Weekly Roundup, Friday 29 April 2016

Good morning

Very exciting news this morning.  I’ve regularly been asked to offer another Travel Insider tour of the Eastern Danube, through the Balkans between Budapest and Bucharest.  The 2007 tour I operated was so popular that it sold out and people were on a waitlist for it, but I’ve held off doing the tour again because I really didn’t like the extension to Istanbul, which involved two days of driving on a bus between where the cruise starts/finishes (close to Bucharest) and Istanbul.

That is a geographic problem, and cruising companies have experimented with various ‘solutions’, including flying between Bucharest and Istanbul, but nothing has really worked well.  I’m also minded of the mild problems I had while in Istanbul (getting caught up in a government sponsored protest march, and street scammers, to say nothing of taxi drivers taking ridiculously roundabout routes to the hotel).

My sense – and confirmed by Turkish ex-pats – is that in the last nine years, Istanbul and Turkey as a whole have become very much less friendly to non-Muslims, undoing many of Kemal Ataturk’s visionary reforms in the 1920s that saw Turkey transform from ‘the sick old man of Europe’ to the progressive modern secular society it became, prior to slipping back into more and more repressive ways from about 2000.

Happily, Amawaterways have now come up with the extension I’ve been wanting all along – extra time in Romania, including a wonderful day tour up into the Carpathian Mountains of Transylvania, and, yes – a visit to the Dracula Castle.  Oh – and they’re also making the cruise available to us with a nice generous $750 per person discount, and a special larger discount to single travelers.  What a very happy and rare change that is for those of us who usually travel alone.

So, as you’ll see below, we’re off to the Balkans in latish August, for a lovely cruise on a nearly brand new ship through a fascinating part of the world that you’d struggle to see in a safe and comfortable manner any other way.  Please do see if you can squeeze the time into your schedule and join us.

Our Bordeaux cruise in July is still available, as is our NZ tour in Oct/Nov.

What else this week?  Please keep reading for :

• Bombardier ‘Wins’ Big Order from Delta
• Boeing Rated Simultaneously as a Buy, Hold and Sell by Three Different Analysts
• Boeing Gets a US Competitor
• How Airlines Stop Competing Without Upsetting Regulators
• 200,000+ Pilot Shortage
• Denver Airport Gets a Rail Link
• US Embassy Issues Security Message for Turkey
• And Lastly This Week….

Bombardier ‘Wins’ Big Order from Delta

I feel sorry for Bombardier.  By all accounts, their new C Series jet is a good airplane, and with good operating costs.  Airlines should be rushing to buy it.

Particularly because it addresses part of the market that is slightly below the size point where Airbus and Boeing become dominant, it would seem to have huge potential.  The company’s failure to do better with their plane to date reflects poorly on the company and the delays and uncertainties in getting the plane to market, and also show that it isn’t enough to have the best product, you need to also be the most adept at selling your product if you are to succeed.

The plane first went on sale in 2009, and is due to enter service in July this year – two and a half years behind schedule.  It has struggled to pick up any ‘big’ orders from credible airlines, and its order book is full of ‘soft’ rather than ‘take it to the bank’ solid orders.

True, Bombardier did pick up a good sized order from Air Canada in January (45 planes and 30 options), but it was widely seen as being the result of Canadian government pressure and a none too subtle ‘bribe’ from the government to Air Canada – you know, the sort of things that would get people arrested and which would be decried from one end of Canada to the other if it weren’t for the fact it was the government that was doing it, and that the beneficiary was a Canadian rather than foreign company.

I’ll struggle not to be distracted with the interesting ethical dilemma of when ‘bribery’ is good and when it is bad, because clearly others are more expert at this than me.

Nonetheless, returning back to the simpler topic of airplane sales, the Air Canada sale wasn’t seen as a very credible or independent stamp of approval and didn’t encourage a rush of orders from other airlines.  The loss of a potential sale to United Airlines at the same time definitely detracted from any positive momentum the AC order might have promised (oh, and the actual specific terms of the AC order have yet to be finalized, although four months have already passed subsequent to the AC letter of intent).

Bombardier has been trying very very hard to win an order from Delta Air Lines, an order which truly would give it the marketplace acceptance it so desperately needs.

On Thursday this week, it was announced that Bombardier had secured an order for 75 CS100s and options for 50 more from Delta.  Bravo!

Or, should that be, bravo?

It seems, from a little bit of reading between the financial lines, that Bombardier sold these planes to Delta for below cost, as also it may have done for the planes to Air Canada, too.  If both orders, and also a conversion of seven options to firm orders by Air Baltic, all had similar pricing, then Bombardier is ‘selling’ its planes for $4 million below cost – about 15% below cost price.

That’s a curious way to manage a for-profit business.  As I said before, it isn’t enough to simply have the best product, you also need to have the best sales team.  Details here.

Boeing Rated Simultaneously as a Buy, Hold and Sell by Three Different Analysts

Boeing reported its first quarter results, leading three analysts to express opinions.  Wells Fargo rated Boeing as ‘Outperform’, Buckingham Research rated it as ‘Neutral’, and Goldman Sachs said ‘Sell’.

The good news is that one of these three firms is correct.  But which one?

Details here.

Boeing Gets a US Competitor

Monday this week saw JetBlue taking delivery of its latest new A321airplane.  Ho hum, nothing new about that, right?  Well, actually, yes, there was.  This plane is the first to be delivered by Airbus from its new ‘completion center’ in Mobile Alabama, with nine more on the assembly line behind it.  Details here.

Does building planes in the US actually give Airbus any competitive advantage?  The answer to that is ‘maybe’, and with a surprising side-bar element.  It seems that Airbus might now qualify for US Export-Import Bank financing, the same as Boeing does.

Of course a US assembled Airbus plane has far from 100% US content.  But the same is true of a Boeing plane, with major subassemblies for many of its newer model planes coming in from international partners.  But it is ironic that ‘Boeing’s secret weapon’ – the Ex-Im Bank – might now be deployable by its major international competitor, too.

How Airlines Stop Competing Without Upsetting Regulators

Alaska Airlines’ purchase of Virgin America is subject to government approval.  We expect that approval will be readily forthcoming (when has it ever not been, after all!) particularly because the airlines are both small.

But what say American Airlines and Alaska Airlines were to merge?  That would be a harder pill for everyone to swallow, and probably the DoT or DoJ would go through the motions of requiring some superficial ‘sacrifice’ in return for approval – the giveback of a couple of gates somewhere that in truth the merged airline no longer needed or wanted, or a solemn promise not to raise fares or curtail flights for a week or two after the merger.

But what say, instead of merging, the two airlines merely increase their codesharing, blurring who it is that operates the flights you book and buy, and with some sort of obscured deal as to who gets to keep how much of each passenger’s ticket price?  What approvals are required for that?

As best I can determine, few or none at all.  Oh, and did I forget to mention – AA and AS, already codeshare partners, have proudly announced they are ‘strengthening their relationship’ by adding new codeshare routes, which will

offer customers even more choices and benefits when traveling throughout the United States

The truth of course is usually quite the opposite.

Codesharing only makes commercial sense to the airlines if it means that instead of each airline operating say three flights that are each 50% full (six flights in total), they can co-ordinate their flights and jointly operate four flights that are each 75% full.  Each airline will tell its passengers ‘Look, you had three flights to choose from before and now you have four’, but the truth is the passengers formerly had six flights over two airlines to choose from, and now they have only four.

There are sometimes possibly beneficial reasons for codesharing that do give value to us as passengers.  A ‘thin’ route, particularly internationally, that wouldn’t otherwise support more than perhaps two or three flights a week by each airline – if two airlines code share to give us equal access to both sets of flights, then that is maybe good.  But on domestic routes, code sharing invariably means soaking up and closing off excess capacity, and reducing the total number of flights operated and seats available.  It is the kissing-cousin of merging, and definitely a means of reducing competition without attracting regulatory scrutiny.

200,000+ Pilot Shortage

Airbus says that Asia alone will need another 200,000 pilots over the next 20 years; Boeing projected a slightly higher 226,000 pilots for the Asian region.  This is due to the enormous present and projected future growth, with a double impact from improving economies giving more people more spending money, and increased liberalization in air routes, allowing more airlines to operate more flights at lower prices.  The result is many Asian countries are expected to see double-digit growth in air traffic for the foreseeable future, and Boeing sees more than 100 million new passengers added a year for the next some years.

To put that number into perspective, the US has about 650,000 passengers a year.  And the total demand for pilots, world-wide, is expected to be about 550,000.

Airbus and Singapore Airlines have just opened a new training center in Singapore to help cater for that demand.  With eight flight simulators and six cockpit training devices, the center claims it can teach more than 10,000 trainees a year.  That’s a surprisingly high number.

If we assume that seven of the eight simulators are always available and operational, and they work 24/7, and if we assume each new trainee pilot gets at least 100 hours in a simulator, that would suggest a capacity for a mere 600 trainees a year.

And that 100 hour number, even if matched with another 100 hours in a limited cockpit training device, is still very low.  Pilots need 250 hours of flying time to qualify for a commercial pilot license, and – in the US – another 1500 hours after that before they can fly for a commercial airline.

Let’s look at it another way.  Those 10,000 trainees can each get no more than 6 hours in a flight simulator and 4.8 hours in a cockpit training device.  They are ‘training’ pilots with this little actual hands-on training?

Denver Airport Gets a Rail Link

Those of us who remember Denver’s former Stapleton Airport have struggled to feel good at the extra distance we now have to travel from the replacement airport in to the city center.  The new airport is 25 miles to the Northwest- a distance best expressed in terms of cab fares, which can quickly go the high side of $70, depending on time of day, traffic, etc.

Now, from last Friday, a new rail line offers service from the airport to downtown Union Station.  Trains run every 15 minutes, the journey takes 37 minutes, and a ticket costs $9.

Strangely, the rail line is to be called ‘The University of Colorado A Line’ due to some type of sponsorship arrangement.  Universities sponsoring rail transportation?

Details here.

US Embassy Issues Security Message for Turkey

Further confirming my unease at the thought of travel to Turkey, the US Embassy in Ankara issued a security warning to US citizens earlier this week (following on from an earlier one the previous week) that said

The U.S. Embassy in Ankara informs U.S. citizens that the U.S. government continues to receive credible indications that terrorist groups are seeking opportunities to attack popular tourist destinations throughout Turkey.

Not my idea of an ideal destination at all.

And apparently, many people are sharing my view; last week, Delta announced it was suspending its JFK-Istanbul service, due to weaker demand and security concerns.  Iberia is also apparently about to suspend its flights there, too.

And Lastly This Week….

As one who sometimes acts as a travel guide of sorts, I can relate to many of these ‘Travel Tips from Guides‘.

The camera never lies, part two :  In the last newsletter I linked to an article contrasting publicity photos with real photos of popular tourist destinations, with the big difference being the publicity shots tended to be devoid of throngs of people, traffic, power lines and street lights, etc.

Now this week, here are some great photos that you can slide between the ‘real’ photo and the ‘enhanced’ Photoshopped photo.  It’s enough to make you stay at home!

Until next week, please enjoy safe travels

David.