[Web version of this newsletter]  [Newsletter Archives]  [Website Home Page]  [Please Donate Here]

Friday 2 July, 2004 

Good morning

The offer of a very few Gmail addresses last week caused my email box to almost burst with eager replies.  The process ended up rather chaotic, due to holding addresses for people then waiting to see if they responded, and various other complicating factors, meaning that for too long I didn't really know who I could give addresses to, other than being certain that I had many more people seeking them than addresses to hand out; coupled with a hope that Google might release a further tranche of addresses to pass on (this did not happen).

The overall level of interest certainly demonstrates the high value of the Google brand, and suggests their stock, once issued, may be one with 'legs'.

My three part series on airline luggage policies comes to a close this week.  This is a pre-cursor to a broad review of carry-on luggage, ranging in price almost ten-fold from the most expensive 'name brand' products to the least expensive Walmart items.  This will be published later in July.

Most of the luggage manufacturers I approached bravely agreed to submit samples for my scrutiny; indeed one supplier 'heard on the grapevine' of my pending reviews and asked if his product could be added.  However, a company that provides top of the range product switched from initial enthusiasm to outright rejection of any participation - maybe they felt uncomfortable at a no holds barred comparison with their competitors?

Do you have any comments, complaints, praise, or general stories about your carry-on luggage?  If you have anything to share that might help other readers better choose their carry-ons, please let me know.

This Week's ColumnInternational Carry-On Luggage Allowances : Some international carriers limit the weight of your carry-on to less than the weight of a normal carry on bag when it is empty!  Others let you carry on twice as much.  This week I list policies for 34 international airlines so you'll have no nasty surprises at the jetway.

Dinosaur watching :  As sent to you on Monday morning, the big news this week was the decision of the ATSB to finally, completely, and unanimously  turn down United's third loan guarantee request.

It seems that United's third application took little note of the reasons for its second application being turned down (ie, United's survival wasn't essential for the wellbeing of our aviation network as a whole, and United could apparently find the money elsewhere if it needed to) and instead simply asked for less money under the same flawed premise.

How did United react to the news?  In a statement that only obliquely mentioned the fact they'd been turned down for the third time, they said 'we are gratified by the ATSB's public recognition of our progress' - this has to be the most positive spin possible on their refusal.

Not quite so positive were United's pilots, who said they were extremely disappointed, but hopefully added that in United's quest to solve its financing problems 'We fully expect that such solutions will be found without management again turning to employees who already have provided significant financial relief for this airline'.  I wouldn't be quite so sure myself....

And in an interesting twist from last week when many people were seeing political pressures being placed on the ATSB to grant United's request, in addition to describing UA's $1.1 billion loan request as miniscule, the pilots union president Duane Woerth had this to say :  'politics have prevailed over sound economics at the ATSB'.

Which do you think is the more ridiculous suggestion - politics drove the ATSB's decision to refuse UA's loan, or sound economics would have argued in favor of United's loan request?

Reader Fred had this to say

The decision is probably even more important to the rest of the industry :  It ought to -- but may not -- signal the end of the gravy train. No single airline can make a national interest claim on public resources. That's the story here. And for aviation investors it should mean, write off your dinosaur shares and take a stake in a next-gen airline.

The market responded with a yawn, considering it an event of almost no importance.  After a brief blip in the share price when a few panicked investors sold early Monday morning, the stock has traded in the same range as the last couple of weeks.

So what will happen to United Airlines?  Several anxious readers have written asking this question.

Expect no major changes in the immediate future is the short answer.

Their exit from bankruptcy is likely to be further delayed while they try and work the best deal possible to get the extra cash they need.  But there is almost no chance they'll suddenly cease flying any time soon, and even if they were forced to consider liquidation, they'd probably sell themselves to another airline much like happened to TWA when American Airlines bought it.

In other words, you can probably continue to safely buy tickets for future travel on United, and you shouldn't expect your Mileage Plus miles to suddenly vanish.

Longer term, it is possible (but not very likely) United might sell some parts of its route system, or simply cut some flights.  And, of course, if you're a United employee, expect to see further attempts to cut back on salaries and to introduce more work efficiencies.  The chances are the unions and United employees will agree to some givebacks due to the stark nature of United's present situation.

Duelling Consultants :  Fuel costs are causing major problems in the airline industry.  Or so says JP Morgan analyst Jamie Baker, who revised his full-year forecast for the US airline industry from a $1.7 billion loss to a $3 billion loss, with a projected $500 million profit for 2005.

Fuel costs are not especially high.  Or so says transportation consulting group Unisys R2A Transportation Management Consultants.  They point out the inflation adjusted price for jet fuel was 52.2c in February, less than half of the all-time high, shortly before the first Gulf War, of 115.2c, and not much more than the 18 year average price of 43.9c for the 18 years prior to 2004.

Furthermore, Unisys said, more efficient aircraft and higher load factors have softened the impact of the higher prices.  Fuel still accounts for 10% to 15% of total airline operating expenses, but that's down from more than 30% two decades ago.

Unisys also said it failed to find a 'strong correlation' between fuel prices and airline profitability when it compared inflation-adjusted prices to airline operating profits for every year from 1982 through 2003.  For example, flat profits in the mid-1980s were accompanied by plunging fuel prices, and the plunging profits of the late 1980s and early 1990s were accompanied by flat fuel prices, its analysis showed.

The report concluded

Fuel prices are important but neither 'high' fuel prices nor fuel price volatility are the primary causes of the industry's profitability problems.  Rather, the problem stems from a business model with core and personnel costs that when summed, along with fuel costs, produce a total operating cost higher than passengers are willing to pay. Lower fuel costs would be great -- but they would be no panacea for the airlines.

Which is exactly what I've been saying.

More good news for the industry as a whole from IATA, reporting that airline traffic for the first five months this year has exceeded that of 2000 - the last 'normal' year before the 9/11 impacts.  Nearly 9% more passengers flew this year than in 2000.

With such buoyant growth, it takes real skill to still lose money.

Storm clouds continue to form around Delta.  The latest development is the formation of a creditor committee in anticipation of a possible bankruptcy, to protect their interests if a bankruptcy does occur.

A reader wishing to remain anonymous might have uncovered part of the reason for Delta's problem.  He wanted to fly from La Guardia down to Washington Reagan Airport for the afternoon this week, and tried to book flights through Expedia with Delta.  He got the flight he wanted down to DCA, but the return flight was not quite so simple.

Instead of a simple one hour nonstop flight, Delta (and Expedia) suggested he fly first from DCA to Atlanta (is that in the opposite direction?).  Then, change planes in Atlanta and fly to Des Moines (even further away from LGA!).  Another change of planes and a flight to Cincinnati, before one more change of planes and flying finally to LGA, arriving fourteen hours after leaving DCA.

He wonders if perhaps he shouldn't have called a travel agent instead.

A disappointing development last week marked a victory for a dinosaur.  Low cost carrier Frontier is cancelling its nonstop service between Minneapolis and Los Angeles.  This had been one of the airline's brave steps to build more routes away from its Denver hub, and flights started in April.  Northwest of course viewed this as a direct attack on their dominant position at MSP.

Northwest dropped its fares to match Frontier's low prices and added nonstop flights to Los Angeles departing at the same times as Frontier's flights.

And as a clear threat to broaden the battle, Northwest also launched flights between Los Angeles and Denver, where Frontier is based.

At one point, Frontier and Northwest dropped their fares to $98 - roundtrip!

So what can we look for now?  Frontier is pulling out of the market, Northwest will probably discontinue its LAX-DEN retaliation, and reduce its flights back to a sensible number between LAX and MSP.  Oh - and the $98 fares?  Forget about those!

Yet again, a big bully has forced a new player out of the market, and the traveling public are the ultimate losers.

The lessons of this latest battle are - as always - starkly simple.  Airlines should not be allowed to price fares below cost in competitive situations, because this kills off competitors.

A month or two of $98 fares was great for the people who could take advantage of them, but longer term, people in both cities have lost an alternative carrier when flying that route, and there is now less competition than otherwise could have been if fares remained above break even points (but still very much lower than NW's earlier fares).

If Frontier had remained flying, you can be sure fares would stay lower than when NW has the route largely to itself.  Frontier's loss is therefore the traveling public's loss as a whole.

Here are three rules that would solve a lot of these predatory pricing problems.

(a)  Airlines can only lower fares on existing routes if their costs drop, or to match new fares published by competitors on the route.

(b)  Low fares can not be offered if their sale would make the flights offering those fares unable to be operated profitably.

(c)  All fares (other than short term promotional specials offered across a large portion of an airline's total network) that are released must remain in the market for a minimum one year period, with a minimum of 10% of all seats on all flights available for sale at that fare level.

Pay rate deflation continues across the airline industry.  US Airways pilots have offered to accept a 12.5% pay cut and to work five more hours a month.  The pilots also hinted they'd probably agree to give more back.  Spokesman Jack Stephan said 'We are not naive enough to know this is the end of it'.

But apparently they are naive enough to make an offer and then immediately signal they're prepared to give more.

One of the key areas the airline is likely to seek more concessions in is pilot productivity.  Although the pilots offered to increase the total number of hours a month a pilot could work (from 85 to 90), US Airways is probably going to want to see more of those hours actually spent flying planes.  Their pilots average 52-55 hours a month in the cockpit.  In contrast, JetBlue pilots spend 68 hours a month.

If you'd like to see how much your next flight's pilot is likely to be earning, here's an interesting website that will tell you, passed on by reader Bob.

Talking about pilots and their sometimes astronomical salaries, we're told they deserve such salaries because of their high degree of training, enabling them to react appropriately in any emergency and to do what is right to save the plane and passengers.

If you had any doubt about this, look to what happened last Friday as proof.  Veteran Hawaiian Airlines pilot Craig Kobayashi made a command decision about what he tells us was a safety matter.  He perceived a problem that he said meant 'I didn't feel that I could function properly' and pilot a flight from Honolulu to San Francisco, so he solved the problem, with the net result that the flight was safe, for which we should all be thankful.

Well, actually, not everyone was thankful.  You see, the problem interfering with his ability to fly the plane safely was when he discovered that one of the passengers (seated safely in the passenger compartment, not on the flight deck) was the airline's bankruptcy trustee, Joshua Gotbaum.  Pilot Kobayashi said that learning about this made him feel uncomfortable, and so he insisted that Gotbaum be bumped off the plane.

And because you run the risk of breaking a dozen very nasty federal laws if you disobey a pilot, that is exactly what happened.

I won't say any more, for fear that Kobayashi might one day find me on his plane and feel uncomfortable again.  Suffice it to say I'd be equally uncomfortable learning that such a prima donna was captaining my flight.

It has been a good week for Singapore Airlines.  In February, it set the world record for the longest commercial flight - 16 hours between Singapore and Los Angeles.  On Monday, it broke this record with an 18 hour flight from Singapore to New York.  The flight covers 10,310 miles and goes over the Arctic, using a super long range Airbus A340-500.

Singapore Airlines (SQ) is now the world's second largest airline in terms of market capitalization.  The world's largest is Southwest Airlines.

In addition to its own market value, SQ is also a shareholder in Virgin Atlantic (VS), who are celebrating this week an extraordinary lineup of six different design awards for their new Upper Class Suites.  VS truly does have a new product that is as much an improvement on ordinary sleeper/bed seats as the sleeper/bed seats were, in their day, an improvement on earlier seats.

Amazingly, VS sells tickets for their Upper Class Suites at regular business class fare prices, meaning you get comfort and service that in many ways beats the much more expensive first class product on other airlines.

Spy and counterspyAir Canada has filed a lawsuit against competitor WestJet, claiming that WestJet improperly hacked into its computer system to get confidential information on flight loadings.  As a result, Air Canada says it suffered loss of revenue and profit.

And now WestJet has filed a counter-suit, claiming that Air Canada and its private investigators searched through the trash thrown away from the house of one of its executives, gleaning confidential financial information.

WestJet further said the Air Canada information was not confidential and

The loss of revenue and profit Air Canada alleges it has suffered arises not from any use of information on the website but from Air Canada's mismanagement of its business, its decision to persist in selling seats on flights for less than cost, its high cost structure and the poor treatment of its customers.

I guess this means we shouldn't expect a friendly out-of-court settlement any time soon.

The flight of SpaceShip One was a wonderful accomplishment last week.  But maybe it is a technology that is about to be obsoleted by something amazingly more fantastic - a space elevator.

Closer to earth, as of yesterday, drivers in New Jersey and DC will be fined $100 if they are spotted using a cell phone in the car without a hands-free device.  Headsets or 'speaker-phones' are permissible.

My recommendation - treat yourself to a new cell phone that supports Bluetooth wireless networking and then get either this cigarette lighter plug-in speaker phone or this hard-wired speaker phone device.

I have both - they are tremendously convenient, because your phone automatically switches to use these devices when it comes within range, and then automatically switches back to normal mode when you leave the car again.  Completely easy to use and very functional.

Here's another reason to have Bluetooth in your phone.  But, just when you're starting to enjoy the benefits of Bluetooth in your phone, here's a possible problem.

Talking about phones, I use a lot of stamps every day when I'm mailing freshly unlocked GSM cell phones back to their owners.  On Saturday I went to buy more $3.85 (priority mail) stamps only to be told at the Redmond Post Office they had run out of those stamps, plus two other convenient denomination stamps.  Instead of a single stamp, I had to affix six smaller stamps onto each package.

On Tuesday I went back to buy the proper stamps.  But they still had none, and now were not expecting any until next week.  More than ten days to get a supply of stamps delivered by the Postal Service to a post office?

This Week's Security Horror Story :  Four security screeners at Fort Lauderdale have been charged with stealing jewelry, computers and other valuable items from passengers' checked luggage. The FBI reported an informant's hidden audio recorder caught four men talking about what they had taken. The men have worked as baggage screeners at the airport since 2002.

A Korean Air flight from Sydney to Seoul turned back after flying almost half the distance when Sydney Airport Authorities reported that they had failed to complete checks for explosives in one passenger's luggage.  The passenger had checked luggage that returned a positive result in a chemical explosives test, but he was mistakenly cleared to fly without any follow-up.  After returning to Sydney, the passenger underwent further security checks, and was cleared to continue to Seoul on a later flight.

Are you going somewhere this holiday weekend?  Many people are - the AAA predict that 39.4 million people will travel 50 miles or more from home, an increase of 3.4% from last year.  34.4 million of these people will be traveling by car, and 4.6 million by plane (up 4.6% from last year).

If you're an environmentally conscious traveler, you might think traveling by car is the most inefficient means of transport, and traveling by rail the most efficient This new study suggests you'd be wrong.  It says a combination of faster speeds and greater safety designs (meaning heavier carriages) have made high speed trains less efficient than passenger cars.  Perhaps it is a good thing Amtrak trains travel so slowly!

And if you're traveling by car in the UK, there is a slight chance you might come across these unusual markings on the road.

Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

If this was forwarded to you by a friend, please click here and subscribe to the newsletter yourself
If you ever wish to unsubscribe, simply reply to this email and set the subject line to say 'unsubscribe'.