Weekly Roundup Friday 2 March 2012

The logo for Continental Airlines used between 1967 - 1991, created by designer Saul Blass.

Good morning

Sometimes I like to open these newsletters by mentioning an anniversary date that falls during the week.  This week, I’ll instead refer to the pending demise of another of the major names in US aviation history – Continental Airlines.

Continental was formed in 1934, originally trading under the name of Varney Speed Lines, an airline operating in the southwest.

It was renamed Continental in 1937 after being bought by its long-time CEO, Bob Six; and expanded first domestically, and then internationally post deregulation in the late 1970s.

Buyouts, bankruptcies and labor problems were a highlight of the 1980s, and then the 1990s saw the airline return to stability and strength.

After a series of rumors of mergers (and denials), and an ‘alliance’ that was signed in 2008 by Continental and United evolved into a merger between them, announced in May 2010.  That merger has been slowly progressing, and this weekend sees the last time a CO designated flight will be available in the airline computer reservation systems, and the completion of the folding of CO into UA’s brand.  (Warning – with changes in their computer reservation systems, keep a close eye on the status of UA/CO flights this weekend and of any reservations you are holding for travel on either airline in the near future – any sort of chaos might occur.)

So – Continental Airlines, 1934 – 2012.  RIP.

It has generally been a week short on good news.  Greece and the Euro might be surviving for another day/month/however long, but not all has been calm and serene in Europe this last week.  Some of us were caught up in the hassles with various strikes, most notably (but not only) in Frankfurt, and there remain threats extant for possible further strikes in the near future.

IAG’s Profits Flying Sky High

However, Europe’s various woes don’t seem to have impacted on IAG.

Who/what is IAG?  It is the new parent company that owns British Airways and Iberia.  Notwithstanding new government taxes and the soaring cost of jetfuel, IAG reported a five-fold rise in its pre-tax profits, with a €499 million profit in 2011, up from €83 million in 2010.  The airline group said it had a 7.2% increase in revenue passenger miles flown and a 10.4% increase in total revenue.

The touted passenger benefits of this merger, and their alliance with AA across the Atlantic, remain less clearly apparent than do the financial benefits to IAG.

This very positive result is notable also for showing that it is completely possible for airlines to increase their profits, even when fuel (and other) costs rise as they have been.  Remember it the next time an airline excuses its massive loss as being due to increased fuel costs.

AA Lurches from Loss to Loss

Did someone say ‘massive loss’?  American Airlines (currently in Chapter 11 bankruptcy) reported a loss of $234 million.  For 2011?  Nope.  For the fourth quarter of 2011?  Nope.  That was a loss for the single month of January alone.

AA said that much of its loss related to its current restructuring operations.  Maybe so.  But it is also relevant to note that it is not making payments on its debt and other obligations during its Chapter 11 timeout.  And, however you present it, a quarter billion dollar loss – in a single month – is, well, exactly that.

On the other hand, it might also be seen as an improvement on its December result.  The airline reported a $904 million loss in December 2011.

Don’t be expecting a farewell epitaph for AA any time soon, however (although if it exits Ch 11 in a merged/bought out form, anything is possible).  The airline still has $4.14 billion in cash and cash-equivalents, enough to fund many more months of massive losses.

Part of American’s problem is that it has an older and less efficient fleet, causing its operating costs to be higher than some of its competitors.  It hopes to address that issue with the massive order for new planes it placed back in July last year, but it will be some years before they start to be delivered.

It Costs the Government How Much to Fly a Plane?

How much does it cost an airline to operate a plane?  It depends on the plane, of course (bigger planes are more expensive to fly than smaller ones, although the cost when expressed per passenger mile is typically lower), and also depends on other factors such as the route it is flying (longer routes cost less per mile than short routes), the costs for fuel and staff, aircraft and overhead amortization, and various other things.

It is a while since I last looked at exact figures, but as a rough guesstimate, I’ll say that a 737 costs about $5000 per hour (with a big range depending on the model 737 being costed), and a 747 can cost more than $10,000 but less than $20,000 an hour.  (If you have more accurate and more recent information, please feel free to provide it).

But if the 747 we are talking about is not a commercial airplane and instead is one of the Air Force’s VC-25’s – the 747-200 planes known as ‘Air Force One’ when our President is aboard, guess what the operating costs become?

Now, I’ll give the Air Force the benefit of the doubt, and will strip out all the staffing costs that are associated with a regular 747.  And we can probably guess that the Air Force pays less for its jet fuel than do regular airlines.

So, go ahead – take a guess.  How much do you think the Air Force One planes cost per hour to operate, excluding staffing costs?  As much as a commercial 747?  Perhaps a bit less due to the saving in fuel and staff costs?  Or, let’s be blunt and brutal – maybe a little bit more because when have you ever known a government program to operate as efficiently as private enterprise?

The answer?  $179,750 per hour.  More than ten times the cost of a regular airline 747.

That’s beyond ridiculous.  Details here.

Another Costa Cruising Crisis

When the Costa Concordia sunk a month or two back, the cruise industry held its breath for several long weeks, worrying if the sorry way that matter was managed would impact on people’s desire to have a ‘fun time’ cruising.  After a temporary blip and fall in booking rates, it seemed the industry quickly shrugged off the Concordia incident as a one-off event that had no real relevance of significance to what most of us could expect on our future cruises and booking levels returned to normal.  A Titanic tragedy, it happily and most assuredly was not.

It has been my feeling that the industry could withstand one disaster at a time, and as long as they were reasonably well spaced apart, it could continue to absorb further disasters into the future, without any lasting damage to ongoing booking levels.

So what will be the significance of this week’s latest cruising crisis – an event made all the more salient due to it occurring on another Costa ship?  On Monday the Costa Allegra suffered an engine room fire that left the ship with no power, drifting in the Indian Ocean.

It was finally towed into port in the Seychelles on Thursday, after three days at sea with no power, no toilets, no showers, no air conditioning, and no cooked food.  Passengers lived on sandwiches and slept on deck.

There were 636 passengers and 413 crew on board.  No-one was injured.

I’m From the Government And I’m Here to Help You

Meanwhile House and Senate hearings are being held into the Concordia event, with lawmakers apparently wondering what additional laws and regulations they can impose on non-US registered cruise ships operating in the Mediterranean.

You might think the answer is fairly obvious, but when has an obvious answer ever interfered with a politician’s grandstanding prior to now (and especially in an election year)?

More Cruise Problems – This Time, Ashore

Cruise problems of a different sort happened to a group of passengers from Carnival’s Splendor, who were enjoying a shore excursion in Puerto Vallarta.

A coach with 22 passengers on board was held up by masked assailants who robbed the passengers of money, valuables, and passports.

The robbery comes two weeks after the US State Department issued a travel warning to avoid all but essential travel to all or parts of 14 Mexican states, including the state of Jalisco (in which Puerto Vallarta is the sixth largest city).

The State Department also warned travellers to use caution in visiting part of Baja California, Colima and Morelos.

Safety concerns caused a number of cruise lines to drop Mazatlan from itineraries last year.

The TSA – Not Just at Airports Anymore

Talking about bandits stopping traffic on the side of the road, here is a thoughtful piece about the latest evolution of the TSA.

The writer, a US Congresswoman, charts the evolution of the TSA from being a scarcely trained group of airport rentacops to now being a still scarcely trained massive agency that seeks out terrorists everywhere in the US.

Her point is simple albeit a bit oblique and wrapped in rhetoric :  Yes, little training is needed to stare at an X-ray machine and to make out the occasional image of a gun or bomb.  But surely a huge amount more training is necessary to be able to appropriately and effectively randomly stop (how many oxymorons in the phrase ‘appropriately and effectively randomly stop’?) ordinary motorists going about their ordinary travels on public roads?

How is it that people – not sworn law enforcement officers, but glorified mall rentacops, with a week or so of training in airport ‘security’ now have the authority to stop citizens randomly in public places while acting normally?

Only in France?  One Hopes So!

Talking about randomly stopping drivers, and lastly for this week, you’ll need to add an extra item to your travel checklist before you next visit France for a self-drive vacation.  Change of clothing?  Check.  French phrase book?  Check.  Pack of multiple breathalyzers?  What!

New legislation in France – a nation famous for its love of wine – requires all motorists to have at least one breathalyzer in their car with them at all times.

Apparently the intent of the legislation is to encourage motorists to test themselves if they have been drinking to confirm they can safely drive (note that one’s alcohol reading increases for some time after taking one’s last drink).  France has a low 50 mg/100ml of blood limit on alcohol levels (compare that to 100 mg/100 ml in most US states) so it is perilously easy to go the wrong side of the limit, even after only a couple of moderately sized glasses of wine.

Experts suggest you should have at least two breathalyzers with you in the car, so if you do feel the need to test yourself, you still have a spare in case of being subsequently stopped.

Whatever will be next?

Until next week, please enjoy safe (and sober) travels







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