Friday 21 November, 2003

Good morning.  I mentioned last week the passing of time and encroaching winter, but we should also count our blessings.  Tuesday marked the day that the US's northern most city (Barrow, AK) lost the sun - the sun will not rise again until 23 January for the 4,400 residents of this town.  I remember one year when my travel company sold over 150 Australian vacations to Barrow residents during this no-sun period.

I mentioned a month back that we have now been publishing for two years.  Another proud statistic - in the last year, daily visitors to the website have doubled.  Encouraged by this, we have commissioned a professional redesign of the website, and will be releasing our new look before year end.

As part of this redesign, we'll probably be retiring the original logo, and replacing it with something different.  The designer has submitted a number of variations, but I'm not sure we have yet found an optimum logo.  What do you think?  Please go have a look at the various logo roughs and vote on your favorite - all opinions/comments/suggestions would be most welcome.

Monday's a potentially big day for some of us.  That is the day when phone numbers become fully portable, at least in the 100 major metropolitan areas.  In theory, you'll be able to transfer your cellphone number from one cellphone provider to any other one, freeing you from the ties that might have held you captive to a cellphone company you no longer like.  Better still, you'll also be able to switch your regular landline phone number to a cellphone provider as well on Monday - this will doubtless add another surge to the trend of people turning off their landlines and exclusively using cellphones.

Although smart observers are suggesting you should wait before switching - it will probably take a while for an escalating series of 'market share stealing' incentives to grow as each cell phone company matches and raises on the incentives offered by its competitors, some surveys suggest as many as 8 million people will immediately switch.  Whether you switch on Monday or not, it's a good time to review your present cell phone service and phone itself.  Which brings me to -

This Week's Column :  Possibly the Best Phone and Mobile Service :  Cell phone technology has evolved at an amazing rate, and even if your current phone is only one year old, it is probably already technologically obsolete and unable to take full advantage of the new features offered by the cell phone companies.  Here's a review of perhaps the best phone currently available, and the best service provider to use it with.  And, best of all, there's an offer from Amazon that enables you to buy the phone entirely for free!

Last week I reviewed Packet 8's VoIP phone service.  In less than a week, the truth has improved.  On Thursday they released new calling packages that give you unlimited international calling to most countries in either Europe or Asia, for $30/month.  Wow.  I continue to be amazed at how wonderful this technology is, and with the dropping prices, if you have broadband at home (or at work) it increasingly seems that a combination of a cellphone and a VoIP phone almost completely obsoletes the need for regular traditional 'plain old telephone service'.

Thanks to reader Kristen who replied to my comment last week about United's support of soldier's coming home on leave from Iraq.  Here's a site - - that allows you to donate miles from your AirTran, Alaska, American, Delta, Pan Am, Southwest or United frequent flier account to the soldiers.

Dinosaur Watching : United's low cost carrier, Ted, continues to take shape.  Their lowest fares will be non-refundable, with a massive $100 change fee, and their highest fares will be very much higher than those of other discount carriers.  We also know that they'll be staffing the airline with regular United staff being paid regular United wages.  So how will Ted make money, and just exactly what is the lower cost, either to United or to the traveler?

Delta's low cost subsidiary, Song, claims to be doing well, with an average load factor on its flights 'in the 70% range' (whatever that actually means) according to its president John Selvaggio.  He also announced vague expansion plans for Song, adding more service into New York and intensifying its competition with JetBlue.

Several people wrote to me after last week's newsletter to ask if I was serious or joking when I reported that US Airways is considering creating a low cost subsidiary to be called Bill, so as to twin with its partner United and create 'Bill and Ted's Excellent Low Cost Airlines'.  I can understand the incredulity, but they do indeed seem to be serious.

This week, another new startup carrier has been named, but this time - thank goodness - with a regular sounding name.  Independence Air is the name that regional airline Atlantic Coast Airlines plans to give to its new low-fare airline.  Atlantic Coast had formerly been operating primarily United Express services, but was unable to get their contract renewed, and so have decided to go it alone.  The airline is scheduled to start service in the first half of 2004, and will be based out of Dulles.

I commented last week about the disappearing value of Air Canada shares - you can see what I said here.  Although I stick by my analysis, which suggests that the shares should quickly drop down to nothing, the market disagreed.  On Friday morning last week, the stock opened at about 67c, and by the closing bell on Thursday this week, it had recovered 31%, back up to 88c!  Amazing.

Perhaps buoyed by over-confidence in their stock price, AC's top executives signed a deal that will make them multi-millionaires just for showing up for work.  Retention bonuses, worth C$21 million each to CEO Milton and 'Chief Restructuring Officer' Rovinescu, have annoyed union members and just about everyone else.  Union members have suffered pay cuts and thousands of job losses; investors have seen their share prices drop twenty-fold, and creditors face a minimal and uncertain payout on the monies due them, but all these groups are now confronted with these extraordinary bonuses being paid to senior management of a bankrupt airline.  Readers will remember that a somewhat similar row over executive bonuses saw AA's CEO forced out of his job earlier this year.

Fighting words from AA's new CEO, Gerard Arpey, who said 'We're through retreating' last week.  Discount carrier AirTran is trying to create a foothold in AA's fortress hub at DFW - a bold move that has seen other airlines such as Vanguard, Legacy, Sun Jet and Western Pacific all be forced out of business when AA competitively responded to their attempts at moving into Northern Texas.

One airline consultant, Scott Hamilton, calls the looming showdown, "American's battle of the Alamo," with American trying to hold discounters at bay.  When it enters a market, AirTran usually drives down fares by almost 50 percent, and this would significantly cut into American's profits - as it has with Delta in Atlanta, and as Frontier has done with United in Denver.  American dominates traffic at DFW, its most profitable hub, and enjoys a big premium on fares, and so will consider it vital to match fares and keep its customers, even if some flights lose money.  In the past, such a battle has seen AA absorb short term losses on a few routes, while driving a poorly capitalized carrier away.  This time, it is possible a different outcome may occur.  Stay tuned.

UK discount airline EasyJet reported full year results for the period ended 30 September.  Passenger numbers were up 79%, and revenue was up 69%.  Costs per available seat mile flown dropped 7.5%, and the average fare was a mere 43.28 ($73.50).  Pre-tax trading profit was up 7% to 96 million.

And its arch-rival, Ryanair, has just finished an offer that is surely hard to beat.  They were not only giving away free tickets, but were also contributing 1 towards the cost of the taxes on the free tickets.  This makes Ryanair the first airline to ever pay passengers to travel.  Ryanair said that they had allocated 40% of their total seats during the period 20 Nov - 20 Dec to be given away on this promotion.

Amazingly, Ryanair is also a profitable airline.  Let's hope that the US carriers choose to copy this promotion!

There is an interesting court case underway in Texarkana involving rebates on airline tickets.  According to Thursday's Wall Street Journal, Ernst & Young received $98.8 million in undisclosed rebates between 1995 and 2000, mostly on client related travel for which the accounting firm billed their clients the full fares.

These payments are the crux of a civil law suit in a state circuit court.  Both Ernst & Young and PriceWaterhouseCoopers are accused of fraudulently overbilling clients for travel expenses by hundreds of millions of dollars since the early 90s. EY has agreed they retained the large rebates from travel companies without disclosing their existence to clients, and said that they had contracts with airlines that barred them from disclosing the contract's existence or terms!

Court records show that EY had contracts with AA. CO and DL and rebates were $36.7 million in 2000, compared with $21.2 million in 1999 and $5.2 million in 1995.

There's another interesting twist to this case.  Continental and American were clients of EY and also had contracts with the firm regarding the rebates. This is a not allowed for audit firms - SEC rules bar auditors from having direct business relationships with their audit clients.

The FAA is proposing regulations to increase the ETOPS allowances for planes.  ETOPS refers to how many minutes away from the closest airport a twin engined plane can fly.  The longer the ETOPS rating, the more direct a route a plane can fly, without having to always keep close to emergency airports.  This is a move strongly advocated by Boeing, because all their planes, other than the 747, have only two engines, while Airbus has four engines on its larger A340 and new A380 planes, putting Boeing at a present disadvantage.

It is true that modern jet engines are ultra reliable and very rarely fail.  But a lot more can go wrong with a plane than 'just' an engine failure, as this following item shows.  (I have a fascinating report on what happens to a plane (and its passengers!) if all its engines fail).

Alitalia Flight 610 was over the Atlantic on its Rome-to-New York flight last July when the Boeing 777 seemed to shudder.  Passengers smelled smoke.  The cabin crew ran up to the flight deck as passengers screamed, said Bruce Northrup, a New York City banker returning from a wedding with his wife and 15-year-old son. "People were yelling, `Tell us what's going on,' " he said.

The twin-engine jet made a U-turn and began descending gradually. The pilot told the 300 or so frightened passengers they had a "serious technical problem" and were headed to Shannon, Ireland, a half-hour away.  After a safe emergency landing 90 anxious minutes later, passengers saw what had caused the problem: a windshield covered with cracks.

"That window looked like something out of an automobile junkyard," Northrup said.  Boeing officials traced the problem to faulty wiring in a window heater. At least two other Boeing 777s have experienced the same problem in the past year. All landed safely and no one was hurt.

Experts say three similar incidents in one year are unusual for an aircraft type.  I hope you're reassured.

Another pointer that good times - for the travel industry - are just around the corner.  A CNN article says the travel industry should expect a big upturn according to consumer surveys, web bookings, and increased event crowds.  Consumer confidence in travel is on the rise - but, alas, airfare prices are also increasing with the increased demand.

An auction of spare parts from Air France's Concordes drew great interest and high prices.  A nosetip sold for $495,000.  Other items - like an apparently worthless couple of spare stub antennas sold for $5300 - also proved popular.  In total AF raised $3.9 million.

This Week's Security Horror Story :  People that lived on Lebanon Street were amongst 5000 people falsely flagged as potential terrorists when two medical insurance companies in MI voluntarily chose to check their medical records for any potential terrorists.  Quite apart from the unnecessary nature of this, it is an interesting insight into how the controversial airline CAPPS II terrorist screening program might cause similar problems.  More details here.

If you say nasty things about an airline you could be barred from flying that airline for life - as Jeffrey Gitomer of Charlotte, NC found out.  US Airways banned the author and consultant (to companies on selling customer service) from ever flying US Airways again.  Apparently Mr Gitomer raked the airline's customer service over the coals in his column in American City Business Journals, saying the airline had lousy food, unfriendly employees and poor service.  US Airways called him a chronic complainer and said in a letter 'Mr. Gitomer's verbal abuse of our employees is legendary, and his tirades have left employees in tears.  Yet for all his criticisms, he still flies US Airways.'

The airline didn't mention that he flies out of Charlotte - a US Airways fortress hub where they have most of the market share.  He didn't have much choice.  If an airline accepts millions of dollars in taxpayer's money as free grants, surely it has an obligation to provide service to those same taxpayers, and if it doesn't like Mr Gitomer's comments, it can either sue him or improve its act so that he no longer has to make such comments.

How to Win Friends and Influence People?  The number of countries that truly like the US is sadly dwindling.  Our 'best friend' Britain seems fractured between those that vociferously hate us and those that don't.  Our second best friend, who also sent troops to the Iraq War, is undoubtedly Australia.  And so, what do we do when a 30 year old Australian woman, a frequent business traveler to the US and the editor of a middle class Australian women's magazine, flying to the US to interview Olivia Newton-John for an article on breast cancer, tries to enter the country in Los Angeles?  Do we smile and welcome her to the US and hope she has a pleasant stay?  No.  Instead, she is locked up for fifteen hours, allegedly denied any food or drink, not allowed to make phone calls to lawyers or to family or to anyone, given intrusive personal searches, bullied and embarrassed, then marched in handcuffs back to the gate and placed on a return flight back to Australia.

Was she a suspected terrorist, cleverly disguised as a harmless and friendly Australian?  Was she smuggling drugs or explosives?  Did she - gasp - make a bad joke about bombs?  No, none of these things.  She was 'guilty' only of a visa technicality - she was traveling on a 'B' visa instead of an 'I' visa.  So, instead of politely explaining the problem and then helping her solve it, she was denied all the human rights which the US goes to war over to insist other countries give to their citizens, and then deported.

This story was front page news in Australia, but, sadly, didn't seem to make the papers at all in the US.  Do we condone such treatment of our friends and allies?  Do we think this is an appropriate response for an offence no more serious, surely, than driving on an expired licence?

Last time I arrived into Britain, I couldn't help but notice the contrast between passing through British Immigration and Customs and the same experience a few days later in the US.  In Britain, neatly dressed immigration officers in civvy suits and ties processed each person.  I joked about being a asylum seeker and they laughed back at me.  A group of suspected illegal immigrants were seated in a corner of the immigration hall, while a lady immigration officer fussed over them in a motherly fashion and gave them glasses of orange juice.  As for Customs, I went through the green lane and didn't see a single Customs officer anywhere.

But a typical entry back home into the US involves first of all being interviewed by a hostile uniformed armed Immigration Officer (why do immigration officers at airports, in secure zones, need guns?), then a repeat performance one, two, or even three times by Customs officers before finally escaping into the freedom outside.

Some sort of good security news for a change.  A new type of suitcase lock has now been developed - the 'Travel Sentry', and will start to appear on new suitcases.  This lock can be opened by the TSA as well as by yourself.  The TSA will have a master key or a master combination.  Care to guess how long it will take for these master keys/combinations to become freely available to luggage thieves?  The most valuable thing about these new locks is that it allows you to lock your suitcase to protect it from accidentally opening.  Don't consider them a security device, just an anti-opening device.

Reminding us that no-one is better than a government department at spending money, the TSA proudly announced a new study to investigate the possibility of using explosive detection systems to screen air freight.  So how much do you think this would cost?  Maybe $250,000 - enough to pay for a couple of people for a year to work with providers of such systems and to evaluate their products, and to liaise with shippers and other affected groups?  Okay, so I'm low-balling it.  Allow for government inefficiency, and multiply this ten-fold.  $2.5 million - surely enough!

Alas, the TSA - while complaining about being desperately short of money and unable to adequately staff some passenger screening stations, causing us to wait much longer than we should to go through screening - is planning to spend $55 million in 2004 on this project!

Lastly this week, thanks to reader Peter for helping us put such trivial things into a better perspective.  Check out these images for a staggering appreciation of how truly insignificant everything I've written about this week really is.

Until next week, please enjoy safe travels and have a great Thanksgiving

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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