Our summer in Seattle is proving rather disappointing currently, to the point of instead of running the a/c, I’ve even had the heaters on intermittently. I hope your summer is better than mine, while not being as hot as some parts of Europe have been experiencing.
Talking about hot weather, our cooler weather December Christmas Markets tour is proving slow to fill. I need to get an accurate feeling for numbers – if you are thinking you might decide to join this, can you let me know asap please so I can right-size things. While I’ve said this many years in the past, I’ll sincerely say it again this year and observe that I think the new itinerary promises to be one of the very best we’ve ever done, and I’m enormously looking forward to a week in the general Bavarian region. I’m sure you’d enjoy it too.
I had a curious thing happen this week, when suddenly, in what for me passes as “the middle of the night”, the Amazon Echo unit in my bedroom erupted into alarm sounds and flashing lights and told me that someone wanted to speak with me. I did not want to speak with them, particularly because I didn’t recognize their name. That was a surprise event and unexpected – it has never happened before. But even more surprising and unexpected was what happened when I called Amazon and spent 62 minutes on the phone with them trying to understand who had called, how they had managed to call to the Echo unit in my bedroom, and how I could prevent it from happening again.
I write about all these surprises in this week’s feature article, which follows after this morning’s regular roundup.
One more “administrivia” thing. As part of my newsletter reformatting, I’m also thinking of how to make the newsletter more generally readable.
When I first started it, in 2001, my target word count each week was 750 words, and another 750 words for a feature article. That number has slowly crept up in the almost 20 years subsequently, even though, at the same time, the average length of most written material has become shorter and shorter. The last few weeks have seen newsletters even exceeding 5,000 words (4,400 words today), and with feature articles that can sometimes go over 4,000 words too, I’m sensing that I’m overwhelming the less dedicated readers with too much content. Too much quantity, and I fear, perhaps at the sacrifice of quality.
At the same time, I’ve really gotten into a good rhythm with Twitter. Using Twitter as a medium seems to have taken the best elements of the former daily newsletter, and built on those to make something more interactive and more comprehensive for you as a reader, and actually easier and less time-consuming for me to put together. The best of both worlds.
If you’re a Twitter user, you are of course invited to join the 2245 people already following my tweets. If you don’t like Twitter, or even if you do, but find that tweets get drowned out by the sea of other tweets that keep coming in, there’s a great free service that sends you an email compilation of my tweets each day. This – with the strange name of ketchup – can be found here.
What else? Well, the same-old same-old (ie bad news for Boeing) and some other items too :
- This Week’s Bad News for Boeing
- Ford’s Terrible Betrayal
- Over-Regulating Privacy Protection?
- Money Cures All?
- Korean Air’s Strange Priorities
- Norwegian Air’s Struggles
- Norway’s Electric Car “Miracle”
- Virgin Galactic Finds Some More Money
- And Lastly This Week….
This Week’s Bad News for Boeing
There were two things of particular note this week. The first was a release of their net new orders received for the first six months of the year.
To be fair, it has been a very bad six months for both Boeing and Airbus, with Airbus reporting a mere 88 net new orders. To put that count into perspective, in 2018, for the full year, Airbus recorded a net total of 747 new orders.
Boeing, however, has had a much worse first half. After its last full year total of 893 net new orders, for the first half of this year, it has had a net total of minus 119 new orders. Yes, 119 more plane orders were cancelled rather than added in the first six months.
Some of you may remember the self-congratulatory fuss Boeing engaged in at the Paris Air Show last month, reporting its order for 200 new 737 MAX planes from BA’s parent company, IAG.
Except that, this was not an order. It was a precursor to an order – a non-binding “Letter of Intent”, and which may or may not ever actually result in an order, in any size, shape, or form. The fine print of the much boasted about order actually not being an order at all was largely overlooked.
Some lazy journalists woke up to the fact that without many 737 deliveries – the mainstay of Boeing’s plane sales and deliveries – Boeing had not delivered many planes in the first half of the year – for example, this article. But the headline grabbing loss by Boeing of the title of being the world’s biggest planemaker is nothing new – it and Airbus have been swapping that title for many years already, indeed, looking back and using these figures, Boeing had the most deliveries for the last seven years in a row, and Airbus had the title for the nine years prior to that – assuming you are measuring airplane deliveries as a way of determining which company is largest (there are plenty of other ways to measure/define that status as well).
Boeing’s July isn’t looking blindingly good, either. Shock headlines erupted earlier this week, reporting how Boeing had lost its first big order to Airbus, a case where an existing order for 50 of Boeing’s 737 MAX planes was cancelled and replaced by an order for A320 planes instead – for example, this article.
But, again, there is a confusion between a formal binding order, and a non-binding letter of intent or memorandum of understanding. In this case, the “good news” for Boeing is that it wasn’t a firm order that was lost, but one of these weaker pre-orders that are never formally counted as orders. The company that cancelled already has A320s, so it was hardly the loss of a strategic client, merely a possible future order that never materialized.
Boeing had a loss of a different sort this week. In what might be mistaken for a bit of ritualized corporate blood-letting, Eric Lindblad, the head of their 737 program is – surprise, surprise – retiring. He is 57, and has been in the job for less than one year. However, Boeing wants to be sure that you don’t make the mistake of thinking Lindblad to be a sacrificial scapegoat. Oh no, that would be entirely the wrong interpretation. Boeing was at pains to point out that he had expressed a desire to retire way back at some undisclosed time last year.
We’ve no reason to disbelieve that statement, of course. But it is surprising that Lindblad was appointed as head of the 737 program in August last year, and then at some unknown time, but seemingly within a month or two of his appointment, announced that he wanted to retire, and then kept his wish a secret while staying on for another 6 – 9 months, before then going public right in the middle of the mess of trying to get the 737 MAX back into the air again.
At least it is better than saying he suddenly decided he wanted to retire to spend more time with his family. Details here.
Ford’s Terrible Betrayal
Talking about Boeing, a former EVP of Boeing and the CEO of Boeing’s Commercial Airplanes Division, Alan Mulally, left Boeing to join Ford as their CEO in 2006. He was generally regarded as a successful CEO, and managed to keep Ford afloat when the other car makers were declaring bankruptcy and needing government bailouts. He retired in 2014.
I have always been a great Ford fan, and have considered them to be by far the best of the American auto makers, and pretty much my entire driving life, there has never been a time when I’ve not owned a Ford car and been delighted with it.
Sure, there have been in the past both some colossal fails (the Edsel) and some dubious decisions (the Pinto) but it had been my belief that Ford these days was a classic example of a company that does everything to a high ethical standard. As the slogan states, at Ford “Quality is Job #1”.
So it was with a sense of shock and sadness that I read this long and excellent expose by the Detroit Free Press, revealing how Ford appears to have deliberately concealed design and safety flaws in the auto transmissions of their Focus and Fiesta model cars for many years, starting from about 2010, and still not resolved, today.
You should read the article in its entirety, and be sure to share it with anyone who may have owned a Focus or Fiesta in the affected model years, ie from 2011 forwards. There’s nothing needed to add to the damning evidence in the article.
But there are two points to make. The first is that here is a Pulitzer Prize winning piece of investigative journalism in a struggling traditional “old fashioned” daily newspaper. While old fashioned print journalism may be in decline, there’s no way that tweets and Facebook profile updates and “infograms” could ever convey the depth of research and analysis that this article has.
The second point is to note the screams of silence from the NHTSA on this matter. It seems they did diffidently raise the matter with Ford at one point, but apparently accepted Ford’s assurances at face value and lapsed back into passive mode. Another branch of the DoT that seems to do insufficient to protect the consumers, while befriending the industry they are supposed to regulate more than perhaps might be optimum.
Over-Regulating Privacy Protection?
Talking about regulation, have you ever got a form letter or email from some company, advising that they have suffered some sort of hacker attack/data breach, and that some of your personal data may have been taken by the hackers? I surely have, many times, and the chances are you have, too.
Most of the time, life has continued on, as it always does. It seems an unavoidable “first world problem” and a part of modern life. Annoyingly, but rarely, once in a while, a credit card company will tell me it is switching off my card and replacing it with a new one – not for any misuse or known problem, but on a “better safe than sorry” basis, just in case the card number has been exposed. That is something I seriously dislike, especially if it is a card I use widely and have set up for auto-billing with a number of different services. It is a hassle to remember who is using the card and to work out how to update the billing details.
But, in truth, it takes less than an hour to sort out. And I’ve never once thought to blame the company that suffered the data breach for its occurrence. If someone smashes in the side-window on my car, and steals something out of it, do I blame the car manufacturer? Nope. It seems to me that it is a similar sort of thing with hacker attacks. If the NSA and DoD can be successfully hacked by individuals, what chance do ordinary commercial enterprises have? With our military and that of unfriendly nations now openly engaging in cyber-warfare, is it reasonable to expect a company to be able to defend against military-grade attacks?
Data hacking seems to be one of those unpreventable elements of modern society, a bit like spam emails, traffic congestion, drug abuse, and whatever other societal ill you wish to cite.
So I read with surprise a decision to fine BA $230 million for a data breach impacting on “hundreds of thousands” of customers, and a similar decision to fine Marriott $123 million for a data breach impacting on 30 million Europeans. Equally draconianly, California now has a Consumer Privacy Act that could fine companies $100 – or more – per affected client data record for failure to enact reasonable security practices and procedures – a phrase which immediately puts a company on the back-foot after a hack attack because there’s a presumption that there was indeed a failure.
The BA fine, which looks to be in the realm of $1000 per affected client, is extraordinary in its severity.
And – oh yes. Let’s not overlook one key point about this fine. None of it goes to us as the injured/harmed people, it all goes to the government.
I guess a fine at some level might be fair, but only if the government turns around and pays out money (but to whom?) when its own records are hacked. While there are plenty of examples of government departments fining other government departments, we all know how nonsensical that is, because at the end of the day, our taxpayer funds remain still within the grip of the government, or, worse still, we have to pay more to compensate the fined department/authority, while not seeing any benefit from the funds received by the fining authority.
Don’t get me wrong. I’m as sensitive to protecting privacy as anyone else, but it makes no more sense to fine large companies for “super clever” hacks as it does to fine airlines and airplane manufacturers for “Act of God” type fatal aircraft accidents.
And, at least in an airplane accident, the injured passengers or their estates get to see some of the money that changes hands. In a data breach, all of the money goes to government departments.
Money Cures All?
The inherent assumption, when fining companies for data breaches, seems to be that taking money from them will somehow make them more secure in the future. If the money confiscated was then used for a related good purpose, maybe there is sense in that. For sure, the $350 million in fines being imposed on BA and Marriott would pay for a lot of internet security. But, as best we are aware, little or none of the money will actually be used for such purposes.
Another example of how a government chooses to take money from us under one guise, but use it for an entirely different purpose, is currently being given to us by the French government. They have decided that there is a “planetary climate emergency”, and so in response, they believe the best solution to this emergency is to collect a fee of between €1.50 and €18 from every person flying out of France.
Astonishingly, the undisclosed research that caused the French government not only to discover this planetary climate emergency but also to appreciate that its solution involves taking money from air travelers, doesn’t actually believe that passengers flying within France should be taxed at all. So, a person could fly from one end of France to the other – 500+ miles say between Lille and Marseille and apparently not harm the planet, but a short 115 mile flight from, eg, Strasbourg to Frankfurt, does harm the planet and so needs to be taxed.
That’s surprising research and findings, for sure. Also unexplained is how paying the French government money will save the planet. Well, to be fair, they’re saying the money will be used to finance “daily transport including rail” – but excuse me, doesn’t subsidising transport encourage more people to travel? And please realize that “daily transport” isn’t an alternate to international flying, it is a different type of travel.
Uh oh, there goes the planet…. Details here.
Korean Air’s Strange Priorities
Now, we understand there are few jobs in the world more boring than being a long-distance pilot. And we fully sympathize with pilots who wish to make the miles go more quickly, the same as the passengers do, by knocking back a few stiff drinks and getting a bit giggly.
So we’re not astonished to read of the KAL pilot who asked a flight attendant to bring him a few drinks in mid-flight. When the flight attendant pointed out that passengers might notice and object, the pilot helpfully suggested pouring some clear spirits into a paper cup and then bringing him the paper cup, looking for all the world like a glass of water. The flight attendant still refused, and the pilot grumpily did goodness only knows what else in the privacy of his locked cockpit.
So how did the airline react upon learning of this situation? Here’s a hint – they fired someone, and admonished someone else.
The answer is they admonished the pilot and fired the flight attendant. Perhaps if the pilot had asked for fresh nuts (click here if you don’t remember this famous incident), the situation might have been reversed and the pilot sent to prison, but apparently, asking for alcohol is a much lesser sin.
Norwegian Air’s Struggles
We are hoping against hope that Norwegian Air will “turn the corner” and manage to get past its current financial challenges and return to a more stable footing. We note with approval occasional announcements about them cancelling unprofitable routes such as their Las Vegas route (just as long as their Seattle flight remains, please!). We agree, they need to switch from growth mode to consolidation mode, and only when they’ve got a profitable base and some spare cash, start growing new routes again.
It is certainly true that the airline has not had an easy path. The appalling intransigence of the US DOT, who passive-aggressively refused to grant them the route operating authority they were legally obliged to do by simply doing nothing, neither allowing nor disallowing Norwegian’s application, but just sitting on it and doing nothing, for way over a year, should be an embarrassment to all American people who believe that our government departments fairly follow the laws and regulations that guide them.
And then Norwegian was caught out by problems with their 787s and the engines on them, and now they are caught out again by their 18 grounded 737 MAX planes. Neither of these operational interruptions were the fault of Norwegian, and it is unclear how much recompense they will secure from Boeing, or when.
But we are a little less sanguine to read about the departure of their founder, Bjorn Kjos. That feels a bit more awkward. Of course, it is being spun as proof that the airline is on the road to recovery and his personal attentions are no longer needed, while also, at 72, being overdue for retirement. We’re not so sure about that, noting that his retirement is sudden with no notice, and with no successor yet announced, but the interim CEO to be the CFO.
Whenever you see the CFO rather than the CMO or COO or some other person step in to fill a sudden CEO “resignation”, you get the feeling that money (or, more precisely, the lack thereof) is very much the focal point of the company.
We do wish Norwegian the very best of good fortune. Details here.
Norway’s Electric Car “Miracle”
Talking of Norway, it is the poster child for electric car advocates. Those far-sighted clean green eco-sensitive Norwegian citizens have embraced the concept of electric cars to an astonishing extent, so much so that more than 50% of all cars sold in March were electric powered. It is expected that sales for the entire year will also see electric cars taking over half of all new car sales.
As a comparison, in the US, a mere 1.3% of all light vehicle sales were battery electric vehicles in 2018.
Clearly, a lot more “education” of the public is called for to encourage the US car owning public to buy electric. And all kudos are due to the far-sighted Norwegians.
But, wait, maybe there’s a less high minded issue present as well. Did we mention that due to massive government subsidies, electric cars are cheaper to buy than comparable internal combustion engine powered cars? Did we also mention that electric cars are exempt from road taxes and tolls? And they can drive in bus lanes, beating congested regular traffic? And, of course, electricity is way cheaper than petrol per mile driven.
Call us cynics if you will, but perhaps the only thing that Norway is proving is that the public mildly prefers to buy the cheaper type of vehicle, and with a lower purchase price and operating cost, and better access to HOV lanes, electric cars win the cost and convenience battle by every measure. Details here.
Dare we suggest that the real surprise in Norway is how it is that almost half of all vehicles sold are not electric?
Virgin Galactic Finds Some More Money
Jolly old Sir Richard (Branson) has a mere week and a day remaining to make good on his promise to go into what he refers to hopefully as “space” so as to honor Apollo 11 (and get some extra free publicity too, of course).
We’re not even going to speculate as to if his companions to “not quite outer space” will be the usual bevy of blonde beauties or not – if they are, we can be sure there’ll be some groan-inducing innuendos about the miracles of weightlessness and a bit of the good old “slap and tickle” (or perhaps in these very sensitive times, one now refers to it only as “tickle” without the “slap”).
But while that remains as yet uncertain, and going by past performance it is fair to say that compared to Sir Dick’s deadlines, Elon Musk sets an enviable standard of perfect punctiliousness, news did erupt from Branson this week that he’s managed to find another company to toss him some more money to keep his joy-riding dream alive a bit longer.
Two interesting points. The first was that the new Chairman of Virgin Galactic, Chamath Palihapitiya (being the new moneybags investor) described the company as an amazing business with software-like margins. By that we presume he refers to how the variable unit cost of an item of software is something less than 10% of its typical retail selling price, and a suggestion that a similar ratio applies to Virgin’s flights.
We’ve no idea what sort of price Virgin Galactic is selling its joy-rides to a-long-way-up-but-not-really-truly-outer-space for, but we do note two points. The first is that the long cited $250,000 per person price seems to now be trending down to $200,000, and wonder if the early purchasers will be refunded the extra amounts they paid. We also wonder if any of them like being told, in essence, by the Chairman of the company, that they’ve been massively overcharged for their eventual flight experiences.
The second point is that Sir Richard himself, with the money presumably safely banked, is predicting a dramatic decrease in ticket prices at some vague point in the future.
But even if prices stay at $200,000 per person, and with six passengers a flight, that suggests a gross of $1.2 million or less, especially if commissions are being paid, and perhaps sometimes not all six seats will be sold at full price. We’re sure there’ll be a measurable percent of free tickets to VIPs and press (no, we’re not eager for one, thank you very much!). So let’s make it a nice round $1 million per flight.
Does it really only cost $100,000 for that flight? We wonder how many flight cycles each of the “rocket” ships will last before needing major overhaul or replacement? How about fuel and normal maintenance costs? And so on.
However, we do note that the company is predicting to be profitable “on an annual basis” by August 2021. So, who knows. Maybe not “software margins” but even a tiny margin is better than a huge loss.
We hope Mr Palihapitiya won’t regret his investment, although he already has his eyes on an “exit strategy” of his own – taking Virgin Galactic public, later this year. Perhaps he needs to stick a gag in Sir Richard’s mouth and tell him to shush and not talk about dropping the fares. Details here.
Needless to say, this is an IPO we won’t be rushing to invest the Rowell family fortunes in.
And Lastly This Week….
The fashion police are on patrol again. AA staff requested a lady of both size and color to “cover up” prior to allowing her to board her flight to Miami. She feels that she should have been allowed on board in her clothing, and – oh, did we forget to mention – she’s a doctor. We do agree with her – while we’d hate to see her dazzling outfit with a hangover, it doesn’t seem worth denying boarding over. Details and, most of the way down, a very bright color photo, here.
Another pushback against greedy “influencers” seeking ill-deserved freebies, this time by an ice-cream truck vendor. There’s something rather sad about people styling themselves as “influencers” who are reduced to begging for a free ice-cream cone, but apparently it happens. The truck operator’s response? Anyone claiming to be an influencer will be charged twice the usual price. Bravo. Details here. (His sales have greatly increased.)
Also counter-intuitive is KLM’s suggestion that people shouldn’t fly as often as they currently do. In a way, it is a bit reminiscent of cigarette companies urging people to “smoke responsibly” (beautiful oxymoron). Or perhaps one should accept the suggestion at face value, and note that it confirms what we’ve always suspected. Airlines hate having to fly passengers.
Not only does KLM want you to fly less, but more and more destinations want you to visit them less, too. Here’s the latest list of cities complaining they have too many visitors.
Truly lastly this week, here’s a hotel room with a difference – it comes with an en suite flight simulator. While that sounds great to many of us, it seems, while the article isn’t actually saying so, there is no way it is a true full-motion simulator. And you’re not actually allowed to use it by yourself – you have to pay an extra $277 for a 90 minute session. So no waking up in the middle of the night and taking the simulator for a quick flight somewhere. Details here.
Until next week, please enjoy safe travels