Good morning
Another wintry week of weather disasters for the North American airline network and its passengers. A great example of your taxpayer dollars, not at work.
It sure is enough to encourage you to escape for a bit of sun, but if you do so, be careful about the airports you choose to fly through on your way to somewhere warm.
Spare a thought also for the frequent fliers who live in the always-impacted cities in the midwest and northeast, who have to wrestle with these challenges week in and week out, all winter long; never being sure if they’ll be able to get home at the end of their travels each time, and, if they can, how many hours of delay and misery might become part of their journey.
Now wonder how it is that we, who like to think of ourselves as the greatest most developed nation in the world, are humbled by a few inches of snow – and try not to think how much of Europe keeps going, no matter how heavily the snow falls.
On a happier note, our New Zealand tour this October continues to fill up, and to help answer questions I’ve been getting about the tour, I’m adding some extra pages about NZ to the website. The first two pages are more about Queenstown, which is featured in our tour’s optional extension, and which I urge all visitors to NZ to be sure to include in their itinerary any and every time they visit the country.
I’ll probably add another page or two about Queenstown next week, too. Yes, there truly is that much to see and do around that area. In case I need to add the disclaimer, although the Queenstown area truly is NZ’s tourist mecca, it is not garishly or offensively over-commercialized; it carefully maintains a balance between small town charm (Queenstown’s resident population is only about 15,000 people) and sophisticated international tourist destination (most days, the locals are outnumbered by visitors, but because many visitors are New Zealanders, it doesn’t feel quite so overwhelmed by ‘foreigners’).
More details and links to the new pages in the additional article at the bottom. And please do consider joining us, in Queenstown and everywhere else in NZ, this October.
Also this week :
- Profitable Airlines
- High Profile Unhappiness With Airline Service
- Interesting Twist on Regional Airline Pricing
- The Sky Whale
- Amtrak, Eat Your Heart Out (Again)
- The Chinese Titanic – and Our Response
- Why it is Better to be a Four Star Rather than Five Star Hotel in China
- Art Imitates Life?
- And Lastly This Week…..
Profitable Airlines
Airlines are starting to announce their results for the fourth quarter of 2013.
The results are very positive – Alaska Airlines reported a net income of $77 million, up 77% from the same quarter in 2012. Southwest had a $212 million profit, nearly three times its profit the previous year ($78 million) and United managed to turn last year’s $620 million loss into a profit of $140 million.
Southwest enjoyed its best ever fourth quarter and its best ever year. In total, it earned $754 million, up from $421 million in 2012. The airline’s previous bests were in 2007 for a full year result ($645 million) and in 2000 for a fourth quarter result ($155 million).
The airlines as a whole had a brilliant December, with unit revenue up 11.5% for the month compared to the same month in 2012. While a single month (or quarter) isn’t a lot in the global scheme of things, it does seem that until whatever/whenever the next catastrophe befells the industry, the less-competitive-than-ever-before airlines are settling in to a nice comfortable period of unchallenged profitability. Heck, they even succeeded in persuading Congress not to increase the security level we pay when we fly.
We expect the other carriers will have similarly excellent improvements to report as well. It is true that in terms of return on capital employed and net profit margin, these results are below the norms for most public companies, so let’s not begrudge the airlines a few quarters of financial happiness. But let’s also hope that they’ll plow some of these profits back into their businesses, and not just in the form of spending hundreds of millions to buy new thinner seats so they can cram more people into planes.
High Profile Unhappiness With Airline Service
Oh, talking about those new seats, a recent TripAdvisor survey showed that 83% of respondents find the new slimline style seats to be less comfortable than traditional seats. And who among us is surprised by that?
Indeed, it isn’t just anonymous TripAdvisor visitors who are unhappy at the latest airline changes. Senator McCain is tweeting his frustrations when he says
… are you as frustrated as I am that the airlines keep moving the rows of seats closer and closer together?
(In turn, are you as surprised as I am that it seems he might be suggesting he is flying coach class?)
One of his colleagues also expressed displeasure with airlines. Former Senator Bill Frist tweeted
… United Air miserable service again….
and yet another former political personage (a term which some would say includes John McCain too), ex-Sen Norm Coleman, tweeted
Sitting on another delayed United Airlines flight. Yet again, will miss my connection. Is there a worse Airline? I don’t think so.
Now you might think, and quite sensibly so, ‘Who cares what these fading political people say, particularly in tweets?’. There’s actually an answer to that question. The airlines care.
Typically the airlines have been very careful to give preferential treatment to lawmakers and opinion setters, who have in turn have been respectful and appreciative of their courtesy upgrades, lounge access, and other special perks, and have happily failed to comprehend or experience much of the misery we endure every day.
When politicians start breaking the rules and complaining in public, you wonder what’s up.
Interesting Twist on Regional Airline Pricing
This is almost certainly not going to work as well as the investors hope it will, but it is an interesting concept, and involves Americans crossing into Mexico so as to enjoy better economic standards. In terms of air travel, that is.
The airport in Tijuana is hard up against the border with the US, and just a few miles south of San Diego, although the delays crossing the border (not so much into Mexico, but rather returning back into the US – yes, the Mexican government provides a better service to the citizens of MX/US than does the US government) make it far away in terms of travel time. But, even so, the hassle can sometimes be worth it, because it is often very much cheaper to fly from Tijuana to other parts of Mexico than it is to fly from San Diego.
Plans are now progressing for a privately funded pedestrian bridge to link the Tijuana airport directly with the US. Only ticketed passengers could travel across the bridge, and would pay a fee of between $13 – $17 for the privilege. But after having done so, they could then enjoy cheaper fares from Tijuana, potentially saving hundreds of dollars in the process.
But why do I say this won’t work? Airlines have a very simple way of controlling their fares. They can require a certain fare to only be valid when sold within the country that the travel originates in (the ‘Sell Inside’ and ‘Ticket Inside’ rules).
So, a great idea, but unlikely to succeed as soon as the airlines move to close the loophole and continue charging massive price premiums for nearly identical travel to us, just because we’re ‘disadvantaged by accident of birth’. More details here.
The Sky Whale
I’ve been bemoaning Boeing’s lack of innovation over the last few weeks – a lack of innovation largely shared by Airbus too, but two wrongs don’t make a right.
I refuse to believe that the current style of airplane design, little changed in the last 60 years, is the ne plus ultra of aerodynamic efficiency. We occasionally see conceptual drawings of totally different airplane design types and shapes, but what ever happens to them?
Here’s one such design, and more pictures of it here (and pictured at the start of this week’s newsletter).
Seriously, why not consider a three passenger level plane? For that matter, is the current concept of ‘freight in the bottom half, passengers in the top half’ inviolable? With increasingly wide planes, why not ‘freight in the middle, passengers on the outside’?
Why not consider tiltable engines to allow for shorter runways? And why not layer solar cells over the tops of airline fuselages and wings – high up above the clouds and pollution, airplanes would get some measurable amount of power from them during their flights. And wings that break off in a crash – maybe a good idea?
Possibly none of these concepts make sense, but are any of them being seriously addressed and carefully considered? We all know that somewhere in among the wilder flights of fantasy there are some new concepts that could bring about the next revolution in airline travel, dropping costs and increasing comfort. We’re surely overdue for this latest transformation.
And, to segue into the Chinese theme that follows, here’s an example of at least some small innovation in airplane design. No prizes for guessing where.
Amtrak, Eat Your Heart Out (Again)
The extraordinary phenomenon that is China and its enormous growth continues to best itself with ever more amazing feats.
The country has just announced plans to invest a further $100 billion as part of a new plan to double its current 6,000 miles of high-speed rail track and 1,000 high-speed trains. Oh – the $100 billion investment. That’s for this year alone!
These 6,000 miles of high-speed track have almost entirely been build in the five years since 2008. By comparison, in early 2009 newly elected President Obama was promising the US would commit to developing its own high-speed rail network, and in January 2010 Secretary of Transportation Ray LaHood famously promised us
And I assure you that one day, not too many years from now, ours will be the go-to network, the world’s model for high-speed rail.
In his January 2010 State of the Union speech, Obama said ‘there’s no reason Europe or China should have the fastest trains’; which is of course very true. But in the four years subsequently, while more trains – and ever faster trains – have continued to be added in both Europe and China, what has happened here?
The pathetic $8 billion of funds allocated for high-speed rail in the US has been largely unspent and not added to. Unsurprisingly, it has resulted in no new miles of true high-speed track at all. But China has added enough high-speed track to go from coast to coast in the US twice, and is spending another $100 billion in the next year to continue its high-speed rail revolution.
Sure, costs are different in China to in the US – here in the US, $100 billion may barely be enough to construct California’s problem-plagued semi-high speed rail line between Los Angeles and San Francisco, but the thing is that we’re not spending anything on rail, whereas China (and Europe and much of the rest of the world) continue to develop a new infrastructure for the 21st century that challenges our 20th century and now ‘old fashioned’ interstate highway system – something which in its day was one of the ‘secret weapons’ of the US economy and productivity, but now is neither.
The oft-cited ‘distance argument’ also doesn’t apply. This argument says that distances are too great for high-speed rail to work in the US. But the Chinese recently opened a 2200 mile high-speed rail route, and it seems to be enjoying great ridership. In any event, not every person using a line has to travel all the way from one end to the other; many people might board at one intermediate stop and get off at another intermediate stop.
We need to switch from blindly accepting theoretical arguments why high-speed rail couldn’t work in the US. We should find answers, not problems. We should copy the Chinese example and make it succeed here too.
Read the mouth-watering details of China’s continued rail expansion here. Read it, then weep.
The Chinese Titanic – and Our Response
Okay, so China might be beating the pants off us when it comes to trains, and the manufacturing of just about everything, and is scrambling to catch up to our airplane industry too. But, hey, at least we still have the market cornered on Disneyland and other theme park extravaganzas, right?
Uh, maybe not. News also this week of plans in China to build a $130 million replica of the Titanic, to be permanently docked inland on a river in Daying as the centerpiece of a theme park based on the ship.
While that’s less than the $500 million that Australian billionaire Clive Palmer is spending to build a sea-going replica of the Titanic (which, by the way, is being built in China – it seems that shipbuilding is another industry falling vulnerable to China) it is still an enormous cost and shows that over-the-top theme park developments, once so quintessentially and even exclusively American, are now becoming accepted in China too.
But maybe yes; maybe we still have an edge in theme park extravaganzas (much to my daughter’s excited delight). Some sources are suggesting that the extensions to the Universal Studios Orlando Harry Potter section could be costing as much as $400 million. Money well spent, according to my daughter.
Look also for a Harry Potter section of Universal Studios, Hollywood, to open in 2016.
Why it is Better to be a Four Star Rather than Five Star Hotel in China
Continuing what has become an unplanned mini-section on China, many hotels are seeking to be downgraded from official five star status to four star status, while new hotels are no longer seeking to get that ultimate stamp of status.
China is going through a new wave of pseudo-austerity, and it is no longer quite so cool, or quite so socially safe, to be seen to be extravagant, particularly if you are a government employee. This article says that this year’s Chinese New Year gift giving has seen toothpaste replacing iPads as gifts. And the five star hotels of course feel it will be easier to sell their rooms if they are labeled as four star (a bit like in the west when the airlines first started using other fare codes and even cabin names to provide a very thin veneer to obscure when we were traveling in first class).
The good news about all of this for the west? If wealthy Chinese people can no longer be ‘conspicuous consumers’ at home, then it will drive them, their wealth and their spending offshore, to relatively poorer places like, for example, wherever you’re reading this today.
Unless, of course, you’re in the US, because here in the US, we persist in viewing China as an economically depressed country and its truly wealthy citizens are assumed to be impoverished financial refugees desperate to move and then illegally remain in the US in the hope of living a better lifestyle here.
The Chinese people I know sneer at this perception. They enjoy much better lifestyles in China and have no desire whatsoever to settle here, but would love to be able to conveniently travel here on vacation. What a shame we don’t make it easier for them to do so.
Art Imitates Life?
There’s a new off-Broadway comedy, ‘Craving for Travel’. It is written by a travel agent and about travel agents, and sponsored by travel companies.
Maybe I’ve been inside the industry too long, but I can see how it could potentially be very funny. All of us who have been ‘doing’ travel tend to build up some stories that are on the far side of believable, but actually true.
If you’re in New York, you might want to go see it during its (ahem) short run. Details here.
And Lastly This Week…..
We’ve written quite a lot about China this week. But not all is good there. China’s continued rush to industrialization, and its lower priority when it comes to balancing development with environmental concerns is causing continued growth of smog, particularly in the largest cities.
It is no laughing matter, and measurable amounts of this massive airborne pollution is traveling over the Pacific to the US (even though it is 6,000 miles by shortest great circle route from Beijing or Shanghai to the US west coast). But sometimes China’s response to this pollution is such that you have to laugh, for fear of otherwise crying.
Such as, for example, on this occasion.
Do you remember back to the Vancouver Winter Olympics in 2010. At the time, they seemed to be outlandishly expensive, but isn’t that true of all Olympic events. And, more to the point, the Vancouver costs are now being massively upstaged by Russia’s hosting of the 2014 Olympics in Sochi, due to commence next month. Some details of the costs of this extravaganza are here.
One of the saddest aspects of the $50 billion blowout in costs (original projection – $12 billion) is that undoubtedly some of the money is being skimmed off the top by graft and corruption, as is shown by the cost of building a new road that became so expensive that it could have been paved in caviar for the same price. And of course the fact that Sochi has a warm climate doesn’t help much for a winter sports event, either.
Highlighting the fact that the $50 billion is only imperfectly securing appropriate facilities is this picture of, ahem, facilities, and the cost-cutting that is being undertaken.
For those so interested, this is not the only place in Russia where such economies are observed. Scroll down through this blog page and see some of the rather cringeworthy photos and situations featured.
Even funnier perhaps is that the Russians responded with alacrity to the hilarity that the picture caused. But their response is also rather strange.
Until next week, please enjoy safe travels
David.
