Weekly Roundup, Friday 27 January, 2017

Good morning

We’re one week into our new President’s term; and one part of his ‘making America great again’ platform is investing into the nation’s transportation infrastructure.

Whether you’re a Democrat or Republican, surely you support that concept, with both parties racing to get an infrastructure spending bill into the House first, so they can claim the greater share of the credit for the $1 trillion they all seem eager to spend.  But, after watching the $800 billion of ‘shovel ready’ spending sort of evaporate with precious little to show for it, what will – and what should – this $1 trillion on transportation be spent on?

Unsurprisingly, I have some thoughts on that matter.  And so, today, here at the end of the newsletter are the first two parts of a new four part series, where I take 7,000 words to carefully look at the fascinating history and present situation of our nation and its transportation story.  Next week, I’ll offer up some ‘outside the box’ suggestions for much of that $1 trillion.

Talking also about transportation, but definitely not about $1 trillion, I’m very close to needing to give back the remaining rooms for the Scotland’s Islands and Highlands Tour this June.  So if you’ve been mulling over this tour, please let me know soonest if you’d like to come along.

Our NZ Tour in Oct/Nov is also slowly progressing; please do be sure to let me know about that in the next little while too.

What else this morning?  Please continue reading for :

• Responding to the Airlines and their No Free Cabin Bag Policies
• MEL or MLB?  What’s the Difference?
• MH370 Search Called Off
• Boeing vs Airbus – The Annual Update
• Norwegian Almost Becoming a Significant Player Across the Atlantic
• More Good News for Battery Electric Vehicles
• And Lastly This Week….

Responding to the Airlines and their No Free Cabin Bag Policies

After United announced that its basic fares would limit carry on bags to only those that fit underneath the seat in front of you, would you be astonished to learn that American Airlines quickly followed suit with a nearly identical policy?  We’re waiting for Delta to complete the big-three with a sure-to-be similar policy.

In response to these new restrictions, reader Walter wrote in suggesting I remind you about the capacious multi-pocketed ScottEvest range of jackets and vests.  A few years back they sponsored a traveler to go around the world with no luggage at all – everything he had was inside his jacket pockets.  I have a couple of their jackets, and I can indeed fit items as large as a folded business shirt and a laptop into the pockets – some of the jackets have more than 40 pockets (although some are very small and are ‘pockets within pockets’).

I also use these jackets when I’m traveling with an airline that weight-limits your carry-on.  Some airlines have 7 kg (15.4 lb) limits on your carry-on items, and I think there might be a few with even more restrictive limits.  An empty bag by itself can weigh up to 10 lbs, leaving you precious little remaining weight for the things you want to pack inside it.

Worse still, some of their airlines are aggressive at enforcing the weight limit, and if you’re caught at the counter with a too-heavy carry-on, you either have to transfer some items to your checked bags (and risk pushing them over their weight limits) or else check your carry on bag (and pay an extra bag fee).

That latter option – being forced to check a ‘too-heavy’ carry-on, sometimes comes with a nasty surprise.  If anything inside gets damaged or stolen, or if the carry-on bag is lost, the airline will refuse to reimburse you if it was a valuable or fragile item!  ‘You should not have checked it’ is what they tell you, pretending to be oblivious to the fact that you didn’t want to check it and it was their own staff who forced you to do so.

So now if you have such problems at the check-in counter, simply transfer items out of your carry-on and into the jacket you are wearing.  Or, better still, anticipate the issue and have your jacket well laden with heavy items and your carry-on bag nice and innocently light, for the several minutes you’re at the counter.

MEL or MLB?  What’s the Difference?

Reader Jane writes

I just heard a fascinating but crazy true story from a shuttle driver (Barry from Melbourne, Florida airport’s Shuttle Express).  He recently encountered an Asian-looking older gentleman wandering around this small Florida airport.  When Barry asked him if he needed help, the man said in broken English that he looked outside the window and it didn’t look like Australia.

Turns out the man had actually flown from Japan, made a connection through Atlanta on his Delta flight and re-boarded for Melbourne Florida, all the while not realizing he was headed to the wrong Melbourne. He had booked MLB rather than MEL and only realized he was in the wrong town apparently upon landing in FL.

In the old days of travel agents booking our flights and accommodations this snafu would have been pretty hard to accomplish.

I’d like to pretend that the elderly Japanese man was unique.  But there are lots of stories of similar misunderstandings (often London in Canada compared to London in UK) and even ones where similar sounding names caused confusion (Oakland, CA and Auckland, NZ).

MH370 Search Called Off

Almost three years after it went missing, the fruitless search for the missing 777 operated by Malaysia Airlines as MH 370 has now been abandoned.

Cynics would point out that much of the three years has been wasted by searching in the wrong place, and optimists would suggest that it is wrong to view it as a three-year search no longer worth continuing when the general understanding of where the plane might be has evolved and improved massively over the months and years.

The search authorities are not saying that they have actually abandoned the search entirely.  With some delightful Catch-22 logic, what they seem to be saying is that they’ll resume the search once someone finds the plane.

The only good part about this very bad affair is that if the plane’s loss was due to a weakness in the plane or engines, it is a weakness that hasn’t repeated in the almost three years subsequently, so we don’t need to feel extremely at risk every time we board a 777.

It is an eye-opening and humbling realization, in this modern era of what seems to be limitless surveillance and monitoring capabilities, that a huge 777 passenger plane with 239 people on board can apparently disappear so thoroughly for potentially seven hours, including travel over and around Malaysia and Indonesia.

Boeing vs Airbus – The Annual Update

Every year I report on the respective orders and deliveries for Airbus and Boeing – you can see the historical series of data now updated for 2016 here.

2016 was an interesting year, inasmuch as, for the first time since a shockingly bad year in 2009, Boeing failed to receive more orders than the planes it delivered.  In industry parlance, its ‘book to bill ratio’ fell below 1.  Airbus also had an order shortfall in 2009, but not last year, receiving a net of 731 net orders compared to Boeing’s net 668 new orders.

On the delivery front though, Boeing came ahead of Airbus, as it usually does, with 748 planes delivered compared to Airbus with 688.  But it is interesting to note that Airbus has been steadily increasing its total planes delivered each year for the last 14 years, whereas Boeing’s deliveries have been up and down from year to year.

The other interesting measure – at the end of 2016, Boeing was sitting on orders for 5,715 planes in its backlog, and Airbus had 6,874 planes in its backlog.  This represents 7.6 and 10 years of future production, respectively.  To put that into context, and choosing a year semi-randomly, in 2007, Boeing had a backlog of 3,400 planes and Airbus had a backlog of 3,421 planes, representing 7.7 and 7.6 years of production respectively (using the production rates then in effect in 2007).

So – which company did better last year?  I am always a bit skeptical about order figures – it is too easy to play games with orders, moving orders forward or back a year, or treating vague future expressions of interest as if they were real orders (from unnamed airlines), so while it is interesting to note that Airbus reported more orders than Boeing, the small difference was hardly a major win for Airbus.

On the other hand, actual delivered and paid for planes are clearly an unambiguous measure.  But production rates only slowly change; it taking sometimes six months or more to increase the speed of a production line, and so although Boeing is continuing for a fifth year to produce more planes than Airbus, that doesn’t necessarily reflect on the production rates that either company wishes it could be experiencing.  In general terms, it is good to have four or five years of production backlog, but having ten years is too much.  You start to lose sales when you have to tell an airline ‘sorry, you’ll have to wait ten years’ and the other company says ‘good news, you can get planes from us in only 7.6 years’.

It isn’t quite that simple – typically airlines don’t want their entire airplane deliveries the day they confirm the order.  Maybe part of the order is to replace planes that are coming off lease or planned to be retired in the future, and they actually want to wait some years; or even if the planes are to add to their existing fleet, there is generally a limited rate at which any airline can add new planes and therefore new routes and new flights to their network and schedule.

So within both the Airbus and Boeing backlog there are gaps that a new customer could exploit to get some planes in less than the apparent 7.6 or 10 years of wait, and by the same token, both Airbus and Boeing have some planes scheduled for delivery in many more years than the backlog would suggest.  (Note that there are also some ‘double booked’ production slots, done so in the expectation that some of the orders are likely to either be cancelled or delayed.  Truly, production planning is as much an art as a science.)

Overall, I’ll call 2016 pretty much a draw, but I do also note that this makes the fourth year in a row that Airbus has received more orders than Boeing, and in total, Airbus has bested Boeing in 8 of the last 10 years for orders.  It is possible to make one or even two years of orders look better than it should, but over a series of years, the truth comes out, and these longer periods of Airbus consistently scoring more orders are significant.

So, perhaps by a narrow margin, Airbus edged slightly further ahead of Boeing yet again in 2016, especially when considering the respective sizes of their backlogs.

Here’s an interesting article about a strategic weakness in Boeing’s fleet line-up which it has been dithering about how to fill – a gap that if simply expressed in seat terms is between the 178 seats of a 737-9 MAX and a 787-8 with 271 seats.  Note in particular that Airbus seems to have sold about 1200-1400 planes into that ‘gap’ compared to Boeing’s 200-400 sales.

Norwegian Almost Becoming a Significant Player Across the Atlantic

One airline that is eagerly taking delivery of its ordered planes as quickly as it can is Norwegian.  The airline is adding 787s and 737s to its fleet, with plans to fly both 787s and 737s too across the Atlantic.

As this article recounts, in the three and a half years it has been flying to the US it has already grown to be the 10th largest airline, in terms of seats available.  And whereas our dinosaurs are lazily staying more or less the same size, or growing in tiny increments, Norwegian is quickly adding more flights between more cities, and promising to move up the list of carriers still further.

Putting those numbers in context, as tenth largest carrier, it has about a 3% market share.  The largest carrier is 4.5 times bigger – BA with a 13.5% market share.  So it has a way to go yet before it truly is a big guy, and – more to the point – where its fare pricing truly does start to move the entire market down in pricing.  But it is heading in the right direction.

The big puzzle, to me, is Ryanair.  Their ebullient CEO often talks of allegedly wanting to start service across the Atlantic, but then he quickly adds some impossible conditions as to when he will actually do so.  He is waiting for the right plane at the right price to become available before he will launch service, or something else that prevents him from actually doing what he pretends he wants to do.  But meantime, other airlines, large and small, with planes, also large and small, are doing what he hesitates to do, and apparently doing so very successfully.

More Good News for Battery Electric Vehicles

Tesla has now announced the prices they’ll charge when vehicle owners recharge their Teslas at company charging stations.  Kudos to Tesla – the prices per kWhr of electricity are very close to regular retail rates such as people would pay to charge their vehicles at home.  That is brilliantly fair, especially in contrast to some of the other third-party charging services that rely on non-transparent charging paradigms to obscure the fact that they’re charging major markups on their underlying cost of electricity.

In other news – good for intending electric vehicle purchasers, bad news for Tesla, analysts are now anticipating that Chinese suppliers of Li-ion battery prices could potentially drop their prices as much as 40% this year.

With pricing somewhere in the order of $100 – $140 per kWhr of battery capacity at present, the battery cost is no longer as massive a component of an electric vehicle cost as it formerly was (when it cost three or more times as much).  But for a Chevy Bolt or comparable car with a 60 kWhr battery installed, a drop from say $115 to $70 per kWhr would reduce the cost of manufacturing the car by $2700, and the battery pack would now cost $4200.

This is potentially good news for us – a $2700 drop in cost price might mean a $3500 drop in sticker price, although maybe not so on the Bolt, which, according to this article, is currently being sold at a $9,000 loss per vehicle.

It might be bad news for Tesla though because its justification for its Gigafactory and making its own batteries was based on their earlier battery cost.  Tesla, three years ago, said that it would be able to make batteries for 30% less than it cost to buy them from third parties.  Battery prices have been steadily dropping in those three years, and now seem to be poised to plunge much further down.  Might Gigafactory batteries now become more expensive for Tesla to make inhouse that the cost of comparable batteries sourced from China?

We understand and generally like vertical integration, but it works best for stable products and processes.  For something as rapidly evolving as batteries, there seems a palpable danger that Tesla’s $4 billion Gigafactory risks being obsoleted in short order.

Maybe that is also part of the reason why Tesla is now repurposing some parts of its Gigafactory, not to make batteries, but instead to make other parts for its vehicles.

There is also more pending competition for Tesla looming on the horizon.  A Chinese auto manufacturer that you may have never heard of is planning to start selling electric cars in the US, in the next two to three years.  Although you might not have heard of the company – BYD – Warren Buffett has, and he is sufficiently enthusiastic as to have become an investor in the company.

I’ve been waiting for the next wave of Chinese goods to appear in the US – cars.  It has been surprising they’ve been so slow to appear, but with almost everything else now coming from China, it surely is a case of ‘when’ rather than ‘if’.

A cynic might say that these are compelling reasons why Elon Musk is so keen to become President Trump’s new best friend.  Some protection on battery prices and Chinese electric car imports would be very much appreciated by Tesla.

But Tesla will still have the US made Chevy Bolt to contend with.  Here’s information on when the car will come available to pre-order in your state, and here’s a review that is very positive.

And Lastly This Week….

The impacts of France’s terrorist attacks continue on its tourism numbers, with apparently the Chinese in particular proving to be very risk averse.  One wonders if there will be similar impacts on Berlin and Germany.

Talking about tourism, there’s a very cruel double standard that afflicts the industry.  Although it is a service that delivers more local benefit to the areas it operates within than most other products/services; many times the locals, while benefitting from the tourists, hate having the tourists there.  They’ll restrict coaches from the ‘interesting’ areas, passive-aggressively try to make things awkward, and indeed sometimes be downright rude when encountering tourists in the street.  (I wonder why I’m reminded of this just after writing about France….)

And now the tiny Pacific island nation of Palau has come up with its own version of how to solve its ‘tourism problem’.  It is proposing a law that will limit tourism only to high-end luxury big-spenders.  That will get them the same amount of tourism dollars, but from vastly fewer people, or so they hope.

Do you want to feel even older than you already do?  Here’s a fun article with 21 products that, it is suggested, today’s children wouldn’t recognize or understand.  I sometimes find myself having to explain things to my daughter, Anna, if we are watching an older movie or tv program, or if we see one such thing in an antique shop.

And talking about old technology, here’s an interesting article about various products that Google is giving up on.  That’s an often obscured consideration when buying new technology – what happens if the product proves unsuccessful and the company selling it stops supporting it?  We love Google’s willingness to try new things, but we’ve been bitten before when they’ve suddenly dropped products and services that we were coming to rely upon.

Lastly this week, it seems that MH 370 will be written into the annals of great unsolved aviation mysteries, where it joins many existing such puzzlements.

One perennial favorite mystery is the story of D B Cooper.  All sorts of theories pop up from time to time, and now here’s a new one.  He was a Boeing employee, or so this article reasons.

Until next week, please enjoy safe travels

David.