Weekly Roundup Friday 23 September 2011

Good morning

Thank you very much indeed to the 103 generous Travel Insiders who responded in the first week of our annual fundraising drive.  This is appreciably up on the first week last year, but still down on the 138 who responded in the first week of the 2009 campaign.

Special thanks indeed to Tom, Sara, Roger, Judy, Glen, Duncan, Jim, Nathan, Paul, Pete, Robert, Bob, another Bob, Montague, Douglas, Nels, John and Terry for becoming elite level ‘super supporters’, and ‘words fail me’ thanks to Leah, Leslie and Don for their extraordinary levels of support.  These twenty one special individuals have, between them, single handedly contributed half the total contributions so far this year.

But, to put these positive results of the first week into context, in total the support received from that week’s contributions is only enough to keep The Travel Insider up and running for seven weeks.  That leaves a 45 week gap still to be bridged.  This is not impossible – if we can simply bring our contributions this year to the same level as in 2009, we’ll emerge triumphant.  I’m sure you wish to continue getting timely bulletins every week, not a diminished service reduced to once every two months; there’d be no pleasure or value in that for either of us.

This is not a passive event that just magically occurs, however.  It needs your personal support – yes, you!  Please click the link to our contribution page now, and send in whatever you feel fair and reasonable.  It should take you no more than a couple of minutes to send in a credit card contribution, and that will help advance the successful conclusion of this year’s fund raising process.

I’ve written before about The Economist magazine’s ‘Big Mac’ index of world currencies (here’s a current chart) – this is the concept that something with uniform inputs should cost close to the same in different countries, if their currency exchange rates are in balance.  While it is a simplistic concept, it is a surprisingly accurate one and suggests which currencies are undervalued and which are overvalued around the world.

The thought occurred to me that maybe there is a Travel Insider index too, based on annual contribution patterns from readers – perhaps as a readout on the general ‘feel good’ factor and the economy in general?  Even if there isn’t, I found it interesting to extract the following statistics for the first week of this year’s campaign compared to last year’s campaign.  The first number is for this year, the second for 2010.

• People who contributed  103  —  66
• First time contributors   18  —  6
• Increased contribution  18  —  17
• Decreased contribution  7  —  9

I’m not sure there is any valid meaning to this, but thought you might be interested to see what your fellow Travel Insiders are doing.  Perhaps (hopefully!) it points to a slight resurgence of general optimism?

I won’t repeat the analysis again next week, because now you know I did it for the first week, you might ‘cheat’ and do something atypical to skew the statistics!

Talking about next week, if you have not yet considered helping this year, may I ask you to please do so?

So please honor the spirit of the open free Travel Insider content, and help us bring you another full year of comprehensive news, views, ideas, suggestions, and miscellanea.  We talk more about this in the next item in this week’s collation of items.

Thank you very much.

I wrote last week about how the US is turning its back on 1.3 million sustainable new jobs, and a corresponding $859 billion boost to our economy (and to our balance of trade).  I’m referring of course to our ridiculously draconian visa issuing policies, making it close to impossible for literally millions of bona fide visitors to come and spend their money in the US, causing them to go to other countries and give their travel dollars to those countries, instead.

By way of contrast, for example, here’s an article about Britain’s Prime Minister David Cameron getting personally involved in helping boost tourism to Britain.  Most other countries aggressively chase after foreign visitors; the US is almost unique in spurning the wealth they bring to our country and the jobs they create.  I don’t know a single country with a more onerous visa issuing process – not Russia or China, not even Turkey or Iran or Cuba, and none of the western nations that are wealthier or more desirable to live in than the US.

The topic clearly touched a nerve, because we had twelve people add comments to the article.  Maybe you have a story of someone you know who has struggled to get a US visa, too, or some other thoughts on the matter; maybe you even disagree with my suggestion that we should liberalize our visa issuing policies.  Please add your thoughts and suggestions to the comments too.

I’m hoping that we can distill some reasonable and actionable items from this; reasonable and actionable items that we can then press our government to do something with.  Remember – one of those 1.3 million jobs you help to create might be for you or a close friend/family member.  Some of that $859 billion boost to the economy will surely flow through to you, directly or indirectly.

We are all losing out at present, and we all stand to benefit if we can get the government to change its policy.

A large part of the reason for the founding of The Travel Insider, now almost exactly ten years ago, was the distinctive thing about the travel industry – although superficially competitive, the airlines provided (and still do provide) appalling service, with some extremely unfair policies, and in a dismayingly uniform manner such that the theory of free market competition seems to have completely failed.

Annual surveys of industry reputation confirm that the airlines are among the most hated and least respected categories of business, and this is a strange situation.  In theory, airlines are amazing facilitators of so many good things.  They help us grow our businesses.  They help us travel to keep in touch with friends and family.  They help us achieve lifetime dreams of visiting exotic places that are otherwise unavailable to us and impossible to reach.

Commentators sometimes talk about America’s love affair with the automobile – because cars too are a great facilitator of so much in our lives.  We should love airlines the same way we love cars.

So why is it we actively dislike the airlines so much?

Every so often, I’m again struck (as in ‘between the eyes with a heavy metal pole’) by an extraordinary example of why it is we truly – and deservedly – hate the airlines so much.  Now I know we gripe and groan about the cost of airline tickets, but that’s a bit like complaining about the cost of a car.  We’d love to get the latest luxury car for pennies on the dollar, and we’d love to fly first class at similar low prices.  But we vaguely understand the underlying linkage between the costs of providing a flight or a car and the price we must pay, so we front up with the money accordingly.

And then there are the exceptions.  We also vaguely understand how much it costs the airlines to transport our bags for us.  We’ve probably even somehow evolved our thinking from expecting bag carriage to be included for free in the ticket price to now agreeing to pay extra for this extra service, a bit like paying extra for air conditioning or leather seats in a car, perhaps.

But when an airline turns around and charges us more to carry our bag than they charge us to carry ourselves, then we know that we are being rapaciously taken advantage of by the airlines, and – yes – we end up hating them even more.

This article reports that fees, per bag, each way, are now in some cases as high as $400 (or even $450 with American Airlines).  $900 roundtrip for a bag!!!  A bag that weighs half or less what we do, and takes up a fraction of the space.  A bag which doesn’t need entertaining, toilets, soda or peanuts, and which doesn’t add wear and tear to carpets, seats, and everything else.  A bag which also doesn’t earn frequent flier miles.

As I have occasionally done before, I repeat my challenge to any airline employee to justify the fairness of charging this much to carry a bag.  Until such time as we can all be persuaded it is right and proper that it costs more for our bags than ourselves, we will continue feeling totally taken advantage of by the airlines, and – yes – I know it is a strong word, but we will continue to hate the airlines.

Something else which perhaps strangely causes us to, if not hate, at least dislike airlines, is when they have airfare sales.

Who in their right mind would object to any company selling their product at a discount?  Well, it is one thing to sell their product at a discount, but it is another thing entirely to sell tickets way below cost price.  It begs the question ‘If you can afford to sell tickets at this price, how come you don’t always sell them at this price?’.

And – here’s the kicker in the equation.  There’s usually an answer to that question – it is only when airlines are fighting over a route.  Both airlines will drop their prices ridiculously low and both airlines will lose money on the route until one airline gives up and goes away.  Then all of a sudden, fares go back up to their earlier levels.

The part that really hurts?  The way the Department of Justice says there’s nothing anti-competitive about a bigger airline forcing a smaller airline off a route by selling tickets at losses – losses the bigger airline can withstand, but which the smaller airline can’t.

We’re seeing the latest example of this at present on routes between DFW and LAX/SFO.  $99 – roundtrip – is the going rate at present on either American Airlines or Virgin America.

Buy the tickets while you can, because for sure they’re not going to last, and if you can drag yourself away from the Aadvantage program, please give your business to Virgin America.  They’re a good airline with a good product, and deserve our support.

It will be interesting to see which airline gives up the fight first.  In theory it should be smaller VX, but there’s some speculation about AA’s current financial health and future intentions, so anything’s possible at present.

Talking about American playing hardball, here’s a really strange item about AA allegedly ‘punishing’ its flight attendants when the flight attendants find something left behind and attempt to return it to the passenger.

According to their union, AA is punishing flight attendants for their Good Samaritan actions.  The union says flight attendants are put ‘through a torturous security interview which ultimately ends with their employment being terminated for theft,” when they attempt to return a lost item.  The union memo  adds ‘In order to protect yourself from the company questioning your good intentions and your integrity please do not play the Good Samaritan.  If you see something left behind on the aircraft, do not touch it.’

I guess there’s some back-story behind this, but it would be unfortunate if a prior ambiguous case of ‘was the flight attendant taking something to return, or taking something for themselves’ resulted in us as passengers not being reunited with the inevitable left behind phone or iPad or Kindle or whatever else in the future.

Surely there’s a positive way for both the flight attendants and the airline to work out a procedure in such cases?

All in all, air travel is just plain not nice, for most of us, on most occasions, these days.  So perhaps the suggestion of replacing airline service with buses is less unpalatable than it might first seem; at least in certain cases.

That is an idea put forward as a solution to the cost of the ‘Essential Air Service’ subsidies given to airlines to operate flights to small airports that might possibly not otherwise get service.

This article estimates there is $89 million in annual savings if we replaced flights with buses at 38 airports around the country, in cases where the journey length to a connecting airport would be less than 150 miles.

What makes the saving even more significant is that this saving is after compensating people for the value of the extra time it takes to bus rather than fly 150 miles.

We’d also save 5.7 million gallons of jet fuel, and reduce CO2 emissions by 63,500 tons.

At present 153 airports in 35 states get subsidies totaling $163 million a year.

If you don’t like traveling by bus, perhaps you’d prefer to take your car to wherever the nearest airport is.  But if you have a GM car with their Onstar service, did you carefully read through their recent revisions to their terms and conditions?

More to the point, do you know that GM now reserves the right to sell information gained from Onstar monitoring about your vehicle usage, including such things as whether you have your seat belt on or not, the speeds you drive, where and when you drive the car, and potentially many other things too.  A combination of GPS and engine data and the remote monitoring capabilities of Onstar make just about everything to do with your car usage available to them.  They can even know if you like to brake hard, accelerate fast, if you get good or bad fuel economy, and so on.

Who would want to buy such information from GM?  Insurance companies, for one.  There are already apps for smart phones that have been devised by insurance companies, ostensibly to allow you to manage your own driving habits – have a look at ‘Driver FB (as in Feedback) for the iPhone from State Farm.  Creepily, if you run this app, not only does it score your driving (based on acceleration, braking and cornering), but it even plots on a map exactly where/when you were driving and the locations where your driving was less than optimum.

How would you like insurance companies to raise your premiums based on information direct from your car about your driving habits?

 Police departments would also love this information – if they could get real time reports of vehicles being driven hard and fast, late at night, and the locations and ownership details of the vehicles, what’s the chance that, in the name of safety, they wouldn’t arrange to have an officer and his breathalyzer waiting in your driveway when you got home?

Or maybe they’d just simply send you tickets by mail any time you exceed the speed limit or failed to fasten your seat belt.  It is only one step removed from automatic photo-radar tickets at present.

Wait – there’s more.  GM reserves the right to continue to monitor your behavior even after you’ve discontinued the Onstar service.  Just because you’ve stopped paying for it doesn’t mean it stops working, apparently.  It just stops working for you – but may continue working for others.

Big brother truly is watching.

One regularly reads reports of airlines starting the process of possibly buying new airplanes at some future date, and I seldom choose to share them, because many times such stories are part fanciful fiction and part ‘negotiating in public’ between the airline and Boeing/Airbus, and really the only thing that really matters is which planes they choose, not what they say a year or more before making the choice.

However, I’ll point out three interesting announcements about pending future purchases made this week.

First, there are renewed signals that the government wishes to replace its two 747-200B planes that are known as Air Force One when the President is on board.

The heavily modified 747-200B planes were delivered in 1990, and the Air Force is now talking about wishing to replace them in ‘the late teens’ – say six or seven years or so from now.

What would the planes be replaced with?  Airbus has indicated it has no intention of bidding on any future contracts to supply Presidential planes, and Boeing probably hopes the new planes would be stretched 747-8s.

More details here.

The second interesting announcement was from the combined airline under two names that is now Air France/KLM.  One of the benefits of the two airlines merging was, of course, held to be the fact that the larger airline group could now combine orders for planes and everything else, and with greater negotiating power, get more generous quantity discounts.

So AF/KL needed to order some more mid-size widebody planes, with the two prime choices being either the A350 or the 787.  After due diligence and research, guess which plane AF/KL chose for its combined integrated order?

Ummm – they ended up splitting their order, signing up for 25 A350s and 25 787s too.  Even more crazily, it seems that in the future, both airlines will operate a mix of both airplane types.

At a time when airlines are trying to reduce the number of different plane types they operate, this seems a strange decision, and with the background of hoped for efficiencies of fleet operation and fleet purchasing spanning both airlines, it seems even stranger still.

Are the two planes so exactly matched that none of the high paid executives could bring themselves to favor one over the other?  Or has aircraft purchasing become such a politically charged game that airlines are now becoming scared to make an unambiguous choice of one model/supplier over the other?

More details here.

The third future announcement is an interesting early announcement by British Airways of their plans to replace their fleet of 55 747s.  BA is currently the world’s largest 747 operator.

The interesting part of this is the plane choices they’re apparently considering.  Are they considering the new 747-8?  No.  Are they considering the larger A380?  No (although they do have 12 on order, with deliveries to start in 2013).

They are instead considering somewhat smaller 787 or 777 or A350 planes.  And that is really interesting.  With BA’s operations centered around capacity controlled Heathrow, you’d think they’d have a burgeoning need to operate planes as large as possible so as to get most value out of the precious limited slots they have there.  This was the logic which drove Airbus to develop the A380 in the first place – a belief that as international travel numbers continue to steadily increase, while key airports remain unchanged in capacity, airlines will variously want and/or need greater capacity in the form of bigger planes rather than more flights.

This apparently good sense approach to managing an airline’s operations has failed to match the reality of what the airlines do.  In very round figures, the 777/787/A330/A350 type planes have been outselling the 747-8 and the A380 by at least ten to one and probably more like 20:1.

One can’t help but also feel that some of the original A380 purchasers have been finding it hard to effectively deploy their planes, and certainly some airlines have been politely allowing other airlines to move forward in the delivery queue.

However, here’s an article showing how Singapore Airlines is about to add its latest A380 destination – New York, replacing current 747 service with new expanded capacity A380 service.  The flight, starting in January next year, will travel between Singapore and New York, with a stopover in Frankfurt.  FRA and JFK will become the ninth and tenth destinations that SQ operates A380s to.

But, in general, few people could claim the A380 to be a runaway success.  Why is that?

There are perhaps two reasons.  The first is that airlines these days would prefer to operate two flights of smaller planes rather than one flight by a larger plane, so as to have twice as many departure/arrival times, hopefully extending their reach further into the potential market for their flights.

On the face of it, this makes sense when the flights are operating below capacity, but much of the time at present, capacities are close to maximum, and one wonders why airlines aren’t more focused on increasing their capacity.  Most other industries, when they are at close to producing at capacity, choose to increase their capacity.  (The answer is the airlines’ internal fear that if they increase their capacity, they’ll be unavoidably tempted into lowering their fares ‘too much’.)

The second reason is that airlines with slots at capacity limited airports want to greedily keep those slots for themselves.  They’d rather operate two half full flights – and keep a competitor from getting one of the two slots – than operate a single full flight and see their other slot passed to another airline.

This is just another example of how allowing the airlines to control the slots at airports does not result in best use of the slots.  While simplistic economic theory might have suggested this would be the outcome, the much more Machiavellian real world is clearly showing quite the opposite to be the case.

Here’s a suggested slot solution :  Allow airlines to rent slots for a year (possibly two) at a time, and have open auctions for the slots.  This would force airlines to maximize the return they get on their annual slot rentals.  At present, the value of the slots an airline ‘owns’ is sometimes an obscured number that is not fully reflected on a balance sheet, and so airlines can use the slots both productively or non-productively without directly and clearly harming their own bottom line.  But if an airline had to pay full market price for a year’s worth of a slot, it would be very much harder to then use the slot for less than maximum productivity.

And now, let’s switch from talking about airplane sales to instead looking at some interesting airplane order cancellations (or at least deferments).

Boeing had prepared a splashy celebration for Monday this week, when it was to finally (some two years behind schedule) hand over its first 747-8 to its first customer, Cargolux (pictured at the top).  The freight carrier was to receive its first 747-8 freighter on Monday, and a second one on Tuesday.

But – ooops.  On Friday, word leaked out that Cargolux was refusing to accept either plane, pending further discussions and negotiation with Boeing over the terms of the sale.  It must be an interesting sales contract that allows an airline customer to step back from accepting a plane one working day prior to its delivery.

Speculation rampaged around the internet as to the reasons behind the delay.  Then mid this week, another cargo airline, Atlas, announced it was cancelling the first three 747-8 freighters it had on order, too.

On the other side of the coin, Cathay Pacific piped up that it remained happy with its own order for ten of the freighters, and expects to take delivery of the first one as currently scheduled, in October.

So how to make sense of all of this?

It seems there may be several different issues all at play here.  Cargolux recently had a 35% share taken in it by Qatar Airways, and Qatar and its executives are well known for playing hardball with airplane orders.  It seems the Cargolux issue is partially linked to Qatar’s own issues with Boeing and the compensation it believes it should receive for its delayed 787 deliveries.  Qatar is using the interesting logic ‘You’ve got to give us bigger compensation on the 747-8 delays because if you don’t, we’re worried you won’t give us enough compensation on the 787 delays either’.

There is also another issue – the plane is apparently not offering quite the promised performance and efficiency that had earlier been anticipated, and in such cases, airlines again expect an adjustment in the purchase price.  Perhaps these numbers are still being negotiated.

There is another issue, too.  The early 747-8s, rather like the first 787s, were built before the plane had completed all its testing and certification, with a requirement for the already built planes to have various modifications and fixes slapped on them, after they had already been built.  New planes yet to be built will have the changes integrated into their original design in a more elegant manner.  It seems that Atlas in particular is unhappy with getting these patched early model planes – particularly because it indicated a willingness to accept another nine planes to be built subsequently as part of its original order for twelve.

In addition to airframe/airplane issues, the GE engines have not performed quite as hoped for either, and while GE says it expects to improve later jet engines, the current ones are almost 3% less fuel efficient than had been expected.

So put all these different factors into the pot, and you end up with an embarrassing situation for Boeing, but probably nothing that won’t be resolved reasonably amicably longer term.  It is hard to say who needs who the greater, because the 747 freighters are the only product of their type available for cargo airlines to purchase.  Airbus is not currently proceeding with its earlier plans to develop a freighter version of the A380, and apparently the 747-8F plane is substantially better than current 747-400 freighter version planes.

Oh – what is happening to the three hand-me-down planes Atlas didn’t want?  It seems that maybe none of the other airlines that have ordered 747-8F planes want them either.  Boeing said they are working to ‘remarket’ those planes.

Here’s a really strange story about how some Southwest Airlines planes have had Arabic style markings painted on their underbellies.  If I’m understanding what the several reports imperfectly describe, it seems the markings might be in a type of ‘secret ink’ – a chemical that is heat sensitive and only readily visible when warmed up.

Southwest says it is treating the incidents, which have been occurring sporadically since February, as an internal prank or petty vandalism.  The TSA and FBI aren’t so sure and are investigating.

Equally strange is that none of the reports, all of which seem to build from a single source, show pictures of any of the markings.  Describing them as ‘mysterious’ and ‘thought to be Arabic’ isn’t very exact a description.

Prank or not, and harmless or not, it isn’t the sort of thing that is supposed to be happening to airplanes.

This article talks about a White House proposal to kinda sorta double what we pay as security fees on airline tickets.  Okay, so that is regrettable, but what else is new.

The thing that caught my eye was the claim by the airlines’ lobbying group, the ATA, when they say that governments should pay for the cost of aviation security, not airlines and passengers, because national security is a government responsibility.

Let’s overlook how ‘aviation’ security suddenly was equated to ‘national’ security, and let’s not even ponder why airlines (and their passengers) should get their security paid for by the government when hotels, ball parks, malls, and most other places don’t also get their own version of ‘national’ security also paid for by the government.

Instead, my question is this :  Who/what is ‘the government’?  Isn’t the government – and its money – simply us, and our money, recycled?  And isn’t this symptomatic of so much that is wrong at present – a belief that ‘government’ money is in some way different to our money.

Let me ask this of the ATA instead – Why should someone who never flies from one year to the next contribute equally to the cost of aviation security alongside the person who flies twice a week?

What the ATA is really saying – and what they demonstrated during the brief FAA shutdown when aviation taxes stopped being payable, with the airlines rushing to up their fares to make windfall profits – is that they want to be able to get as much extra money from us themselves.

In a similar situation, airlines are complaining that new Department of Transportation customer rights rules make it harder for the airlines to show us how much of a ticket price is going to the government as fees and taxes.  The DoT basically wants airlines to quote gross ticket prices, so as to make it simple and obvious and easy for us to understand how much it actually will cost to fly somewhere.

That is sensible and good.  But in doing so, it also acts to obscure any awareness of how much of the total charge is going to the government, and the airlines wish to keep that figure prominently visible.  And you can sort of understand why the airlines wish to inject this small element of exposure and accountability into the government’s ever increasing slice of airfares, can’t you.

Here’s an interesting story about how at least 165 passengers are known to have disappeared, without trace, off cruise ships in the last 16 years – almost one a month.  Alien abductions?

We’ve endured liquid bombs, shoe bombs, and of course crotch bombs and ‘internal’ bombs.  Now here is a new threat – turban bombs.

While few of us wear a turban, perhaps a heightened concern about bombs hidden about one’s head explains this lady’s experience?

Lastly this week, not all ‘drunk’ pilots are really truly drunk (or even really truly pilots), and sometimes it seems to be an unfair shifting of blame.

Here’s a case in point.  In a recent plane crash in Russia, headlines said “Navigator in fatal Russian plane crash ‘drunk‘.”  Never mind the scare quotes around the word drunk; the clear implication is that a drunk navigator somehow caused the plane to crash.

But if you read to near the bottom of the story, you’ll see that ‘experts’ – whoever they are – believe (rather than know for sure) that the navigator had ‘about’ a glass of vodka (how much is that?) shortly before the plane took off from Moscow (how long before?).

Take it from me.  Most Russians can quite safely consume ‘about a glass of vodka’ and not be materially impaired at all.  In any case, the vodka was consumed probably three or more hours before the plane crashed, and the navigator doesn’t fly the plane.

I’m not suggesting pilots should have a few drinks before flying, but I am saying that this is probably the most trivial of the factors involved in this crash, and is not deserving of being given headline treatment.

One of the fascinating parts of the article is the disclosure that some Russian planes still operate with a flight crew of four – pilot, co-pilot, engineer and navigator.  It is decades since western airplanes had a four person crew, and these days it is exceedingly rare to even find a three person crew.

But, perhaps we should not have given up on navigators.  Because, lastly this week, here’s an amusing story about a lost pilot who had yet to even take off.

During a recent early morning ‘rush hour’ at London City Airport a flight was delayed due to technical problems.

Since they needed the gate for another service, the aircraft was towed away whilst the engineering crew worked on it.  The passengers were then told a new gate number.  Everyone moved to this gate, only to find a third gate had been designated for them.

After some further shuffling, they all boarded, and as they were settling in, the flight attendant made the standard announcement, “We apologies for the inconvenience of this last-minute gate change.  This flight is to Edinburgh.  If your destination is not Edinburgh then you should ‘deplane’ at this time.”

At this point a very confused-looking and red-faced pilot emerged from the cockpit, carrying his bags. “Sorry,” he said, “wrong plane.”

Please do choose to help out in our annual fundraising campaign.  Your help truly does make a difference, and truly is appreciated.

Until next week, please enjoy safe travels.

David.