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.
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!
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
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
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
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
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
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
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
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
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
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
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!