Weekly Roundup, Friday 17 July 2015

Good morning

I included a short piece last week about your rights if/when hotels are overbooked and refuse to accept your confirmed reservation.

It attracted quite a lot of interest, comments and questions, and so I’ve massively increased it in size (now at 4000 words!) and republished it as a standalone article.

Unlike airlines, hotels have no federal and formal obligations to compensate guests they can’t accommodate, but there are some standard practices that most hotels observe, and some obligations imposed on them by the law of contract.

This imprecision is why the article grew in size, and also why it is important to understand these issues rather than being blindsided by a hotel that tries to bluff its way out of its obligations when turning you away and not honoring your confirmed/guaranteed reservation.

The article is attached at the end of tonight’s newsletter.

And now, please read on for :

• Aer Lingus Sale to BA Approved
• Delta Sulks, Threatens to Take its Toys and Go Home
• About Those Free Flights
• About Those Pilots
• Fewer Airlines = More Competition?
• Talking About Fees
• Travel Agents Beware – There’s a New Game in Town
• She’s Not Sick – She’s Scottish
• And Lastly This Week….

Aer Lingus Sale to BA Approved

IAG – the parent company that owns British Airways, Iberia, and low cost Spanish carrier Vueling, has now added another airline to its stable – Aer Lingus.

Its $1.4 billion bid to buy the Irish airline won EU approval this week, and included the ridiculous concession of giving up five slots in London to enable ‘competitors’ to also offer flights between London and Dublin.

The reason this is such a ridiculous concession is because the surrendered slots were at Gatwick, not Heathrow.  And while it is selling five slots at Gatwick, it is gaining 24 slots at Heathrow that belong to Aer Lingus.  Surely even an EU regulator can do that math – sell off five low value Gatwick slots, but acquire 24 high value Heathrow slots – not exactly a balanced quid pro quo, is it.

With Heathrow slots valued at as much as $60 million each, it could be said that IAG is getting the airline, its planes and other assets, all for free, thrown in with the valuable Heathrow slots.

The sale to IAG also marks the fulfillment of an 11 year dream for Willie Walsh, head of IAG.  In 2004, when he was CEO of Aer Lingus, he asked the Irish government if he could lead a management buyout of the airline.  They refused, and said that Walsh was trying to ‘steal’ the airline (which was at the time largely owned by the Irish government).  Walsh then became CEO of BA and oversaw its transformation into the International Airlines Group (IAG), which has now bought Aer Lingus.

With the analysis above of the value of the LHR slots alone, it seems that Walsh not only ended up buying the airline he always wanted, but he did indeed end up ‘stealing’ it, too.

More details here.

Delta Sulks, Threatens to Take its Toys and Go Home

Delta is in the throes of renegotiating the contract with its pilots, and the pilots are perhaps getting greedy, seeing the airline’s massively increased profits and wanting a larger share of them.

Never mind the fact that what the pilots do has almost no bearing at all on any airline’s profits.  The pilots probably figure that because they already get so much money from Delta, they should therefore get even more.

Delta pilots currently earn up to $270 an hour (12+ years seniority on a 747 or 777) and even a pilot with ‘only’ five years experience, and on a smaller A330 earns $242 an hour.  On top of that there are per diems, hourly over-rides, generous allowances and pension contributions, and some profit sharing, to say nothing of the free travel perks.  With most pilots flying about half time, ie 85 hours a month (a typical 40 hr week such as the rest of us work comes to 173 hours/month), senior pilots can look to earn the high side of $300,000 at present for their part time jobs (see this page for an interesting schedule of Delta’s pilot salaries).  Delta pilots earn more than United pilots, but less than American pilots.

Delta is trying not to be any more generous than it already is, and its latest contract offer was rejected by the pilots’ union.  And so, in an interesting non sequitur, the airline has announced it is cancelling orders for 40 new Boeing 737s and 20 Embraer E190s.

Is the airline ‘punishing’ its pilots by withholding nice shiny new airplanes from them?  Most of us would think there is no clear link between replacing old planes and adjusting fleet size on the one hand, and pilot pay scales on the other hand, and furthermore, the actual impact per flight caused by the likely changes in pilot wages that might be agreed upon are close to minimal.  Think of a typical two hour flight in a 737/A320 – say a pilot at $200/hr and a copilot at $125.  Even a (very unlikely) 10% increase in wages paid would only add $65 extra to the cost of operating the flight, and spread that over close on 200 passengers and that’s a mere 35c per passenger.

About Those Free Flights

Talking about the most visible perk offered to pilots, and pretty much to every other airline employee too – free or reduced rate travel – it isn’t nearly as valuable a perk as it used to be.

In the ‘good old days’ airline employees, and even some non-employees such as, ahem, myself, could pretty much head to the airport at just about any time of any day and be reasonably assured of being able to fly on their choice of flights to wherever they wished to go, and all for free.  The only uncertainty was which cabin you’d be traveling in.

What a change we’ve seen over the last 10 – 20 years.  The airlines have got very much better at selling, or if not selling, giving away for free their premium cabin seats to frequent fliers, and have formalized their approach to controlling staff travel, with endless layers of priority and formality for who gets on the planes first and last.  That has greatly reduced the amount of upgraded travel available, and your ability to ‘schmooze’ your way onto a plane.

And as for the generic free coach seat, that too is becoming little more than a fond memory.  When was the last time you were on a plane with abundant empty seats?  Not only are the flights close to consistently full with fare paying passengers, but with fewer flights, there’s a longer wait until the next possible flight comes along, and it is also my sense that the airlines have become less cooperative about offering benefits to competing airline employees.

Because flight benefits extend beyond employees to selected family members too, and also to retired employees, there’s something well in excess of two million people eligible for some type of ‘staff’ travel in the US (AA alone has 750,000 people so qualified).

Pilots have highest priority, and can fly on in-cockpit jumpseats as well as regular passenger seats.

Here’s an article about how free travel is becoming less practical and less of a benefit.  I know people who are entitled to free staff travel but who now sometimes choose to buy regular tickets, the same as the rest of us.

It is also changing what was formerly an accepted ‘lifestyle’ benefit – airline employees would live in their choice of cities and then ‘commute’ to work – flying to whatever city they started and finished their tours of duty in, and possibly with some type of temporary residence in that city shared with many other airline employees during their duty period.  Because it is now harder to confidently plan your travel, it is harder to use free staff travel to commute between the city you live in and the city you work from.

About Those Pilots

Sure, they might earn up to $300,000 a year for working part-time, but wouldn’t it be so much nicer if pilots actually knew how to fly, and could consistently do so safely?

As regular readers know, I maintain that pilots cause more accidents than they prevent, and look forward to the day when automation completely replaces pilots.  We’d have fewer bullets in airplane toilets, too.

An interesting example of what was probably pilot error occurred on a Sky West flight last April.  A plane plunged from 39,000 ft down to 27,000 ft, due to what the FAA deems to have been a stall.

In simple terms, a stall occurs when a plane is flying too slowly for the conditions it is in, and doesn’t generate enough lift over its wings to keep it aerodynamically flying through the air.  The higher the altitude, the less air there is, and so the faster a plane needs to fly to keep above its stalling speed.

All planes have an ‘envelope’ – a range of acceptable speeds and altitudes – they can safely fly at.  As the plane goes higher and higher, the ‘envelope’ gets smaller and smaller.

The plane in question (thought to be a CRJ700 or 900) has a service ceiling – a maximum altitude – of 41,000 ft, and so was operating close to the limit of its safety envelope, and would have had to be flying at a moderately high rate of speed to remain safely above stalling speed.

As a result of this incident, the FAA has issued restrictions to Sky West, requiring them to limit their operating altitude to no more than 35,000 ft, and to fly at a minimum cruise speed of 288 mph.  By requiring a lower max altitude and a higher minimum speed, the FAA is ensuring the flights don’t get near the edges of the envelope.

Sky West however denies there was a problem, and certainly denies the plane stalled.  Oh no, it wasn’t a stall, goodness me, no.  Instead, the airline says the plane ‘experienced a slow speed event’.  Which just goes to show that while the pilots might not be very good at their jobs, the public relations staff are excellent at theirs.

A rose by any other name, methinks.  And the bottom line remains the same – the plane lost 12,000 ft of altitude before recovering.  Ugh.  (Actually, that’s a surprising amount of altitude to lose.  I’d guess that most stalls could be recovered from in much less than half that amount of altitude loss – my own stalling experience is in denser air and lighter/slower planes so I’m not sure about up at those heights, but it does make me wonder about why there was so much altitude loss prior to recovery.)

Details here.

Fewer Airlines = More Competition?

As you know, the airlines famously claim, and the DoT infamously believes, that allowing airlines to merge will increase competition and benefit consumers.

A recent report confirms that there is much less competition these days, and also seems to suggest that there’s much less benefit to consumers, too.  Who’d have thought that!

Airline tracking company Diio shows that 40 of the 100 largest US airports now have a single airline controlling over half the seats for sale.  Ten years ago, that was the case at 34 airports.  At 93 of the airports, either one or two airlines dominate, up from 78 ten years ago.

During the same ten years, airfares have climbed, after adjusting for inflation, by 5%, ancillary fees have skyrocketed from almost nothing to now sometimes $200 a bag, free food has disappeared, fuel prices have dropped, load factors have increased, and airline profits are soaring.

This article, with some specific examples of disproportionate rises in airfares due to substantial reductions in competition at specific airports, makes depressing reading.  It also shows that the very few airports that have ceased to be dominated by a single carrier have seen reductions in airfares – thus proving both the positive and negative outcomes of more/less competition.

Someone should send a copy of the analysis to the DoT.

Talking About Fees

Never mind the comparatively slowly rising airfares.  How about all the fees that are an increasing part of the total cost of travel?  The airlines like to forget this when they try and play down the rises in airfares, and sadly, the DoT doesn’t have any accurate/consistent way of tracking the total cost of travel, just the published fares alone.

A private study has suggested that fees grew by 21% last year worldwide – a year marked by little or no inflation in almost everything else, dropping fuel prices and soaring profits.  Yes, airlines charge fees not because they need to, but because they want to.

In the US, the increase in fee collection for last year compared to 2013 was 19%, and totaled $14 billion.  United collected more fees than any other airline in the world – $5.8 billion in 2014.  Rather than being a contributor to the airline’s profit, the fee income eclipsed its profit, which in total came to ‘only’ $2 billion.

To put this in further perspective, in 2007, total fees collected, worldwide, were $2.45 billion.  In 2014, it was $38.1 billion – a 16-fold increase in seven years.  Details here.

Tell us again about how fewer airlines is good for competition?

With fees running so wildly out of control, some passengers will do anything they can to avoid paying more in fees than absolutely necessary.  Such as, for example, this person who collapsed from heat exhaustion due to wearing 12 items of clothing onto his flight, to avoid luggage fees.

Travel Agents Beware – There’s a New Game in Town

Google bought a travel data company, ITA Software, in 2010, getting final DoJ approval in April 2011.  ITA provided an airfare search and pricing system used by online travel companies and airline booking systems, and there has been much speculation since that time as to why Google bought the company (for $700 million) and what its plans would be.

We’ve seen occasional glimpses of Google starting to toy with offering travel booking services – go to www.google.com/flights for example.  And now Google has started offering direct hotel booking services.  It is a very limited ‘toe in the water’ but it seems destined to become more substantial.

It is true that Expedia has started to command ‘too much’ market share and needs a strong competitor.  But it is also interesting to note that while Expedia has managed to negotiate substantial margins from hotels, it generally pockets those margins rather than passing savings on to travelers.  The internet has not provided any financial benefit to either hoteliers or their guests; it has merely created a new class of highly paid intermediary (quite the opposite of what everyone expected a decade or two ago), and there’s little reason to expect that Google’s participation in this market will benefit the public, either.

One interesting reason why the internet has failed to benefit either travel suppliers or travel purchasers is the actions of the hotels themselves.  Many hotels forbid their agents from selling hotel rooms at less than the advertised prices on the hotel’s own website.

She’s Not Sick – She’s Scottish

Officious airline busybodies decided that a 14 yr old girl traveling with her parents and siblings, about to board an Etihad flight from Manchester to the Maldives, was ‘too pale to fly’.  This was the conclusion of an Etihad staff member with no apparent special skills in determining allowable passenger complexions.

The family said she wasn’t at all sick, just Scottish, and with a pale red haired complexion such as is common among some sectors of the Scottish population (yes, it is the Viking influence).  But the Etihad check-in person ‘knew better’ and refused to allow the girl to board.

The family managed to find an airport paramedic who briefly examined the girl and said she could fly.  That also was insufficient, and Etihad said it would accept nothing less than a written letter from the girl’s doctor.  Oh yes, did we mention that the flight was boarding and about to depart?

Miraculously, the family managed to get their GP to send a one sentence note to the airline saying there was no reason he was aware of that the girl shouldn’t fly.

Am I the only one to be concerned at the ability of ordinary airline employees with no medical training whatsoever to arbitrarily require a passenger to get a doctor’s ‘fit for flight’ letter on a whim?  What would you do if you were pulled out of line while waiting to board a flight and told you couldn’t fly until you produced a doctor’s letter proving you were fit to fly?  And what doctor in the US would send such a letter without first conducting an in-person exam?

Details here.  The passenger is pictured at the opening of this newsletter.

And Lastly This Week….

There’s a new social sharing app for fliers, called ‘MileHi’.  What on earth could it be designed to help passengers with, one wonders.  The answer, we are told, is to help passengers share taxi rides and such like.  Try telling that to your spouse – ‘Oh no, dear, I just use this app to find people to share cabs with’.

Truly lastly this week, an airline passenger with two baggage carts full of luggage.  Well, perhaps not outstandingly unusual, until you learn that those two baggage carts were full of what the passenger hoped would be carry on bags – purchases they made at Duty Free prior to boarding their flight.

Wealthy Chinese tourists are delaying flights from Narita to China due to the volume of their last minute in-airport duty free purchases.  I’d never really associated Narita with excellent duty free shopping, but then again my view of duty free is very one dimensional – whisky and nothing much else (because in truth just about anything you’d buy in a duty free store, anywhere in the world, can be bought more cheaply through Amazon or elsewhere once you get back to the US).

Someone should tell that to these Chinese people.

Until next week, please enjoy safe travels

David.