Friday 23 August, 2002
Good morning.  What an incredible week it has been, with the airlines continuing their histrionic outpourings in the press - am I the only one to suspect that all this public posturing is the lead up to a request for another massive across the board government payoff?  As a business owner myself, I have occasionally had tough times, but I have never publicly stated that my business was on the verge of bankruptcy (unlike the airlines).  There has to be a hidden reason for all this public posturing, because it sure doesn't make any sense otherwise - how do you feel about buying a ticket several months before traveling on an airline that is openly talking about declaring bankruptcy?  And, talking about airlines not making any sense, its time for the final part of the very popular three part series on airfare loopholes.

This Week's Column :  How to Make it Difficult for the Airlines to Catch You :  I'm not advising you to break the rules. I'm not encouraging you to make use of the loopholes discussed in the previous two articles; indeed, I'm cautioning you that if you do, you may be committing criminal acts (theft of services) as well as definitely contravening the airlines' conditions of carriage.  But, if you're merely interested in understanding (for educational purposes!) how the airlines track and catch offenders, click to this week's column. 

For more material on these (and many other) topics, Bob Cowen publishes a monthly newsletter and has a web site Internet Travel Tips that makes for fascinating reading.

For a change, much of this week's newsletter is on a single theme.  I'm putting it in a box so you can conveniently either treasure or trash this part of the newsletter!

Everyone's talking about the airlines and their problems at present.  Now its my turn to give you some direct analysis of what went wrong and why.

The US Government has just negotiated new fares with 14 of the US airlines for 2003.  The tickets are unrestricted, and average 72% LESS than comparable business fares offered to the general public.  Yes - if you buy a full fare ticket for $500, the government is buying the same ticket for $140.  I've seen corporate discounts for companies that buy millions of dollars of travel a year go as high as 40%, but I've never seen 72% in regular commercial contracts.

Would someone explain to me, then, why it is that the airlines are complaining at not making money and needing to charge more, when they discount their tickets a stunning 72% to the government?  If it makes commercial sense to transport government employees on tickets with no restrictions, no advance purchase, no penalties, no Saturday night stay, at these rock-bottom discounted rates, why can't the airlines offer the same rates to other travelers?

The airlines have been desperately trying to spin the story about why business travelers are now refusing to pay 'business' fares every which way, but the secretive government discounts illustrate the underlying ugly reality the airlines wish we didn't know.  Their so-called 'business fares' have no credibility.  The truth is out.  Only fools pay full business fares.

The airlines are puzzled about what happened.  They offer various analyses and are trying to implement various responses. But they are still getting it all wrong.  For proof of this, let's look at a quote from former American Airlines CEO Bob Crandall.  On  'Meet the Press' last Sunday he said

The public has been offered a choice, in effect, between quite high levels of convenience and service on the one hand and very low prices on the other.

This analysis is dead wrong!  The airlines have not offered 'quite high levels of convenience' to any of their travelers for many years!!!

Why are the traditional carriers spinning in a death spiral down into bankruptcy at present?  The reasons are actually stunningly obvious and simple.  They did (and still are doing) five things wrong :

  • They increased the spread between discounted fares and full/business fares.  Only a few years ago the spread from highest to lowest fare was a factor of three, but when the airline industry collapsed, the spread had widened to six to one.  At the same time, discount carriers have been narrowing the spreads between their highest and lowest fares.
  • Secondly, while increasing the cost of unrestricted fares, they reduced the benefits associated with these fares, making the so-called 'no frills' airlines more and more attractive on a service (as well as cost) basis.
  • Thirdly, they pretended that the new low cost carriers such as Southwest were not 'real competitors'.  Rather than learn from and respond to these airlines, they ignored them and what they implied about their customers' real needs.
  • Fourthly, they have allowed the hassle factors and time costs of air travel to make it cheaper, more pleasant and quicker to travel larger and larger distances by car not plane.  The airlines estimate that security hassles will cost them $2 billion in lost revenue in 2002, but are spending none of their own money to help improve these problems - how stupid is that?
  • Lastly (and it might well be the last thing that some of them do as they go into potentially terminal bankruptcy) they insist that the only cure to their problems is to cut back on services and to increase fares, well beyond the point that anyone will pay for.  Their competitors - the lower cost airlines that are stealing massive market share - are succeeding by doing exactly the opposite - increasing the quality of their service while reducing their fares!

Now for a lesson in the real world - the place that airline executives never seem to inhabit.  These days the service on Southwest is generally better than the service on a so-called 'full service' airline.  By taking away every possible perk of 'full service', and while allowing (or, it seems, encouraging) surly service and an anti-customer attitude to pervade every level of their organizations, the big airlines have nothing left in their favor (except frequent flier programs, and read more below about how they're trying to kill that golden goose, too) while the discount airlines are looking better and better.

Anyone who has ever experienced Jet Blue's planes, cabin crew, and ground staff will tell you for as long as you care to listen how amazing this carrier is.  Better planes, better seats, better service, better fares - better everything.  You'd be nuts to fly any other carrier if Jet Blue has a comparable schedule and fare.

And so how do the major carriers respond to this?  Do they say 'we need to urgently respond to this new high service/low cost marketplace paradigm'?  No!  Instead they say 'we're going to cut back on our service even more.  We're going to operate fewer flights and longer connections.  We're going to increase our fares, and we'll make flying with us even more miserable than it already is.'  And so, you, the abused traveling public - but blessed with a ton more sense than a roomful of airline executives - do the obvious thing.  You cut back on your flying.  You refuse to pay ridiculous fares with no associated benefits.  You switch to decent airlines with decent fares and decent service.

Here's an example of the difference in approach.  This week Spirit Airlines announced it was increasing and improving its First Class service.  At the same time, Continental said that it is cutting out more customer service items - for example, there will be no more plastic knives served with breakfast trays in coach class. This will save the airline potentially $85,000 a year.  Continental had gross income of $8.15 BILLION dollars in the last twelve months - can you believe that they are obsessing over an item that is one thousandth of one percent of its income?  Is this the most important vital step they can take to return to profitability?  Is there nothing more valuable or important that they can focus their oh so highly paid management attention on (CEO Gordon Bethune's weekly earnings, in 2001, were almost exactly equal to this new savings)?  Well, yes, unfortunately there is.  No longer will you automatically get an entire can of soda if you ask for a drink!  You'll only get a small glass of soda (more available on request - if you're lucky).

And while traditional airlines are desperately seeking to increase fares, adding on surcharges, and cutting back on 'waivers and favors' to preferred fliers and travel agencies, guess what Southwest did on Thursday?  Southwest reduced their last minute one way fares, across the board.  Effective immediately, their most expensive fare is no more than $299 each way (down from a previous maximum of $399).  Senior VP of Marketing, Joyce Rogge, said 'we're saying that if you pay more than $300 each way, you're paying too much.'

And, showing that some airline executives do still live on Planet Earth, she added  'You shouldn't have to charge higher fares to your customers in order to offer them the level of service they deserve every day.  We consider "service" to be a great selection of frequent flights to 59 destinations, an ontime arrival, low everyday fares, an extremely lucrative frequent flyer program, the convenience of online booking, and Customer Service delivered with warmth and a smile. You shouldn't have to pay an arm and a leg for that.'  (By the way, consistently profitable Southwest can still afford to pay travel agent commissions, too!)

If Joyce Rogge ever wants to run for President of the United States, under any party banner, she's sure getting my vote!  Maybe she'd be a good CEO choice for United Airlines?

Meanwhile, the 'major' airlines are continuing to nickel and dime their customers and their travel partners any which way they can, while not realizing that the penny they save is losing them a dollar in revenue.  For example, most of the majors have now started charging if you try to check a third piece of baggage.  Formerly it was common that you could check two bags and take one carryon with you, or check three bags and have no carryon.  Now a third piece of checked luggage will cost you $40 or more each way (and, of course, with draconian airline security, more people are having to check rather than carry on items).

The airlines are trying to charge even more and more for paper tickets.  Most airlines now charge you $20, and they are now trying to up that charge to $25.  There is no way that this is an honest cost recovery on the part of the airline - honest cost recovery for what should be a totally automated task would suggest a fee of maybe $1 or at the most $2 (how much does it cost a theatre to print a ticket to a show?).  And, to add further insult to travel agents, Continental will charge $20 if a travel agent issues you a paper ticket (this was formerly a no cost item allowed by all the airlines).  Continental claims that this fee is to recover their costs of the travel agent issuing the ticket (and what costs exactly would those be, I wonder!!!) and what makes this charge absolutely ridiculous is Continental requires the travel agent to write out a laborious and usually manual charge form (that will be costly for the airline to process) to record the fee paid each time.

I have never seen an industry, anywhere else in the world (not even in the crazy wilderness of Russia seven years ago) where a service provider is so aggressively at war with its customers.  I could continue, but I think the lesson of this editorial is already clear :  Traditional airlines don't just dislike travel agents and customers - they seem to actively hate them, and seem to be hell bent on making our lives a misery.

Did he lie to us, or is he just uninformed?  In the same 'Meet the Press' program that Bob Crandall appeared in, Congressman Peter DeFazio (D-OR) made some fairly strong comments, including describing former TSA head John McGaw as incompetent, and wondering if the government needed to re-regulate the airlines.  But the show-stopper item was when, in supporting the current approach to baggage screening, he said

Well, in Great Britain at Heathrow, every single bag goes through explosives checks, and they’re using American technology.

But what he didn't tell you, and which is covered in my 19 July column about the problems with baggage screening, is that Heathrow does not screen all its bags through these monstrously oversized and underperforming machines the government is buying.  Instead, most bags go through a simple speedy and small automatic X-ray machine, and only the very few that register as 'possible' alerts are then closely scrutinized by 'American technology'.

Rep DeFazio is one of the lead policy makers in the government on this topic, and he doesn't even know what he is talking about?  For another story about the increasing nightmare - and complete impossibility - that introducing this mandatory 100% baggage screening is becoming, visit here.

One of the common soundbites from airline executives is the need to change their business plan (usually accompanied by no changes, just more of their same idiocy).  Well - here's a major potential change that will revolutionize short haul air travel.  Thanks to reader David for passing on this article about a new type of 'air taxi' - a small twin engined jet plane that carries only four or five passengers, but for about the same cost as a regular coach fare on a scheduled carrier!  There are so many exciting and positive things about this breakthrough approach - unlike, eg, the Boeing Sonic Cruiser, it has the feel of a 'real' technology and is expected to be FAA Certified by December of next year!  This is the most development I've ever seen in the airline industry, and threatens to rob the traditional carriers of almost their entire 'full fare' traffic.  If the traditional carriers don't adopt this technology, they are likely to be destroyed by it.

I've commented before about the obvious way the airlines have been trying to use their current financial problems as a bargaining lever with their unions.  United's attempt to secure concessions out of its Flight Attendants union backfired last Friday.  The Flight Attendants issued a press release with some wonderfully sensible points such as asking that management take the lead in absorbing cost cuts, rather than first looking to their staff to give back their wages!  Another insightful comment was

Short-sighted management decisions such as the premature announcement of a potential bankruptcy, will ultimately cost the carrier more money in lost revenue from passengers booking away than it could ever get out of flight attendants' pockets.

Their press release went on to point out that while United's total labor costs represent 52 cents for every dollar of revenue, only 7 cents of that goes to Flight Attendants.  The flight attendants feel that United has better ways to return to profitability than to try and cut their wages.

Not to pick on United, but under the category of 'How Low Can You Go', ABC's Good Morning America had a story on Thursday claiming that United tried to avoid paying the widows of the pilots of the two planes they lost on 9/11 their salary for those flights, due to the flights being - wait for it - 'incomplete'!

And in what looks like a case of Aawaard raape, thanks to another David for passing on the bad news that American Airlines has quietly introduced a policy whereby any ticketed award reservations will be levied a $100 fee if changes are made.  They will also no longer allow open returns on Plan Ahead awards, and only allow reservations to be held for 14 days rather than 30 days as previously.

As I said above, the airlines seem to hate their customers, and the better the customer you are, the more they hate you!  We all earn our awards by flying many flights, but the airlines increasingly want to 'double dip' and charge us extra for our so-called free award travel.

It is nice to see that some airlines understand these things.  Struggling Air New Zealand has announced major liberalizations to its frequent flier program, including a commitment that an average of 15% of all seats will be available for booking award travel!  Wow.  Well done, Air NZ.

And, adding to the very low fares based around September 11 travel, Air NZ announced an astonishing $499 fare for travel to NZ or Australia if the outbound or return flight is on 11 September.  Lots of other restrictions apply, and the flights don't qualify for mileage accrual, but at $499 for a LAX-Sydney flight, that is an amazing bargain for sure.

This Week's Security Horror Story :  Last weekend a story was floated that NASA is developing a brain-wave monitoring machine that can detect the thought patterns of potential terrorists in airports.  This provoked a flood of criticism, with people fairly pointing out that fear of flying and the anger at going through stupid security searches would make many reasonable people develop brain waves that the NASA machine might misinterpret as coming from a terrorist!

And, unfortunately for NASA's somewhat spotty reputation on quality control, at the same time a news item came out about NASA's new $159 million spacecraft for spotting asteroids being - ooops, slightly off course and broken into two large pieces; now just two more pieces of expensive space junk.

Back pedaling followed a couple of days later, with NASA re-spinning the story as merely being a bit of 'outside the box thinking' about futuristic ideas to aid the nation in the war on terrorism.  Let's hope this idea stays a long way outside of the box - if we can get arrested for joking about our billfolds containing a full size rifle, and if we have 2" plastic guns seized from 5 year old children, who only knows what types of thought patterns might result in what types of responses from our ever-eager security screeners!

Lastly this week, guess what the truly surprising part of this story is?  An Air France flight from Paris to Oslo was forced to make an emergency landing in Belgium when a naked passenger tried to force his way into the cockpit. The captain of the flight appealed to Belgium air traffic controllers for help after the 31 year old man stripped off his clothes and headed for the cockpit. The man was removed from the flight after its emergency landing, and no reason has been given as to why he disrobed and tried to break into the flight deck.

Okay - the surprise is this :  The man was released without being charged!  No reason was given.  And that, gentle reader, is a much bigger story than his nakedness and attack on the cockpit.  Who was he?  What happened?  Why were no charges brought against him?

 Until next week, please enjoy safe travels, and, unless you're on an Air France flight, please stay fully clothed for the entire journey.  I'm off to Vegas for the weekend and should I win $1 million or more, there'll be no newsletter next week!

David M Rowell aka The Travel Insider
ps :  Don't forget to visit Joe Brancatelli's site for his weekly updates, too.

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