'less competition is better'.
One airline's desire to merge with another
is seldom anything to do with creating an economy of scale per se, but
rather it is all to do with eliminating a competitor and being able to
enjoy a less competitive marketplace that allows for greater
inefficiencies and more profit, all at the cost of their passengers (and
often at the cost of their staff as well).
United and Continental have already gone
much of the way to a merger by becoming alliance partners. But
apparently Continental is proving to be a naughty 'kiss and tell' lover
- here's a
fascinating article that should be on your 'must read' list if
you are a UA frequent flier.
It tells how Continental published a chart
showing award seat availability on other Star Alliance airlines, and in
the process revealed the obfuscations that United has often used.
Apparently United doesn't like to allow its Mileage Plus members to
redeem too many awards on its partner carriers, because there may be an
actual cost to United when that happens. But instead of being
up-front about this, it seems that United has instead chosen to be
economical with the truth and has told its frequent fliers 'I'm sorry,
but there are no award seats on that flight with that carrier' - blaming
the other airline, when in truth there were award seats but United was
too stingy to allow them to be claimed.
Shame on United, and well done Continental
for exposing United's perfidy.
Talking about United, here's a
stunning story about how United refused to allow a passenger to
fly first class because a gate agent deemed his attire to be too
informal for its first class cabin.
It is true that many airlines still have a
dress code policy, but this only applies to their own staff and other
industry insiders who are traveling on free tickets, not to paying
customers. Indeed, there's an industry joke that you can always
spot the airline employees who are traveling first class for free - they
are the people wearing the suits.
It is very true that the more experienced
fare paying passengers these days dress down rather than dress up,
choosing comfort rather than wishing to make a 'fashion statement'.
United's Customer Service department has not
responded either to a letter of complaint by the passenger or to three
calls by a local television station following up on the event. The
passenger booted out of first class is a frequent flying VP for Best
Buy. Care to guess if Best Buy will be changing its preferred
airline as a result of this? One certainly hopes so.
I'd mentioned last week that airfares had
dropped in the second quarter down to levels not seen since 1998.
But there's no need to feel sorry for the airlines.
This article points out that the industry enjoyed a 29% drop in
costs during the second quarter of the year.
Airline lobbying group ATA's Chief Economist
proudly said 'Carriers are demonstrating tremendous cost discipline' -
perhaps what he actually meant to say was 'carriers are
benefitting from windfall drops in the price of fuel and other costs
that have dropped per passenger due to squeezing more passengers onto
each flight than we'd formerly thought possible'. And in a grim
warning as to what the future may hold, he also said 'Airlines remain
intensely focused on reducing expenses and identifying additional
sources of revenue'. I guess he means to say 'We're looking at
removing another lettuce leaf from the salads and finding still more
things to charge you for that were formerly free'.
All of which kinda makes you want to give up
flying, doesn't it. And if that is what you're thinking - good
news. Carlson Wagonlit Travel is very sensibly redefining its
business and now will not only happily sell you any travel you want, but
will help you not travel, too.
They have a new arrangement with Tata
Communications and Cisco TelePresence Suites worldwide, allowing their
clients to create virtual meetings in specially equipped teleconference
rooms, complete with HD video and audio and life-size images of other
Talking about not wanting to fly, there are
now some very regrettable knee-jerk responses to the curious
story of the NW pilots who overflew their destination a couple of weeks
ago. You'll recall their excuse is currently that they were busy
working on their laptops. So some of our political leaders now
want to create new legislation that will ban laptops and all other
forms of electronic devices from the cockpits. Details
Whether you believe the pilots' story about
being distracted by their laptops or not (and I definitely don't believe
the story) responding with a ban on all electronic devices is a
terrible mistake. Rather than distracting pilots, such devices
can actually entertain them and help them to stay awake. Which
would you prefer - a pilot struggling to stay awake with absolutely
nothing to occupy his mind and body at all, or a pilot happily watching
a movie, reading an eBook, playing a computer game, or in some other way
keeping himself active, awake and alert?
When you're driving and feeling drowsy, do
you turn the radio off? Or do you turn it up? Our lawmakers
think the best thing to stay awake is to remove any source of
Several readers wrote in angrily accusing me of bias in my comments
about Boeing opening a second production line in SC
last week. In
particular, they glommed on to one part of the puzzle and then shaped it
to fit their own bias (hey, if they're accusing me of bias, can't I do
the same?) - Boeing's often-times fractious relationship with its unions
in the Seattle area. Staff in SC will not be unionized (at
least, not yet.....) and are apparently happy to work for eg $14/hr
instead of eg $28/hr for comparable work in the Seattle area (again, at
least for the present, who knows how long that will last into the
So - wow? Half price labor in SC. Is that a 'deal clincher'
that would make any sensible company rush to SC? Ignoring the fact
that SC isn't yet jam-packed with companies who have closed down their
operations in more expensive states, let's consider the importance of an
apparently lower labor cost to Boeing.
First, only 19% of Boeing's employees are currently members of the
International Association of Machinists and Aerospace Workers (IAM) -
these are the main people who are affected by the plant location.
Another 13% are members of the Society of Professional Engineering
Employees in Aerospace (SPEEA) - I don't think they are so much
production line workers, and there are 2% of employees who are members
of the United Automobile, Aerospace and Agricultural Implement Workers
of America (UAW) - I don't think they are involved in the 787 assembly
Next, in 2008 Boeing generated a total of $60.9 billion in revenues, and
in 2007, $66.4 billion. Total salaries and wages for the two years
were $15.6 and $14.9 billion (25.6% and 22.4% respectively).
Let's do an immediate rough calculation from these first two points.
Total wage costs come to about 24% of total income. IAM workers
are 19% of the total workforce, and can be reasonably expected to earn
less than the average wage earned by engineers, executives, etc.
So let's say that their costs are 16% of total wages. If we halve
the cost of IAM employees, this represents a saving of $1.25 billion in
2008 and $1.2 billion in 2007. For sure, a billion dollars is a
lot of money, but it is not quite 2% of the total revenue earned by
Boeing. So, first go-round suggests that halving the IAM labor costs
represent a 2% overall saving/benefit.
But even this minimal 2% saving is an
overstatement, because it assumes we are halving the cost of all
IAM employees. Only a very few of them will be replaced by half
priced labor in SC. The actual savings will be enormously lower
We know that the 787 is unique in Boeing history, inasmuch as it is
almost completely built elsewhere, by other unrelated companies. Most Boeing planes have some componentry outsourced, but the 787 has just about everything
outsourced. All the Boeing production line employees do is almost
literally bolt the bits together, and snap the connectors into place.
The Boeing labor content in a 787 is massively less than the labor
content in any of its other planes (from memory, I think there is about
ten times fewer Boeing man hours to assemble a 787 than to assemble eg a
777). Most of the labor costs are incurred by the sub-contractors,
and these costs are unaffected by Boeing's new production line in SC.
So the actual labor savings created by
this SC production line become relatively trivial.
Another point. Does Boeing really need to go to the lowest
labor cost state in order to compete with Airbus - especially now with a
soaring Euro and a falling dollar (which makes Boeing planes cheaper and
Airbus planes more expensive)? No, it doesn't. France and Germany - where Airbus planes are built - are hardly 'right
to work' low cost states.
I'm not saying Boeing is
obliged to pay more than it should for labor, but I am saying that
Boeing can't hide behind the need to compete with low cost alternate
plane suppliers, because - at least for now - there aren't any. Airbus' labor costs are almost certainly higher than
Now for a more fuzzy concept.
Companies surely have some degree of responsibility to - within fair
limits - 'sharing the wealth', not just with their ever-more-highly-paid
senior executives and their shareholders, but also with their employees
and their communities. If it is all about getting the absolutely
lowest costs, every company will move its operations to China or some
other third world country, and then, all of a sudden, the US will have
next to no economy at all, which means that these same companies, while
being able to produce things at much less cost, will suddenly find
there's no market left in the US to buy the goods they've produced
In addition, all companies get 'free'
benefits from the society they operate in. That society educates
the people who become the company's employees, and provides a stable
positive social structure to encourage the employees to be similarly
stable and positive at work.
These are highly nuanced concepts (to
steal a phrase from a former unsuccessful Presidential candidate), and
I'm not saying they are deal maker/breaker issues. But I am saying
there is more than merely finding the lowest cost workforce to be
considered by companies.
Talking about social responsibility, it is
certainly true that Boeing has suffered greatly from its poor relations
with its unions. But, just like in a marriage, a breakdown in a
relationship is seldom exclusively the fault of only one party.
Yes, Boeing's unions might be seen as greedy and obstructive, but when
and how did this happen? Boeing's relationship with its unions has
evolved over decades, and Boeing has allowed the greed to develop
(should there indeed be greed present) and has mismanaged
expectations consistently in the past.
How can any company expect its unions to be
content when the union members see an increasingly out of touch
senior management paying itself more and more, with the differential
between shop floor staff and executive pay rates increasing and
increasing, and at the same time, seeing the company as a whole being
profitable - is it no wonder that the union members feel that they are
being unfairly excluded from the 'wealth creation' that the company is
Boeing's management must accept some
share of the blame for the fractious union relationships it
currently has, and one has to wonder how it is that this same management
will create a perfect problem-free work environment in SC when it has so
abjectly failed in WA.
None of the preceding analysis has
considered the harder to quantify inefficiencies of creating a
second production line some 3000 miles distant from the first production
line, and the same distance away from where all the engineering resource
is located (and let's not forget the strange decision to move the
headquarters to Chicago - surely not a low cost location).
One more comment about this. Remember
General Motors and their bold brave project - their new Saturn brand of
cars? Hailed as a way to revolutionize the way cars were built
in the US, GM turned its back on high cost unions in Detroit and
opened a new manufacturing plant in low cost Tennessee, and followed
what it believed to be 'best practices' modeled on what the successful
Japanese auto manufacturers were doing. Look at what has happened
to GM and in particular, what has happened to Saturn.
GM is on life support and is a beneficiary
of the Federal Government, which now owns 60% of the company. As
for Saturn - what was once claimed to be the future of GM and the way it
designed and built and sold and supported cars? It is being
completely closed. GM doesn't want it, and neither does anyone
else. The total Saturn concept has been a failure,
notwithstanding its location in a low cost state.
Sometimes the problems in a company go
way beyond their labor costs, and surely Saturn is the clearest example
Boeing too has problems that transcend the
cost of labor to assemble its kitset 787s, and by creating a new
production line in SC, Boeing is attacking a minor symptom rather
than the major underlying cause of its malaise.
To give specific example to underscore this;
opinions differ widely, but I've seem some analysts estimate that Boeing
has currently incurred about $5 billion in extra costs due to the
delays in its 787 program. With many of us not believing the
current official Boeing timeline for the 787's entry into commercial
service, and instead fearing there are still further delays yet to be
announced, this cost could continue to escalate who knows how
much further. These many billions in costs are orders of magnitude
greater than any labor savings that could be incurred in the new
production line in SC.
So, my suggestion to Boeing is :
Go ahead and open production lines wherever you like, because it really
won't make much difference to anything. But, please, close down
your Chicago headquarters, and reopen a new headquarters, perhaps also
in SC or perhaps in a third world country. Don't just now pay your
production line workers half the previous rate. Staff your
executive offices too with people at pay rates half those you're
currently paying. Your biggest costs and your biggest problems
are nothing to do with the people on your production floor.
They're related to the overpaid underperforming people in your
Here's an interesting
story - Warren Buffett - 'The Sage of Omaha' - is making possibly
his biggest ever acquisition, spending $26 billion to buy the BNSF
freight railroad. His very powerful vote of confidence in the
future of rail freight, however, should be seen as bad news rather
than good news for passenger rail.
One of the terrible things that happened
when Amtrak was formed to take over passenger rail services is that it
lost any ownership of any track (apart from its Northeast corridor), and
relies on finding available schedule time on the freight railroads to
run its services.
With rail freight volumes increasing, it is
getting harder to fit passenger services onto the same routes.
And, of course, freight focused railroads will never have any great
interest in improving their track and signaling to allow for more
comfortable smooth rides and faster services for passenger trains -
indeed, the faster passenger trains, the harder it is to fit them in the
gaps between freight trains.
Think of it like a freeway. If you're
on a three lane freeway with light traffic, it is easy for you to weave
in and out of the lanes, taking advantage of gaps in traffic and to
speed past the other cars. But if there is dense traffic, you're
stuck in your lane, going at the same speed as everyone else. With
fewer 'gaps' between freight trains, there is less opportunity to add
faster Amtrak services - always assuming, of course, not only that
Amtrak could operate any faster services, but also that it was wanting
to add extra passenger services.
America's passenger rail future
necessarily lies in the realm of creating new high speed track separate
from existing low speed freight routes.
As an aside,
this article is interesting inasmuch as it indicates a surprisingly
high cost to merely renovate a train carriage - just over C$1.5 million.
Wow. You don't get much for a million dollars these days, do you.
Reader John writes in with an interesting
I recently booked a room near LaGuardia Airport at the "Lexington Marco
LaGuardia Hotel", a hotel that I had never used before. The facility is
very nice and the customer service staff exceptionally gracious. I was
picked up by their courtesy van and delivered safely to the hotel a bit
At check-in, I was told that check-in time was 3:00 PM. I was aware of
the policy and it has been my experience that if there was a room
available, I would be allowed to check in. The same was true here but
with a little twist.
The clerk informed me that I had two choices. I could check my
belongings and return for a room after 3:00 PM or, for an additional
$20.00, I could take one of the rooms that were actually available at
the moment. The room was clearly made up so there was no special service
that needed to be done. Nevertheless, someone in this organization, saw
it as a revenue producing opportunity to extract money for something
that was previously simply a courtesy that had no incremental cost to
What's next? Care to speculate?
That's a terrible shift in hotel policy, and
is very different from an airline now charging for meals or bags.
With the airline, it incurs a cost to fly your bag or feed you, and it
has decided to take out that cost and charge for it separately.
But a hotel incurs no extra cost no matter when it allows guests to
check in to their rooms, once they have been prepared.
This is a nasty new concept, and if hotels
are now considering this, what will be next? We all love to joke
and speculate about pay toilets on planes, maybe we'll find pay toilets
in our hotel rooms? Electricity meters you have to put coins in?
An extra fee for every towel and sheet changed. The 'extra revenue
opportunities' are limitless, aren't they.
One of the more controversial practices in
many countries around the world is charging a higher price for
foreigners than locals to visit various attractions. This is
particularly prevalent in poorer countries, and it often arouses the ire
of foreigners if they should find out that they're paying maybe ten
times the local price. Museum admissions might be $1 or less for
the locals and $10 for foreigners.
But did you know that such practices
occur in the US, too? For example, in Florida, many of the
attractions there will charge in-state residents a flat fee for a year
of unlimited visits, with the price of a year of visits sometimes being
the same as the cost of a single day pass for out of state visitors.
For example, SeaWorld Orlando has just raised its one day ticket to
$78.95, but a full year 'Fun Card' for local residents is only $69.95 if
prepurchased online or $74.95 at the gate.
I can actually understand and sympathize
with countries who allow their residents a lower admission to
attractions, particularly if those attractions are supported by the
locals' taxes. But it is hard to see the fairness in the policies
at SeaWorld (and not only there) - and remember next time you're stuck
in one of those interminably long lines waiting for a ride, perhaps part
of the reason the line is so long is because a large number of the
riders in front of you got into the park for free.
Here's a very important and useful tip from
reader Suzanne. Although she writes about her iPhone, most modern
phones have the same telltale indicators on them :
I bought my iPhone last fall.
It totally stopped working about 6 months later. When I took it in to
get it diagnosed, they stuck a little magnifying glass gizmo in it. There is a layer of some sort of substance that had turned pink, which
meant that the phone had been wet at some point in my owning it, and as
such, was not covered by warranty. I had to spend anther $200 to get a
For the life of me, I could not think of
ANY way that I had gotten that phone in any kind of water.
About a month ago, I figured it out. I used to always put the phone on
my bath counter when I get ready for work. In taking a shower
(especially in winter) the bath room fogs up w/ condensation, which I
now realized was seeping into my phone, day in and day out. It took awhile,
but finally that condensation accumulated enough to trigger the warning
I don't know if the condensation also
caused my phone's problem or not, but I do know
I am not the only person who takes the phone into the bathroom when they
shower. Please warn people not to do this, because they might be
unknowingly voiding their phone's warranty.
This Week's Security Horror Story :
A couple in the Phoenix area apparently managed to steal a thousand (or
possibly even more) suitcases from arriving baggage carousels at Phoenix
Airport, taking them one or two at a time over an unknown period.
The moral of this story is to get to the
baggage carousel before your bags do, and to position yourself closer to
where the bags first appear on the carousel rather than somewhere on the
other side such that your bags are, for some time, obscured from you.
You should also choose not to buy generic
black colored bags the next time you're buying suitcases. It is
easy for one black bag to look much like another across a crowded
baggage claim area, and close on half of all bags are black. Get
any other color bag and you'll make it enormously easier to spot your
And whether your bags are black or not,
consider adding conspicuous tags to them to make your bags more visible
to you and to everyone else. It seems a likely assumption that a
luggage thief will always seek to take a very plain ordinary generic bag
- anything you do to make your bag stand out will decrease your risk of
having the thief take your bag. My bags are always prominently
these excellent bag tags. Yours should be, too.
Of course, not all luggage thefts involve
the total loss of your bag and its entire contents. Sometimes
something may be pilfered from inside the bag by an airport employee
during the time the bag is out of your sight and in the
airline/airport/TSA care. Did you know that you have a limited
amount of time from when you collect your bag at the end of your journey
until when you are required to lodge claims for stolen items with
interesting article that includes a table of how long you have to
report losses. It varies by airline.
Here is a
very thoughtful article about making the TSA more accountable,
written by a recently retired Assistant Chief of Police in MD.
Many of the reader comments that follow the article are very sensible
too. Well worth reading.
I'll be in Britain next week, having flown
over on BA's intriguing new flight to London City Airport this
coming Sunday, so the timing of next week's newsletter may be a bit
Until then, please enjoy safe travels