Weekly Roundup, Friday 20 February 2015

If you're thinking that looks like a giant posterior, you're not alone.  See last item, below.
If you’re thinking that looks like a giant posterior, you’re not alone. See last item, below.

Good morning

Winter weather has been giving our airlines – and those of us forced to travel on them – a continued beating.  When will we reach the stage of enlightenment where we no longer accept ‘bad weather’ as an excuse for bad airline performance and a refusal to ‘harden’ their systems to work not only on warm sunny still days, but also in predictably adverse weather too.

I was asked if my silence last week about the Poseidon Arctic Cruise and the Scotland’s Highlands and Islands Tour means both are now sold out.  Sort of yes, sort of no is the answer.  There’s still room on the cruise, and you’re most welcome to join us on that.  But the Scotland tour is probably now full (in the sense of there being no hotel rooms left in a couple of the towns we stay in).  If you’ve been slow to decide and now that it is pretty much unavailable, are thinking you’d actually like to come, let me know and I’ll see if I can beg, borrow or steal a room somehow for you, but no promises!

The Scotland tour will be notable for being the first time ever that a Travel Insider tour will be co-hosted by a female member of the Rowell family.  Yes, I’ve managed to sneak Anna (my daughter) out of school a few days early and we are both delighted she’ll be coming along too.

Also this week, is an eye opening article in which I calculate the actual total cost of fuel on a trans-Atlantic flight, and point out that the total cost of jetfuel per passenger is probably about one third of the cost of the fuel surcharge currently being claimed.  It follows on from the newsletter.

Shouldn’t there be a law against this?  Well, it turns out that there sort of it – a Department of Transportation ‘guidance’ issued back in December 2012.  So what is the DoT doing about such flagrant breaches of its guidance?  Well, sadly, you don’t need to read the article to guess the answer to that rhetorical question, do you.

And now, please continue reading for :

  • Ralph Nader vs The Airlines, Round Three?
  • Should Nader Really Approve of Southwest?
  • What Does Nader Think of Boeing?
  • Another Possible A380 Customer
  • More on Hopper
  • The Battle of the Batteries Part 1
  • Battle Part 2 – Apple’s iCar?
  • Britain’s Banned Travel Ad
  • The Contradiction of the Internet (Again)
  • Ocho Rios Killing its Golden (Cruise) Goose
  • And Lastly This Week….

Ralph Nader vs The Airlines, Round Three?

Professional complainer and five-times failed Presidential Candidate Ralph Nader famously won an earlier battle with the airlines.  After an airline was as short-sighted as to bump him off a flight in 1972 and offer him no compensation in return, he pursued the matter tenaciously until regulations were passed that required the airlines to compensate all bumped passengers on all flights in the future.

Less well known is a more recent interaction when US Airways refused to refund him tickets he cancelled.  But whereas in 1972 Nader had to go all the way to the Supreme Court, in 2011 it took the mere mention of the Small Claims Court to get his refund, but ‘on a one off basis’ rather than a precedent setting case.  So – fewer headlines, less benefit to the rest of us, but an interesting mention here.

It seems he has been less active of late – perhaps understandable because he is now 80 – but it is possible he might have found a new cause – the airlines again.

He erupted into print this week with an open letter to Jeff Smisek, CEO of United Airlines.  Well, yes, he is going after the low-hanging fruit, but there’s no harm in that.

But should he really get incensed that United is open-sourcing some of its labor requirements, and may switch from in-house union employees to third party non-union service providers?  Probably not at all, and while Nader tries to obliquely hint at the oft-cited canard that non-airline staff might be less safe when working on planes, etc, than full-time union-member airline employees, there is zero evidence to support that claim and all airplane work needs to be done to FAA approved standards.

We wish Nader the best, but suspect that his pompous, almost to the point of bullying, tone in his letter to Smisek will accomplish absolutely nothing.

Should Nader Really Approve of Southwest?

In his open letter to United, Nader cites Southwest Airlines approvingly.  While the airline might be a great airline to work for, we’re increasingly unexcited at the thought of flying with them any more, as they transition to becoming more and more a ‘corporate’ airline – which is of course code for ‘a ripoff dinosaur airline, just like the others’.

This week saw a disgraceful example of how even once thought to be flier-friendly Southwest now foists lies on us,  When called on their hinted pending moves to cheapen their frequent flier program, a spokesperson uttered this delightful phrase

In an effort to stay competitive…

as justification for cheapening their award structure.

Since when has ‘competition’ required ‘competitors’ to raise their prices to match the highest price of any of the suppliers?  Since when has it required ‘competitors’ to match the worst conditions of their ‘competing’ suppliers?

Call me naive, but isn’t competition all about the market encouraging suppliers to offer better terms and conditions, better services and products, and better pricing?

But the airlines justify their lockstep matching of each other’s steadily degrading services and increasing fees as bringing improved competition to the US airline market.  No wonder the DoT is so happy accepting the airlines’ promises about how their mergers will result in ‘increased competition’ and better service for us.  What we failed to understand was that both the DoT and the airlines have a 180° wrong definition of competition.

Would anyone please sponsor sending someone at the DoT to a first year economics class.

And back to Southwest again, I wonder what Mr Nader thinks, not only of its ‘competitive’ responses, but also of Southwest not wanting to play nice and share with Delta (or any other airlines) at Dallas Love Field – an airport rising in value and strategic importance now that limits on flights from there are being removed.

Southwest currently has 18 of the 20 gates at Love Field (Virgin America has the other two) and has been sharing one of the gates with Delta to allow the airline to continue to operate its five daily flights – flights Delta has been operating from Love Field for very many years.

Delta had currently been sharing one of two gates owned by United, but United has now sold its gates to Southwest, and Southwest – Mr Nader’s example of an excellent airline, cited to UA, you might recall – is refusing to extend UA’s arrangement with DL.

To be polite, Southwest does not seem to occupy the moral high ground on this matter.  The irony is most amusing.  What on earth does Mr Nader think of this?

What Does Nader Think of Boeing?

Still on Nader related issues, he also casts opprobrium on United’s share buyback actions.  We’re ambivalent about that matter and, apparently unlike Nader, don’t know enough to comment on the specifics of United’s share buyback program.

But we do have a comment to offer on Boeing’s share buyback plans – the company recently increased its share buyback fund from $10 billion to $12 billion.

In this article, Boeing CEO Jim McNerney is quoted as proudly saying he hopes Boeing will be able to keep returning 80% of its free cash flow to investors (either as dividends or via share buybacks), while maintaining ‘competitive’ levels of R&D relative to Airbus.

An 80% distribution level is high, particularly for a company that has very capital intensive present and future development needs.  It seems an unfortunate decision from a company that is watching its earlier dominance in single aisle aircraft erode due to not investing in a new competitive alternative to Airbus’ almost 20 year newer series of A320 family airplanes, and which finds itself with no airplane available to compete with the A321 except perhaps reviving its (discontinued ten years ago) 757.

If ever there was a desperate need for Boeing to plough a bit of its earnings back into its business rather than distribute it to shareholders, it would seem that now is the time.

Another Possible A380 Customer

Because there are so few of them, any announcement of a possible new airline customer for the A380 has to be considered a very exciting development for Airbus.

This article reveals that Turkish Airlines is rumored to be weighing up the plane, and might opt to dip a toe in the water by leasing some of the six currently owned by Malaysia Airlines.

Note the very sad comment about how Malaysia Airlines has shrunk so much after its two airplane losses last year that it no longer needs the A380s it already has.

It is interesting also to observe the continued rapid growth of Turkish Airlines.  In 2013 it was cited as the world’s 7th fastest growing airline, and its total passengers carried in 2013 (48.3 million) was 24% up on its 2012 numbers, and we estimate continued strong growth occurred during 2014.  It currently serves 261 destinations in 108 countries.

More on Hopper

I wrote about this great new iPhone app a couple of weeks ago.  It tells you if you should buy your airline ticket now or wait for the price to go down, and has an impressively robust methodology for making that prediction.

It is now publishing some of its findings on its website – here’s a good article on international fare buying strategies.

If you’ve not yet loaded this free iOS app onto your iPhone, you definitely should.

The Battle of the Batteries Part 1

A friend commented earlier this week that one of the defining inventions of the last 100 years is air conditioning.  No disagreement there – for most of us, it would be difficult/impossible to live and travel comfortably and to work productively without the modern miracle of air conditioning.

Not to denigrate the vital importance of a/c at all, but there are other equally essential inventions of the last 100 years.  And while (particularly in February!) you mightn’t be reading this in an a/c cooled environment, the chances are that you are surrounded by battery powered devices – your phone, of course, your camera, and so many other things that we don’t even think about as battery powered except for the once a year or two when their batteries need to be replaced – remote controls, smoke detectors, watches, and so on.

You might think that battery technology is boring, and that a book written about the evolution of batteries would be arcane, technical, and unapproachable.  If you thought that, you’d be very wrong indeed.

Here’s a wonderful article about certain things to do with the development of modern lithium-ion batteries, and how their investor, now 92 years old, is hard at work developing their successor.  Let’s wish him every success, because higher density batteries are the essential key to electric cars and so much more.

If, like me, you find the article fascinating, I’d urge you to consider buying the complete book it is taken from, The Powerhouse: Inside the Invention of a Battery to Save the World – an equally readable and fascinating detailed look at the development of battery technology and the high international stakes surrounding this field of science.

Battle Part 2 – Apple’s iCar?

News coalesced this week about possible plans by Apple to enter the electric vehicle market.  Earlier speculation that maybe Apple just wanted a more prominent role in providing the customer facing electronics in electric (and regular) cars has now evolved to credible speculation that Apple actually plans to build its own electric cars.

While it seems extraordinary that a computer maker would extend its product range to cars, all modern car owners known that their cars are as much electronics as they are an internal combustion engine, and for a company that has already gone into music players, phones, and soon to be watches, why not cars too, particularly when you have as huge a war chest of cash to spend on things as Apple does.

How do you get up to speed quickly in a new evolving market you want to enter?  You either buy an existing company – of which there are very few to choose from, and with the obvious player, Tesla, being currently very highly valued; or, failing that, you buy in expertise and hire the most talented people from other existing companies.

Although some have speculated that Apple will buy Tesla, we agree with this article that it is not likely to happen.

Instead, it seems Apple is going the second route, and on the face of it, there’s nothing wrong with that.  Who, reading this today, hasn’t been thrilled and delighted if they’ve ever received a call from a head-hunter?  Surely the ultimate accolade is to be recruited by a head hunter, with a bulging new remuneration package to boot.

Apparently Apple has already hired 60 people from Tesla as well as big name senior execs from other car and technology companies.

But, according to this lawsuit, Apple is being naughty in doing so.  It provides an interesting background, from a different perspective, both on what Apple’s plans may be, and also on another dimension to the battery wars.

Britain’s Banned Travel Ad

One wonders what is happening across the Atlantic, in the home of ‘the mother of parliaments’, and freedoms stretching back to the Magna Carta in 1215 – Britain.

News comes this week of how its Advertising Standards Association (a curious oxymoron of concepts – since when have advertisements had standards?) has banned a series of advertisements promoting medical tourism to Malaysia.

Nothing in the ads and travel packages was illegal, unusual, offensive, or in any other way against the public good, and the procedures in Malaysia recently won three awards in an international medical competition.  But free speech is apparently not such a concept in Britain, and the ads were banned.

The Contradiction of the Internet (Again)

It is just over 20 years since I had first contact with the internet (a Christmas 1994 gift of ‘Internet in a Box’ was my introduction), and it is sometimes interesting and always astonishing to think back about how the internet has evolved.

Remember when the internet was thought of as the ultimate in anonymizing tools?  When anyone could be anyone and do anything?  Now the internet is the ultimate in tracking tools where ‘they’ (three letter government agencies, and, even more so, advertising services) know more about us, no matter how much we try to obscure our internet footprints and presence.

Do you also remember when the internet was going to give everyone an equal voice?  We could all be heard on the internet.  Not now.  The major websites have sucked the life blood out of the smaller sites, and the flipside of Google’s stunningly excellent search capabilities is that no-one ever needs to look before the first three or four websites offered by Google in response to any search.  The ‘long tail of the internet’ that once held so much egalitarian promise has vanished.

Talking about equal voices, the internet was to be empowering and enabling and allowing for improved levels of careful discussion and consensus building.  And what happened – instead we have Twitter and 140 character messages devoid of meaning but filled with meaningless hashtags; and misleading and simplistic – but pretty – infographics rather than solid information.

Remember also how the internet was going to transform the marketing and sale of everything, opening the flood gates to an army of at-home entrepreneurs?  Hello – Amazon.  Sure, Amazon, its prices, and its free shipping is brilliant, but what happened to all the second level internet stores?

And then there was travel.  The internet was going to be a brilliant ‘disintermediation’ tool, eliminating the ‘middle man’ (more accurately, the several middle men) in the travel distribution chain, giving more money to travel product operators and allowing them to simultaneously sell their products at lower prices to travelers.

This was first exemplified by the airlines going online and cutting out travel agencies.  With the internet, the airlines believed they could dictate the terms of how their travel was sold, and no longer needed travel agencies any more.

Travel agencies responded by creating their own websites, and for a while, there was a glorious profusion of travel sites.

Admittedly, these days there are still quite a large number of major travel sites, but many of them share common ownership with their apparent competitors, and so far this year, we’ve seen Expedia gobble up first Travelocity in January and now Orbitz this month.

There’s an amusing side bar to this story.  Orbitz was founded by a group of airlines – it was to be the airlines’ attempt to beat the websites at their own game, when they first started to sense that the internet was going to be harder to exploit than they’d first anticipated.

That attempt failed, the airlines bailed out of Orbitz, and now Orbitz, such as it remained, has been bought for a comparatively modest $1.33 billion by Expedia.  Expedia and Priceline are the two remaining major players, and it is a long distance from them to the next largest travel sites.

Well, you can always go to Kayak, right?  Well, yes, except that Kayak is owned by Priceline.  Well, then, maybe choose Hotwire.  Oh, you’ve just gone to Expedia.  How about Hotels.com – there you are, at an Expedia site again.  Booking.com – ooops, that’s a Priceline site.  And so it goes.

Travel operators, rather than rejoicing in the disintermediation of the internet, are now finding that the earlier jumbled market, made up by a crazy pastiche of different companies, none of which had any substantial degree of market control or measurable market share, is now massively dominated by two companies, Expedia and Priceline.  And with the market now forming around two major players, the net result is that rather than the travel operators gaining more control over the distribution and sale of their product, they have actually given up and lost control.

The only credible competitor to Expedia and Priceline is a company slowly building up its travel presence – Google.  And that’s hardly a prospect that will delight the travel suppliers either.

But the irony of all of this is that the airlines, which precipitated a lot of the rush to the internet by destroying travel agencies’ ability to book travel for free (and get their payment via airline commissions) are now finding they are locked in a deadly embrace with Expedia and Priceline – two companies that have at least equality of bargaining power, and both of which have demonstrated, in the past, a willingness to play hardball with airlines if they don’t get what they want.

And the hotels, thinking they could do an ‘end run’ around their former distributors, wholesalers and travel agencies, are now discovering contractual terms from Expedia and Priceline demanding that they get the lowest net rates the hotels give to anyone, or else.  But Expedia and Priceline don’t pass those low net rates on to their customers, they simply pocket the extra commission.

The internet has changed from a low cost method of selling travel that the suppliers could control, to a high cost method that the intermediaries control.

Ocho Rios Killing its Golden (Cruise) Goose

Apparently the site where Columbus first landed in Jamaica, Ocho Rios, is a largely unremarkable Jamaican town that lives for cruise ship port visits.

Unlike Alaskan towns which also live for their cruise ship visits, and which simultaneously love and hate the cruise ships that give them their life and vitality, Ocho Rios is under no such double standard and definitely understands which side of its slice of bread is buttered.  But perhaps one could say that it loves its cruise ship visits too much, and the result is a mad free-for-all scramble by the locals, all desperate to get the most they can from the suckers visitors who come off the ships for brief visits.

The locals have made the experience so appalling that, after long signaling its intention to do so, it appears Carnival is going to take the port off its itineraries.

The town’s response to this is as confused and chaotic as is its marketplace(s).  Here’s an account, but – warning – your head might explode if you try to follow through everything too carefully.

And Lastly This Week….

I wrote a couple of weeks ago about the disappointment concealed within the decision to buy two new 747-8 planes to do duty as Air Force One.  Giving us an example of what other rulers make do with is this article, showing North Korea’s 32 year old ‘Air Force One’.

In English English rather than American English, this enormous new airship is being referred to as, ahem, the Flying Bum.  The pictures explain all.

To put the airship’s vaunted capacity to lift 20,000 lbs of cargo, a 747-8 freighter can lift 308,000 lbs of cargo – as much as 15 of these airships.  And can fly it six times as fast to wherever it is to be taken.  A load of electronics from Shenzhen in China to Los Angeles would take just over three days in the airship (80 hours), or 14 hours in the 747.  And if the airship got stuck in a 100+ mph jetstream head wind, it would, ooops – end up flying backwards rather than still pressing on forwards.

As for its operating cost, the article hints at it being exorbitant when it says that the costs are about 10% – 20% less than the cost of a helicopter, which is a polite way of saying ‘still extremely high’.

So don’t go expecting the skies to be full of airships any time soon.

And now, truly lastly, something for the men.  Should you happen to find yourself in London on the evening of 7 March, here’s an event that might be of interest, and which, for some of us, won’t cost much to attend.

Until next week, please enjoy safe travels






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