Weekly Roundup Friday 8 March 2013

A 1914 International Women's Day poster from Germany.
A 1914 International Women’s Day poster from Germany.

Good morning

Happy International Women’s Day to all readers of the fairer gender.  It is surprising that American retailers haven’t made this another event that mandates men spending massive sums on cards, gifts, flowers and chocolates for the women in our lives.

Another week with the 787 on the ground (today is day 52 of the grounding), and yet again an eventful week (but not in any good ways).  I felt so outraged at some of the latest disclosures, and the threat of the FAA caving in to Boeing pressure, that I chronicle this week’s 787 ‘developments’ in a separate article, below.

The 787 story is not getting the main stream media attention it deserves.  I’m beyond appalled at the ever-greater mess that is being revealed with each passing week, and my sense is most news outlets are offering a few platitudes and headlines but little or no analysis.

There’s another article below as well which took an enormous amount of time to write.  Although it only has 2,000 words, it also has 12 charts, and on the basis of a picture being worth a thousand words, I guess that makes it the equivalent of a 14,000 word article!  The number 14,000 is appropriate, because to write this article I had to massage at least that many individual data points to create what I hope you’ll find an interesting article charting the collapse in airline competition from the ‘good old days’ of regulation through to the present day.

Talking about (almost) thousands, we’ve enjoyed a flood of readers rushing to join our Danube Christmas Cruise this December.  Eight more readers decided to join our group this last week, and their presence adds further to my expectation that this year’s cruise will be the best ever.

We have the best ever Prague and transfer to Budapest pre-cruise option, the best ever ship to cruise on, the best direction for the cruise, almost the biggest and almost certainly the best group of Travel Insiders, a great set of dates nicely between Thanksgiving and Christmas, and definitely the best ever bargain prices (40% off regular rates).

So, as long as you can find non-787 operated flights, why not choose to add to this great group and come along too.

We now have both a single lady and a single gent seeking someone to share a cabin with on the cruise.  If you’re also a single traveler and want to avoid the single surcharge, here’s your chance.  Both these two people have traveled with me before, and so I’m completely comfortable endorsing them as fine potential roommates.  Let me know if you might be interested in joining forces with either of them.  They’re both young/active seniors.

Keep reading for articles about

  • Other Boeing News – Irrational Exuberance in Boeing’s Share Price?
  • BA to Inaugurate A380 Service
  • Southwest Airlines Gets Greedy
  • Larry Ellison Ignores Warren Buffett’s Advice
  • The Gimli Glider Is For Sale
  • Senator to Propose Law to Allow Electronic Devices on Planes at All Times
  • The TSA Boldly Fights Back Against Sequestration
  • TSA vs Flight Attendants :  Are Small Pocket Knives No Longer a Deadly Threat?
  • The Cost of Docking the Carnival Triumph for a Day in Mobile
  • And Lastly This Week….

Other Boeing News – Irrational Exuberance in Boeing’s Share Price?

The main Boeing 787 feature is by itself, next after today’s newsletter, but there is also this interesting item.

When the 787 grounding first occurred, some commentators were predicting class action shareholder lawsuits against Boeing, seeking to recover the losses they would surely suffer as Boeing’s share price dropped to reflect the 787 problems.

Well, that surely hasn’t happened.  Boeing shares closed on Thursday at $81.05, after reaching $81.95 in very active morning trading.  This is their highest for five years, and almost 10% up on when the 787 was grounded.

How can this be?  Last week we reported that – so far – the grounding is estimated to have cost Boeing in excess of $1 billion, and now that the grounding is extending further, airlines which had apparently earlier been patiently waiting for the problem to be fixed are starting to ask for cash compensation.  It seems probable that Boeing is now getting up to almost $200 million a week in straight-from-the-bottom-line losses caused by these delays, and with a best case scenario (assuming the FAA’s acquiescence) of another four weeks between now and the planes being released back to general service, total losses are likely to exceed $2 billion.

How can the company’s share price rise, and its market capitalization increase by over $5 billion during a two month period where Boeing has suffered an unexpected $2 billion loss and massive damage to its brand value and reputation?

Maybe the rise in Boeing’s share price is delayed investor delight at Boeing losing its argument with the SEC and being told it must allow a shareholder vote on whether it can continue to combine the offices of CEO and Chairman or if it must split them.

BA to Inaugurate A380 Service

Unlike the problem plagued and grounded 787, the A380 continues its rollout with more and more planes joining more and more airlines.

It is true the A380 has had problems – mainly engine problems rather than airframe problems, but it has also had wing spar cracking issues too.  However, that’s not something I’d lose sleep over, because we know just about everything there is to know about aluminum based metalworking, and in particular, how to detect cracks of even the tiniest and most insignificant of sizes.

I don’t think we have such technology in place to detect weakening of carbon fibre structures, but that’s probably a problem to make the 787 still more ‘interesting’ a bit further into the future.

BA is planning to receive its first A380 in October, with the first flight being a Heathrow to Los Angeles flight probably on 15 October.  I hope they’ll add A380 service to Seattle too, but won’t go holding my breath.  My one all-too-short flight on an Emirates A380 vividly showed the plane to be quiet, smooth riding, spacious and comfortable.

While you definitely should avoid 787s, if you have a chance, do fly on an A380.  Chances are you’ll love it too.

Southwest Airlines Gets Greedy

Memo to Southwest’s CFO, Tammy Romo :  When you’ve got nothing to say, you should say nothing.

When questioned about Southwest’s thoughts about introducing change fees to its tickets, Tammy said the airline would start to tighten some of the restrictions on their lowest priced fares later this year.  But when pressed for specifics, she failed to provide any more details.  So what was the point of stirring up upsets any earlier than needs to be the case?

Clearly now that Southwest has become the nation’s fourth largest airline and has a seat at the ‘big table’, it increasingly feels it can behave the same way as the three airlines remaining larger than itself.  But, in doing so, Southwest overlooks two things – Southwest grew to the size it has become by being different to the other airlines, and the now only three remaining larger competitors have become so few in number because of the very behaviors that Southwest is now increasingly adopting.

More details here.

Larry Ellison Ignores Warren Buffett’s Advice

Warren Buffett invested in US Air(ways) in 1989, and for a while was risking a large loss on his investment; an experience that put him off airline investing.  In 1995 he famously told a group of students at UNC’s Kenan-Flagler School of Business that he had to plead temporary insanity for buying into the airline and said

That’s a recipe for a lot of trouble [ie investing in an airline]. I now have this 800 number, and if I ever have the urge to buy an airline stock I dial this number and say, ‘My name is Warren, I’m an air-o-holic,’ and this guy talks me down on the other end.

Clearly Larry Ellison, co-founder and CEO of Oracle Corp, and the country’s third wealthiest individual, doesn’t feel the need to heed Buffett’s advice.  In June last year he bought the island of Lanai’i in Hawaii, and decided he wished to develop it and make it more focused on tourism.

This brought a consequential problem that many independent nations have faced – how to bring more visitors to the island, and so Ellison (who is worth more than some smaller countries) has solved the problem the same way.  He bought an airline – details here.

He now owns Island Air, a tiny Honolulu based airline that operates 224 flights a week.  Wikipedia says it has two planes, a 37 seater Dash 8 and a 64 seater ATR 72, I think it might already have more.  Another seven ATR planes are on order for delivery in the next year or so.

We wish Island Air and its new owner well.  As the article below on dwindling airline competition shows, we need all the viable airlines we can get.

The Gimli Glider Is For Sale

One of the more amazing stories of aviation, and one which equates reasonably closely to Captain Sullenberger’s landing of a US Airways A320 in the Hudson in January 2009 after the plane lost power in both engines immediately after takeoff, is that of the Gimli Glider.

The Gimli Glider was an Air Canada 767 in 1983 that was misfueled, due a a confusion between metric and imperial measurements of jet fuel.  As a result, it ran out of fuel, pretty much in the middle of nowhere in Manitoba.  Its pilot, a glider pilot (as is Sullenberger) managed to glide the lifeless plane to a near-perfect landing at a former RCAF airport, and being used for sportscar racing instead at the time.

All sorts of challenges on the approach and landing, including no checklists for how to fly the plane with both engines failed, the loss of cockpit avionics, and various other exciting things, all made for a harrowing experience for Captain Bob Pearson and Co-pilot Maurice Quintal, but they managed a landing of the type that is best described as ‘any landing you can walk away from is a good landing’.  All 61 people on the plane survived with only minor injuries associated with exiting the plane via emergency escape slides.

The plane has been affectionately termed ‘The Gimli Glider’ ever since.

This page has a good factual narrative, and this is a wonderful telling of the story.

With that as long-winded introduction, Air Canada repaired the plane and it flew with no further problems for 25 years before being retired in 2008.  After various post-retirement happenings, the plane is now being auctioned off on 14 April, with an expected selling price in the order of $2.75 – $3 million.

Perhaps Larry Ellison might like it?  Details here.

Senator to Propose Law to Allow Electronic Devices on Planes at All Times

Safety concerns have caused the FAA and airlines to take a ridiculously over-cautious approach to selectively allowing or prohibiting electronic device usage on planes.  Some things are permissible at any time, other things can be used by the pilots in the cockpit, right next to all the avionics that the FAA worries the same devices, 50 or 150 ft away in the rear of the plane might interfere with, but can’t be used by passengers.  Some things can never be used, and other things can only be used at times when there is an ‘r’ in the month or something else equally as capricious.

Although the FAA grudgingly said a year ago it would take another look at the matter, it has apparently been too busy encouraging Boeing’s 787 activities to spare a thought for passenger convenience, and has done what it is so brilliantly good at doing for the last year – nothing.

So Senator Claire McCaskill (D-MO) has said she intends to introduce a bill that will allow selected devices to be used not just above 10,000 ft but at all stages of flight.

I wish her well.  It is such a nuisance – having eBooks and music and videos which I can access for much of the flight, but not for the first or last half hour or more, and not due to any real risks, but due to lazy airlines issuing premature blanket prohibitions on devices well before the plane even pushes back from the gate, citing non-existent FAA regulations in support of their dishonesty.  ‘FAA regulations require all electronic devices to be switched off before we can close the cabin door/start the engines/push back from the gate’.

And don’t forget the bookend matching laziness when the plane starts its descent – well before 10,000 ft we’re told we must have all electronics off again; purely to allow the flight attendants to finish up earlier.

Details here.

The TSA Boldly Fights Back Against Sequestration

Cutting costs?  The TSA refuses to be intimidated by the specter of sequestration, and has announced an ambitious $50 million contract to buy its employees new uniforms.

That’s actually quite a lot of money.  The TSA has about 50,000 employees, but not all of them wear uniforms.  We’ll give the TSA the benefit of the doubt, and say two-thirds are uniformed employees, but in truth we doubt that even half are.  So that means fewer than 33,500 employees get uniforms – that’s a cost of over $1500 per employee.  Details here.

What do you get for $1500?  Three long-sleeved shirts, three short-sleeved shirts, two pairs of trousers, two ties, one belt, a sweater, some socks and a jacket.

Based on Wal-Mart or Target prices, you could get all of that for change out of $200.  There’s no way that you could spend $1500 on this, not even at Nordstroms, and doubly not when part of a $50 million contract direct from the manufacturer.

The good news is the contract is only for a year.  So – would you like to form a syndicate with me and we’ll bid on next year’s contract?  I figure if we come in at about $1350 per employee, we’re undercutting the present supplier by 10% and still netting more than $1200 per employee profit – a nice easy $40 million profit.

Seriously, it is beyond belief how the TSA can pay such a ridiculously inflated amount for its silly rent-a-cop uniforms.

In contrast, a Marine lieutenant’s uniform allowance, a one-time payment rather than regular ongoing gifts of clothing such as TSA employees can receive, is $400.  And if you’ve ever seen a Marine in his Dress Uniform, you know that’s a real uniform and definitely costs a very great deal more than $400.

How is it we spend four times more money on outfitting airport rent-a-cops than we do on US Marines?

TSA vs Flight Attendants :  Are Small Pocket Knives No Longer a Deadly Threat?

In a quite alarming demonstration of good sense, the TSA has said it will now allow small pocket knives on flights.  If the blade is less than 2.36″ long and less than 0.5″ wide, it will be allowed on flights after 25 April.

In case you’re wondering at how ridiculous it is to require a blade to be less than 2.36″ long – why can’t they simply say 2.4″ long, or even just a plain simple 2½”, this is another example of fools who take an approximate rounded measure in one set of units (in this case, 6 cm) and convert it to an inappropriately accurate seeming measure in another set of units (in this case, of course, inches).  So we’ll probably end up with TSA agents in their impeccable new uniforms outfitted with vernier scale micrometers and checking to the nearest one hundredth of an inch if blades comply with the new law, whereas in the rest of the world, the concept of 6 cm is understood as simply meaning ‘more or less short’.

This 5 March announcement and its effective date of 25 April of course begs the question – why do pocket knives remain banned and dangerous for seven more weeks, and then suddenly on April 25 become safe?  What makes them dangerous at 11.59pm on 24 April, but no longer applies at 00.01am on 25 April?

Although the TSA can ban something in less time than it takes to think about it, apparently unbanning something takes a very long time.

To be fair to the TSA, they may not have wished to do this, but decided to conform to international aviation security norms.  Details here.

However, showing that the TSA hasn’t become completely rational, it has decided to extend its ban on box cutters, out of sensitivity for people who associate them with the 9/11 attacks.

At least the TSA didn’t try to pretend that a box cutter with a fragile 1″ exposed blade is more dangerous than a pocket knife with a blade nearly two and a half times as long.  But if we’re to start to base our laws not on rational analysis but instead out of sensitivity to irrational fears and emotion, my gosh, whatever will be next?  Banning guns, perhaps – oh, wait….

Predictably the flight attendants have erupted in outrage, and as we know, there’s nothing quite as nasty as an outraged flight attendant.

The flight attendants claim to be an aircraft’s ‘last line of defense’ which is an offensive nonsense of a claim.  They are the third or fourth last line of defense, with the other 3rd or 4th line being any on board Air Marshals.  The second last line of defense is the strengthened cockpit door.  And the last line of defense is the pilot – hopefully an FFDO, ie an armed pilot.  And let’s not forget all the passengers on the plane, who are increasingly willing and actively involved in restraining their fellow passengers (albeit sometimes rather unfortunately and unnecessarily).

In addition to offering up this offensive nonsense about the inflated sense of self-importance, the flight attendants say that this new rule puts them in a much more dangerous position.  Details, if you care, here.

As for me, I’m delighted by this change, as seem to be most other fliers too.  I always travel with a Swiss Army Knife, which (I just measured) just so happens to have a 2.36″ long knife blade.  So I can now travel again without needing to check baggage, except for, perhaps – oh, wait….

The Cost of Docking the Carnival Triumph for a Day in Mobile

You may recall in mid February Carnival’s ship, Triumph, had an engine fire, lost power, and had to be towed to Mobile, where passengers were disembarked after four nasty days without power (or toilets) at sea.

The ship spent a day moored at the city’s cruise terminal while passengers disembarked, and Mobile has now presented a preliminary bill for the ship’s visit to Carnival.  $74,855.02.  This includes the mooring fee, plus overtime costs incurred by police, fire, rescue, and public works employees, and the city says it is the actual cost without any markup.

Care to guess if the city offset its bill by the sudden blip in revenues enjoyed by suddenly having thousands of people surge into its city?

And Lastly This Week….

I wrote last week about the former CEO of Groupon and the refreshingly frank letter he wrote after being fired.  This week, news breaks of his severance package.  $378.36.

Yes, Andrew Mason, formerly CEO of Groupon, a public listed company with a current (depressed) market cap of $3.5 billion, gets a not quite $400 severance package.  And that’s an example more public company CEOs should be compelled to follow.

Yumm?  Or Yuck!  A passenger arriving into London from Burkina Faso was found to be traveling with 207 lbs of dried caterpillars.  The passenger said they were for his personal consumption.

Venezuela officially announced the death of its President earlier this week (there is speculation that Hugo Chavez may have actually died some time earlier), and doubtless this will be a time of transition for the country and whoever it elects as its next President.  While many Venezuelans are expressing quiet delight at the passing of President Chavez, one wonders if they would feel the same way about the consequential ending of one of his more popular policies – cheap gas.  According to this site, petrol in Venezuela currently costs 11c a gallon, making it the least expensive nation in the world to buy gas in.

Until next week, please enjoy safe travels







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