Weekly Roundup, Friday 25 November 2016

An example of a 777 cockpit fire, such as may have occurred to MH370.  This fire, pictured, happened to an EgyptAir 777 while on the ground in Cairo in 2011.
An example of a 777 cockpit fire, such as may have occurred to MH370. This fire, pictured, happened to an EgyptAir 777 while on the ground in Cairo in 2011.

Good morning

I hope you had a wonderful Thanksgiving and over-ate abundantly, so as to give you sufficient energy for today’s Black Friday sales.  My daughter wants to go ‘normal shopping’ and I’ve had to persuade her to wait until the far side of the weekend’s madness before getting within several blocks of any of the local malls.

I’m extending the Black Friday theme into one of the two articles added to this morning’s roundup newsletter.  Certainly, online, ‘Black Friday’ is becoming much more a fuzzy type of entire week of alleged bargains, followed of course by the new ‘Cyber Monday’ concept immediately afterwards.  We’re already seeing amazing deals on Amazon, including Kindles for as little as $49.99 and Fire tablets (the 7″ tablet is as low as $33.33, but our pick is the new 8″ tablet, if it can still be had for $59.99 instead of the regular $89.99 price – that’s an astonishing steal of a deal – see our review of the 8″ Fire here), plus plenty of not-so-amazing “deals” on products that seem to be little discounted off their normal pricing.

We also expect to see some sales of smart watches.  With total smart watch sales dropping rather than increasing in the last year, and a whole bunch of new improved models expected out in the next few months, that’s surely a recipe for some price drops on the current crop of products.  We’ve always desperately wanted a smart watch, but struggle as we might, we’ve also never seen the sense in buying one.

Have the steady stream of incremental improvements, combined with general drifting downwards of prices, changed this?  Should you buy a smart watch if you find one on sale at present?  For answers to those questions, please read the very detailed article that follows.

In terms of ‘please read’, I recognize that releasing new Travel Insider tours on Thanksgiving week probably shows less than a great sense of timing.  But please do consider the two tours we released last Friday – our June 2017 Scotland’s Islands and Highlands Tour, and our July 2017 Australia/NZ Family Tour.

Note also that I’ve managed to trim the cost of the 2017 Family Tour substantially, so even if you looked at it last week, please return to it again now.

One couple who are looking to join the Scotland tour were speaking with Icelandair about their travel dates earlier this week, and were surprised to learn that the airlines flights in June/July are already filling up.  They – like me – see clear benefits to Icelandair, which with its flights through Reykjavik and direct to Glasgow allow you to avoid going through any of the potential trouble spots in the European mainland next summer.  So please do think about this some more very soon, while you have air options and I still have hotel options.

There’s also another article after the newsletter, rebutting one of the strange mistruths and misunderstandings that seem to obscure a full and fair understanding of the exciting appeal of battery-electric vehicles.  Meanwhile, in a recent piece of good news for battery-electric vehicles (BEV), former BEV skeptic Toyota announced a day ago that it has made a discovery that might extend battery capacity by 15%, and which could be on sale within a couple of years.  A 15% improvement might not seem like much, but add this 15% improvement to all the other incremental improvements which are appearing, and almost every month sees BEV technology move another step forward towards not just competing with internal combustion powered vehicles, but soundly beating them.

And what else this week?  Please keep reading below for :

  • Very Detailed and Credible Explanation for MH370 Disappearance
  • Even Emirates Being Impacted by New Low Cost Airlines
  • Richest Man in Australia Accused of TripAdvisor Cheating
  • Airbnb to Add More Travel Services.  Expansion?  Or Loss of Focus?
  • Airbnb to ‘Partner’ with Chinese Company
  • Australia’s Attempt to Increase Fee on International Travel Fails
  • And Lastly This Week….

Very Detailed and Credible Explanation for MH370 Disappearance

Remember the mysterious disappearance of the Malaysia Airlines 777 being operated as flight MH370, way back on 8 March 2014?

After disappearing off the radar, the plane was subsequently established to have flown a bizarre route before settling into a steady south easterly direction and disappearing somewhere into the Southern Ocean.  A massive, and still ongoing search, has failed to locate the plane’s remains, although pieces of it are now starting to wash up on shares around the western Pacific rim.

While we totally don’t know exactly what happened – or perhaps because we don’t know what happened – there has been no shortage of possible explanations offered up.  Some are simple – pilot suicide or terrorist attack – and others are fanciful in the extreme, involving state level actions by major powers such as Russia or the US.

As well as attracting fairly wild speculation, it has also attracted the sincere focus of people with very credible backgrounds and detailed knowledge, and indeed, these ‘enthusiastic amateurs’ have often been at the forefront of determining what little is currently accepted and known about the mysterious disappearance.

On the one hand, the matter is now 2.5 years behind us, and would seem to be a ‘one off’ event, whatever it was, and therefore of little interest or impact on us, today and tomorrow.  But on the other hand, we are talking about the total loss of a common type of plane which many of us regularly fly, and if there’s an underlying airplane weakness or vulnerability, either in the form of something that might accidentally go wrong or something that can be deliberately interfered with, we should understand what this is so we can ensure it doesn’t happen again.

A new theory has been making its way to the forefront of discussion about the event which makes for compelling and very credible reading.  In brief, the theory is that the plane’s windshield caught fire, destroying the cockpit, the flight controls, and the communication equipment.

What’s that, you say?  How can a windshield catch fire?  Glass doesn’t burn!  Well, that is all true, but cockpit windshields have heaters inside them, and it is the heaters that can cause a fire, with at least 39 such fires to Boeing 757, 767 and 777 planes being reported (and the suggestion of more unreported) between 2002 and 2014 , including more than would be randomly expected to planes in the same build series as the MH370 777.

Here’s the very detailed explanation of how a windshield fire might occur and result in the strange observed behaviors and ultimate total loss of the plane (and the illustration at the start of this newsletter shows the type of conflagration that could occur – a problem made still worse when the cockpit windscreen breaks).  Or, if you prefer, here’s a summary explanation to introduce you to the concept.

Even Emirates Being Impacted by New Low Cost Airlines

It is an interesting and changing dynamic that speaks poorly to the US marketplace and regulation, but whereas a couple of decades ago, domestic flights within the US were marked by a reasonable amount of competition, while international flights were less competitive, that scenario has more or less flipped around.

Now there’s almost no competition domestically within the US, and while it is probably fair to say there is not much competition internationally – particularly as a result of the dozens of airlines around the world obediently aligning themselves into three more or less equal groupings, there are more airlines now operating disruptively on international routes than there are domestically.

Some of these disruptive airlines compete on service rather than cost.  Emirates itself – an airline that has come from nowhere (founded in 1985) to now currently be the world’s fourth largest (by at least one of the several measures that can be used) – and if it keeps growing, may become the world’s largest in only a few more years) is definitely disruptive, but it has grown primarily through providing a high quality/value product rather than by being a low cost airline.  It has also been one of the world’s most profitable airlines, with a US$1.24 billion profit in its 2014/15 fiscal year.

But its profit plunged 64% during its most recent half year.  The reason?  The airline says it is facing increasing competition on its long-haul international routes by low cost competitors.  With open-skies treaties making it easier for new airlines to operate on routes that once were exclusively reserved for national ‘flag carriers’, and with the lazy non-competition between the Star, Oneworld and Sky alliance members, new airlines are challenging the traditional dinosaur brands and seeking to pluck some of the lowest lying fruit off the international travel tree.

This article, while explaining the phenomenon, also points out that there is one set of routes that have remained largely immune to the impacts of low-cost international airline competition.  Inexplicably, those routes are to/from the US and the rest of the world.  Strangely, the country that most prides itself on free markets and fair competition has less effective airline competition than most other countries.

Well, no, that shouldn’t be a surprise.  With bona fide airlines and totally compliant applications to add more air service to the US – such as that presented by Norwegian Air, and the massive delays and non-responses received from our Department of Transportation in return, our government is showing itself to be not one iota ‘for the people’ while resolutely ‘for the US dinosaur airlines and their unions’.

However, the exciting thing is that surely there’s only so long the DoT can delay this particular tide.  How much longer before sufficient people find it impossible to ignore the inconvenient truth that better air travel options and lower fares can be found in other countries but are not available in the US?

Richest Man in Australia Accused of TripAdvisor Cheating

Known as ‘High-rise Harry’, Harry Triguboff is considered to be the richest man in Australia (as an aside, Australia’s richest person is actually a woman, Gina Rinehart), and has an estimated net worth of US$7.5 billion, much of which relates to his success as a property developer and serviced apartment/hotelier.  He claims to be Australia’s largest provider of hotel rooms, with a total inventory of more than 4,500 suites in 18 locations.

But in spite of – or perhaps because of – this, his company apparently is very sensitive to the risk of negative TripAdvisor reviews.  The company (like many others) has an arrangement with TripAdvisor whereby all guests are solicited for feedback after a stay, but it is alleged that in cases where the company fears the possibility of a negative review, it will send TripAdvisor a deliberately mistaken email address for the guest so that TripAdvisor’s solicitation for a review is never received.

The Australian Competition and Consumer Commission has now brought a legal action against Harry’s company (Meriton Property Services) alleging that it has been engaged in ‘misleading or deceptive conduct in connection with the posting of reviews of its properties on TripAdvisor’ over a one year period.  The company denies the charges.

Airbnb to Add More Travel Services.  Expansion?  Or Loss of Focus?

Airbnb has been spectacularly successful, and deservedly so.  It is a poster child example of how the internet and its ‘disintermediation’ can create entirely new business models.  As you probably know, Airbnb provides a way for ordinary homeowners to rent out a spare room to guests, becoming, in effect, a one or two room micro-hotel/bed and breakfast.  Homeowners get a new source of income, and travelers get efficient access to a large inventory of alternate accommodation options over and above the usual hotel type choices.

Its latest round of capital raising was on the basis of a $30 billion valuation, an extraordinary sum for a company with no assets.  This is an interesting article contrasting Airbnb’s valuation with that of ‘real’ hotel companies.

The company is private, so little is known of its financials, and similarly, little is known about why it continues to raise so much extra capital (potentially up to $1 billion this year).  One would assume that a company with very few assets could only command a $30 billion valuation if it is ridiculously profitable.  But you know what they say about assuming!

This week sees interesting news that the company is about to expand its offering beyond simply connecting people looking for a room with people with a spare room keen to take in a paying guest for a few nights.  This seems to imply the company has spare cash sloshing around and no clear view of how to spend it.

The company says it now wants to start offering ‘Experiences’ (note the capital E) to its customers.  CEO Brian Chesky said “We realized we needed to create a holistic experience, for the whole trip”.

A ‘holistic experience’?  Is that exactly what a person looking for a cheap room for a couple of nights is actually wishing to find on Airbnb?  Is this a relevant appropriate extension of the Airbnb brand, or hubris writ large?

I’ve found that the more ‘ambitious’ a travel company becomes in what it seeks to offer, the more likely it is to spectacularly fail.  It has consistently seemed that the more specialized a traveler’s requirements, the more specialized a service they seek to fulfill their requirements.  In other words, the market for specialized travel is both very small and very demanding.  General travel sites are invariably unable to scale to meet the detailed interests and informational demands of specialized travelers.

Let’s hope that Airbnb doesn’t become the latest example of this trend.  But switching from a ‘new economy’ business model to becoming instead a traditional online travel agency hardly seems like a recipe to continue commanding sky-high valuations.  As an interesting comparison, publicly traded Expedia (which also includes subsidiaries such as Travelocity, Orbitz, Hotwire, CheapTickets, HomeAway, and assorted other brands) is only worth two thirds the value ascribed to Airbnb ($19 billion compared to $30 billion).

Another measure also points to the astonishingly high valuation ascribed to Airbnb (and which hints at how any move into more traditional type activities will surely threaten this).  Airbnb is thought to have about 2500 employees (ie each employee represents $12 million in stock value – a number not unlike some other high tech companies such as Google and Uber).  Expedia has over 18,000 (ie each employee represents $1 million in stock value – a number not unlike some other new economy companies such as Apple).  Still more traditional style companies such as General Motors shows about a quarter million dollars in stock value per employee, and IBM about $500,000.

Airbnb to ‘Partner’ with Chinese Company

In other Airbnb news, the company has announced plans to partner with (or, more specifically, to buy out) a Chinese competitor, Xiaozhu, so as to hopefully succeed at breaking in to the Chinese market.

If this sounds familiar, it might remind you of Uber’s failed attempts to enter China, culminating in eventually selling its Chinese business to local competitor Didi after expensive and failed attempts to compete.  Or Google’s failures.  Or Facebook’s latest gyrations and submissions to Chinese censorship in an attempt to get into a market it has not yet managed to break into.  Lots of examples of failures by western companies to break into the Chinese market are provided here.

Xiaozhu is not the Chinese market leader in Airbnb type services, and is quite a distant way behind the leading company, Tujia, which has more than four times as many listings, and very deep pocketed backers.  So the success of this alliance is far from assured.

It is very hard for any company that isn’t majority owned by Chinese interests to compete in China.  Will Airbnb become the exception to this rule?  Or is it suffering from a simultaneous second attack of hubris?

Australia’s Attempt to Increase Fee on International Travel Fails

A beloved source of income to rapacious governments, always seeking sources of more money to spend/waste, is to add fees (a ‘fee’ sounds nicer than a ‘tax’) to allegedly wealthy people such as international travelers.  Taxes on international travel are particularly tempting because in most cases, it is reasonable to guess that half the people paying the tax are foreigners who don’t vote.

So we’ve seen an explosion in fees levied on international travelers.  When I first started traveling between the US and other countries, 30 years ago, the total taxes were either $4.95 or $9.95 on an international ticket (I forget which).  That number has steadily climbed, both in absolute dollar terms and also when expressed as a percentage of the related airfare, but even as recently as the end of the 1990s was still usually only $19.95 per roundtrip ticket.

While the fees successively added to our tickets have generally been described as being required so as to provide ‘better services’ for international travelers (shall I pause for a minute here until you recover from your fit of laughing) or – even more mirthfully, in the case of Britain, to combat global warming, the reality and truth is that the largest part of all such fees simply vanishes without trace into the government coffers without helping the hapless people who were forced to pay it.

Any careful study, ever conducted, has always consistently and clearly shown that such levies on the cost of travel do more harm than good.  By making travel more expensive, fewer people travel, and spend less money in the country they’d otherwise have visited.  The extra $10 or whatever of fee – a small sum that seems ‘harmless’ to governments, eventually becomes a tipping point that results in the loss of a $5000 or more total expenditure by the visitor who has turned away from the country adding the fee.

This also happens regionally.  Cities, counties, and states that add extra charges to hotel bills or whatever else invariably end up losing more money overall than is gained from the fee.  But because the fee income can be measured, and flows directly to the taxing authority, while the overall loss of total travel revenues is harder to exactly establish, and harms the region’s economy as a vague whole rather than the taxing authority specifically, the various authorities who levy such fees don’t really care at all and continue to add more and more fees, no matter what the consequences of their selfish short-sighted actions.

The Australian government decided that it would increase the fee it levies on every international traveler from an already hefty A$55 to A$60.  It’s only another A$5, they reasoned, and hardly noticeable on an international airfare.

But this time, rather than trying to use reason and business studies to combat the proposal, the Australian ‘Tourism Task Force’ (an industry lobbying group) came up with an Infographic to explain the issue in simple form.  Like most infographics, some of the information is a bit distorted and/or oblique, but the pictures are pretty and the apparent message clear.  You can see it featured in this article.

A couple of the headline points it makes are interesting.  The fee brings the government four times the income it needs to fund the alleged purpose of the fee, and has grown to a point where it now can be half the price of a discounted international ticket to NZ.

I’m not sure if one should be delighted (at the result) or dismayed (at the low-information methodology required), but the final outcome saw the Australian government narrowly vote against increasing the fee.

And Lastly This Week….

The never-ending saga of Britain’s inability to decide what to do about its ever-more-desperate need for more international air service, and the related on-again/off-again twists and turns of maybe/maybe not an extra runway being added to Heathrow took an amusing twist this week.  British Airways apparently realized, for the first time, that if a third runway is added to Heathrow – something it generally supports – the flight path to the runway would be such that its own world headquarters building, only recently completed in 1998, and at a cost of £200 million, would have to be demolished.

Adding further mirth to this merriment is that, due to the way that the costs of the airport expansion project would be passed on to the airlines involved, in effect BA would have to itself pay the costs of demolishing its lovely new headquarters building.

In other humorous airport news, here’s a futuristic piece that predicts, with not a single smiley face to be seen, that the airport of the future will offer ultra-fast security processing and no more lines to check in.  Technological developments and more self-service options will bring this all about, we are told.

I’ve got to call BS on this prediction.  First of all, most of us already know that it takes us as long or longer to self-checkin for a flight than it used to take when standing opposite a checkin agent at a counter.  Secondly, we also know that the most significant ‘non-change’ has been from not enough agents to check everyone in to now not enough machines to self-check in with, or not enough agents to accept our already tagged bags, or some other bottleneck, somewhere else in the checkin process.  Speeding up one part of the process is only a benefit if all other parts of the process don’t become new bottlenecks.

To suggest this will all disappear in the next couple of decades is nonsense, very much like the predictions that new airplane layouts will include shopping arcades, food courts, bars, casinos, and other space-consuming attractions.  All these predictions were made of the A380, and before that, of the 747, but no matter how big the plane, airlines invariably decide they’d rather fill it with seats than with recreational amenities.

In the case of airports, to ensure no lines would require more physical space for checking in more people at once, and more equipment, and more staff (even after the automation).  The reason that checking in and security all takes time at present is nothing to do with technology.  It is simply because it is cheaper for the airlines, the airports, and the security services to have fewer people all steadily working than it is to staff up to handle the peaks of demand rather than smoothing them out via a requirement to stand in line.

It is the economics of the process that will never change.  And therefore, so too will the need to stand in line never disappear.

Oh – and one side effect of taking a very long time in an airport?  The need to use its facilities.  In which context, good news for passengers traveling through MSP.  Its restrooms, or at least some of them, have been awarded the title of 2016 Best Restrooms in America.

I’d like to see the runner-up restroom at Coca-Cola Park in Allentown, PA.  The mind boggles as to exactly what the ‘hands-free, motion-controlled, urinal gaming system’ there might be….

Until next week, please enjoy safe travels






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