Weekly Roundup, Friday 30 January 2015

Good morning

Our Scotland’s Islands and Highlands tour has grown again, causing also its per person price to shrink.  We’re now at 18 people and the cost per person, originally $3295, is now delightfully down to $3045.  Another couple would see it drop further to $2995.

So there are 18 people all hoping you’ll choose to come along and save them another $50!  On the other hand, any further requests to join the tour are definitely subject to being able to get hotel rooms – we’re now spread out over three hotels in two of the towns, and while that’s no big deal in these tiny towns, it does mean we’ve soaked up almost every remaining available room.  Please do hurry if you’d like to join us.

In particular, can I point out that we have both a single gent and a single lady looking for share partners.  So if you were thinking of coming along as a single but didn’t like the thought of the single supplement (which is a very modest $475 in any event) you have a chance to join with another Travel Insider in a share twin and avoid the supplement.

The Poseidon Arctic Expedition also had another person choose to come along, and with their guaranteed single share basis, we can welcome a few more participants, either as singles, sharing or not, or as couples.

There are two additional articles added to the main newsletter this evening (down at the bottom).  One reports on the dismaying discrepancy between airline competition in Europe and in the US – sadly, and surprisingly, these days airline competition is a thing of the past in the US, while thriving in Europe.  That’s a complete opposite of what used to be the situation; how did we ever end up with only four airlines dominating our skies?

The effects of this four airline lack of competition are making themselves felt every time we fly.  Air fares are steadily increasing, even though jet fuel prices have halved in the last six months.  But, you know, most of us would probably happily pay the unfairly inflated fares if it bought us something approximating a comfortable and convenient flying experience, but that’s something that has been lost along the way as well.  Now we’re stuck on full planes, and the airlines are not adding extra flights in response, but rather are simply pushing the fares as high as they can while rejoicing in the artificial market shortage of flights they’ve allowed to happen.

In any other industry, if there are only four dominant players, a massive amount of latent product demand unfulfilled, and the four players enjoying record profits, you just know there’d be a scramble by new players to enter the market, and at least one of the four major players would probably start adding new capacity.  But with the airlines, we see the opposite.  A total silence when it comes to potential new startup carriers, and the most recent startup, Virgin America, is struggling to make any profit at all and get above a 1% market share.

Something is very wrong, and the cruel irony is that the evolution of this situation has been aided and abetted by the very bodies that are supposed to be looking out for us and encouraging competition – the DoJ and DoT.  Don’t they realize, in those famous words that strike dread into every private citizen’s heart, they’re from the government and are there to help us?

The other piece reports on the announcement on Wednesday of the DoD contracting with Boeing to buy two 747-8 planes to replace the two 747-200 planes that currently serve as Air Force One.  But that’s not actually an announcement that we should be too proud about, as my article points out.

What else?  Please keep reading for :

• Plane Crash Update
• Naughty United
• AA :  Our Pricing is Nothing to do with Oil Prices
• Airports Keep Trying to Take More of Your Money
• Top Tourist Cities
• Is Apple a One-Trick Pony
• An Amazing New iPhone Fare Predicting App
• Skymall – Maybe Not Gone, Definitely Not Forgotten
• And Lastly This Week….

Plane Crash Update

There’s been a lot of meaningful glances and significant intonation accompanying the ‘revelation’ that the co-pilot was flying the AirAsia flight that crashed almost a month ago.  This has been determined from an analysis of the cockpit voice recorder tape.

Two responses.  The first is a massive yawn and a ‘so what?’.  There’s nothing currently suggesting that the co-pilot was in any way insufficiently skilled to fly the plane – well, nothing except the plane now being in the ocean and everyone dead, of course!  We know the co-pilot had 2,247 hours flying time, although we don’t know how much of that was in the A320 type plane (the captain had a massive 20,537 hours flying time).

This leads to the second point.  The instant things started to go wrong, you can be certain that the captain would have started to participate in problem solving and saving the plane.  In such cases, it is common to have one pilot concentrating on ‘flying the plane’ as best he can while the other pilot focuses on identifying and correcting the problem.  If the pilot in command decided his co-pilot was better tasked at the controls while he did the troubleshooting, then so be it.

We also now know that apparently the pilot(s) turned off two key flight management computers – either as part of their problem solving procedures, or perhaps immediately prior to the problem and causing the problem to arise.  Ooops?

But we don’t know anything more at this stage, and while pilot error remains a prominent probable cause, nothing is yet certain.

And talking about errors, here’s a rather dismaying article that looks into Indonesia’s clumsy and failing attempts to recover the airplane fuselage and more of the bodies.

A short comment also on the big aviation mystery of last year – MH370.  The Malaysian government has now formally declared it an accident and the people on board dead.  But that doesn’t mean there’s been any breakthrough or new information obtained, it just means the government has decided there’s no remaining chance of the passengers being alive anywhere, and by making this declaration, that clears the field for insurance payouts and other things to proceed.

Meanwhile, although an international task force continues to search for the plane, it remains obstinately unfound.

Naughty United

Talking about airplane crashes, the FAA is threatening to fine United Airlines $1.3 million for ‘allegedly’ violating regulations to do with the transportation of hazardous materials on at least 120 different occasions.

But before you get too outraged, it seems the violations are a failure to do all the paperwork, rather than transporting forbidden items.

And don’t shed too many tears for United.  These types of headlines that the FAA loves to release typically result in a less impressive reality.  Probably what will happen is that half the fine will be waived if United doesn’t repeat its blunder for a while, and as for the half that has to be ‘paid’, it is common for the FAA to allow the airline to spend much of the sum on ‘improvements to their internal systems and additional staff training’ to ensure the problem doesn’t reappear.

So the actual cost to United of this ‘fine’ is probably going to end up as close to zero.  But you’ll not see mention of that on the FAA’s triumphant press release.

Delta, on the other hand, seems to be a little too trigger happy in its evaluation of what is and is not allowable to take onto a plane.

AA :  Our Pricing is Nothing to do with Oil Prices

You don’t have to follow the airlines for too long to realize their ‘ratchet’ policy on external events.  If something bad happens, they’re howling to high heavens about it, demanding government assistance/relief, pushing up airfares, and laying staff off.  If something good happens, the ratchet clicks, and they say/do nothing.  There’s no balancing reciprocity.

Imagine if every time oil prices rose, the price of gas also rose at the pumps, but every time oil costs dropped, the pump price stayed the same.  That’s an unthinkable terror, isn’t it.  But that is what is happening with airfares currently.  We all know how the airlines like to charge way more than their fuel costs as ‘surcharges’ any time jet fuel prices go up.  But now that jet fuel prices have halved, they’re doing nothing – except for a few shameless airlines such as Qantas that are eliminating their fuel surcharges and then increasing their fares by the same amount, so the ticket price we pay stays the same.

That’s bad enough, but the real danger?  When prices recover and start to increase again, will the airlines say ‘don’t worry, all that is happening is that prices are going back to what they were’?  Oh no, they’ll start wailing and moaning about fuel costs adding billions to their annual costs, and will push up the price of their fares and surcharges yet again.  Heads, the airlines win.  Tails, they don’t lose.  If fuel prices go up, they profit by adding fuel surcharges that return them more than the extra cost of the fuel they buy.  If fuel prices go down, they profit by leaving the surcharges in place.

As evidence of this, AA’s CEO, Doug Parker was quoted earlier this week as saying

We’re going to continue to run American like we still have $100 a barrel oil.  You won’t see any changes from us in the near future because we continue to run the airline as if high fuel prices will return.  Pricing simply goes with demand.  When demand is strong, you see prices move accordingly.

Don’t you love the way he shifts blame for their high fares – it is our fault for wanting to fly, not their fault for wanting to rape our wallets.  That’s a bit like the traditional rapist defense, isn’t it – ‘she wore a short skirt so deserved what she got’.

Now, like all the best lies, his comments are half true.  Pricing is indeed linked to demand – in most normal, non-monopolistic markets.  But there’s a third variable to consider as well – price, demand, and supply.

And that’s where the airlines are really truly ‘cheating’ at present.  By continuing to keep the supply of seats on planes lower than ever before in the almost 100 year history of commercial aviation, they’re not only making excess profits through higher than normally possible load factors, but they’re also creating a scarcity of resource that supports high pricing.

The airlines are now pricing to meet the upper half (or whatever percentage) of the market, and have ignored/rejected the rest of the market entirely.  You know, people like many of us – people who have curtailed our travel, and who now drive more than we fly, whenever possible.

In other words, the airlines are saying ‘we’d rather make $10,000 flying one plane full of passengers than make $12,000 flying two planes each three-quarters full’.

Maybe that’s even their right, privilege, and prerogative.  But see how quickly that willingness to stick it to us with few flights and high fares vanishes when a competing airline tries to break into a market that is begging for more flights and lower fares.

All of a sudden, the Doug Parkers of this world change their tune, double their flights, and halve their fares, and saying with a perfectly straight face that they’re not trying to kill the new competitor but merely responding to marketplace demand.  But as soon as they’ve starved out their competitor, the pricing and scheduling is back to their preferred definition of ‘normal’.

Astonishingly, the DoT and DoJ consider this rapacious practice to be ‘fair competition’.  And, with the connivance and demonstrated ability to selectively see only what it suits them to see of these two enabling authorities, the airlines quite confidently tell us ‘we’re going to pretend oil is still twice the cost it now is’, because they know there’s no consequence from doing so.

AA will save an estimated $5 billion on jet fuel in 2015 compared to 2014.  And its CEO is boasting that it plans not to pass a single dollar of those savings back to us. Seems like they’re taking aawful aadvantage of us.

Airports Keep Trying to Take More of Your Money

Talking about greedy, the airlines seem matched in their greed by airports, who discovered a wonderful new way, in 1992, to increase their spending budgets.  This was via the so called ‘Passenger Facility Charge’ – back then a $1, $2 or $3 fee added on to your tickets by airports that you flew into, out of, or through.  In 2001 the $3 maximum per airport was raised to $4.50.

Well, the airports would like to see that go up to $8.50.  There has always been a limit of four PFC fees per ticket, so that could see as much as $34 added onto your ticket price if the airports get their way.

They point out, not unreasonably, that inflation has eroded the value of the $4.50 they have been able to collect since 2001.

But they are quiet when other factors are also considered.  The number of passengers passing through almost every airport in the country has colossally increased since 2001, so the airports are getting more fees.  Plus those passengers are also generating more revenue for the airports through the commission the airport charges all their retailer outlets in the airport – as much as 10% of all the money you spend in an airport goes back to the airport authority.  And then there are parking fees and all sorts of other fees, plus – oh yes, the fees the airports charge the airlines, too.

Now there’s an idea.  Why not simply charge the airlines more – they’re the ones so flush with extra profit at present.

That concept has the airlines a little aggravated, and so they point out that between 2000 and 2013, airport revenues per passenger grew 52%, while inflation only grew 35%, and ticket prices only increased 22%.

That seems fair, but whenever you see a time series quoted for anything, you need to very carefully look at the start and stop dates and wonder why the particular dates were selected.  You can prove almost anything with a carefully selected start and stop date.

And that’s what happened here.  In this case, the airlines chose a time series from immediately before the airports had a 50% increase in the fees they could charge, so if they were to instead look at fees per passenger between 2001 and 2013, they’d only be able to point to a 2% increase, compared to their own 22%.

And, wait, there’s more.  What about 2014 – a year with strong airfare increases, but low or zero inflation and low or zero growth in airport per-passenger revenues.  I’ll guess that if the airlines instead looked at a time series from 2001 to 2014 instead of 2000 to 2013, they’d point to 33% inflation (down from 35%), 30% airfare growth (up from 22%), and 2% airport fee growth (down from 52%).

The only part of airports that have become much nicer in the last decade or two are the shopping and eating facilities – the revenue generating parts of airports.  Basic passenger facilities remain fairly spartan, and probably always will, no matter how large a fee the airport gets to charge us as we pass through.  The biggest bugbears for most of us – waits to check in, to go through security, and to collect our bags – are seldom things the airports control.  The airlines decide how many staff to deploy to their checkin counters and also how many staff to work their baggage handling services.  And the TSA decides its manning levels for the security screening points.

Bottom line – the airports should transition more to a ‘user pays’ model.  If they need to invest millions more in a new parking garage, then they should require the parking income from that parking garage project to be sufficient to support the construction of the garage.  If they need larger lounge areas, they should charge the airlines more for gate rentals to fund such costs.  If they need new runways and other on-tarmac services, they should charge the airlines for such things.

Top Tourist Cities

Euromonitor International just published its list of top tourist cities around the world, albeit using 2013 data.  2013 was a very good year for international tourism, and so too was 2014, although the numbers are not yet at hand.

The top tourist cities in 2013 were

Hong Kong (25.6 million arrivals)

Singapore (22.5 million)

Bangkok (17.5 million)

London (16.8 million)

Paris (15.2 million)

Macau (14.3 million)

New York (11.9 million)

Shenzhen (11.7 million)

Kuala Lumpur (11.2 million)

Antalya (11.1 million)

 The strongly Asian slant on this is due to the ever increasing numbers of Chinese tourists.  But while outbound tourism from China is growing in leaps and bounds, inbound tourism is not – Shenzhen showed a 3% decline, Shanghai recorded a 6.5% drop, and Beijing fell 10.1%, having barely more tourists than Sofia in Bulgaria and not quite as many as Johannesburg.

The biggest loser, in 2013, was not Beijing, which was only the second most reduced destination.  Cairo lost 25% of its international tourists in the same year.

Here’s the full report.

Is Apple a One-Trick Pony

Apple released its Q4 2014 result this week.  Its $18.04 billion net profit for the quarter is not only its best ever quarter, but is also the best ever quarter, for any company, anywhere in the world, and convincingly ahead of second most profitable company, Russia’s Gazprom, which reported a $16.2 billion quarter back in Q1, 2011.

That is an amazingly impressive result, and seems to be primarily due to an explosion in sales of its iPhones, which now contribute two thirds of Apple’s revenue.  One could wryly observe that the runaway success of the new larger screened iPhone 6 and 6+ phones (with 4.7″ and 5.5″ screens) rather contradicts the earlier assertion by Steve Jobs that the ideal screen size is 3.5″, and of course, part of the reason for the huge quarter (immediately following the release of these two new phones) was due to several years of pent-up demand from iPhone loyalists who were becoming increasingly desperate for a larger screened phone.

The interesting thing (to me) is that the quarter also showed a modest 9% increase in Mac sales (can you say ‘halo effect’?) but also showed a stunning 22% drop in iPad sales.  Ooops – what happened to that halo?  And what happened to the iPad?

Whereas Apple has been keeping a fairly steady market share for phones, it has been continually losing share for its tablets.  As for other product categories, the iPod is all but defunct and no longer separately tracked, and the new watch product has been delayed and is not now expected until April.

I’ve not heard anyone eagerly/excitedly awaiting the release of the watch product, either.  I know plenty of early adopters who have rushed to get smart phones and tablets and other gadgets, but none of them are lining up for an Apple watch.  Indeed, when did you last notice anyone wearing any sort of smart watch?  While there’s still a chance that Apple’s watch might transform the largely moribund smart watch category the same way its iPod did for the portable music player category, there’s no current indication this will happen.

An Amazing New iPhone Fare Predicting App

Talking about iPhones and iPads, give pause for a moment and think about every time we update the operating system on these devices (or on Android devices too for that matter).  It is drop dead simple, right?  You download a file and a few minutes later, the phone or tablet is updated.

Now think about the issues when you update your operating system from eg Windows 7 to 8.  Drop dead simple?  Or just ‘drop dead’?  More the latter, in most cases.  Why is it that the nowadays sophisticated phone and tablet operating systems have this dead simple upgrade/update feature, but our Windows OS does not?

Anyway, with that aside now pushed to the side, I came across what seems to be a brilliant new app for iOS devices.  It is the Hopper Flight Research and Prediction app, and it is free.

It does two things brilliantly well.  The first thing is to tell you if you should buy a ticket now or wait for a lower fare, and gives you time windows during which it suggests fares might subsequently go up or down.  The second thing is it very intelligently suggests other nearby airports with lower fares.

Now there are other apps and websites that do both these things, but – assuming Hopper’s predictions are correct, and they claim high accuracy with a fairly detailed explanation of their methodology, Hopper seems to do it better than anyone else.  It also makes predictions for international travel as well as domestic travel.

For example, I plugged in the dates for my daughter’s travels to come join me on the Scotland tour in June, and it told me that the current price was about $1865 (ouch!) but that prices would probably fall by as much as $625 over the next two months before then steadily rising.  Okay, based on that, there’s no way I’ll buy her fare today.  Hopper offered to send me realtime updates to my phone as and when the fare dropped, so there’s no need for me to obsessively check every day or two.

It also suggested flying not from Seattle but from Vancouver or Victoria in Canada instead, which could allow as much as an $1184 saving in fare!!!  That’s astonishing, and also wonderful that it searches for airports that far away.  I could buy a roundtrip ticket from Seattle to Vancouver for about $350, meaning a $800 net saving.

The app has a brilliantly easy and intuitive interface and really useful data.  And – oh yes, it’s free.  Very highly recommended.

If you don’t have an iOS device, you can also use their website, although the website interface doesn’t seem as fully featured or intuitive as the phone interface.

Skymall – Maybe Not Gone, Definitely Not Forgotten

It is always a surprise as to what creates a reaction in the travel community, and what results in no response at all.

The demise of the Skymall inflight catalog, reported last week, seems to have stirred readers and other travelers, the world over, and there’s been a rush of articles reminiscing on the ‘good old days’ of the catalog, and a ridiculous article attempting to analyze the saving to airlines by now not having to carry the extra weight of the magazine on their planes.  I say ‘ridiculous’ because the article totally overlooked the key factor – no airlines carried Skymall for free.  They were all paid to do so, with my understanding being that generally airlines either were paid a flat fee and/or a commission on sales made from the magazines on their planes.

One of the better retrospectives is offered by Joe Brancatelli, here.

But a sudden outbreak of nostalgia doesn’t mean that there’s a future for the magazine, just waiting for someone with a bit more entrepreneurial skill to come along and tweak the business slightly into success and profit.  However, at least one person disagrees with me.

Scott Jordan, the founder of the Scottevest line of multi-pocketed travel jackets and other clothing items, has said that he knows what to do.  He says :

SkyMall was doomed to fail by its business model.  But I know how to fix it.

As a regular advertiser in Skymall, he probably knows something about the catalog, and it would be nice to see a new re-imagined Skymall catalog in our seatback pockets again – perhaps with even weirdier and wackier products featured.  But I’ll not hold my breath.

And Lastly This Week….

My dream car is a Tesla, and its new dual motor version truly offers something for nothing – a combination of faster acceleration and also better economy/longer range.  The reason for this apparent contradiction is because the two motors do a better job of recovering energy when the car brakes.

As for the accelerating part of the picture, its high performance dual motor car boasts an incredible 3.2 second 0 – 60 time.  Even better, just yesterday, Tesla announced that a software upgrade would allow this time to be shortened to 3.1 seconds.

Have you ever wondered what it would be like to be in a car that goes from 0 – 60 in 3.1 seconds?  That’s almost exactly 1g of acceleration, by the way – and the most distinctive part of a Tesla speeding up is that the power is instant.  There’s not the slightest bit of lag between flooring the gas pedal and full power coursing through the twin motors.  So, if you wonder what that’s like, there’s an easy way to find out.

Have a look at this Youtube video showing the reactions of passenger’s in a guy’s P85D when he demonstrates full power acceleration.  (Would it be churlish of me to wonder exactly what the speed limit was on what seem to be suburban streets when these video clips were filmed?)

I was writing about plane crashes above.  To offer a more upbeat note, here’s an amazing video of a non-plane crash.  If only such technology could be added to all commercial passenger planes.

And now, truly lastly this week, Colorado voted in 2012 to allow marijuana use and the first stores opened in 2014.  Its citizens, or at least some of them, are apparently enjoying the liberalization in state law.  But, at the same time it is now legal to buy and smoke marijuana, it is not legal to buy a t-shirt about the new state freedom at Denver International Airport.  Details here.

What were the airport officials smoking when they thought that up?

Until next week, please enjoy safe travels

David.