Jul 262012
 

These one eyed creatures are London’s two official Olympic mascots, named Wenlock and Mandeville. They are said to represent two drops of steel from one of Britain’s now largely defunct steelworks. The official explanation includes such appalling nonsense as the claim ‘Their skins are made of highly polished steel allowing them to reflect the personalities and appearances of the people they meet’. By the time you read this, the 2012 Olympics have already started.

Good morning

I hope you’re enjoying the summer, and if you’re going to the Olympics, I hope you managed to physically get your tickets – a dismayingly nontrivial task, as one of our readers discovered to his last minute horror – apparently the one official seller of tickets reneged on its arrangement to send tickets out by mail or courier to people who had advance ordered them, and has been requiring people to visit their temporary offices in London to collect tickets.

As you may possibly imagine, this has resulted in chaotic scenes at their temporary offices, with people waiting in line up to six hours just to collect the tickets that they’d been told would be mailed to them.

An interesting measure is provided in this article, which says there are 10,000 athletes in the games, protected by at least 36,000 security officers, police, and armed servicemen.  But to be fair, the police aren’t just guarding the athletes.  They’re guarding the Olympic ‘VIPs’ as well – a huge number of people with imagined importance.

These VIPs are getting more special treatment than that given to the Prime Minister of Britain, or the Queen.  For example, the President of the International Olympic Committee had five police on motorcycles escort him from the airport in to his London hotel.  It is common for the Prime Minister to travel with a single support vehicle and no police outriders, and I’ve watched the Queen be escorted around town with only three (I think) police outriders.  But the IOC President gets five – oh yes, and he has his own special unique lane on the road as well, which you’d think means he doesn’t also need five police outriders.

Oh – while all the Olympic VIPs get police escorts and their own special traffic lane, Britain’s own Prime Minister, and all his Cabinet Ministers (the highest ranking elected officials, second only to the Prime Minister in importance) will be traveling to attend the Games on public transport, probably standing in crowded metro/subway (‘Tube’) trains together with everyone else.  Everyone else, that is, apart from the ‘Olympic VIPs’.

Whether it be VIP elitism of a level unheard of in any other situation, or a 3.6:1 ratio between security and participants, the Olympic ‘police force’ killjoys now scouring the country to stop and fine anyone anywhere making even the most extremely tangential of references to the Olympics, it is hard to understand why British PM David Cameron wants these Olympics to be remembered as the ‘friendly Olympics’.

Anyway, the good news is that Britain seems to be over its unseasonably cold/wet spell (yes, believe it or not, for at least part of most summers, Britain realistically expects warm to hot and dry weather) and maybe the weather will help the Olympics to be the success that clearly so many people are hoping for.

There are not just one or two but four other articles also in today’s roundup/newsletter, plus in the newsletter part itself, items below on :

  • Fuel Surcharges Increasing Faster than Fuel Prices
  • Other Fees Increasing Even Faster
  • US Airways Merger With AA – Would Any Promised Improvements Eventuate
  • Business Valuations and Mergers – Strange Not Just with Airlines
  • If At First You Don’t Succeed, Try, Try, Try, Try, Try, Try Again
  • What Meal Type is Missing from this List of Airline Special Meal Choices
  • A Special Type of Special Meal from Korean Air
  • Hungry Pilots?
  • 11 yr old Boy Flies from Manchester to Rome with no Ticket and no Passport
  • Make of This What You Will
  • A Privacy Checking App Gets Deleted by Apple – Apple Refuses to Say Why
  • Twitter Can be a Double Edged Sword
  • GPS Can be a Double Edged Sword
  • And Lastly This Week……

Fuel Surcharges Increasing Faster than Fuel Prices

Why are we not surprised by this article that reports fuel surcharges have gone up 53% since April 2011, while jet fuel prices have gone up a mere 24%.

The airlines’ perfidy when it comes to hiding behind alleged high costs of jet fuel is well known to us all.

Other Fees Increasing Even Faster

But when it comes to getting aggressive with pricing, the airlines are still rejoicing in the income they are gathering from us for providing services that used to be included in the ticket price.  According to this article, in 2011 a stunning $22.6 billion in fees were collected by 50 major airlines around the world, a 66% increase in a mere two years.  This article points out that bag fees alone, for just US carriers, came to $3.4 billion in 2011.

In total, out of the $22.6 billion in fees globally, US carriers took in over half that sum; indeed the six largest US carriers by themselves benefitted to the tune of $12.4 billlion.

With these fees not attracting the US Federal Excise Tax of 7.5%, the $12.4 billion also represents a $930 million loss in tax revenues to the government.  It is an interesting testament to the lobbying power of the airlines that there have been no moves to close this taxing loophole.

Never mind the empty rhetoric about millionaires paying ‘their fair share’, or an unutterable suggestion that the 50% of the population who pay zero in federal taxes should perhaps pay their fair share, too.  How about the airlines paying their fair share?

US Airways Merger With AA – Would Any Promised Improvements Eventuate

Here’s an article with a somewhat misleading headline ‘Possible American-US Airways merger could create clean slate for passenger experience improvements’ – the headline implies good things may follow, but the actual article is not quite as positive.  Now, for sure, the article appears in an airline cheerleading blog focused primarily on in flight entertainment issues, but even so, there’s little reason for celebration or eager anticipation from its contents.

Perhaps the most relevant test is what happened after US Airways’ own merger with America West in 2005 (the deal was essentially America West buying US Airways, but choosing to subsequently operate under the better known and less regional brand of US Airways).  Did anyone notice any brilliant boosts to any part of the flight experience?  Did airfares magically fall due to greater efficiencies?  Were there all of a sudden twice as many flights to twice as many destinations?  Did staff start greeting passengers with broad happy smiles?

There’s no reason to expect any positive transformation if US Airways now buys American Airlines than was the case when America West bought US Airways.

Business Valuations and Mergers – Strange Not Just with Airlines

In an interesting disclosure this week, Google explained how it came up with its $12.4 billion valuation and payment for the purchase of Motorola.

The biggest part of the cost – $5.5 billion – is what Google deems the value of Motorola’s 17,000 patents to be worth (ie an average of $324,000 each, although in reality some patents are probably worthless while a precious handful are highly valuable).  Unfortunately, we have to sort of accept that assessment at face value, although it could prove to be, in time, way high (or way low) an estimate.

Then there is a further $2.9 billion which corresponds the the value of cash assets owned by Motorola, and that’s a number that’s probably close to exactly correct, with little ‘wiggle room’.

This leaves $4 billion still to be accounted for.  Google says that $730 million applies to the value of Motorola’s customer relationships, and also values other assets acquired at $670 million (I guess that is for things like desks, chairs, filing cabinets, and so on).  The remaining $2.6 billion is for ‘goodwill’.

Goodwill is a scientific sounding word that actually means nothing.  Goodwill has a reasonably easy to understand concept when a business is profitable – it is a representation of the value of future profits.  In other situations, it can be used to explain the difference in purchase price between what a thing is worth and what it is paid for.  In the case of Motorola, the company is unprofitable (it lost $233 million in the last quarter) and has been for some time, so from that perspective, it has negative rather than positive goodwill.

It is relevant to realize that the $5.5 billion ascribed to the value of patents probably embodies plenty of ‘goodwill’ in that calculation already.  This additional $2.6 billion – and quite likely some of the $730 million for ‘customer relationships’ – another intangible sum that is not represented by any underlying measurable asset – is hard to understand in the context of a company that has been losing money and with no clear business plan to get its way out of its money losing scenario.

At least Blackberry and Nokia talk up their future ‘company saving’ products, and promise some glimmer of hope (which may or may not be real) but Motorola is not sharing any similar rosy views for its future, and as pointed out last week, it is surprising to see Google shunning Motorola during the development of its Nexus 7 tablet.  More details here.

I bet American’s shareholders are hoping that any future merger/buy-out might see a similarly generous purchaser.

If At First You Don’t Succeed, Try, Try, Try, Try, Try, Try Again

BAA – the Spanish company that owns most of the major airports in the UK (not to be confused with BA, the UK company that owns the major Spanish airline) was ordered four years ago to sell its London Stansted Airport as part of a break-up of its monopolistic holdings.

Since that time it has appealed the order not just once or twice, but seven times.  It has lost its appeals all seven times.

Care to try for eight?  The airlines – in particular, Ryanair, who has a major presence at Stansted – hope not, and are keen to see the airport sold to an(y) unrelated third party.  Strangely, the airlines are not too pleased by BAA’s doubling of prices at Stansted since it was first ordered to sell the airport – could that be a way of increasing its value prior to a sale?  I wonder what the goodwill value is on an airport with overpriced fees?

Details (but not of the goodwill value) here.

What Meal Type is Missing from this List of Airline Special Meal Choices

Most of us haven’t noticed that airlines are reducing the range of different special meal choices they offer on long flights.  But reduce them, they surely are.

One of the people coming to North Korea with me wrote to observe

Why doesn’t United Airlines offer diabetic meals on long International flights any more???  They offer Muslim, Vegan, Gluten-free, Kosher and others but no diabetic.

I’m flying from Chicago to Beijing….. this is a very long flight and I cannot bring my own food for a flight of this length. I don’t quite understand their logic about offering Vegan and Muslim but not diabetic. These non-diabetic people are not going to get sick if they do not eat “non approved” food but a diabetic might if he does not eat, or eats inappropriate foods.

I have contacted United and all I have gotten in return is “we no longer offer diabetic meals”. In fact, many of their own employees do not know this. I was told by several customer service people that the airline offers these meals but when I asked how to request them, they came back and said “these are no longer offered”.

There are 26 million diabetics in the US, almost exactly ten times as many as there are Muslims.  There are about 5.3 million Jews in the US, almost exactly one fifth the number of diabetics.  There are 3 million people with Celiac disease (ie gluten intolerant) and perhaps another 15 – 20 million people with milder forms of gluten intolerance – still significantly less than the count of diabetics.  So why does United offer Muslim, Kosher, and Gluten-free meals, as well as ‘lifestyle’ type Vegan meals, but not offer anything for diabetics?

Happily, both AA and DL offer diabetic meals.  Clearly this is one example of how a merger (between UA and CO) has definitely not resulted in any improved customer experience at all.

Shame on United for its selective myopia on this.

A Special Type of Special Meal from Korean Air

While United Airlines is cutting back on its special meal services, Korean Air is rolling out a new service that it has been trialing for some months now in its local Asian markets.

Now, on all flights, you can request a special cake or cupcake if you are celebrating a wedding, birthday, or any other type of special occasion during your flight.  You need to make your request to the airline’s US call center – (800)438-5000 – at least a day prior to your flight, and the cake will be presented by a flight attendant during the meal service.

No word on if all the flight attendants will gather around, clap, and sing ‘Happy Birthday’ to you, but our sources do suggest that sparkler type candles, or the ones that you can’t blow out, will not be featured!

Our thanks to Korean Air for returning a small touch of humanity to the airline world.

Hungry Pilots?

Continuing our riff on airline food matters, imagine you’re not a pilot, for a minute.  Imagine you’re, instead, a passenger.  Your job requires you to fly to some far away place for a few days then return home again.  With me, so far?

Now, your employer has agreed to generously reimburse you for all your meals while you’re away, indeed, you know some of your colleagues who manage to profit on the meal reimbursement arrangements; and even as a worst case scenario, at least you’re not having to pay for meals you’d otherwise buy at home.  But that’s as may be, the key thing is that you can afford to eat while traveling, and don’t end up out of pocket.

Now for a question.  What about your breakfast at home, before driving to the airport to start your travels?  Who should pay for that?  You or your boss?

Okay, enough imagining.  Now for the real world, or the version of it that Air New Zealand’s pilots had hoped for.  They claimed the airline should pay for a breakfast for them if they were to be on a flight lasting more than eleven hours, even though they spent the previous night at home.

NZ’s Employment Court found for Air NZ, and refused to order the airline to reimburse pilots for their before-leaving-home breakfasts.  The Court also required the pilots to pay Air NZ’s legal fees in defending the claim, too.  And that was probably an unpleasant meal for the pilots to chew on.

11 yr old Boy Flies from Manchester to Rome with no Ticket and no Passport

An 11 yr old boy managed to slip through eight different security checks at Manchester Airport earlier this week, and successfully boarded a flight and traveled to Rome.  His undocumented travel was only discovered when other passengers on the flight, en route to Rome, became puzzled and suspicious about how the boy was traveling alone and alerted the flight crew.

However, an airport spokesman assures us that everyone else’s security was never at risk.

The boy went through full security screening so the safety of passengers and the aircraft was never compromised.

Perhaps the airport spokesman might want to reconsider the use of the phrase ‘full screening’?

More details, including a listing of the eight different ‘security’ checks the boy somehow evaded, here.

Make of This What You Will

Campaign contribution records show that people who list their occupation as working for the TSA are contributing to the Obama campaign at a level nine times higher than to the Romney campaign.  Details here.  Perhaps further underscoring the disconnect between the TSA and ‘real’ people involved in the war on terror, veterans support Romney 59% to 35%.

Talking about money and the TSA, you may remember, earlier in the year, the TSA was reporting that ‘budget cutbacks’ would force it to cut airport staff, leading to longer waits for passengers – presumably all the fault of those pesky Republicans.  But the TSA failed to mention how they are getting an extra $25 million to expand their ‘out of the airport’ programs, most recently in Southern California bus and train stations.

I don’t know about you, but I’m far from happy to see people wearing shirts emblazoned ‘TSA Inspector’ (something they never call themselves at airports) in bus and train stations, while being simultaneously told the TSA can’t afford to maintain sufficient staff in airports.  And what’s with the logic of searching people after they have completed their travels on public transit and are seeking to leave the station?  More details here.

A Privacy Checking App Gets Deleted by Apple – Apple Refuses to Say Why

I mentioned in my Google Nexus 7 review series, last week, about the growing tendency of smartphone and tablet apps to access more and more data about ourselves, and complained in particular about how Google makes this ‘optional’ – except that, if you want to limit the data Google can keep about you, Google in turn will limit the functionality of its programs.

There’s an interesting story coming out about a wonderful app for Apple iPhones and iPads – Clueful.  It analyses the apps on your iOS device and reports to you on what of your information the apps access, and other information about things such as inefficient battery usage and whether the apps encrypt your data before broadcasting it for anyone and everyone to monitor.

Sounds like a great app, right?  It has already uncovered some shocking things, such as how 43% of apps don’t encrypt sensitive personal information before broadcasting it.  But now, mysteriously, Apple has removed the app from its iTunes store.

Why did Apple first approve the app then subsequently delete it?  Apple isn’t saying.  More details here.

Twitter Can be a Double Edged Sword

The Maldives tourist marketing body decided to embark on a Twitter campaign to promote tourism to its country.  If successful, this would of course be the first time that 140 character text messages were able to persuade people to spend thousands of dollars to go to a country that most people couldn’t even find on a map.

But, alas, it was not only unsuccessful, it was worse than unsuccessful.  How can that be?  It ended up with a very unintended result – people started posting reply tweets pointing out the recent police brutality and social unrest in the country.  Ooops.

Mind you, my own cynical view of Twitter is that the negative messages were probably as ineffectual as the positive original tweet was, too.

More details here.

GPS Can be a Double Edged Sword

Don’t get me wrong.  I’m as keen a user of GPS as anyone, and there are usually at least two of the devices in my car at any given time (and that’s not counting the one on my phone).

But ‘the law of unintended consequences’ is an unfathomable but ever-present force in all parts of our lives.  In the case of GPS devices, you may recall the episode of The Office where Michael Scott drove his car into a river, ignoring the evidence in front of his eyes, while concentrating on the GPS which ‘knew best’.  While I thought it to be ridiculously far-fetched when it was first screened, there have been a number of real world situations where people have done exactly that.

Today’s unintended consequence however is more like that suffered increasingly by tiny English villages – places in the middle of nowhere, and accessible only by narrow one lane roads (if they can indeed be dignified by the title of ‘road’).  These villages are increasingly being terrorized by massive big trucks, particularly from Europe.  Drivers are using a GPS to navigate to their destination, and if not correctly configured, the GPS may choose the shortest route, even if it involves narrow one-way roads and tight corners and low-clearance underpasses that trucks just can’t fit on, around, and below.

The problem is now spreading, in a suitably Americanized form, to the US, too.  Perhaps we should feel sorry for the residents of this neighborhood and the traffic jams they’re now suffering as a result of GPS users.

And Lastly This Week…….

Talking about traffic related issues, here’s an interesting news flash for Los Angeles readers (and for those who occasionally visit L.A.).  Did you know that fines you receive in the mail as a result of being caught going through a red light by one of the automated traffic cameras do not need to be paid?  They are voluntary fines, not mandatory fines.

But – with logic that some would say is comfortably at home in California, if you go to court to fight such a ticket, and lose, then the fine becomes mandatory and must be paid.

Apparently about 60% of people ticketed currently ‘volunteer’ to pay what can be fines of many hundreds of dollars.  So here’s your chance to finally become a member of a privileged minority group – the 40% of drivers who choose not to pay the fines and who save as much as $476 a time in the process.

Don’t believe me?  Well, I can understand why you’re cynical.  So here’s a link to an article in the LA Times.

And now, truly lastly (apart from the four articles which follow), and still talking about interesting legal logic, a judge in OR has ruled it is perfectly legal to strip naked at a TSA checkpoint.  Although nudity laws made it illegal, the passenger in question argued that he was making a constitutionally protected act of free speech in protesting the absurdity of the TSA check he was enduring.

The passenger explained to the court that he was taking off his clothes so as to protect his privacy.

The judge bought his story.  Details (but, no pictures) here.

Until next week, please enjoy safe travels

 

 

David.

 

 

  5 Responses to “Weekly Roundup Friday 27 July 2012”

  1. HI David, Just returned from a lovely trip to Alaska. Did I miss your article on the Nexus 7? if so, please direct me to it. I hear rumors of a coming “mini Ipad”, now that Jobs is dead, so am anxiously waiting for all
    Suzanne Barber.

  2. David,

    Good info as usual. Just one quibble on the Motorola/Google story. It has been many years since I took my economics classes, but I seem to recall the definition of Goodwill is related to the company’s brand and ability to attract sales based on brand loyalty/familiarity. So it doesn’t necessarily need to be tied to profits (although over a very long period, it usually will).

    While they may be overestimated the value of Motorola’s goodwill, it is still there even though they are losing money. There are probably still a lot of people in the world who had Motorola phones or other products in the past who still have a positive image of the brand and if they came out with a good product, it would be much easier to get those people to buy a Motorola smart phone, than it would to get people to buy the exact same phone if it were named Yibber (made up name).

    An airline example. Pan Am is likely a company that had some goodwill value even as it was liquidating. I seem to recall someone bought the rights to the name and did try to use it, and they probably were buying the goodwill and nothing else.

    Enjoy your weekend.

    Steve

    • Hi, Steve

      It has been, ahem, many years since my economics classes, too. So perhaps it is a case of the blind leading the blind in this discussion!

      But I’d like to claim we’re both correct. I’m correct in the sense that Goodwill is a sort of generic dumping ground used to complete the analysis of the purchase price and what it bought, you are correct that ‘brand equity’ is indeed a component of goodwill and can be a thing of value, even in the case of a company that chronically loses money.

      I could make a cheap shot and refer to the multiple failed attempts to get Pan Am up and operating again, and the same for Braniff too. While there’s definitely even now some remaining value to the name(s), I hope the various people who purchased the name didn’t pay too much for it because it clearly failed to give them a guaranteed successful business plan.

      The further point you raise about the underlying value of a brand such as Motorola is an interesting one, and worthy of a lengthy B-school paper (indeed, I’ll wager that lots of papers have been written on this very topic). The thing is, with a long standing brand name like Motorola, there is a lot of ‘baggage’ associated with it. Sure, some people might have happy memories of past Motorola products (I do myself) but if they are not current Motorola owners, what does that say about their overall preponderance of memory?

      And for everyone who has a happy memory, there is someone else with an unhappy memory. Truly Motorola made some appalling products – as well as some brilliant ones.

      Plus there’s another interesting swings and roundabouts factor, too. High tech state of the art electronics is a product category that doesn’t sit so comfortably with long-lived brands and a corporate history going back generations. Maybe your notional ‘Yibber’ brand could more quickly make a positive name for itself in the market, starting from a fresh point, with no older impressions to zero out and counter, than could Motorola.

      I’m trying – albeit not very hard – to think of an example where a brand has been resurrected with success, and with some measure of that success being attributable to the brand per se, rather than the products now being labelled by the brand. I can’t think of one; I sense they may exist, but there’s no immediate compelling example that leaps to mind.

      Branding is a fascinating subject. I really like the work by Jack Trout and Al Ries, even if their views are not very mainstream. The several books they’ve written are very readable.

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