Skype hits 100 million users

VOIP is now a factor to be considered for inflight communications; VoIP pioneer Skype says it has passed the milestone of 100 million registered users. The company says it reached the figure just two and a half years after entering service, and that the subscriber tally has nearly doubled since last September, when it stood at 54 million. Skype software gives PC users unlimited voice communications with other Skype subscribers. The software is available in 27 languages and is used in almost every country around the world. The company generates revenue through its premium offerings, which include calls to and from fixed and mobile phones, as well as voicemail and call-forwarding. This means any traveler with a laptop and a headset, flying on a Connexion-powered flight, can make calls for free (at no additiona charge to a fee for going online). You don't have to wait for the Luddites to give you permission. You don't need airlines to further irritate you. Just go ahead and make good use of those hours you are strapped to a seat. Technology can set you free.

Flip seats may cut risk of DVT for airline passengers

This is great fresh thinking about the increasingly limited space on-board. Airlines dodged the bullet on DVT. But the issue has not gone away. Flights are getting longer. Indeed, in our interview with leading California cardiologist Dennis Goodman, we learned that DVT becomes an issue on any flight over four hours. (visit www.iagportal.com to hear the interview). ---------- Telegraph -- Cinema-style "flip seats" could be introduced on aircraft to speed boarding and help cut the risk of Deep Vein Thrombosis (DVT). New composites are leading to thinner seat backs, but the flip seats are seen as an even better way of increasing the space available. According to Aida, the German manufacturers, passengers will have three times as much room as on a conventional seat. Boarding will be quicker, because passengers will be able to move swiftly into their seats having stowed their luggage, which in turn means that other passengers will not be backed up the aisle. One of the biggest advantages will be the ability it gives passengers to stretch their legs. By just standing up they will be able to do a range of exercises which could reduce the risk of DVT, which affects more than 8,000 British passengers a year.

Its Friday - take a 5 minute break

and watch this animated video - its very well done. click

Airline Branding - Much Ado About Nothing

IAG and Action Marketing Group, Inc. have produced a white paper on airline branding which is available at this link.

Fliers would use iTunes if available

Regulars on this site are not surprised by this story. ------------- Over a third of airline passengers would download songs from Apple iTunes if they were available in seat-back in-flight entertainment systems, a recent poll suggests. The poll, run by leading aviation media portal www.flightglobal.com , showed that 38% of site visitors would download songs from iTunes if they were available in seat-back in-flight entertainment systems, while 62% said they would not. The poll was run in response to recent talks held between Apple and Aircraft in-flight entertainment (IFE) system providers on the possibility of licensing iTunes media download software for airlines' in-flight systems, enabling passengers to use their frequent-flyer miles to download music and videos onto their iPods in-flight. The poll attracted 750 participants, and ran between April 12 and 18 at www.flightglobal.com , the world's leading aviation media website, attracting a wide range of aviation professionals and enthusiasts.

Fresh thinking from Boyd Group

We are firm believers in critical thinking and this piece matches that. By the way, if you need a great laugh, read more of their views here. Some comments are rather biting and funny. ------------- Just When Airlines Thought It Was Safe To Get Back Into The Black... $75 Oil - A Whole New Dimension Hot Flash Summary: It's fairly certain that if oil stays above $70 - or goes even higher - the airline industry will need to again fundamentally change. Here's another strategic trend forecast from The Boyd Group, one that the aviation cognoscenti will sneer at today, and next year will be preaching like an evangelist who just discovered a gospel tent: The airlines best postured to weather this oil price storm are legacy carriers. The ones that will be hurt worst and first will be low-cost carriers. Some key points: - Legacies have reduced their operating costs, so they aren't wildly at variance with LCCs any longer. - Higher fuel costs will lead to higher fares. Higher fares will hit discretionary, price-driven passenger segments first. Passengers who in the past were created by low fares to Orlando will think twice with higher ticket prices and $3-per-gallon gas for the SUV. - Legacies will continue to have access to the strong growth traffic at places such as Shreveport, Taipei, Montgomery, Tupelo, and Kaoshiung. (Tupelo? Yup. Traffic's up almost double in two years. Maybe it's the consultant they hired.) LCCs don't have the fleets or the route systems to access these flows. - Most importantly, legacies are not as vulnerable to traffic down-turns as are LCCs. That's because several legacies have significant fleets they can quickly park, and have limited aircraft on order, unlike most LCCs. In fact, the new-airliner orderbook may well be the Achilles Heel of the LCC segment in the next 18 months.

Le Google

This is hysterical. Here we have a confluence of ideas that seems too good to be true. Google and Yahoo are getting massive free advertising from the French state courtesy of their xenophobic President. Imagine the gall (Gaul?) of the man. Named Quaero (Latin for "I search") M. Chirac’s brainchild does not even have a French name. Indeed, the name is in a language that most people consider dead. M. Chirac says he wants to raise the global profile of French industry and avoid a future in which France is known only as a "museum country". Heck that is what it is! With the exceptions of the TGV train (an awesome ride) and Airbus (great technology at work, no question) – what has France done lately? It seems a French growth industry is trying to irritate America. Makes us want to break the French jokes. ---------- Guardian -- The French president, Jacques Chirac, yesterday unveiled what he hopes will be his great legacy to France's struggle against the global dominance of the US: a series of technological projects including a European search engine to rival Google. Yesterday, he announced that he would provide €2bn (£1.4bn) in funding for a series of innovative grands projets, including a Franco-German search engine to compete with Google and Yahoo!.

Olympic & Dr Kevorkian

Many of you will remember Dr. Death. He was the doctor who helped terminally ill patients commit suicide. Dr. Kavorkian believes in euthanasia, a process of painlessly putting a terminally ill patient to sleep for ever. This way a person could (his opinion) die with dignity rather than spending the last few months of their life in constant pain and becoming a burden to their family and friends. Unfortunately the Doctor is in prison. We might have considered exporting him to Greece where he could perform his clearly needed services in Athens. The Greek government has defied the EC over and over again over aid to Olympic. Perhaps the EC can toss out Greece and take Turkey instead? The Greek government now wants to relaunch (again? I hear you cry) Olympic but branded as Pantheon Airways. Oh boy. Even the EC has to be running out of patience. What with other governments handing out aid (remember the Italians and Alitalia?) and not sticking to their deficit formulas, why would anyone take the EC seriously?

Podcast interviews

We mentioned this to readers some months ago and have been beavering away at developing podcasts. The technology is new to us and we are learning how to make this better. Meantime we have some neat interviews for you to listen to. Click - This button will take you to our podcast storage area. We have one free podcast you can hear as a sample. The remainder are for sale. If you have suggestions on improvements, subjects or people to interview, please email us at info@iag-inc.com.

Is the 757 making a comback?

The earlier rumor we heard about Delta wanting to buy the ex-TWA 757s from American may be part of something going on in JFK. There is a little war of words going on between Delta and Continental about who flies the most to Europe. Continental says it flies more from the Metro-NY area than Delta (true) but Delta flies more to Europe from the entire US (true). Behind this silly spat, something bigger might be going on. A recent hire at Delta is an ex-Continental biggie. Said person is a proponent of 757s across the Atlantic. Note that Continental is putting winglets on its 757s to cut fuel burn (or increase range). Therefore, it seems if Delta gets these additional 757s (which American should be pleased to get rid of, as they are not common with their own 757s) we are likely to see a spurt of trans-Atlantic flights on 757s from Delta. These flights could more easily work from Boston, but JFK would be fine for many smaller city pairs. Of course, it would be better for Delta to add winglets - but based on what we hear of Delta’s internal workings nowadays, that might not happen. The next paragraph explains why. For example, Delta has a reputation of "tankering" more fuel than any other US carrier. This goes back decades; a flight between Boston and Bermuda ran out of fuel and had to land at a military base. Frequently Delta’s flight to Athens lands with 22,000 pounds of fuel – imagine the cost of flying that much gas around rather than payload. Now figure this thinking on all their flights - it boggles the mind. Landings with this extra weight surely adds to maintenance costs as well. It also shows fresh thinking and reviewing or challenging anything within the current Delta management is not rewarded, compared to what has happened at American and Continental. A number of good people have been laid off at Delta recently for not singing the company song and not drinking enough of the company Kool-Aid. Back to the 757 resurgence. It is clear that the 757 offers interesting opportunities to fly smaller city pairs effectively. Delta could start a number of new city pairs to Europe that unzips European hubs. This is great for Delta and its alliance partners. This last point being very important. Delta will not use the 757s to upset existing alliance hubs. That limits the city pairs a bit, but also indicates where they might want to add service. The ex-TWA 757s are good for west of a line drawn from north to south stretching from Helsinki to Milan from JFK. Once you go over 4,200 miles, you're taking passenger and cargo hits. Cities under consideration might include HEL, GVA, NCE, MXP, BGO, SVG, OPO, VCE, NAP, BCN, AGP, LUX. One could even envisage ATL-LIS. These are boutique markets. Alliance partnerships reduces risk of new service as the capacity is used by all. Why is this so interesting? Because it means we are seeing yet another evolution away from hub to hub. This type of activity plays squarely into the sweet spot defined by the 787, and now the 350. Secondary cities are where the big growth is going to be. Yes, one side of the city pairs mentioned above starts at a hub. That is to ensure lowest risk. Once traffic flows start to change, to better exploit new service, traditional hubs will lose connecting traffic forever. It is a poignant moment for the 757. The MD11 also saw its future brighten after it went out of production. It is strange how things work out sometimes.

The mysterious Taiwan 747-8 order

Weird things happening across the Pacific. Check this out. April 27 (Bloomberg) -- China Airlines plans to buy 10 of Boeing Co.'s 747-8 passenger aircraft costing almost $2.5 billion, the Economic Daily News reported, without citing anyone. The two sides are expected to sign the deal by the end of June, the Taipei-based, Chinese-language newspaper said. April 26 (Bloomberg) -- China Airlines, Taiwan's largest air carrier, said it will pick the supplier of its new large airplanes by the end of this year, denying an Economic Daily News report that it had chosen Boeing Co. for the order. So this was either a slip up by somebody within the airline yesterday mouthing off prematurely or a negotiating tactic. Taiwan has the money to buy whatever it wants, and what it wants most of all is friends. Reliable friends. It is fair to say that this aircraft order will be more politically motivated than most others. The Taiwanese have been very good about spreading the joy between Airbus and Boeing. That said, we are inclined to go with the 747-8 over the 380 on this order because the US has been Taiwan's best friend. (BTW two months ago, both China Airlines and EVA Air publicly told the media that the traffic volumes and transit traffic at Taipei does not require A380-sized aircraft in its fleet) However, the airline does need to think about replacing its 330s eventually and is goign to remove the A300s. It has a smallish fleet of 67 planes. With little domestic traffic, the airline is widebody biased (like Singapore). The airline is pleased with its 330s and would therefore be a candidate for the 350.

The Southwest Blog

http://www.blogsouthwest.com - a new destination for you to visit. Once again, Southwest has shown leadership in the industry. Traditional media is dying. Smart people are discovering that blogs are a conversation, which is what makes them compelling. Good for Southwest. Now lets see how long its takes the othes to figure out that conversations are useful, entertaining and powerful means to communicate.

What is Delta up to?

Delta are at it again; they are apparently trying to get American to sell them the ex-TWA 757s and also acquire all Iberia's MD-88s. There is too much capacity in Delta's system - especially widebodies to Florida. Delta has started to drop the 767-200s and -300 domestics and they are also removing 737-200s and -300s. Delta is left with a gauge gap between 70 seats and the next biggest plane is the MD-88 with 142. While there is too much capacity in many markets and dumping old planes helps; but going out and getting more capacity before seeing how the reduced capacity works out is, frankly, dumb. It seems certain people at Delta believe market share is directly proportional to revenue and profitability. All three are separate. Delta should be pushing for maximum profitability - smaller could be better since there is a seat glut. But there's more trouble brewing. Instead of doing line checks every night, Delta now gets has these done every 5 days. The idea of outsourcing MRO work has not gone well and the word is Delta wants to sell its MRO. Narrowbodies now cost more to have work done and it takes longer to get completed. Air Canada's YVR MRO center does HMV work on 767 and 757s for Delta. Guess what? The word is Delta can't get the work done fast enough. The YVR center cost Delta over 280 flights days last year because of delays. Imagine the cost of a 767 out of service for 280 days. Imagine having that revenue generation instead of hammering staff for more give backs. (Now think about US Airways using Air Canada for the maintenance work.) What flavor KoolAid are they drinking in Atlanta? How likely is it that Delta will survive? Things are not looking good. Myopic management is not what the company needs now.

Those Standing Room "Seats"

NYT -- Airbus has been quietly pitching the standing-room-only option to Asian carriers, though none has agreed to it yet. Passengers in the standing section would be propped against a padded backboard, held in place with a harness, according to seating experts who have seen a proposal. CNN -- Airbus disputes report it is in discussion with Asian airlines to offer padded backboards to have flyers stand in effort to increase capacity. ---------- Current information from the NYT reporter (Chris Elliott) is as follows: "An Airbus spokeswoman admitted to me last night that the standing room seat exists. Its only argument with the story is that it said it no longer is pitching the concept. But the seats are real." Update -- Word is Airbus wants the NYT to do a retraction. Odd don't you think, since they admit the seat idea did exist. Was this a bad joke that got traction?

The BAE & EADS Divorce

Read our take here

787 sales help the 350

Boeing has sold out the first three years of its 787 production. It is highly unlikely Boeing can double its 787 output fast enough. Therefore, the 787's success is actually to the 350's advantage. We have been saying this for some time now. Too much of a good thing for the 787 is the best thing for the 350. We're talking current 350, not a newer one. Any airline that has to wait for 2015 (some say its 2010 but Boeing keeps selling the 787 very well so it could be 2015 before long at an annual output of 125) to get their hands on a 787 might as well go for a 350 delivered before then. Nobody has said the 350 (in current guise)is outclassed by the 787. Indeed, Qantas and Singapore have both said the planes are quite close. So lets define "quite close" as the 350 is 80% equivalent of the 787 (which is generous to the 787). Which airline is going to wait for a 787 when they can get 80% of what they need years earlier? The question therefore is - how much is the 787 really worth? Is it worth waiting for? The big driver at present (and perhaps more so after 2010) is fuel cost. The planes will have basically the same engines and will carry about the same number of people. The difference in cost per seat mile between the two at present is estimated between 10-15% (advantage 787). It seems to us that Airbus can stay with the current 350 design and do better than the 25% market share Mr. Udvar-Hazy said. If this class of airplane is going to be so popular (3,000 they say), then Airbus has done an excellent job with the 350 as it is. A low risk option for Airbus and its airline customers. Whatever changes are considered, let us hope Airbus focuses on greater use of composites to make the plane lighter still and not a hugely delaying hull widening. Airbus has enough delays in other programs. A wider hull is not the panacea Boeing would have you believe. They have managed to keep the "tube machine" building the same hull on the 737 which dates back to the 707. Wider is better, yes, but Boeing has managed to very successfully compete with a wider 320 using a narrower 737. ----------- Reuters -- Airbus plans to decide on possible changes to its future A350 mid-sized aircraft by mid-2006 following complaints from customers, Airbus head Gustav Humbert said. "We are talking intensively with our customers and looking very closely at the matter," Humbert told reporters in Dresden, Germany. "We have an A350 that is good. If we can improve it, we will do that with profitability and the market in mind." His remarks suggest a decision could come in time for the Farnborough Air Show, due to take place in England from July 17 to July 23.

jetBlue's loss & Battered Airline Syndrome

Our take on the news from jetBlue is here

What does one make of this?

Are these people suicidal? Stupid? Or among the best pilots you have ever seen? We think these South Africans are plain (plane?) nuts. Lots more here

Connexion Interview

We interviewed David Friedman, VP Marketing & Direct Sales at Connexion by Boeing today. Summary and audio are here

Airbus 340 gets a lift

India's Kingfisher Airlines has ordered five Airbus 340-500 aircraft and taken options on five more, the European aircraft maker said on Monday. With these planes the airline plans to fly to the US in 2008. Kingfisher has also ordered 380s and 350s. Their growth is on a tear. Kingfisher's funding is from its brewery busines...lets hope consumers devour the stuff because the airline is going to chew through capital. The airline started operations one year ago.

BAE & British angst

An interesting piece in The Observer describes a feeling of angst in the UK about BAE's selling its Airbus stake. There have been numerous stories about Britain losing its commercial aerospace capabilities. This is odd, since the country "lost" the capability years ago. It has only been building parts for planes. When was the last "British" commercial plane created? This comment says a lot: "BAE's willingness to repudiate civil aircraft manufacture is strategically stupid, technologically vapid and deeply depressing." We think the British are stuck with the last part the most - they are depressed. BAE is a shareholder owned company and the fiduciary duty of the managers is to maximize profit for shareholders. If BAE can make better returns in the US defence sector, that is the obvious place to invest. It’s called outsourcing and we in America are, painfully, adjusting to this as well. This depresses Americans a lot, too. State supported industry is a Euroland sport. What is so painful for the British is that having been given the asset, BAE has decided that they can do better elsewhere. It’s tough when you get something from the government, sell it and then invest someplace else. "The government's record in making strategic judgments about aerospace has been infinitely better than the market's." - This too says a lot. In America we would actually prefer less government in everything. We don't see government doing anything particularly strategically smart. Governments cannot because they are not market driven. Government's "vision" changes with each election in a series of fits and starts. In America we are comfortable doing business despite government ineptness; we expect the government to be wrong most of the time. What makes the British government so much better? So rather than wring their hands in angst, our British friends should rather become more embroiled in the capitalist model. BAE is taking a bet. They may win or they may lose. There are lots of British firms with their fingers in the US defence business. If the Pentagon decides, as it now appears it could, to buy Airbus 330 tankers are we Americans going to feel betrayed because Boeing didn't get the deal? We Americans see ourselves as shareholders too. If the US government actually gets anything cheap we are thrilled because our government spends money like a drunken sailor. Ours is the nation of the $600 toilet seat after all. So as citizen shareholders we appreciate Airbus competing for the tanker order because it will keep Boeing honest. Therefore if BAE enters the US market in an even bigger way, and manages to bid more cheaply on government contracts we Americans are thrilled. Moreover, we will not begrudge BAE shareholders a bit if their dividends go up and paid to British shareholders. Indeed, British citizens can extract value from their nation's support to BAE by becoming shareholders in the firm. If BAE's shares go down, the market will have decided the Airbus stake sale is wrong. Thislink seems to show that the share price has reacted favorably to the Airbus sale. BAE's share price has not performed particularly well in 2006. Perhaps the market, with all the information available, has already decided that the bet being made by BAE is the right one.

Extremists May Target Private US Planes - TSA

Oh boy, here we go. Now TSA is going to be on the lookout for GA threats, too. Of course you see this coming can't you? They'll need more money. The $18bn DHS gets is not enough. How hard is it for anyone with an IQ approaching 100 to threaten planes in the US? Any planes? The mind boggles. ------------- Reuters -- The US Transportation Security Administration has warned aircraft owners and airport managers that Muslim extremists may be targeting private American jets and urged them to boost security. "On April 13, 2006, a message posted in Arabic on an Internet forum explained how to identify private American jets and urged Muslims to destroy all such aircraft," the TSA said in an advisory issued on Thursday. The TSA quoted the Arabic message as saying: "We call upon all Muslims to follow and identify private civilian American aircrafts in all airports of the world." "It is the duty of Muslims to destroy all types of private American aircraft that are of the types Gulfstream and Lear Jet and all small aircraft usually used by distinguished (people) and businessmen," it quoted the message as saying. It said the message explained how to identify private US jets and also provided the tail number of a private plane believed to be used by the CIA. The TSA and other law enforcement organizations regularly issue advisories when they have information of a potential threat though there have been no major incidents since the September 2001 hijacked plane attacks on New York and Washington in which about 3,000 people were killed. The TSA urged plane owners and operators to boost security measures and secure unattended aircraft and verify identification of crew and passengers. "Be alert/aware of and report persons masquerading as pilots, security personnel, emergency medical technicians or other personnel using uniforms and/or vehicles as methods to gain access to aviation facilities or aircraft," the TSA advised. It said the theft of any private plane should immediately be reported to law enforcement and TSA.

New Mobile Travel Tool

Readers might like to made aware of and participate in, the beta launch of Skip – a new (free) way for people on-the-go to manage their travel details using their mobile device/phone. Everything you need to know about Skip can be found on our site: www.GoSkip.com. Skip is available for OTA download to almost every type of mobile phone – the site explains this and guides you through the process. The proposition is that you can make and track all your travel arrangements using your cell phone. The world keeps moving towards your cell phone, that lives in your pocket and goes everywhere with you.

A finger in the dike

This is an open letter from the BTC, a coalition that "represents business travel". By being an ally of the travel agent side of the equation, BTC has staked out its position. BTC's position is amusing - they get to it near the bottom of the piece below. "Content source fragmentation is unacceptable as it generates inefficiency and additional costs. Any revisions to the economic model should balance the interests of all industry principals and not be dictated by airlines to corporations and others." That's a bit of a joke. What hope do these people think they have? Airlines have a lost billions and their current model is broken. In order to survive they will first and foremost search for a solution that suits them. Business travelers no longer pay top dollor. Nobody pays top dollar. Airline pricing is in the tank, even with recent fare hikes. -------------- U.S. Post-Deregulation Travel Distribution The Moment of Truth and Call-To-Action Prepared by Business Travel Coalition April 19, 2006 I. INTRODUCTION After decades of U.S. federal government economic regulation, the global distribution system (GDS) industry is currently undergoing a marketplace upheaval that could bring with it acceptable changes or devastating losses to travel industry principals. Some airlines are endeavoring to structure a fundamentally new economic relationship among these principals -- airlines, GDSs, travel management companies (TMCs)[1] and corporate buyers -- that could have irreversible, worldwide implications for corporate managed travel. No issue in a generation has been this important to the travel industry or corporate travel managers. At issue is whether the lion’s share of benefits from a new distribution system model will flow primarily to network airlines at the expense of others, or alternatively, whether all principals’ interests will be taken into account. So far, TMC and corporate travel executives have been largely silent and unengaged; however, their bottom lines are at great risk. The economics of the new model will likely be determined by this summer, when (for better or worse) most of the new airline-GDS agreements will be concluded. Many TMC and corporate travel executives are in danger of being surprised and unprepared for potentially radical change. However, corporate travel managers are in the best industry position to influence the outcome, if they choose to speak out. II. BACKGROUND For twenty years ending in 2004 the U.S. GDS industry was heavily regulated by the U.S. Department of Transportation (DOT) mainly because the airlines that owned the distribution companies used their ownership positions to distort travel agents’ neutrality, frustrate airline new entry and drive the costs of their airline competitors up. In cities where airlines dominated hub airports and controlled most travel agents’ desktops through their GDS firms, the effects of airlines’ abuses were especially pernicious and often led to exceedingly high business airfares. This regulatory period was characterized by a single, DOT-imposed business model, replete with one-size-fits-all approaches to travel distribution services, including significant pricing restrictions. Most corporate travel managers had no reason to pay much attention to GDS issues, since access to content was assured by law and incentive payments were money in the bank. By 2003, U.S. airlines had sold their ownership stakes in these GDSs, which changed the relationship between GDSs and airlines dramatically, and paved the way for deregulation. These travel distribution firms were now standalone businesses freed of their airline parents, but encumbered by the now unnecessary DOT regulations. Indeed, airlines’ divestiture of ownership positions in GDSs eliminated the rationale for regulation. GDSs and other industry participants successfully petitioned the government to deregulate the marketplace for travel distribution services. DOT announced GDS industry deregulation during the last week of 2003. An airline drumbeat for reducing GDS costs suddenly got louder. Airlines and GDSs, both about to be thrust into a deregulated environment, entered into a series of three-year agreements in late 2003 which gave the airlines significant reductions in booking fees in exchange for full content guarantees. This brought some stability to the marketplace for a 3-year period for suppliers, distributors and customers, and bought time for industry participants to conceptualize new business models, relationships, products and services. Indeed, much experimentation began to take place. Some airlines predictably used this time to try to bolster new alternatives that would dramatically alter the economics of travel distribution in their favor. In 2005, in advance of the expiration of these agreements the following year, some airlines deployed a full blown industry relations campaign in support of new entrant technology firms such as G2 Switchworks. Although the technology was unproven and remains largely undeployed, the issue, fueled by airline support, dominated the industry trade press and industry gatherings. Many observers saw airlines’ very public support of these new entrants, however, as mere posturing ahead of 2006 GDS negotiations. Unsettling threats were made by some airlines that they would consider withdrawing content from a GDS altogether. Those threats made TMCs and corporate travel managers nervous. Sabre and Amadeus responded with a content backup agreement in March 2006 guaranteeing content from the other GDS should such a worst-case scenario develop. More recently, American Airlines and Continental Airlines announced new agreements with Worldspan amidst unparalleled secrecy over their details. Confusion has quickly gripped the marketplace with speculation that incentives would disappear entirely and TMCs and corporations would have to begin paying for access to content. Negotiations between GDS companies and airlines are occurring right now – some deals have already been signed. Others are likely to be reached in the next few months, and it’s probable the details of these transactions will have a profound and perhaps permanent effect on the economics of travel distribution. The die is about to be cast. Corporate travel managers could be in the not-so-advantageous position of informing senior management that GDS pass-through financial incentives will not be available in 2007, and moreover, there could be a significant content access fee added to each airline ticket. There would potentially be hundreds of thousands to millions of dollars in bottom line impacts for corporate buyers. ARC-certified CTDs would be particularly vulnerable. III. THE EVOLUTION OF THE MARKETPLACE As the commercial air transportation marketplace has evolved, at the upstream position there are several hundred airlines connected to a small handful of GDSs immediately downstream. These GDSs provide significant value to their airline customers by signing up thousands of TMCs that match the airlines’ geographic and market segment needs. These TMCs provide airlines further benefits in connecting airlines to millions of downstream customers. This marketplace has operated very well for airlines. Up to 50% of the GDS segment fees paid by airlines are actually competed away downstream as GDSs vie with one another to sign up TMCs that are in market positions to benefit airlines that are GDS customers. Incentive payments paid by GDSs to TMCs are likewise often competed away by TMCs competing to sign up corporations, also for the benefit of airlines at the upstream position. The GDS segment fee has evolved to become the financing mechanism for a marketplace consisting of millions of complex airline-related products and services and hundreds of millions of end customers spanning the entire globe. Many other industries’ markets such as the cell phone industry are organized and financed in this same manner. Economists such as Dorothy Robyn of The Brattle Group describe the GDS and similar industries as ones with a “two-sided intermediary market.” IV. CURRENT SITUATION So the issue is not that change is coming, or that there might even be a reconfiguration of economic responsibilities among airlines, GDSs, TMCs and corporate buyers. The issue for BTC is whether the outcome of the current uncomfortably secretive process, which will end in just a few months, will enrich just the airlines at the expense of their best corporate customers, or alternatively, will conclude with customer and TMC interests protected. According to industry sources, there are signed airline-GDS agreements that are truly toxic to corporate managed travel programs, but these agreements are being kept secret under confidentiality clauses until the marketplace has moved closer to the model envisioned by some airlines. These airlines are counting on corporate travel managers being asleep at the switch until such time as it is too late to influence the design of the emerging model. It’s time for travel managers to engage the issue and take action to protect their companies’ interests. V. POTENTIAL OUTCOMES BTC sees three potential outcomes: 1. Fine Tune. The existing incentive-based model will remain with across-the board reductions in booking fees charged by GDSs to airlines and reductions in incentives paid to TMCs by GDSs. 2. Variable Change. Several variations on the existing model will emerge with no dominant, market-leading framework prevailing. 3. Blow Up and Dominate. A sweeping, radical transformation of the existing business model will be forced on the market wherein incentives to TMCs virtually disappear and corporations pay for content. VI. INDUSTRY CONCERNS There is little doubt that some major airlines are working diligently to ensure that outcome #3 above comes to be the prevailing model, but without input from and recognition of the concerns of corporate customers. These airlines want TMC incentives virtually eliminated. It’s very unclear that any thought has been given to how such a model would impact other stakeholders. The airlines have an unimpressive track record when it comes to strategic distribution decisions, and in particular decisions that impact their best customers. Corporations need assurances that the existing marketplace model described above is not replaced with a fragmented and inefficient one with total processing costs rising from complexity and pricing levels increasing through lack of access to full content. In the most macro economic sense, it is the corporate customer who is largely financing the current travel distribution system. Its costs are baked into the price of a ticket. It is the corporate customer who is also at most risk should the current model be precipitously blown up. However, and importantly, it is the corporate customer, more than any other industry participant, who can influence the outcome over the next few months for the benefit of all industry principals. Blowing up the current model is not pre-ordained. A couple of airlines will not be able to dictate to the rest of the industry if corporate travel managers speak out and secure a seat at the negotiating table now. The choice is simple. Travel managers can accept a new, potentially fragmented distribution system model that saddles corporations with distribution costs they are already paying for in the price of their tickets while at the same time causing overall costs to escalate. Or, they can protest, seek to intervene and ensure that a rational and equitable model finds footing in the marketplace. VII. THE BTC POSITION BTC believes that corporate travel buyers, as the best consumers of airline services, bring enormous value to airlines and deserve to have a role in all decisions about revising the industry’s current economic model. Specifically, corporate travel buyers should insist that full content be available through GDSs without additional airline-imposed service fee charges. Corporations already pay for these distribution costs in the price of their tickets. Content source fragmentation is unacceptable as it generates inefficiency and additional costs. Any revisions to the economic model should balance the interests of all industry principals and not be dictated by airlines to corporations and others. VIII. CALL-TO-ACTION The American Society of Travel Agents (ASTA) and BTC have teamed up to give both TMC and corporate travel executives a platform from which their concerns can be voiced and interests represented on this issue. The Travel Distribution Working Group has been formed by ASTA and BTC to bring shape to TMC and customer proposals for sensible reform of the distribution system. Membership is also open to other industry Associations. With BTC participation, ASTA will be conducting an industry conference call on May 4 at 2:00 pm (EST) to discuss this critical issue and the details of the Travel Distribution Working Group. Conference call information will be communicated to the industry in the near future. … CONTACT BTC || Kevin Mitchell | 610.341.1850 | Kevin_mitchell@verizon.net. Founded in 1994, the mission of the Business Travel Coalition is to lower the long-term cost structure of business travel. BTC seeks to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to them.

Euroland/Italian chaos

easyJet was handed an amazing advertising opportunity. This story goes to show what happens when you allow gnomes too much power. The law is an ass, but its the law anyway, and if you find a loophole, we close it right now. With this kind of chaos, its no wonder Euroland's economies are stagnant. Its no wonder Italians are famous for not paying taxes. The Euro-consumer could use fewer laws and a lot fewer bureaucrats. How about some logic? We are certain the passengers (and consumers generally) see that monopolies are inefficient. Its the 21st Century! ----------- easyJet has been forced to cancel its inaugural flight between Milan and Olbia due to ENAC’s (Ente Nazionale Aviazione Civile – the Italian National Civil Aviation Authority) unlawful refusal to allow easyJet to fly. The Italian authorities objected to easyJet’s new route connecting its base at Milan Malpensa with Olbia, in Sardinia, thereby reinforcing the monopoly of the incumbent airline Meridiana, under guise of the Public Service Obligation (PSO). As a result of this unlawful activity easyJet has filed a legal challenge in the Italian courts and lodged a complaint with the European Commission. While the court case is pending, the airline planned to continue to operate the route, taking the dramatic step of flying all of the passengers for free. This was a perfectly legal alternative as the European regulation 2408/92 on PSOs clearly states this only applies to 'the transport of passengers for remuneration.' However, this morning, ENAC intervened and prevented easyJet from operating the service, forcing both the airline to cancel the flight and its 149 passengers to travel with the monopoly carrier – who had an aircraft prepared especially for the occasion. Speaking at Milan Malpensa Airport today Arnaldo Munoz, General Manager Commercial for Southern Europe, said: “Not only is the Italian Government’s attempt to impose a Public Service Obligation on this attractive route ludicrous - it goes against every PSO principle and is a clear breach of European law. But today’s decision by ENAC to prevent easyJet from operating this service at no charge is also unlawful and a clear example of blind bureaucracy. In order to sustain their untenable position ENAC is willing to stamp on everything and everyone, and passengers first of all. In spite of all the efforts made by easyJet to find an amicable solution to the benefit of all the parties involved, unfortunately the final decision is now with the Italian courts.” Passengers due to travel with easyJet today supported the low-cost airline’s cause and protested to the Italian officials who prevented them from flying. easyJet has reimbursed the passengers’ cost of the flight and offered a €100 voucher to be used on other easyJet flights in the future.

Southwest & ATA - we told you so

We've been talking about this for a while. It makes sense and the aircraft that allow this exist in form of long range 737s and 757s. Aloha has shown that Hawaii to the west coast is doable with 737s. ATA already flies long routes, so the North Atlantic is next. The good news for legacy carriers is that ATA/Southwest will have limited capacity and have to use out of the way airports. The bad news is people are used to exploting out of the way airports for LCCs. Since airline brands now count for less than ever, witness BA's new pricing, this next step will be very scary for legacy carriers. Readers might be interested to know that we are developing a paper on airline brands; titled "Airline Brands - Much Ado About Nothing". Meanwhile, read this link for insight on the issue. Click ------------- FT -- Southwest Airlines on Thursday gave its clearest indication to date that the world's largest low-cost carrier would launch international flights for the first time. The Dallas-based airline said it has furthered preparations to launch cross-border flights with partner ATA Airlines, though Gary Kelly, chief executive, said the domestic market would remain its primary focus over the next two years.

BA's new pricing

Lets see how long they can handle this. There is no way BA's cost structure will handle a one-on-one with the likes of Ryanair or easyJet. BA's strength lies in long hauls where people might pay a premium for service. In the short haul market we cannot see this working. ------------ "We have slashed our one-way fares by up to 50 per cent and will have over seven million plane seats a year, to more than 65 destinations, available at these new prices. "This is not a short-term gimmick, but a long term commitment to our millions of customers to offer irresistible low fares every day of the year. There are no hidden extras and air travellers will receive the same excellent standards of service that are the hallmark of British Airways." British Airways' Commercial Director, Martin George

Dummy of the Week #11 - TSA again!

The Transportation Security Administration bagged a terrorist in Los Angeles International Airport Tuesday, or so they thought. Daniel Brown’s name came up on their no-fly watchlist, so they dragged him into interrogation and grilled him, despite the protestations of Brown and his fellow travelers, who swore they could vouch for him. The others in Brown’s party went on their Northwest Airlines flight to Minneapolis-St. Paul, where they waited on a bus at the airport. You see, the detained man was Staff Sergeant Daniel Brown, USMC Reserve, and he was traveling with the other members of his Marine Reserve Military Police unit, which was heading home to Minnesota from eight months of combat in Iraq. The Marines were in full uniform and all, including Brown, had travel orders and military identification cards. After attempts to stonewall under claims of “security,” TSA spokesmen finally admitted that Staff Sergeant Daniel Brown was placed on the no-fly list, and ultimately detained, because they had detected gunpowder on his footgear — not on this flight, but on a prior flight, which earned Brown a permanent place on the TSA’s mysterious terrorist lists. The footgear that had been exposed to gunpowder? Brown’s combat boots, and the occasion of that flight was after his return from his first combat tour in Iraq. Source: http://rightrainbow.com/archives/2006/04/its_amazing_the.html

MAXjet flying higher

Its great to tell a good story in the midst of higher fuel prices and general industry malaise. This performance speaks very highly of the team behind MAXjet. Which other US airline has a 98% recommendation level? ---------- The all-business-class airline, MAXjet is reporting high load factors and strong passenger confidence, supported by the airline's first passenger survey. The airline recently announced its highest load factors to date since MAXjet began service in November 2005. MAXjet now provides service from both New York and Washington D.C. to London. At the end of March, for the first time ever, all 102 MAXjet seats were full on the New York flight. On average, loads for March were more than 50% with the latter part of the month coming in at nearly 70%. Bookings for April indicate that the New York route will average at 70% load factors for the month, with bookings for May and June also looking strong. MAXjet recently launched its inaugural four times weekly flight from Washington D.C. to London on April 3, in addition to the six times weekly service from New York to London. The Washington route is still gaining ground, and MAXjet is confident in its success with strong future bookings for May and June. "There has been a great deal of speculation about the success of our business model, but the figures speak for themselves," said MAXjet's CEO Gary Rogliano. "We have managed to build up our loads as quick, if not quicker, than any airline developing a new international route. We are currently negotiating for our third and fourth planes to expand the MAXjet fleet. We are very confident. Not only do our future bookings illustrate our growing success, the quality of our product is also endorsed by the positive results from our first passenger survey. Some 87% of our customers found the experience to be very good or excellent, and 95% of passengers said they would likely fly with us again." The passenger survey also highlights that 96% of travelers thought the service was either what they expected or better than they expected, and 91% of those questioned felt that MAXjet was delivering on the promise to provide value-driven, all-business-class travel. Some 98% of passengers said they would recommend MAXjet to others.

Today's non-story - Boeing & Whistleblowers

This is an odd story. The plane is no longer made, having been replaced by a newer version. Operators of the affected planes have had no issues. The industry has ALWAYS had to make parts fit. It is quite common, from what we have been able to gather, that aircraft parts though made to fine tolerances, often don't fit as planned. The black magic knowledge has been the secret of the old hands; they were always able to make the parts marry and fit. These parts came from a pre-CAD/CAM era. There is no smoking gun of an accident or broken airplane. Slow news day we suppose. ---------- Reuters -- Three former Boeing employees have alleged that the planemaker installed improperly fitting parts in hundreds of Boeing 737 jets, a newspaper reported on Monday. Boeing has denied the whistle-blowers' claims, contained in a lawsuit filed in US District Court in Wichita, Kansas, insisting that no faulty parts could have slipped past Boeing controls and that there is no safety issue related to the parts, the Washington Post said.

Boeing to Lay Off About 900 Kansas Workers

Its only speculation on our part but here's what we read into this story. Kansas has a small Congressional delegation. Washington and California have much bigger ones. The C17 plant at Long Beach needs work, big time and California will not be pleased to see an end to aerospace skills at Long Beach. Everett might be a great place to start building a 777F-based Air Force tanker and Long Beach a great place to do the finishing touches. This makes both delegations happy. Washington's delegation wants something back for its unswerving loyalty. But without a push from California, a 777 tanker might need help. Boeing irritated a lot of people in DC over the past few years. They don't want another fracas over the tanker thing again. If something had to give, Wichita is has to be. But, no worries, Airbus/EADS is looking for 200 aerospace engineers. Wichita already has some Airbus interests. These are interesting times with so many big pieces floating around. ---------- AP -- Citing defense budget cuts and delays, Boeing Co. announced Monday it would restructure its Wichita operations and lay off about 900 workers, or about 25 percent of its current work force at the plant. The Chicago-based aviation and aerospace company said its Wichita plant will focus on military 747 and wide-body aircraft modifications and upgrades and continue its engineering center. The plant currently employs about 3,600 people and Boeing said the work force would be 2,700 by early 2007.

IFE hardware prices start to fall

Competition is a wonderful way to focus attention. Airlines have to be delighted that the cost of at one technology is going down. We predict further pricing mayhem as travelers start to bring their own devices and content with them. Consumer electronics are going to defeat IFE tyranny, where you have to watch/endure canned crap on a screwy system. After the 1,000th veiwing no sitcom is funny. Reruns may make the syndicate owner rich, but the viewer is done. If the Internet has managed to mortally wound television, what makes airlines and IFE manufacturers think they can withstand this phemonenon? Content is king, but unlimited channnels is impossible in-flight. Digital content has and enabled a move into a universe where a customer market size of one is perfectly acceptable. Airlines would do well to get out of the hardware game altogether. People are breaking off into ever smaller groups and they will buy the content they are interested in. As groups grow smaller, their demand inelasticity rises. There are people who would happily pay for access to a hunting or fishing channel and watch it all across the Pacific. Since the airline has no hope of providing this but couldmake good money selling it, why not enable this? Anyone in advertising can tell you how much more you can charge for such a small section of a market. Yes, you can focus down to a market of one. But first you have to open your mind to this reality. Its called creative destruction. And it has worked in numerous other markets. ------------ The potentially game-changing nature of IMS Inflight’s decision to base its next generation of handheld IFE systems on the Archos AV 700 consumer digital video recorder (DVR) (Inflight Online, April 4) has been driven home by the French manufacturer’s announcement of new, lower, prices for its mainstream products. The company is now offering the top-of-the-range 7in-screen, 100Gb AV 700 for $599.95, a $200 cut, and the 40Gb version for $499.95, down $100. The 4in-screen, 100Gb AV 500 is going for $549.95 (previously $699.95) and the 30GB version for $449.95 ($499.95). The cuts presage further developments in the Archos range – the company says its 2006 products will have new features not seen before in the portable video player market. They also look like good news for Californian-based IMS Inflight, which has just switched from custom hardware development to adapting the AV 700 on the grounds that is now feasible to make consumer devices fit for the IFE market and offer them at prices significantly lower than those of purpose-built systems. “We recognise that consumer products like the AV 700 are rapidly approaching the capabilities of proprietary-built IFE portables at a much lower price point,” IMS chief executive Alan Pellegrini said earlier this month.

Re-engining the MD80

We came across a neat piece of insight today - Click

Webaroo

This is potentially awesome for IFE.  Hate to admit it, but the late starters in the US (read legacy carriers) are benefiting from their wait.  The solution further builds on what we believe is the future of IFE - bring your own deliver device and, maybe, turn to the airline for a pipe to the content.

---------------

IFExpress -- How would you like to do a little surfing on a plane that has no connectivity? Or, if you are a portable IFE vendor and you would like to give passengers the Internet on your portable? What if you were responsible for providing Internet contend via Wi-Fi for your airline passengers but you had none of that expensive connectivity hardware? The answer to all the above is Webaroo, and it's free.

Here's the story; Webaroo is an Internet startup that had a great idea - how can we help all those folks who have no Internet connection or have laptop or Smart phone and are mobile - say, on an airplane or train. No problem, simply log on to Webaroo and download the client to your PC or laptop then select from the various "packs" available. Right now they are building a library that is free online and updated daily. You send the pack to your portable devise and thousands of compressed HTML pages are transferred to the device. Let the surfing begin! Webaroo has a cadre of technologists in California and India who have developed an algorithm that picks a targeted subject (like San Francisco, or Wikipedia), and the client downloads the pack off the Webaroo server. Webaroo told us that they can drill down one link on their whole collection of websites but plan to develop more link depth later... all for less than a megabyte per pack. Think of it as a cached Internet that is updated by the client the next time you log on. Hey, this service was made for travelers. Webaroo told IFExpress that airlines and vendors have free access to the service and we could see a time when an airline would place the client on their intranet server and update whenever they landed. Phones, laptops and portables that are surf capable can use Webaroo. Expect to see web packs in the future that provide news, destinations, weather, or whatever. You pick your pack and you are good to go. The Webaroo model will, no doubt, be driven by a paid search model (Oops, Google territory), and we expect other search providers to up the ante if this idea takes off. We hear that Acer portable laptops will soon ship with this feature. Check out Webaroo.com and surf with or without an Internet connection.

 

 

Dummy of the week #10

This week we offer you a choice - who's the dummy here? The passenger or the crew who gave the passenger this much booze? We say both! Too bad for this fellow he landed in the USA - he's in very deep doo-doo now. Unfortunately the dumb flight crew get to go home. ------------- A man who authorities say drank five to six bottles of champagne aboard a flight from Japan to Kona has been arrested and charged with assaulting four crew members and interfering with the flight crew. Iwao Amano, who was aboard the flight that left Narita Sunday, and reportedly drank the champagne in economy class, is accused of then punching one of the flight attendants "lightly in the forehead" when trying to move to the business class. He later grabbed a flight attendant by her hips, lunged at another flight attendant and tried to grab her breasts and kicked a flight purser, an FBI affidavit said.

OFCOM on in-flight phones

OFCOM, the UK office of telecommunications, has issued a 45-page discussion paper on the introduction of mobile service on aircraft with the closing date for responses 23 June. Oftcom does allude to the fact that the ultimate responsibility is held by the CAA as a question of aircraft safety. The paper goes into in some detail the legal and technical aspects concerning the introduction of mobile phones on public scheduled flights. It also mentions, thankfully, the human factor. At the end of the day are we to have ‘quiet zones’ on aircraft? Are there to be large signs (under the no smoking ones) forbidding the use of mobiles in the washrooms? For the downloaded documwent - Click

Tanker RFP out soon

This is going to be very interesting. Boeing does not have this deal in the bag. Airbus' experience in tankers is a work in progress. But their 330 is more airplane the than the 767. Will Boeing come back with a 777-based tanker? Boeing is not hurting the way they did when this whole tanker mess first started. Rather than get the original deal, greed and other stuff got in the way. This has given Airbus time to create its own offering. A number of customers have signed for the 330-based tanker. The Pentagon now has a real competition for its business. ------------ Reuters -- The Air Force got the green light to relaunch the process from Kenneth Krieg, undersecretary of defense for acquisition, after a two-year study by the non-profit RAND Corporation on ways to upgrade the US fleet of 531 KC-135 tankers. Krieg signed an order late on Thursday clearing the way for the Air Force to start a competition, said Cheryl Irwin, a Pentagon spokeswoman. Rand concluded that potentially suitable tankers could be derived from Airbus's A330 and A340 as well as from Boeing's 767, 787, 777 and 747 jets. "A mixed fleet consisting of more than one of these alternative candidates also has comparable cost-effectiveness, so there is no reason to exclude a priori an Airbus-Boeing mixed buy on cost-effectiveness grounds," the study said.

A350 redesign?

Great story in USAToday (Click) Readers here will already know most of the background to it. But what is interesting for us is the fact that it describes the cash crunch at EADS. We have been expressing concern about this issue. Buying back the BAE holding is a must. Getting the A380 flying commercially is a must. Getting the A400 project done is a must. Getting the A350 to better compete with the 787 is a major must. This is a long list and EADS does not have the resources. They will have to go into debt to finance the A350 redesign. Where will the money come from? Banks, especially Euro-banks. To avoid another WTO row the loans will have to be commercial. We hear the redesign will cost around $11bn. More importantly, the redesign will also cost two years in deliveries. So lets say EADS gets the loans (without any obvious government involvement and without any WTO issues). Whats does Airbus tell its customers for the A350 who have signed? There are about 100 orders for the plane as it is now. The redesign is going to make the hull wider. This may impact the wing and main gear. Of course these changes will impact the price airlines have already agreed to pay. Besides the technical changes, airlines now have to deal with a higher price and a delayed EIS (entry into service). It is likely that A350 customers will demand compensation and Airbus will give it to keep the orders. This compensation must be added to that being given to A340-600 operators now. Whatever form the compensation takes, it costs Airbus and EADS real money. Actually there may never have been a better time to order the A350. Airlines could basically get away with a deal they could never get on a Boeing - any Boeing.

ElAl sneaking up to Airbus?

This story is rather entertaining. You may recall that ElAl is really steamed at the government since they gave access to their crown jewel route between Tel Aviv and New York to a competitor. At the time we suggested that to irritate the government the most they could do was start a dialogue with Airbus. Hey presto! ElAl is now privately owned. They can buy what they want. They will buy the 787 because its best for them. But, they first need to irritate their government - a lot. Boeing no doubt is unsure how real the courting of Airbus is. Airbus is probably also unsure how serious ElAl is. So Boeing will keep quiet in public but the phone lines are hot trying to ascertain the real situation. Boeing has lots of friends in Tel Aviv. ElAl is playing a dangerous game. If they buy 330s, it would be a temporary measure. Their old 767s will be snapped up and turned into freighters. The 350 would naturally replace the 330s. But why would ElAl buy Airbus? They just ordered two more 777s. Perhaps they want a better delivery slot on the 787? If ElAl gets Airbus worked up and then drops them in favor of the 787, Airbus will never take them seriously again. Boeing will never give ElAl a big discount again. Who loses in this game? ElAl every time. In a two horse race, being a small airline gives you very little wiggle room. ------------ El Al is seriously considering buying airplanes from Airbus Industries for the first time ever. Until now, El Al has had an all-Boeing fleet, but is on the verge of purchasing a number of Airbus A-350s and A-330s, TheMarker has learned. A high level delegation of Airbus executives met yesterday with El Al's owners and senior officials, along with representatives of the Israel Aircraft Industries, at the offices of the Borovich-Moses Group (BMG). A month ago, a less senior team from Airbus visited El Al in secret and presented management with a proposal to purchase the Airbus A-330s. Yesterday's meeting was, for all practical purposes, the beginning of negotiations over the deal, and issues such as price, delivery schedules and credit were discusse. The new planes are meant to replace El Al's old Boeing 767s.

ALPA goes mad

We just came across a scab list put out by ALPA. We live in weird times. Would any other industry do a thing like this? We sell a lawsuit coming. Hit the link before they take it down. Link

US market share of international tourism at all-time low?

This should come as no surprise to most people who have the slightest inkling of the US travel industry. In the US, Congress has repeatedly cut the budget for the US' national tourism efforts. What used to be an agency with the Dept. of Commerce (USTTA) was cut and the remnants (now known as OTTI) was pushed under the International Trade Administration. The issue, it seems, is that Congress is confused about the need for a national tourism office. The group assigned the task of marketing the US, has a budget of ~$5m. The following table puts this budget into perspective. This chart shows how much the top ten US states spend on their tourism marketing. Clearly at the federal level the US "under spends" on its marketing the country as a destination. Moreover, the Travel Industry Association (TIA and quoted below) maintains the US international tourism is at an all time low. Beware what you read. The official source of international travelers to the US is not TIA. The official source is the OTTI. Their website offers some very different perspectives on inbound tourism. Use this link . Bottom line? The US has increased its share of overseas tourism in the past two years. The US is third in the world after France and Spain as a destination. The US has a commanding lead in tourism spending. So the sky is not falling. The US is a hot destination and US taxpayers are getting this job done on a pittance. An interesting statistic would show how much spending each country is putting into its tourism marketing efforts and divide that by the number of tourists. We bet the US is in a league of its own. -------------- FT -- US market share of international tourism is at an all-time low, dropping 35 per cent between 1992 and 2004, which translates into $286bn in lost revenue, according to the Travel Industry Association of America (TIA). While about 20 US states have overseas marketing campaigns, there has not been a unified US-themed one in 15 years. The issue has become urgent as countries such as Australia and Ireland market themselves aggressively and capture greater share of global tourism. Mr Rasulo blamed the slow response from the US on lack of cohesiveness from the diverse travel industry, which broadly includes hotels, airlines, restaurants, car rental agencies, cruise lines and related businesses. "The travel industry has not spoken with a single voice," said Mr Rasulo. "We hope we're changing the channel."

Airbus rumor

This is a new one doing the rounds in certain circles - aerospace engineering circles specifically - Airbus is looking for 200 engineers in the US. Part of the pitch is that if an engineer accepts the gig, they might need to go to China as "liasion" on a temporary basis. Of course interested parties might be able to negotiate Euro-standard vacations but the money might not be good enough. And living in China, even temporarily? The best place for Airbus to find these people is in Wichita, Long Beach, Everett and Seattle. Particularly Long Beach. But Boeing does not like this poaching of hard-to-find and hard-to-keep talent. Headhunters are doing their best though.

US carriers start to turn around

The old saw is supply and demand. It appears the legacy carriers are matching these better. Supply is growing slowly while demand remains strong. With LCCs using the rising fares to cushion themselves, this rising tide is lifting all airlines' revenues. Load factors are rising, and appears to have started to remain at or above 70% regularly. It used to be, with lower fuel prices, that 65% was the nut to crack and ensure a profitable flight. Legacy airlines are still struggling with their costs, particularly labor. But as the demand holds while prices rise, the revenue gaps are closing. These gaps are no doubt much smaller than a year ago. If fuel prices soften, then we should see dramatic changes of fortune among the airlines. The latest run up in fuel prices is based on Iranian sabre rattling. The price of oil is skittish and tends to over react to anything untoward. The unfortunate truth is that the world's oil supply is located in places not known for peace and quiet. That said, oil supliers need the markets as badly as markets need oil. Prices will settle again, bringing relief to US carriers. Update -- 11:30PDT SAN FRANCISCO (MarketWatch) -- The parent of Fidelity Investments, seeing an opportunity in the downtrodden airline sector, has become the largest shareholder of United Airlines and has built up its stake in American Airlines, according to regulatory filings this week. -------------- USAToday -- To break even, this year's industrywide average domestic fare — including business and leisure fares — needs to be around $179 one way, or 21% higher than it was in the third quarter of last year, when that average domestic fare was about $148. "We're only about halfway there, measuring from the third quarter of last year," says Vijay Bathija, a senior principal with the consulting arm of the Sabre Group, operator of the Sabre computer reservations system and online travel seller Travelocity.com. Based on bookings data (not actual sales), "we think that the average domestic fare right now is only up somewhere between 10% and 13% from the fall." In January and February, the big carriers reported filling the highest percentage of seats ever for the historically slack travel months: 73.7% and 76.8.%, respectively. For all of 2005, the USA's biggest airlines filled 77% of their seats, a record according to the Air Transport Association (ATA). Last week, most of the big carriers reported record March load factors near or above the 80% mark. • The average domestic fare paid per mile flown was up 12.5% in February from a year earlier, when fares were the lowest ever in inflation-adjusted terms. A 2,000-mile trip that cost, on average, $229 in February 2005, was up to $258 this past February. •The price of the typical one-way business fare between Chicago and Washington was $339 in early April, up 71% from a year earlier, according to price-tracker Harrell Associates. The demise in January of discounter Independence Air, based at Washington Dulles, influenced that jump. But the defunct carrier was not a factor on many routes, such as Detroit-Los Angeles, where the business fare was $599 in early April, up 29% from a year earlier. • A broader sampling of business travel fares done by American Express Business Travel shows that the average one-way business fare rose steadily through most of 2005. For 329 popular domestic routes, it reached $223 in the October-December quarter, up more than 10% from $202 from the first quarter of the year. • Southwest Airlines, the giant discounter popular with leisure travelers, pushed its average one-way fare above the psychologically important $100 mark on March 10 when it added $2 to $4 each way to most fares. It also raised the absolute cap on its fares by $10, to $309 one way.

MRO - On the Brink of Structural Change

This white paper, by Ernest Arvai President of The Arvai Group, considers the future of the MRO sector from a strategic perspective. An analysis of the forces driving the industry results in an analysis of likely future developments and the relative impacts they will have on industry participants. This insight becomes very important in light of Boeing offering its own product support on the 787 for example. o There is a coming revolution in MRO for commercial aircraft. o What innovative products and services will be introduced? o How will those products shift, and who will offer them? o How will the structure of industry participants be changed? o Will new alliances be created? o Will PMA Parts grow to have major impact, or be thwarted? o What will airlines outsource, and what will they maintain in house? o How will airline-affiliated MRO providers be impacted? o What will be the economic and commercial impacts of new technology components on MRO? This 15 page strategic summary is available for $99.95 here

Credit Card Fees - the next cost cutting item among airlines

No cost is too small and OK to ignore.  Airlines are embracing e-commerce with a vengeance.  The surprise here is that Qantas is the first mover.  We would have expected a US carrier (Southwest at least?) or perhaps even BA.  But before the month is out, this issue will be all over. Get your debit card ready.  Airlines are getting into the habit of charging you for everything they can.  Every $1 they can hit you for is good clean, new revenue.  If every passenger in the US paid but $1 more, airline revenues would skyrocket by nearly $800m in 2006.

------------

Qantas is to introduce a cash payment option on qantas.com and move to a flat fee for credit card payments from 24 May 2006. Customers can purchase tickets, using BPay, up to seven days before departure.

 

Qantas Group General Manager Sales and Distribution Rob Gurney said that the airline’s credit card surcharge from 24 May would be A$4.40 for domestic and trans-Tasman bookings and A$12 for international bookings, charged per passenger per booking and covering all sectors in the booking.  “The change from our current percentage based credit card surcharge is simpler for customers, who will know from the outset the cost of using a credit card to buy an airfare.

 

“The flat rate will mean that some customers will pay less in fees,” he said. “For others the cost may be slightly more, however BPay will provide an alternative payment method where no fees apply.”
 

 

 

'Babyboomers' have highest look-to-book ratio

The piece below confirms what Richard Eastman said to us late last month.  Baby Boomers have the money and are a very significant part of the online travel buying public.  Note the piece mentions only 10% actually book online although they are voracious readers of content.  This is the generation that is used to working to find information as opposed to younger generations would have less patience and endurance for "work".  The younger you are, the less brand loyalty you have and conversely the older you are the more you value a brand you know and trust. --------------------- A VC-backed research group has issued a US-focused study which looks at how different age groups book travel online.

Boston MA-based Compete found that babyboomers – people aged 45-64 - are most likely to book online. It says that ‘10% of the 17m babyboomers who research travel online will also book online...’ Babyboomers are also the most voracious researchers, looking at an average of 36 pages of content when researching. Other headline findings from the study show that ‘young travellers’ – the 18-24 age group – are most likely to book at price-focused online travel agencies, visiting an average of 1.7 OTAs when researching. Only one in five will book travel without visiting an agency site. At the other end of the demographic scale, seniors – 65+ -  are the most likely to go supplier direct. Airline sites account for 80% of all seats bought by seniors, compared with 72% for the 25-34 age group. And 68% of seniors’ hotel bookings are made at the hotel site. Gregory Saks, a senior associate at Compete, said: ‘Travel marketers that develop content, services and promotions targeted as different age groups will be ideally positioned to more effectively manage their online distribution strategies.’ The VCs behind Compete are Charles River Ventures, William Blair Capital Partners, Split Rock Partners, North Hill Ventures and Idealab!.

 

 

 

A Pilot's life - yo ho, yo ho, a pilot's life for me

The current fracas at Delta gives one pause. Are the pilots nuts or smart? The same question applies to Delta's managers. Federal Air Regulations (FAR) limit commercial pilots to 1,000 flying hours in any 12 month period. Dividing 1000 hours by 52 weeks in a year and you get ~19 hours on average that a pilot is allowed to work on a weekly basis. Monthly the average allowed by FARs is a little over 83 flying hours per month to remain with the 1000 hour 12 month limit. CBS reported in December 2005 that Delta, the nation's No. 3 airline, has said in bankruptcy filings that its 6,000 pilots make an average annual salary of $169,393. So on average Delta's pilots are making over $150,000 per year and they work (under FAR) for about a half-month. Imagine, if you will, that your job paid that and you had a work rule imposed by the government that you only worked 2 weeks per month. There is no information on what the average manager (non-pilot) at Delta earns. But we know its likely to be under $150,000 and it certainly is for at least 160 hours per month. We fully expect to get comments from pilots complaining about the numbers and our not understanding what really goes on. Before that happens, let us give a tad more perspective. Carl Kuwitzky, a vice president for the union, said in an interview Wednesday with The Dallas Morning News that the union has been improving its partnership with Southwest. "Our pilots have no problem working hard," he said. The airline's 4,700 pilots had about 67 hours of actual flying time a month before the latest agreement, reached Nov. 6, goes into effect. Southwest pilots used to average about 70 hours a month a decade ago, the carrier's union officials say. But as the pilots have gained seniority, they've also earned more vacation. Moreover, a 777 Captain at American flies 320 people for ~$170/hr while a Southwest Captain flies 150 people for ~$190/hr. However, Southwest's model is vastly more efficient. Whereas an American 777 pilot will fly the 777 for say 10 hours, he/she then takes 24 hours off and comes back with 320 people. That means 640 passengers in 3 days. During the same period, a Southwest pilot will have carried people for three days, likely flying six legs per day with over 100 people per leg. That means while an American 777 captain transported 640 people in three days, the Southwest captain transported about 1,800. While we used the example here of American (based on data we found online), it could just as easily been Delta or United or Northwest or Continental. We came across a fascinating theory put forward by Sam Fairchild, a well-known aviation industry consultant. He proposes, basically, that airlines split themselves into two separate groups. One handles all customer facing issues - call this company A. The other handles all flying issues - call this Company B. Company A then contracts with Company B for transportation. You could see what happens next, if Company B becomes too expensive, Company A can shop around. This model will quickly ensure that Company B never has the power it has within a combined airline structure as it does now. What happens now, in an airline, is massive transfer pricing from everything in the company to those protected by FAR - with the exception of the great and greedy who run the company, of course.

Its not all Boeing

Getting lost in all the fuss and bother over the A350, Airbus is building its single-aisle planes as fast as it can. The story people should be following here is the 737 vs. 320 production. Most orders are coming in for these airplanes. There is a great battle going on between factories to get these planes to their customers. Knowing this one might ponder production build quality - are these planes coming out with no pre-delivery issues? We are watching for build quality changes. -------- ATW -- Boeing holds a healthy lead over Airbus in terms of new orders for March and the first quarter of 2006, while Airbus delivered more aircraft in the quarter. Turning to deliveries, Airbus had a slim lead through March 31, having delivered 101 aircraft in the first quarter versus 98 for Boeing. Interestingly, Boeing actually out-produced Airbus in March, handing over 41 jets versus 33 for its rival.

Apple talks to IFE developers to bring iTunes to seatbacks

You have been reading here about our thinking on this matter for some weeks. At last its in the open. Apple is the best thinking firm in the mobile entertainment space. We have recommended that travelers use their miles to download content not only on Apple devices. This could be used for movies and other content, too. The upstream value for airlines is clear - they can get rid of the in-seat equipment that breaks. Airlines can become conduits for content and get paid for this. For instance, iTunes charges 99c for a song or $10 for a whole CD. Instead they could charge 2,500 miles for this and use up miles at a higher value than giving aways tickets. Airlines have embraced e-commerce and are hunting for ways to get higher share of wallet. Travelers clearly don't want to pay more for seats. Michael O'Leary should love this model. The increased use of mobile devices that entertain and provide communications (hello iPhone?) need a lot of storage. Flash memory requirements are going to get bigger. In the US, if 1% of travelers buy downloaded content at $1 per time, airlines could see a huge rise in revenues. In 2003 (last year of data we found on DOT's website) there were 646 million enplanements. Traffic has jumped since then, we estimate 715 million for 2005. No wonder Apple is taking a hard look. ---------- FI -- IFE providers aim to lure Apple on board aircraft as Panasonic launches broadband and Thales system is approved Aircraft in-flight entertainment (IFE) system providers have held talks with Apple Computer on the possibility of licensing its iTunes media download software for airlines' own systems, enabling passengers to use frequent-flyer miles to download music and videos on to iPod MP3 players in-flight. Downloads are one of a range of concepts being explored by suppliers such as Thales and Panasonic in response to airline requests to expand the range of on-board applications. “We’ve had lots of discussions with Apple,” said Thales vice-president and in-flight systems general manager Brad Foreman last week at Aircraft Interiors Expo in Hamburg. “The key is to get them to see the value of hosting iTunes on an aircraft. Is it a big enough market for them to be interested in? I’d try to do it tomorrow if they said yes.” Panasonic Avionics strategic product marketing director David Bruner agreed that “there’s a lot of airline interest” in the idea of hosting iTunes. “Apple is aware of the market,” he said. “It’s a small market for them, but it’s a very visible market.” But Bruner added: “Our interests are wider – not just Apple, but enabling any e-commerce on the aircraft. Music is one thing in that category we are working on.” Apple refuses to confirm or deny the talks, saying "Apple never talks about the future." Several airlines have requested building iPod docks, or Universal Serial Bus (USB) portsin seatbacks, allowing passengers to browse iTunes through the airline's IFE system before transferring music directly to the MP3 player. Flights could be an ideal time during which to download songs, but currently it is restricted to those passengers with laptops flying on a flight with a wireless network. In order to license an onboard system offering, Apple would have to re-engineer the software to allow songs downloaded mid-flight to be transferred back on the customer's computer hard disk, currently prohibited. Apple would also encounter licensing issues similar to those faced by in-flight telephony providers over where copyright and sales data are recorded for media downloaded in international airspace, according to industry insiders familiar with the negotiations. During the Interiors Expo show, Panasonic announced plans to boost its IFE offerings by launching a broadband data communications service over Ku-band satellites. The company expects to reveal subcontractors for the project and its first two airline customers soon. “Communication is the hot thing for the next two to three years,” said Bruner. “Connexion by Boeing has proved there is a market for broadband.” Panasonic will also support AeroMobile’s service, enabling passengers to use their mobile phones. Meanwhile, Thales’ TopSeries i-4500 has been approved for use on Air Canada’s Embraer 175 and 190 regional jets, making the French company the first supplier of an in-seat, all-digital IFE system for the Brazilian manufacturer’s aircraft. The video and audio on-demand system dispenses with the need for a box of electronics under each passenger seat.

SAA joins Star Alliance

Star Alliance is welcoming South African Airways (SAA) as its 18th member into the alliance. Star Alliance is the first aviation alliance to include an African airline and SAA is the first airline from Africa to have joined such an alliance.

BTC weights in on Wright Amendment

Group urges Mayors to focus strictly on public interest Calls on Southwest to move to DFW, but cautions American to be careful what it asks for RADNOR PA., April 10, 2006–The Business Travel Coalition (BTC) today published analysis and conclusions regarding the Wright Amendment controversy after a 5-month due diligence initiative. In a letter to Dallas Mayor Laura Miller and Fort Worth Mayor Mike Moncrief, BTC urged the officials to consider BTC’s findings as well as Senators James Inhofe’s (R-OK) and Tom Harkin’s (D-IA) proposed legislation, S. 1425. According to the Coalition, if the Mayors and City Councils pursue what’s in the highest and best public interest versus what’s in American Airlines’ or Southwest Airlines’ interest, then business travelers in Texas and around the country will benefit enormously. It is BTC’s conclusion that the public interest is best served by Southwest Airlines moving to DFW, a move advocated by DFW and American. BTC Chairman Kevin Mitchell cautioned though, “Some may think such a move would be a dancing-in-the-street solution for American, but the airline should be careful what it asks for. Did US Airways invite Southwest into its hubs at Baltimore , Philadelphia and Pittsburgh ; United, Denver and Dulles? Of course not. Southwest’s entry to DFW would be a serious threat to American wherein the only winners who matter would be the consumer and the taxpayer.” The BTC Report can be downloaded at http://btcweb.biz/wright.htm.

New business class airline to launch

As if the New York-London market does not have enough capacity. eos and MaxJet are already there and then there are the legacy carriers. How does this airline think its going to get any traction? What is so compelling about their offering? To think that their market research is suffcient reason to create this new airline seems like a long shot. The good news is, of course, that it makes the market more interesting. we're all for that. -------------- CNN - British and American business travelers will soon have a new low-cost airline to choose from for flights between London and New York. Silverjet is expected to start its Luton to Newark business-class service six to nine months after it lists on London's Alternative Investment Market (AIM) in May. Silverjet announced on Monday that it hopes to raise £25 million ($43.5 million) from institutional investors. The company eventually wants to run a 10-aircraft fleet to other destinations. All 100 seats onboard the aircraft will have flatbeds and a full business class service will be offered, the company said. There will also be significantly reduced check-in times -- as little as 30 minutes. The airline will be based on a similar model to short-haul budget counterparts easyJet and Ryanair. The first all-business airlines offering low-cost fares, MAXjet and eos, began operating between London and the U.S. in November. Silverjet chief executive Lawrence Hunt has been working on developing the business for two years. Hunt has been involved in six start-up businesses since 1984. He told the UK's Press Association that big airlines gain most of their profits from premium customers and lose money in economy class. In effect, business class passengers were subsidizing economy class passengers, and by losing economy seats, prices can come down without any compromise in service, he said. "Market research has shown that passengers are currently not satisfied with the value of business class services on offer," Lawrence said. "We therefore believe that there is a real demand for a long-haul airline, operating on a low-cost basis yet offering a high-quality, business-class product." Peter Owen, a former British Airways operations director, is Silverjet's chairman, while John Bavister, a former Thomas Cook and Airtours executive, is finance director. Following the float, Mr Hunt will own a 10 percent stake in the business while a further 10 percent will be owned by the other five members of the management team.

Dummy of the week #9

A man has been living at a Paris airport since 1988. He could be any passenger waiting for a flight, sitting patiently on a red plastic bench in Charles de Gaulle Airport's Terminal One, luggage piled neatly by his side. He sips a cup of hot chocolate and scans the crowd, occasionally cocking his head to listen to the airport announcements. He peruses a book, Hillary Rodham Clinton's "It Takes a Village." But Merhan Karimi Nasseri is going nowhere. He has been waiting for a flight out of France, he says, for 10 years. Nasseri was expelled from Iran a decade ago for his political views. Through a series of fateful missteps, he landed here without any documents. Since then, Europe's increasingly stiff stance toward refugees and his fragile mental state have kept him at the airport here in legal limbo. His is a story of broken hopes and bureaucracy, of a trip across Europe in search of a homeland that became a journey into mental chaos and despair. And it is a story of a man who has searched for his family, only to find an adopted one here, at Charles de Gaulle. "He's like a part of the airport. Everyone knows him," says Muhamed Mourrid, the manager of the Bye Bye Bar, pointing to the spot where Nasseri, 47, has lived for a decade. "That's his table, his chair, his place." Adds Marise Petry, a Lufthansa clerk, "He's one of us. We even get letters for him." Among the annals of horrific refugee tales, Nasseri's story is remarkable for its pathos and complexity. It begins in Iran in 1977, when Nasseri, fresh from studying in England, was expelled for protesting against the shah. His expulsion left him without a passport. Nasseri came to Europe. He bounced from capital to capital, applying for refugee status and being refused, again and again, for nearly four years. In 1981, his request for political asylum from Iran was finally granted by the United Nations High Commission for Refugees in Belgium. That decision gave him refugee credentials, which in turn allowed him to seek citizenship in a European country. The son of an Iranian and a Briton, Nasseri decided in 1986 on England with the hope of finding relatives there. He got as far as Paris, where in 1988 his briefcase containing his refugee documents was stolen in a train station. Nasseri boarded a plane for London anyway. But when officials at Heathrow Airport found he had no passport, they sent him back to Charles de Gaulle. At first, the French police arrested him for illegal entry. But as Nasseri had no documents, there was no country of origin to which he could be deported. So he took up residence in Terminal One. From its circular confines, he and his attorney, the Paris-based human rights lawyer Christian Bourget, battled to define his status and send him to London. In 1992, a French court finally ruled that Nasseri had entered the airport legally as a refugee and could not be expelled from it. But the court could not force the French government to allow him out of the airport onto French soil. In fact, Bourget said, French authorities refused to give Nasseri either a refugee or transit visa. "It was pure bureaucracy," said the lawyer. French immigration authorities have no comment on the case. Bourget and Nasseri then focused on Belgium, where they hoped to reclaim Nasseri's original refugee documents. But Belgian refugee officials refused to mail them to him in France. They argued that Nasseri had to present himself in person so that they could be sure he was the same man to whom they had granted political asylum years before. But, inexplicably, the Belgian government refused at that point to allow Nasseri to return there. And under Belgian law, a refugee who voluntarily leaves a country that has accepted him cannot return. In 1995, the Belgian government finally told Nasseri that he could retrieve his refugee documents if he agreed to live in Belgium under the supervision of a social worker. Nasseri refused. He said he would move only to Great Britain. And so here he has remained, year after year. At first glance, the dignified man does not appear to be a refugee who sleeps on an airport bench because he has nowhere else to go. His clothes are clean, his moustache well-trimmed. He keeps his one blazer covered with plastic wrap, hanging from an airport cart. His belongings are carefully packed in a frayed suitcase and a stack of Lufthansa boxes. Nasseri nods hello to a clerk, who calls him "Alfred," his nickname here. He follows the news closely, thanks to the most recent Time magazine, which the postman has just dropped off. And he loves to discuss the new selections from the Book-of-the-Month Club. "I just keep on reading, every day," said the soft-spoken Nasseri, a courtly gentleman who rises and offers his seat to a visitor. "I just keep waiting here." His pallid complexion is testament to his inability to cross the airport threshold to the outside world. He walks to the doors of Terminal One and absorbs fresh air as they swing open. But he never steps outside. His hollow cheeks and thin frame show the limits of the generosity of airport staff and strangers to help with his meals. Nasseri's confused account of his plight speaks to the psychological price he has paid in his fight to become a man who belongs somewhere. "Nobody could suffer all he did and stay normal," noted Bourget. The sad truth is this: After fighting for years to leave the airport and apply for citizenship elsewhere, Nasseri was afraid to do so when the opportunity arose. Belgium offered Nasseri the chance to settle there, but he refused. "Now, I think he will stay in the airport until he dies," Bourget concluded softly. His bizarre tale has brought him a degree of fame. He has been the subject of news reports from Finland to Britain. His life story became a 1994 French film, starring Jean Rochefort. Nasseri gets fewer visitors now to punctuate the long days down on Terminal One's boutique level, ringed with stores and small cafes. But he still has a following who help clothe and feed him and lift his spirits. "He does no harm to anyone," said Papa Starr, manager of the Les Palmes restaurant. "Everyone cares for him here." Several times a week, the airport priest stops by to visit him, as does Dr. Phillipe Bargain, the airport doctor. Many staff regularly visit him at his table for a cup of coffee and a chat. "I get lots of cards at Christmas," he said. "I call it my American Christmas." His life follows the quotidian airport cycle. He wakes at 5:30 in order to shave in the men's room before passengers arrive. He reads all day long. At night, he waits until the airport stores are locked before he brushes his teeth with the toothbrush and toothpaste from a complimentary airline travel kit. Weekly, he rinses out his clothes overnight in the bathroom. Nasseri is renowned throughout the airport for his refusal to ask for help. "We have a colleague who gave him clothes, but he returned them, saying 'I'm not a beggar,'" said Crystelle L'Hospitalier, a Lufthansa clerk. But he has to eat, and accepts occasional meal vouchers and francs from stewardesses and airport staff. As the years have slipped by, it has become increasingly clear that Nasseri will never leave Charles de Gaulle. His airport years have made him "crazier by the day," on the topic of his future, said airport doctor Bargain. When he talks about flying to London, the staff here greet him with understanding smiles. "An airport is kind of a place between heaven and earth," said Danielle Yzerman, spokeswoman for Charles de Gaulle. "He has found a home here."1 Nasseri, who has since adopted the name "Sir, Alfred Merhan" (that's not a typo — Nasseri took both the title and its misplaced comma from a mistake in a letter from British immigration), has changed the story he tells about his background several times over the years: Over the years, he has claimed many things about his origins. At one time his mother was Swedish, another time English. Nasseri's effectively reinvented himself in the Charles de Gaulle airport and denies these days that he's Iranian, deflecting any conversation about his childhood in Tehran. ("He pretends he doesn't speak Persian," his longtime lawyer, Christian Bourguet, says. "He was interviewed by Iranian journalists and made believe he didn't understand.") When we first met two years ago, he insisted that the United Nations High Commissioner for Refugees was attempting to locate his parents in order to establish his identity. But a spokeswoman for the agency dismissed the assertion as "pure folly." Early on in his saga, Nasseri maintained that he was expelled from his homeland for antigovernment activity in 1977. According to a number of reports, Nasseri protested against the regime of Shah Mohammed Reza Pahlevi while a student in England, and when he returned to Iran, found himself imprisoned, and shortly thereafter exiled. He bounced around Europe for a few years with temporary refugee papers, alighting finally in Belgium, where he was awarded official refugee status in 1981. He traveled to Britain and France without difficulty until 1988, when he landed at Charles de Gaulle airport after being denied entry into Britain, because, he contends, his passport and refugee certificate were stolen in a mugging on a Paris subway. Nasseri could not prove who he was, nor offer proof of his refugee status. So he moved into the Zone d'attente, a holding area for travelers without papers. He stayed for days, then weeks — then months, then years. As his bizarre odyssey stretched on, Bourguet, the noted French human rights lawyer, took on the case, and the news media piled on. Articles appeared around the world, and Nasseri became the subject of three documentary films. (Oddly, apparently none of his friends or relatives have attempted to contact him.)2 Nasseri is known for his honesty (when he isn't talking about himself) and his refusal of charity. On two occasions he turned in billfolds full of money that had been mislaid by passengers. Airline and airport personnel push meal vouchers on him so he can eat. "French fries are my favorite," he confides. "It's not a very healthy diet, but I get enough." On 17 September 1999, an international travel card and a French residency permit were put into Nasseri's hands. With them, he's now free to leave the airport, either to take up residency in France or to fly to another country that will allow him entry. He refuses to sign them, however, because they list his nationality as Iranian, and he wants it listed as British. He remains at Charles de Gaulle airport, using the excuse that he's determined to stick to this point rather than face life outside the terminal: [In 1999] he finally got permission to leave the airport — in fact, he can now go wherever he likes in Europe. The problem is, he no longer wants to. "He is scared to leave this bubble world he has been living in," said Dr. Philippe Bargain, the airport's medical director. "Finally getting the papers has been a huge shock to him, as if he was just thrown from his horse. When you wait 11 years for something and suddenly in a few minutes you sign some papers and it's done — imagine what a shock that is." "He will have to be weaned from the airport, like an addict really." Dr. Bargain said. "Still, it does make you wonder what kind of a society we live in that this can happen to a man."3 As of 2005, Nasseri is still living in the airport. He does not lack for money, as Dreamworks paid him a rumored $250,000 for the film rights to his story.

DFW & Love Field

Last week we interviewed Bernhard Weinstein, Professor of Applied Economics at North Texas University. An attempt to interview a DFW official was rebuffed because, he advised, DFW is in a "quiet phase". Prof. Weistein proved to be a good substitute. The podcast of the interview is still being prepared and will be available on the IAGportal (see link above). A key point made in the interview is that the Wright Amendment was poor legislation. But that does not mean its removal would help the DFW Metroplex now. The region has so much invested at DFW, anything that negatively impacts this regional asset will hurt a lot. Love Field is constrained and Southwest has limited options there anyway. No wonder there are rumblings about moving the entire Southwest HQ operation to somewhere else, like Phoenix. So, if Southwest were to quit Love Field and move into DFW, that airport will be protected inasmuch that it needs (desperately) Southwest's traffic flow. DFW carries a lot of debt, the ratings on which can only improve with Southwest's arrival. However, with DFW apparently run as an American Airlines resource, Southwest may have to be forced to move there. The idea of a regional airport authority is a smokescreen, it appears, for the eventual closure of Love Field and forcing this move. So it seems the real story here is not so much the protection of American Airlines, as it is the protection of DFW. Metroplex residents might lose much more if DFW cannot pay down its debt. And this is why so many people want to close Love Field. That has to leave people at Southwest wondering about going to DFW and being in an environment controlled by American's allies. Maybe Phoenix looks better every day. We certainly don't see Southwest needing to bend to the concerns and fears of the Metroplex. Indeed, were Southwest to move its base to Arizona, the Metroplex will lose anyway. Southwest can write its own ticket. Seattle had to face that reality recently. The Wright Amendment looks more complex every day, providing little wiggle room for anyone. It may in fact be in Southwest's interests to get out of town. That would minimize its exposure to the forces at play, trying to protect DFW and the complexities of dealing with American Airlines. Of course any drawdown by Southwest in North Texas means even higher fares in the Metroplex. This whole business looks more and more like a Mexican standoff. We're betting on Southwest doing a pre-emptive strike.

A Delta strike

Are these pilots or lemmings? Washington Post -- Nearly 95 percent of the Air Line Pilots Association's members voted in favor of walking off their jobs if their contract is thrown out. "Today's outcome will not disrupt Delta service," Delta spokesman Bruce Hicks said. --------- Not disrupt service? What is this man smoking? We would like to see when Delta's managers will take their 18% + 32% pay cuts. To think the airline can survive a strike is silly. Unfortunately we don't see Delta's management leading from the front. Whatever you do, don't book on Delta until the dust settles. When it settles there may only be a hole in the ground.

US Travel Booking Season starts early

Americans are already getting excited about their summer vacations. That means business, big business. Figures from the Travel Association Industry of America (TIA), show that travel and tourism generate about $1.3 trillion in economic activity in the US every year. This equates to about $3.4 billion a day or $40,000 a second. A great deal of this activity is crammed into the summertime, when school is out and families take off to see the country. According to the new TIA/Synovate "Voice of the Traveler Survey," a substantial majority (81%) of Americans who are planning to travel this summer have already started making plans for their longest summer trip. The survey found that 43% of those now planning their vacations are planning the same time as they did last year and 30% are planning earlier than they did last year. "The message for travel marketers is that many travelers are making summer travel destination choices very early in the year, and they may want to launch summer travel campaigns earlier this year than in the past," said Sheri Lambert of Synovate. 21% of Americans who are planning to travel this summer have already arranged lodging at their destination, according to the survey. The rest are either exploring their options or have not thought much about their summer trip at all. ----------- Are the airlines ready? Are other suppliers in the industry ready? No - but that's OK becuase 32% have not decided on a destination and only 38% have decided on their mode of transport. What next? Expect rising airfares because the capacity is a lot tighter. Don't be surprised if its cheaper to fly overseas than cross-country. Also expect screwups at airports because, for sure, TSA isn't ready. That trip to Canada looks ever more enticing. With Air Canada's little jets buzzing all over the lower 48, we suspect that's going to be a hot spot for Americans this summer. Its close enough to be time-efficient and yet "away from it all". This piece is not sponsored by Tourism Canada.

Aboulafia, ILFC & Airbus

Dear Fellow Airplane Development Second-Guessers, Selling things for a living is hard work. You’re only as good as your last hit. And sometimes second best doesn’t get you much. It’s like the sales contest in Mamet’s Glengarry Glen Ross: “As you all know, first prize is a Cadillac Eldorado. Anyone want to see second prize? Second prize is a set of steak knives. Third prize is you’re fired.” Selling aircraft is particularly tough, but it really depends more on the product and less on the sales technique. ILFC’s Steven Udvar-Hazy, easily one of the most powerful men in aviation, cast serious doubt about Airbus’s A350 at this year’s ISTAT conference. After John Leahy gave a vigorously optimistic review of Airbus’s widebody products, Udvar-Hazy praised the latest A350 incarnation, then damned it with a “silver medal” compared with the 787’s gold. GECAS’s Henry Hubschman then endorsed Udvar-Hazy’s message. This means that any airline management team that selects the A350 has to explain to their board why, exactly, they chose a plane that the smart money regards as a runner-up. Udvar-Hazy confirmed that the middle market is where the action is, and he implied this looked like a winner-take-most market. A runner-up plane gets a 25% market share (Udvar-Hazy’s figure) and weak pricing. That’s the aviation equivalent of a set of steak knives. And so far, that’s reality. While the A350 numbers aren’t bad, it has yet to garner a serious blue chip airline customer (TAM, Finnair, and USAirways are the quality buyers here). That vaunted Qatar order (not blue chip, but at least big) hasn’t been signed. The 787 has swept Asia, including India and Australia. Just as important, numerous blue chip airlines are set to place an order for a mid market jet this year, including BA, Emirates, Lufthansa, and Singapore. What if they all go with the 787? Couple the A350’s weakness with the likely demise of the A340 (that’s Udvar-Hazy’s view, confirmed by an Emirates deferral just after ISTAT) and you have a potentially catastrophic situation. After 2008 (Udvar-Hazy’s possible year for the A340’s demise), Airbus’s only presence in the 200-550 seat range will be just one plane. A runner-up plane. The good news is that Airbus has a way forward. Udvar-Hazy recommended a family of middle market planes that leapfrog Boeing’s 777 and 787 (a strategy backed by a faction within Airbus). He also said he wants to see a commitment to this family by Farnborough. From the audience, that sounded vaguely to me like an ultimatum. Selling planes isn’t like selling computers or stereos. If the market rejects a new consumer product, it’s easy to kill it and come up with something they’ll like. With aircraft, you get one or two shots a decade. Airbus’s hubristic A380 launch in 2000 is only now starting to negatively impact their future. (If you think Teal’s A380 forecasts are harsh, they’re generous and buoyant compared with Udvar-Hazy’s “300-400 at best” comment. He also correctly identified the A380 launch as the cause of Airbus’s mid-market woes.) Any correct decision Airbus made now would only bring rewards after 2012, but it might be well worth it. European firms are supposed to be better at long-term thinking. Now would be a smart time for Airbus to start an all-new widebody family to compete against both the 777 and 787 in the next decade. The 777 looks great today, but in ten years it would be vulnerable. A new family of planes to compete with the 787/777 would benefit from composites experience learned with both the 787 and A400M; Airbus could even advertise the new planes as superior second-generation composite jetliners. They could give priority to the 250-seat A330/350 replacement, with the larger A340 replacement arriving a year or two after. Drawbacks: a new Airbus family would cost $3-5 billion more than the current A350. That may be difficult when EADS needs to attract more public investors as Daimler Chrysler and Lagardere reduce their stakes in the company. Abandoning the current A350 means leaving Boeing alone in that segment for at least five years. It would also delay any A320 follow-on necessary to respond to a 737 follow-on, potentially hurting Airbus’s important narrowbody revenue stream. And a massive course change would hurt Airbus’s credibility in the eyes of customers. This is serious stuff. But it beats relying on CannibalAir to rescue your 200-550 seat market standing (“We have met with your A350 salesman; he was delicious. Send another for further consultation.”). That’s a recipe for a slow, steady decline. All of this assumes that Boeing gets it right with the 787. That remains a considerable risk. But what’s the worst-case scenario? Given the production volume that looks likely, it will be tough for them to not make cash. Boeing’s worst ever technical hiccup would mean only a 6-12 month delay—painful, but not enough to help Airbus. The only real problem would be performance or operating economics shortfalls. There’s certainly risk there. But banking on the other guy’s failure is a strategy for defeat. For years Airbus dismissed critics of its widebody product strategy as being in Boeing’s pocket. And now Airbus has exactly Two Options. One: “We made mistakes, and are now paying for them. This will take hard work, and we will lose business in the short run but we will embark upon a new product development strategy that ultimately will return us to market strength. We’ll be back!” Option Two: “Steve Udvar-Hazy? He’s in Boeing’s pocket.” Yours, Waiting For An A360/A370, Richard Aboulafia ------ For more on the 340's demise (still to be officially announced of course), please check IAGportal.

Southwest Airlines requests rates at Dulles

PRNewswire-FirstCall -- Southwest Airlines today announced it has requested two gates at Washington Dulles International Airport for service the carrier intends to start in the fall of 2006.

"We are celebrating 35 years of Legendary Service in 2006. Still, the opportunities to grow our famous Southwest Low Fare leadership within the United States are abundant," said Gary Kelly, Southwest's Chief Executive Officer. "The sheer size and scope of the Washington, D.C. metro area makes Washington Dulles International Airport an exceptional market opportunity. Located in northern Virginia, Dulles will be a terrific complement to our Baltimore/Washington International Thurgood Marshall Airport (BWI) operation located near Baltimore, Maryland."

"The population and business growth in northern Virginia means a great opportunity is rapidly getting even better," Kelly said. "As the Washington, D.C. metropolitan area continues to expand, the need to serve our Customers in northern Virginia becomes more urgent."

"The Baltimore/Washington market and Maryland's BWI airport are very important to Southwest Airlines," Kelly said. "We are very excited to grow our Baltimore/Washington presence and welcome new Virginia Customers at Dulles with our Low Fares and Legendary Customer Service." 
----------------
To assume that the folks at BWI are furious and those at MWAA are jubilant is an understatement.  Dulles needed a replacement for Flyi and they got the big mama here.  United must be feeling ill - its bad enough Southwest came to Denver.  Recall that MaxJet is looking for feed, so no doubt they are delighted.  Consumers in the region should be elated.  Those people who have flown into BWI to get to DC are also thrilled.  No more the extra $75 each way in car service.  This move by Southwest is big news.

French strikers are 'lazy frogs'

telegraph.co.uk -- The chief of a British low-cost airline has called the French "lazy frogs" after one of his planes was delayed by protesting French students. Philip Meeson, chief executive of Jet2.com, was incensed that French police allowed about 50 students to stage a runway sit-down that stopped around 100 passengers boarding a Boeing 737 at Chambery airport in the French Alps last night. Eventually the plane was able to take off for Leeds Bradford airport, where it arrived 90 minutes late. On his airline's website, Mr Meeson had complained last week about a strike by French air traffic controllers and called for "lazy frogs to get back to work". Today he repeated the "lazy frogs" comment and said he was annoyed that French police had done nothing to stop the Chambery runway protest which also forced Jet2.com to divert a flight from Manchester to the French town of Grenoble as it was unable to land at Chambery. Robert Evans, Labour MEP, hit out at Mr Meeson's comments while stranded at London City airport by a delayed Air France flight to Strasbourg. He said: "These cheap and derogatory remarks are beneath even a budget airline." The leader of Britain's Liberal Democrat MEPs, Chris Davies, was just as critical of Mr Meeson - but he also attacked the French approach to strikes. "This is a stupid and crass remark, given that we want the French to visit Britain as much as Brits want to travel to France. "But there is no doubt that the French are cutting their own throats by striking at every opportunity. Last year French railways lost 10 per cent of their freight traffic - more than any other country in Europe - through actions like this." Mr Davies warned: "France and Italy are in a headlong economic race to be the sick man of Europe." ----------- Yikes.

JetBlue partners with Travelport

In what is being termed as a ground-breaking content agreement, Travelport has signed a pact with JetBlue Airways that offers all of Travelport’s US-based corporate customers exclusive access to JetBlue’s full inventory, delivered directly and seamlessly online.

 

The agreement also provides access to JetBlue fares for Galileo’s Travelport resellers.

Dean Sivley, chief operating officer and general manager, Travelport I Orbitz for Business, said that Travelport is now one of only two online booking tools to which JetBlue distributes its content.

Referring to JetBlue’s decision to agreeing upon extending its distribution to corporations through the “ground-breaking agreement” with Travelport, he said, the company will provide its clients with “simplicity, convenience and great service” that JetBlue is known for.

“This agreement in particular, underscores the value and efficiency of our corporate marketplace to suppliers worldwide and puts our Travelport customers in an extremely competitive position,” said Sivley.

As per the information available, by booking all their travel in one place and within corporate policy, corporate travelers save time, eliminate hassles, and stretch their travel spend. 
--------------------
So JetBlue continues to evolve and become more the rest of the airline crowd that its has poked fun at.  Note that each new sales channel means the airline is giving up some revenue somewhere.  Also recall JetBlue's CEO wants to see an extra $10 per leg this year.  Makes us wonder if JetBlue is as strong as everyone thinks.

Air France to fly world’s first aircraft with inflight mobile phone system

Air France will take delivery in early 2007 of the first Airbus aircraft line fitted with the OnAir GSM equipment enabling the use of mobile phones on board, it was announced today at the Aircraft Interiors Expo in Hamburg. Air France will receive the first aircraft, a single-aisle Airbus A318 that will have the OnAir system pre-installed, and will conduct a six month commercial trial using the new service. The passenger trials will take place on short-haul flights within Europe and to and from North African destinations, and will help Air France to consider every impact this new service may have on the cabin environment and the travel experience. George Cooper, OnAir CEO, said: “Delivery of the first aircraft to be fitted with our system is a landmark development in this industry. It prepares the ground for many types of aircraft to be similarly equipped. “OnAir is pleased that an Air France A318 aircraft will be the first off the Airbus assembly line with this equipment installed and that the airline has committed to a six months trial of our system. This is a further endorsement of our service. This aircraft will be flying as part of one of the world’s largest airlines and this therefore represents a very significant step forward for OnAir.” Rüdiger Fuchs, Airbus SVP Cabin & Cargo Customisation and member of the OnAir Board points out: "By introducing onboard mobile communication services Airbus underlines its leadership in cabin innovations. As a very important Airbus customer, we are particularly delighted to deliver the first aircraft to Air France; for the airline industry in general, we expect this to be the first of many line- and retrofit aircraft, enabling airlines to respond to growing passenger demand to communicate onboard." The OnAir service will allow Air France travellers to use their own GSM mobile phones and GPRS-enabled devices such as the BlackBerry or Treo, to make and receive voice calls or to send and receive SMS messages or emails during the flight without harmful interference to the aircraft navigation systems. --------- We are seeing a pattern in IFE. The killer app is not movies and other content. Its dawning on people within the airlines (at last!) that flying is tedious and an event to endure. Basically nobody really wants to be there. Anything that takes us out of that environment helps us endure the experience. The best option (by far) is to allow passengers to communicate with the outside world.

American 767s to carry IMS Inflight handhelds

AMERICAN Airlines has selected a handheld device from IMS Inflight to provide IFE in the business cabins of its Boeing 767-300 fleet. These aircraft are also to be equipped with IMS’ Terminal Data Loader (TDL), which can accept new digital content either wirelessly or from removable media such as DVD, CD, USB 2.0 memory stick or AIT tape. The latest in a series of products that includes the original PEA and the P-series, announced last autumn, the new device features a 10.6in screen, the largest to be offered to date in handheld IFE, and an exceptionally large 80Gb hard drive. The IMS handheld is part of a package of improvements to business class in American’s 58-aircraft fleet of 767-300s that also includes a lie-flat seat, advanced lighting and roomier overhead bins. The first refurbished aircraft will be introduced this spring, with the rest to be completed between September and early next year. It is understood that each aircraft will carry a stock of 48 devices and that the order from IMS totals around 2,800 units. Business passengers on the 767s – they operate on American’s transatlantic routes, and within the USA and Latin America – will have access to a selection of four early-window films, four late-window, two classics and two shorts, and nearly ten hours of television content, including popular sitcoms, dramas and content from Discovery Networks. The portable will also carry a selection of interactive games, music videos and 100 audio CDs, and will give access to daily Reuters news in video and text formats. IMS will provide both hardware and all related content services, including content acquisition, licensing, encoding, integration, security and delivery. “American successfully trialled PEA last year,” says IMS chairman Joe Renton. “Since then we have been working with the airline on the best way to use our technology to meet their needs. The result is a new portable with a 10.6in, 16x9-aspect-ratio touchscreen that fits into the 767 seatback.” The device will draw power from a docking station in the seatback and will normally be viewed there. But it can also be removed and placed where the passenger chooses. Passengers will also have the use of a Bose QuietComfort 2 noise-cancelling headset to exclude cabin noise and enhance audio quality. “We believe our customers will love this system,” says Mary McKee, American’s managing director of inflight products. “They can leave the device in the seatback for convenient hands-free viewing or move it to the tray table or even the lie-flat bed.” IMS believes that this system configuration will lead in time to content loading at the seat via a cabin WiFi wireless network. The IMS Terminal Data Loaders destined for the American 767s can use a range of wireless technologies to bring content on to the aircraft. “Once a WiFi standard for onboard data transfer was in place you would never again have to move the portables for content loading,” comments IMS content consultant Michael Childers. “This could be the platform of the future – an embedded data loader on the aircraft with wireless clients that are portable in nature but which do not have to leave the in-seat docking station for content refreshment.” ----------- So we see the glimmer of the future here. Get rid of the quipment built into the seats. WiFi in the plane is a great idea. Soon you will see thse IMS devices tossed. Why? Because peple will soon have their own WiFi devices that can network with the plane's content. The sooner airlines get rid of equipment which breaks the better. Airlines are not in the meal business and they are not in the entertainment business. Meals only get served on long haul flights because competitors do it. So that is a market driven cost they have to bear. However in terms of IFE, American is doing the smart thing here. They are preparing their cabins to deliver content. As soon as they can, we have no doubt, they will drop the equipment part of this deal. Providing access to content provides the best leverage - charge for the service and have limited hardware in the game.

In-flight internet gets bumper repeat business

e-TID.com -- The availability of in-flight internet services is affecting passengers’ choice of airline, according to a new survey on behalf of Connexion by Boeing. The survey found 83% of respondents said the availability of Connexion, which allows users to surf the internet, send emails and watch live TV, would have an impact on their future travel plans and choice of airline. It also found 94% planned to use the service again on a future flight, while 92% would recommend it to others and 84% said they thought it was ‘good or fair value’. When asked what were the key benefits of Connexion, 44% said the ability to be productive while travelling, 25% to stay in touch and 22% to access their emails. The survey questioned 3,200 passengers worldwide who had on average flown 23 round trips during the past year, 85% of whom were travelling on business. Connexion by Boeing, which launched commercially in May04, is currently available on flights operated by Lufthansa, SAS, Japan Airlines, ANA, Singapore Airlines, China Airlines, Korean Air, Asiana, El Al and Etihad Airways. Access to the service costs from $9.95. ----------- The concept is gaining momentum.

Atlanta is latest city to sue sites over hotel taxes

By Dennis Schaal - Travel Weekly Atlanta joined the ranks of several other big cities and sued the major online travel agencies for allegedly unpaid city hotel taxes. The civil suit, filed March 29 in the Superior Court of Fulton County, Ga., seeks to collect the allegedly unpaid taxes as well as damages, penalties and interest. The suit doesn’t estimate the amount of taxes owed because it alleges that the defendants have not filed required reports on their sales. The litigation, filed by two Atlanta firms, Powell Goldstein and Pope McGlamry Kilpatrick Morrison & Norwood for the city, seeks an accurate accounting of the amount of taxes allegedly owed, the establishment of a trust to cover the liability and the granting of a “preliminary and permanent injunction requiring defendants to collect and remit occupancy tax on the full consideration that is paid by customers for the right to occupy rooms in the city.” The city’s tax rate on hotel stays is 7%. The defendants are Cendant Travel Distribution Services, Expedia Inc., Priceline.com, OneTravel Holdings, Travelocity.com, Site59 and some of their affiliates. The suit alleges that the defendants act as hotel operators or agents of the hotel when they sell rooms on a merchant basis, and that they improperly collect -- or should be responsible for -- taxes on the retail rate, but only remit taxes on the wholesale rate they get from the hotels. “The defendants carefully hide their failure to remit all appropriate taxes from their own customers, who are led to believe that the amount they pay in ‘taxes and fees’ covers all appropriate hotel/motel taxes on the quoted room rate, and that these taxes are actually being paid to the city, when in fact the defendants are pocketing a significant portion of the taxes the customers have paid,” the suit alleges. “Defendants hide this practice from their customers by charging a bundled amount in ‘taxes and fees’ that is more than sufficient to cover all applicable taxes, without disclosing the applicable tax rate, or the amount of tax that is actually remitted,” the suit says. The suit alleges that the defendants “acted in concert and jointly in their industry-wide failure to remit applicable taxes under shared business models.” To back up that claim of collusion, the suit cites the defendants’ numerous partnerships, common practices and technology, communications with one another and membership in the Interactive Travel Services Association. The language about acting “in concert” is important because the city is trying to show that it is appropriate to sue the online agencies in one suit instead of having to pursue them individually. In other jurisdictions, the defendants have sought the dismissal of suits, arguing that they improperly were joined as defendants. Other Georgia municipalities, as well as Los Angeles, San Diego, Chicago, Philadelphia, among others, have filed similar suits. The online agencies counter that they are following local tax laws in paying taxes on the net rate because they do not control hotel inventory and thus are not hotel operators or agents of the hotel and thus are not liable for taxes on the retail rate that consumers pay. The defendants are vigorously fighting the numerous lawsuits. ----------- Attempts to tax the Internet continue. Its going to be interesting to see if any of these suits stick. We suspect that no matter who wins, the cities are going to try force a method by which they can collect their occupancy taxes. In the end, it will be the properties that bear this burden as they interface with the traveler.

Virgin America - Less desirability than the name suggests?

The tag line on their web site suggests that they are, ‘an airline we hope you’ll love.’ Clever and witty double-entendres aside, that is probably the safest, most plausible thing they can hope for. After all, love defies logic. It makes you buy incredibly expensive gifts for a woman who makes more than you do. It makes you do illogical things like hire skywriters to print her name in the clouds. It makes you go on romantic vacations to places that don’t have big-screen TVs or SportsCenter, and claim that you enjoy it. In short, it makes you do things you would not do in your right mind, because, in fact, you are not in your right mind. And no one in their right mind could think Virgin America will work, at least in its present form. It’s a nice looking website, at least. This is starting to look like Virgin Express all over again. I am sure that there are those who believe that just slapping the Virgin brand on a carrier in the US will mean something and be worth passengers from day one. However, without a plan, a product, or a strategy, it isn't going to be worth anything. It still has to be an airline, with a product, and a route structure, and a strategy. Preferably something unique. As a new carrier, there has to be something to differentiate it from the millions of excess ASMs that are running around the industry already. This is especially true in the California Corridor, were Southwest has taken a lead role. JetBlue has done marginally well from Long Beach, and that is a market that they, basically have to themselves due to slot restrictions. I see no plausible unique draw for Virgin America. Sure, there is only so much you disclose during startup, before you have an operating plan, even before you have planes or an operating certificate. But eventually something has to be disclosed. And they are fast losing any form of momentum they had. We know of Skybus in Columbus, Ohio, that they plan to be a ultra-discounter. Even though that is still somewhat vague from a product standpoint, we can be sure they will not have a front cabin and we can be sure they will not be a domestic Maxjet. We know nothing similar about Virgin America. Will there be a front cabin? Will they focus on long-haul or short haul? Will this be a domestic Virgin Atlantic, with a high level of frills and good service? Major airports or secondary? Primarily transcon? A year from startup we knew that JetBlue would have service to Upstate New York and to Florida. What is in a name? How much is 'Virgin Atlantic' worth in the domestic US market from a brand identification perspective these days? And how many of the people who they will be appealing to have even heard of, or much less flown on, Virgin Atlantic? Will people automatically make the connection? It has been made clear that this is a franchise operation. This is NOT Richard Branson running the company. This is a new airline that happens to be wearing the Virgin name. That said, how much of what Virgin Atlantic does, and does well, will this carrier be able to mimic, or even want to replicate in the domestic market? Very, very few people choose an airline based solely on a name, a brand. It is not a brand we seek. It is a good fare, a good schedule, frequency, or, especially being the only nonstop operator in a market. Sometimes it does help to have a reputation of serving edible food, but not much. Think of how many bad meals you’ve endured on an airline and still flown with them again. Without something in one of these categories, there is no reason to select a given airline. Very few people will go fly an airline just to fly them, though I had intended to do that with Independence Air – just to hear the pre-flight announcements given by celebrities. I didn’t move fast enough on that one. Does anyone really choose an airline based on it being trendy, hip, cool, or snazzy? I don’t think so. If that were the case, wouldn’t Delta be re-doing the entire airline as Song, as opposed to taking some aspects of Song and putting them into Delta? JetBlue may be all those things above, but they were also an airline serving quantifiable demand. Sure, you will question, the original Virgin Atlantic made its name being those things when it started service. Massages onboard and all that. True, but they were also an operator from Heathrow, which has value over-and-above everything else. Route structure first, frills later. If you’re not flying somewhere people need to go, the other stuff doesn’t matter. For everyone that says a US operation could be as successful as Virgin Blue, I say it could be as much of a failure as Virgin Express. Pessimistic? Absolutely. One can do very well being pessimistic in this industry. Anyone had a can of Virgin Cola recently? No? Virgin Express was questionable leadership, an excess of optimism, an incoherent route strategy, a lack of a unique market position, and bad marketing. It had a name and not much else. Virgin Blue entered the market at the same time Ansett exited the market. Perfect timing. There is no slot, no unique position for this carrier to fall into in the US domestic market. While I have been critical of JetBlue, I am downright pessimistic about Virgin America. JetBlue found routes from New York that needed a discounter presence, or just needed additional capacity. For all my previous criticisms of JetBlue, their initial route strategy was sound. They may be suffering now from excessive optimism, but initially, they got things right. And it didn’t hurt that TWA basically exited the New York market after the merger with American, and USAirways basically left the NY-Florida market soon after the JetBlue entrance into the market. And let’s be honest, USAirways had been gouging passengers going from NYC to upstate NY. I hardly see any of the West Coast participants being so willing to cede territory to Virgin America, especially given the JetBlue example I just noted. There is plenty of capacity on the West Coast, and plenty of discount capacity on the West Coast. Of course, when you have a new carrier, the traditional approach is to bring in a successful industry veteran to lend credibility to the new enterprise. Preferably, someone who has a track record of moderate success. If he/she had a STRONG record of industry success, you wouldn’t expect for him to be available to be lured away to a new entrant. So moderate success is acceptable. MODERATE SUCCESS! I love the way Fred Reid basically throws all of Delta under the bus as an explanation of why Song didn't work. "But ultimately what happened with Song was that the distress of the parent (Delta) overcame the ability of the parent to really run two brands and a different business model." That is only the same dichotomy that has existed with EVERY SINGLE AIRLINE-WITHIN-AN-AIRLINE SCHEME EVER CREATED! There are so many problems with airline-within-an-airline - too many for no one to have noticed that this should be a non-starter. And they still keep trying it. I will talk about that in a future installment. But at least we see where he is going with this. It could read something like, “You saw what I tried to do at Song! Think that, but across a WHOLE AIRLINE. And without all the baggage of being a legacy carrier! That's what we MIGHT do. Maybe. Unless it doesn't turn out to be a good idea, then we will take whatever the next great idea is! Because whatever we do, it will be great.” And the idea of it failing was not the fault of those running it, but the fault of the entire model being flawed. Amazing that the people who created this didn’t realize the inherent problems. In reality, I think, in the case of Virgin America, we are looking at a replication of the JetBlue strategy on several fronts. First, being a discounter at a major hub. Second, a discounter with a primary hub on a coast. Third, though, is the concept of waiting for a major competitor to fail. I think United coming out of bankruptcy has seriously jolted Virgin America. Let's be honest, how much room is there for additional carriers in the Bay Area? You already have Southwest and United. JetBlue is doing the discount transcon thing. Alaska has a presence, as does everyone else. Virgin America will not be entering a single market without at least 2 competitors on it, frankly because those are the only markets with any hope of attracting passengers. Just being the one discounter who operates from SFO is not enough to hang an airline on – there are plenty of other carriers running around who will lower their fares to match you. Just serving the markets the other discounters don’t serve will not allow one to build a coherent route strategy – ask Vanguard Airlines about that. But at least they realized that being a discounter in Southwest markets didn’t allow them to bring much more to the party. I do not think Virgin America can play the discounter game, and that has its own downside. First, there is simply no room for another discounter in the Bay area. You cannot ‘out-Southwest’ Southwest. Southwest owns the short haul, California-Corridor market, and United has a presence which means there are already a lot of seats in the market. A third carrier simply offering cheap seats and a name bring nothing to the market. Remember also that United and Southwest fly from multiple Bay Area airports to multiple Los Angeles Basin airports, and I believe that choice is important. Being able to offer that choice is expensive. Additionally, it would be a mistake to underestimate the power of Alaska Airlines in terms of customer loyalty in the medium-haul market to the Pacific Northwest. Making any headway against them will require a mix of low fares and good service, which Alaska provides. Again, just putting the seats out there and charging a cheap fare does not pull passengers to a new carrier. Southwest has a presence here too, as does United. Medium haul to the south, Phoenix, Tucson, Albuquerque, etcetera, is basically controlled by Southwest and USAirways. Not a lot of room here either. JetBlue owns the long-haul discount market, with American and United are slugging it out for the premium long-haul market, with Continental also taking a piece of that. The Delta/Song product firmly occupies the narrow area between premium and less-than-premium. (This is not a bad area, it means some amenities, but a definitely second-tier front cabin product – and long haul is where that front cabin matters.) So, in summary, the discount market out of the Bay Area is locked up. But so is the premium. What I like to call the Mid-Continent routes may be the most promising area, in terms of the level of competition, but this is by no means a guarantee either. Most of the fortress hubs (Chicago, Minneapolis, Detroit, Dallas/Ft. Worth, Atlanta, Kansas City, St. Louis, Houston, and Milwaukee) have only one carrier operating nonstop service, but usually at very high frequency, or at least enough frequency to effectively serve the market. Some of these markets, however, are highly seasonal. Great for a use between April and October, but what do you do with the plane for the other 5 months of the year? And honestly, one cannot really have a successful carrier just operating these Mid-Continent markets. These aren’t the most dense markets from San Francisco, which is obvious because of the lack of heated competition on them. So just being in these markets without offering the rest of the markets that Bay Area travelers consider important makes you a niche carrier. Could be profitable, but it definitely means limited growth. Frontier has done the job right – even if it hurts a little, you have to operate the most important destinations for you home markets. Frontier, I believe, serves 20 of the top 25 business markets from Denver. And in the California Corridor, there are 3 things you need to compete; frequency, fare, and scope. In short, a lot of flights, with cheap fares, to a varied group of destinations. Mr. Reid points out in his recent interview that San Francisco is a cosmopolitan city, with links to many cities, countries and companies. And to be valid and valuable to the market, a carrier should offer a varied route structure. This is Airline 101 – offer a service suited to your market. There are simply not enough markets that beg for service, that have room to enter or that have a weak competitor on them, to build an airline on. Let me make this clear. Without a failure by a carrier operating in the Bay Area, there are not enough markets for Virgin America to piece together into a successful, viable, valuable route structure. Being a coastal carrier, as JetBlue is about to find out, can have disadvantages. Circuity will be key among them. Sure, taking a connecting a flight from Portland, Oregon to San Diego via San Francisco is conceivable (except for the dozen or so nonstops in the market already, but let’s not get to that) but how about Denver to Portland via San Francisco? How about from Dallas to Calgary via San Francisco? Once you’re basically east of Salt Lake City, the number of destinations to which you have to substantially ‘go out of your way’ in order to get to increases. And there are very few product enhancements you can offer that will make a trip with a substantially higher elapsed time appeal to passengers willing to pay decent fares. North-South connections work via SFO; east-west connections do not. This is a market that can eat airplanes. An hourly pattern to LAX from SFO requires at least 5 aircraft alone. To fly the transcon market, each aircraft at best gets you two round trips, and more likely, at best, one – how many red-eyes can you operate? And as I noted earlier, operating one or two trips in a market is not the way to compete in this area. As if all of that were not enough, there’s more. Utilization. Discounters, Southwest the chief among them, live by keeping planes in the air. Tight schedules are key. Southwest doesn’t like operating into mega hubs due to the chances of planes getting stuck through waves of delays. In fact, Southwest, when they discontinued service to SFO, noted that flights operating from SFO tended to be delayed, which would then cascade through the system to all flights tied to that SFO trip. And knowing how Southwest schedules, ONE SFO leg might be tied to 6 other trips at least. 24 SFO departures could lead to at least 144 other possible delays around the system. Enter Virgin America. A discounter, who thinks they will be able to keep planes in the air constantly and keep costs reasonable (notice I did not say low). I’m not saying this venture cannot work. The history of this industry is full if improbable success, imponderable gambles gone right, and miracles. And the investors involved have deep pockets and will not give up on this experiment quickly. But the odds are not in their favor. PT

Deal Unlikely In Airbus-Boeing Dispute

Reuters -- The United States and the European Union are unlikely to negotiate a settlement to a dispute over subsidies for aircraft rivals Boeing and Airbus, US trade officials told reporters on Friday. The dispute is potentially the biggest ever to go before the World Trade Organization. Each side accuses the other of showering billions of dollars on their aerospace giant. While Washington remains open to a negotiated settlement, "we haven't made the progress we've been looking for, which is why we've been pushing forward with the WTO case." a US trade official said during a phone briefing on the US Trade Representative's annual foreign trade barriers report. Jim Mendenhall, general counsel in the US Trade Representative's office, started the phone call with a set of on-the-record remarks. But several other US trade officials who spoke during the briefing did so on the condition they not be individually identified. The United States and the EU filed tit-for-tat cases at the World Trade Organization over government support for Boeing and Airbus in May 2005. Since then, both sides have professed their desire for a negotiated settlement without any notable movement toward that. The US trade official told reporters he doubted that situation would change. "I suspect you'll continue to see the case moving forward," he said. The United States filed its case because it believes European government launch aid loans to help Airbus develop new aircraft violate WTO rules. In its counter complaint, the EU charged that Boeing benefits from a number of indirect subsidies ranging from state tax breaks to government research and development contracts. US Trade Representative Rob Portman told reporters on Thursday that the United States was waiting to hear from the EU on any proposals it had for a negotiated settlement. "We are perfectly willing to put everything on the table and have a discussion about this, but it must include the removal of launch aid. That's been our consistent position from the beginning, but at this point they're not prepared to have that discussion," Portman said.

Dummy of the week #8 - TSA (again?)

Airport screener 'roughs up' woman, 83, in wheelchair Worldnet Daily -- An infuriated Denver woman has filed a complaint with the Transportation Security Administration after a security screener forced her 83-year-old mother to get out of her wheelchair and walk to a pre-flight screening area, despite doctor's orders not to stand and an orthopedic card saying she had a metal plate in her hip. The incident at Denver International Airport occurred eight days ago when Sally Moon, her sister and a Frontier Airlines employee were transporting Bernice "Bea" Bogart to a special security screening area. Moon's sister, who did not have concourse clearance and the Frontier employee were left behind as Moon pushed her mother to the screening site. Bogart, wheelchair bound since a 1999 fall that broke her hip and further disabled by breast cancer surgery in 1997 and a major stroke in 2004 that caused dementia, was under strict doctor's orders not to stand without assistance or her walker. She carried a special orthopedic card to alert airport security she had a metal plate in her hip. Moon had been told by Frontier and TSA staff that screeners would not require Bogart to leave her chair for the security check, so she turned to put her mother's carry-on luggage through the x-ray device. When she turned back, she discovered her mother had been picked out for further screening and was out of her chair, "hobbling" through a glass-walled corridor. "There were no grab bars," Moon told the Rocky Mountain News. "What I could see really was her fingers trying to hang onto a little ledge." Moon says she instinctively reached out to assist her mother, fearing another fall and another broken hip. "Don't touch her!" Moon says the screener warned. Moon attempted to tell the young screener, a woman in her mid-to-late 20s, that her mother was under doctor's orders not to stand without her four-wheeled walker, but the screener shot back, "You'd better change your attitude. Or do you want me to make it so you don't fly today?" Bogart, who is also hard of hearing, was allowed to sit briefly, but the screener soon instructed her to stand again and lift her arms, according to Moon. She then reportedly lifted Bogart's arms because the elderly woman couldn't, due to her earlier breast cancer surgery. Moon says she was told to sit across the room "or else" when she continued to protest. After the "prolonged search," the pair was cleared to continue to their gate and Moon put her "shocked" mother on the flight to Tennessee for a month's visit with Bogart's youngest daughter. An angry Moon attempted to complain to Denver's TSA management, but was told to make her complaint to the national office. Supervisors would not tell her the name of the screener who had made boarding her mother so difficult. "I don't know if she thought my mom had a bomb in her Depends or what," Moon said. While Moon is still angry and cynical that TSA will do anything about her complaint, a Denver TSA spokeswoman said the agency expects a high degree of professionalism from screeners and Moon's complaint would be investigated. TSA's Office of Civil Rights will soon issue a response, she said. "When we receive complaints, we take them very seriously, we investigate them and we address any personnel issues as appropriate," she said. Bogart, now in Nashville, says she doesn't want to see anyone get in trouble. "They were all kind except for that one girl. I thought she was a little harsh," she said. "She wouldn't let my daughter help me. And I have a hard time standing very long at a time at all." ------------- Oh boy.

VoIP builds velocity … as Apple waits in the wings

Shepard online -- CONVENTIONAL mobile communications providers should be afraid, very afraid. If they haven’t built VoIP into their plans, it could already be too late. Industry observers are speculating that Apple could be about to throw its iPod-nourished weight into VoIP, while various sources are reporting continuing steep growth in subscribers and usage. It’s not all gloom for conventional cellular, however, as the multi-megabit HSPA family of technologies begins to make its way out into the marketplace. UK consultancy Visiongain believes that this spring Apple will launch its rumoured “iPhone” – a high-end cellphone to which VoIP capability will subsequently be added. Apple and networking partner Helio are targeting the same young-consumer market as the one in which the iPod music device has been such a runaway success, according to Visiongain telecoms analyst Pam Duffey. Set up at an estimated cost of $440 million, Helio is a US mobile virtual network operator. Chief financial officer Todd Tappin recently said the company planned to sign about three million customers and generate more than $2 billion in revenues by 2009, and declared that the target demographic would be both willing and able to pay for high-end phones. "iPhone will probably be as disruptive to the existing carrier market as the iPod was to the mobile music industry,” Duffey predicts. “And when VoIP capability is added it will be even more disruptive.” Meantime, VoIP is doing nicely on its own. Dublin-based research and Markets says that in the Netherlands alone VoIP first-line connections will reach around 1.6 million by the end of this year, versus 664,000 at the end of 2005. US service provider VoIP Inc reports that usage minutes had reached 3.6 billion by the end of last year and that it is now handling over 8 million calls a day on its VoiceOne network. And Iowa direct-marketing provider says it has just acquired the 250,000th new VoIP subscriber for its customer networks, which include Vonage and Packet8. There’s one minor cloud on the VoIP horizon, though, in the form of a prediction that spending on network equipment and software will peak next year at $5.5 billion. According to UK consultancy Juniper, revenues will then stabilise and fall in revenue terms as the Chinese market begins to mature and competition from low-cost suppliers in China and India erodes prices. Even so, the market is expected to be still worth as much as $3 billion at the end of the decade, while the VoIP applications market will show sustained growth, exceeding $500 million by 2010. In the mainstream cellular world, megabit-rated High-Speed Download Packet Access (HSDPA)-based services are now arriving on the market after trials over the last 12 months. Latest carrier to offer the ability to download at up to 3.6Mbit/sec is Partner Communications of Israel. “HSDPA is an evolution of UMTS technology,” comments Partner technology VP Alon Berman. “We will be the first to launch HSDPA services in Israel and among the first to launch anywhere in the world.” --------- Now if this iPhone has a screen like the iPod, and can store music & video - hey presto! We have another in-flight entertainment alternative.