Weekly Roundup Friday 13 July 2012

Good morning

It’s a Black Friday today.  Superstition holds this to be an unlucky day for traveling, so be careful out there.

I opened last week’s newsletter eulogizing Andy Griffith (which one reader mildly disagreed with); and so there’s a temptation to do the same this week for another of my favorite1960s era sitcom stars, Ernest Borgnine, star of McHale’s Navy.  He’d been one of those people I kept assuming had died long ago, but would occasionally come across (most recently in the fun movie ‘Red’ last year).  He was 95.

But, to adopt a happier note instead, let’s observe anniversaries for America’s oldest railroad, the Union Pacific, turning 150, and also that other American institution, Spam, turning 75.

On the other hand, if we were to observe a passing, perhaps a more travel related one would be that of Lord (and formerly Sir Colin) Marshall, who was the CEO of British Airways from 1983, and subsequently its Chairman until retiring in 2004.

This was a tempestuous time for British Airways, with the airline being privatized in 1987, and suffering more than a bit of controversy, including the ‘Dirty Tricks’ campaign against Virgin Atlantic Airways that saw Virgin and its owner, Sir Richard Branson, awarded £610,000 in damages – oh yes, and also up to £3 million in legal fees too.  This was also the time when BA dropped its former livery in favor of a pot pourri of generic international themes, a move criticized for spurning the airline’s Britishness.

However, Lord Marshall (he was knighted in 1987 and made a life peer in 1998) himself seemed to avoid any personal criticism of the actions taken by his airline, and was well regarded in British business circles, accepting many different directorships and similar roles.  More details here.

What else do we have?  An attached article looking at some of the insanity that passes as preparations for the London Olympics, now a mere two weeks away from commencing, and items below about :

• Reader Survey Results – How Much to Upgrade Your Flight
• Analysis and Airline Actions
• AA – Mergor or Mergee?
• An Interesting Question and Answer
• A Big Win for Boeing
• United Adds New Routes
• Flying Cars Again
• Unintuitive Things
• NAB Want to Get a Free Ride on Your Cell Phone
• More on Internet Smart Pricing
• New ‘Laser’ Scanners for Airport Security?
• And Lastly This Week….

Reader Survey Results – How Much to Upgrade Your Flight

Last week I asked your opinion about how much extra you’d pay, per hour of flying time, to fly domestic first class rather than coach, assuming the only benefit you’d get for your money would be the first class seat, a free meal and drink, and early boarding.  You were asked to treat the cost of the upgrade as if it were more or less coming out of your own pocket – we all know that if we’re flying on a bottomless expense account, then of course we’ll be in the comfy seats with much less concern for cost or value!

As you can see, the results show a broad spread of answers, which illustrates the challenge the airlines face.  5% of passengers will pay over $100 extra per hour, and another 8% will pay $75 – $100 per hour to enjoy first class travel.

At the other extreme, and (pretending we are airline revenue managers) let’s ignore the 14% who refuse to pay anything, but we as revenue managers will also want to get as much revenue as possible from the 32% of passengers who would pay $25 – $50/hr and the 13% who would pay $50 – $75/hr too.

Analysis and Airline Actions

The problem is this – how to take $75+ from the 13% of passengers who will pay that much, and also – at the same time – take the lesser $50 – $75 from the 45% of passengers willing to pay these types of premiums, too?  Clearly if the airline sets a single price too low, it will have the 13% of passengers willing to pay $75 or more an hour either happily paying less, or being annoyed because the seats sold too quickly to someone else in a scenario where 13% of passengers would happily pay much more to guarantee them a seat.

Some airlines have trialed concepts such as auctioning off some of their first class seats, and it would seem this is a very fair way for the airlines to unashamedly accept different levels of payment from different passengers for the same seats, and to allow the passengers themselves, through the bidding process, to set their own priority and price levels.  With the rise and acceptance of sites like eBay, and the prevalence of ‘off the shelf’ auction software, we’d expect airlines to more aggressively adopt the auction model for selling/filling their first class cabin, and we’re surprised there hasn’t yet been more broad acceptance.

There’s one interesting interpretation of why airlines haven’t moved more aggressively to auction selling off all their first class inventory.  They are scared to, because they don’t want to offend their most frequent fliers.

As you surely know, there is an expectation among elite level frequent fliers that one of their perks will be generous access to free first class upgrades.  This is perhaps the most valued of all elite level benefits, and we all know people who have switched airlines and programs based on a perception that one airline had a more (or less) generous upgrade policy than the other.

So if an airline were to offer all first class seats for sale, it would have none left to give away for free.

We are surprised at the airlines’ timidity on this point.  Surely the same airlines that have boldly instituted fees for everything else, and marginalized many other aspects of frequent flier programs, don’t now feel unable to take away this benefit?

On the other hand, it is perhaps relevant to note that many of the new fees that airlines charge do not apply to their elite level frequent fliers.  Maybe, indeed, the airlines truly are scared of their frequent fliers abandoning them?

This however begs two further questions.  The first one is to wonder why, if one airline started selling/auctioning all their first class seats, other airlines wouldn’t gleefully leap on that bandwagon as fast as they could.  And, secondly, to observe there are plenty of workarounds that a creative airline could adopt to simultaneously blend selling and giving away first class upgrades.  They could give elite level fliers so much bid credit, depending on their elite level – first tier members could be told “You automatically have the first $25 of your bid comp’d by the airline”, mid tier members might get $50, and top tier members $75.

Anyway, that’s all hypothetical.  For now, elite frequent fliers have easy access to upgrades, and it seems most people are willing to pay quite a lot of money (remember these rates are not per flight, but per hour of flight) to be upgraded.

AA – Mergor or Mergee?

American Airlines has long been known for its refusal to consider merger deals with other airlines.  Sure, it has occasionally bought out competitors itself, but it has consistently turned its back on any sort of deal that might see it not keeping the upper hand in any combined corporation.

As you surely know, AA has been in Chapter 11 since November last year, and its Chapter 11 status caused a flurry of speculation that another airline might choose to buy out AA.  AA aggressively sought to quell all such speculation by saying it had no interest in doing anything other than emerging out of Chapter 11 (something it has now requested an extension of time to do) in a new improved form, alone and unmerged.

Undeterred, US Airways (itself a recently merged combination of two former airlines) has conducted a campaign in the media to try and woo AA, its shareholders, and its employee unions (these latter two groups of people having sadly little say in the matter) in an attempt to buy the airline at what it says would be a very fair price, but at what it also of course surely hopes to be a bargain value.

After some months of sniffing disdainfully at such suggestions, AA’s new post-Chapter 11 CEO Tom Horton has conceded that, well, yes, maybe he would be interested in talking mergers with another airline.

But – and it is a big but – it seems that AA would prefer to be the major partner in any new merged airline.  ‘Sources familiar with the matter’ (don’t you love that phrase, which seems to be a part of almost any news item these days, no matter what the topic) say that AA is considering five different airlines as possible purchase targets – Alaska, Jetblue, Frontier, Virgin America, and US Airways.

Alaska has long been rumored as a prime possibility for being bought out, Frontier is definitely in a weak state, but Jetblue and Virgin America seem much less likely candidates, and one can only guess how a discussion with US Airways would go, with both airlines trying to buy the other.

One wonders if the ‘familiar sources’ didn’t simply list every airline they could think of that is smaller than AA without really putting too much thought into the possibility of them being true merger/buy out candidates.

Here’s a bit more on this, which is clearly now a developing story and, we have to gloomily predict, will probably result in another merger and still more consolidation in the US airline industry, with the Departments of Justice and Transportation both happily concluding that we, the passengers, will benefit from fewer competitors.

(Oh – my spelling checker claims there are no such words as ‘mergor’ and ‘mergee’.  But I think there should be!)

An Interesting Question and Answer

Here’s a generally bland article in USA Today with a Q&A between the newspaper and the two top execs of US Airways.

The airline executives get a ‘free run’ by the passive question askers – for example, see how the story leads off with a ‘hard hitting’ question about US’s hoped for merger with AA, but a totally oblique answer that the paper just lets sit there without any follow-up.

But one of the non-answers actually seems to hint at a real answer.  The question was whether or not the airline would consider charging for carry-on bags, or charging less for checked bags (as if!) so as to reduce the crush of bags people currently try to carry on planes with them.

As you may recall, charging for carry-ons is a very controversial topic, but one which we feel is absolutely inevitable in the new ‘pay extra for everything’ approach to flying.

In reply, President Scott Kirby says

I think we will continue to experiment. There are a lot of different models out there.

And the airline’s CEO Doug Parker adds :

There are indeed bags that are getting down to the aircraft that should have been checked. We acknowledge that we’ve created the problem. We’re not trying to blame the customer. We created this problem by charging for checking and not charging if you bring it on.

So they will ‘continue to experiment’.  How do you think the airline will solve the problem it created?  By stopping charging for checked bags?  Or?????

My guess?  The major airlines have observed how Spirit Airlines has managed to introduce carry-on bag fees without apparently suffering any dire consequences, and so are now currently drawing straws to decide which of them will be first to start charging for carry-on bags.

Public comments such as this are one way for the airlines to sound each other out – if another airline signs a formal pledge, written in its CEO’s blood, promising never ever to charge for carry-on bags, other other airlines will back away from the concept.  But silence, and similar ambiguous public comments, indicate a willingness to also start charging for carry-on bags.

A Big Win for Boeing

This week saw a very lackluster biennial Farnborough Air Show (it alternates with the Paris Air Show).  Boeing and Airbus like to time announcements of big new orders to coincide with these air shows, but this year, apart from a handful of genuinely new small orders, we instead saw the at times farcical spectacle of the manufacturers – and particularly Boeing – re-announcing orders that had already been announced.

As Ben Sandilands rightly points out, in the good old days, Boeing would simply announce a sale.  No ifs, ands, or buts.  But these days, we have announcements for orders from undisclosed buyers, previously undisclosed buyers now made public, announcements of intentions, letters of intent, understandings, ordering rights, orders, commitments, confirmations, and now reconfirmations too – oh, to say nothing of options and future options too.

A single sale can now generate half a dozen different triumphant press releases.

Interestingly, the biggest announcement of the week wasn’t actually made at Farnborough at all.  Instead, it was announced in Chicago, with United and Boeing slapping each other joyously on the back to celebrate United’s decision to buy 150 737s – 50 current generation 737-900ER models and 100 new generation 737-MAX9 jets.  Wait – was this a commitment?  An order?  An understanding?  An intention?  Stay tuned for future announcements over the next few years and airshows.

Actually, it seems to be pretty close to a firm order, and has been widely expected for several months.  More details here.

It seems the former Continental Boeing 737 preference and ‘gentleman’s agreement’ for exclusivity with Boeing has won out over the former United A320 preference.

United Adds New Routes

Normally, the act of a large airline adding new routes would be fairly ordinary and boring, but it is rare and therefore newsworthy to see a US carrier adding both new international and new domestic routes.

This week United announced ten new routes – three domestic (including a seasonal extension to existing service to Anchorage from Chicago), two to Canada, and the rest international.  It is nice to see a little bit of growth again.  More details here.

Flying Cars Again

The two perennial themes in aviation that never go anywhere, but which always excite and interest, are supersonic transport and flying cars.  (One of these days I guess someone will propose a supersonic flying car – now that really would be something!)

Over the years we’ve several times skeptically chronicled various projected flying car projects, but they’ve always been some years into the future and fearsomely expensive.  However, we think we’ve actually found a flying car which, if one applies a generous definition of the term, may almost be practical, and which is being made, driven, and flown right now, with a far from outrageous price tag attached – $94,000.

Seven have been made so far, and the company optimistically tells me it could build more in about 90 days from receiving firm orders.

Here’s an article that tells more about this car and suggests one non-typical application for it.

On the other hand, if you prefer the classic lines of what might be the original ‘real’ flying car (there have been experimental concept flying cars dating all the way back to 1917), the 1954 Taylor Aerocar (pictured at the top), of which only five were ever made, one of them has just gone on the market.  No need to wait up to 90 days for it, but it is a wee bit more expensive – $1.25 million is the asking price.

The current owner also makes full disclosure by pointing out one potential disadvantage – you would need to get, simultaneously, both auto and airplane insurance for the vehicle.  But if you’re spending that much on it to start with, you’re probably okay with the insurance.  More details here.

Unintuitive Things

A couple of interesting and unintuitive things.

First, which should be more expensive.  Parking a plane at an airport – or a car?  You might think that cars should pay less than planes, but if you were traveling to Brisbane airport, you’d pay less if you fly there than drive there.

No-one ever suggested that airport parking was cheap, but surely it is getting beyond ridiculous when it costs more to park one’s car than one’s plane.

Which do you think would be faster between Seattle and Portland?  Amtrak’s upmarket state of the art tilt-trains, or a Greyhound subsidiary’s scheduled bus service, driving up and down the usually congested I-5 corridor, where even if the traffic is open, the bus is speed limited to 60 – 65 mph?  And which would be cheaper – a ticket on a train capable of carrying hundreds of passengers in the most fuel efficient means of land transport known to man (metal wheels on metal rails) or a ticket on a forty-some seater bus that gets maybe 5 miles per gallon?

Well, you can guess the answers, because we’re in the unintuitive section.  Yes, the bus is faster than the train.  And cheaper too.  Details here.

We all know the excuses for why Amtrak can’t compete with other modes of travel for long-haul 1000+ mile routes.  Okay, we get that and accept it.  But a 180 mile run is right in the heart of what should be Amtrak’s ultimate sweet spot – it should be the fastest, bestest, and least expensive means of traveling 180 miles – faster than a plane and cheaper than a bus.

Alas, it’s neither.

NAB Want to Get a Free Ride on Your Cell Phone

One wonders just how many of the seven deadly sins the National Association of Broadcasters is currently evidencing.  Envy, certainly.  Greed – without a doubt.  Pride and Sloth – possibly also.

What provokes this thought is their call that it should be made mandatory that all cell phones have an FM radio receiver built into them as well.  The NAB have watched – doubtless with envy – their member radio stations lose market share and audience listener hours, with people switching to other forms of entertainment and communication, many of which are funneled through smart phones and other electronic devices.  And they – perhaps greedily – want to rebuild their audiences any way they can, maybe slothfully through compulsory legislation rather than by providing compelling content to bring people back to ‘steam radio’, and so they’ve been suggesting to Congress that all new cell phones should have a built in FM radio receiver.

Their justification for this?  So that, in emergencies such as happened with the storm on the east coast a couple of weeks ago, there will be a way of communicating with people to let them know what is happening.  Oh yes, folks, mandating the inclusion of an FM radio receiver in our cell phones is, ahem, for our own good.  We should be appreciative that we have such a public spirited group as the NAB to point this out to us.

The CTIA – the wireless industry trade association – disputes the NAB’s claim, pointing out that there are over 900 million FM radios in the country already – three for every man, woman and child.  More details here.

Certainly, adding an FM radio receiver to your cell phone would only be one more of the many things we nowadays use them for already.  Indeed, these days, placing and receiving phone calls is no longer the most common purpose people use their smart phones.  Nor the second most important.  Not the third.  Not even fourth.

Using your phone for, ahem, phone calls is now only the fifth most common use.  Details here.

More On Internet ‘Smart’ Pricing

I mentioned, a couple of weeks ago, about the growth of ‘intelligent’ pricing on websites.  The example I cited then was how people who used an Apple computer were being quoted more expensive hotels than people who used a PC.

Here’s a fascinating example of another dimension to internet pricing – how multiple vendors on Amazon will change their pricing relative to each other, and sometimes automatically.  The interesting twist is how some companies will take advantage of another company’s automatic pricing mechanism to lever down their competitor’s price to below the cost of the product, and then will buy all their competitor’s products at below cost.

Clearly this is a technology that needs some further polishing.  Equally clearly, it is not a technology designed to benefit us, the consumers.

New ‘Laser’ Scanners for Airport Security?

Here’s an interesting article that refers to a new type of ‘laser device’ that can scan people and things and detect all sorts of items on them.  It is said to be ten million times faster than any current devices, and a million times more sensitive.  Even more incredibly, as this article reports, it could be deployed in as quickly as two years or less at airports.

Sounds amazingly good, right?

Well, maybe.  Of course the first thing it exposes is the hundreds of millions of dollars the TSA has wasted on current generation X-ray type scanners.  But perhaps that is forgivable – who can foresee the ongoing march of technology?

There’s one other little quibble I’d offer, however.  We all know about lasers, and feel safe around them, so to read of some sort of futuristic laser scanner sounds no more dangerous than a laser pointer or supermarket checkout scanner.

But, actually, as this article hints at but doesn’t really develop, the ‘laser’ scanner isn’t really a laser as we’d understand the term.  Rather, it seems the term ‘laser’ has been co-opted to give an inappropriate warm fuzzy familiar safe feeling to a very different technology – terahertz radiation (oooops – don’t mention the ‘r’ word!).

What is terahertz radiation?  It is a type of radio/radar wave that is approximately 100 to 1000 times higher in frequency than that you’d find in most microwave ovens or cell phones.  We know that microwave ovens are not safe, and the jury is still out on cell phones, so while terahertz radiation is generally believed to be non-ionizing (unlike X-rays) there are still concerns over the effects of extended exposure to this type of radiation.

With the myriad of potential security and screening applications these new devices appear capable of offering, and the extraordinary rush to market of devices using this technology, is it too much to wish for a bit of extra time-out to enable the devices to be properly tested and for safe working limits to be established?

We see the day – terrifyingly soon – where such devices will be everywhere, even more places than security cameras are now, and while the dose we receive from occasional exposures from one or two units may be okay, we’ll be bathed in the radiation much of every day.  All to make us safer, of course.

And Lastly This Week……

The mayor of a small town in Germany decided to respond to the decision to create special parking places for women in the municipal garage (these were ‘safe’ parking places close to exits and well lit), and so added some special parking places for men, too.

So what is it that makes a parking space especially suitable for a man?  Click the link to find out.

And now truly lastly this week, here’s a video clip of what may perhaps truly be the ultimate package holiday from (or should that be, to) hell.

Until next week, please enjoy safe travels

David.