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Friday 20 August, 2004 

Good morning

Perhaps inevitably, after a discussion last week about the purported unluckiness of Friday 13th, there was an embarrassing error in the newsletter.  The link to our feature column on  wrinkle free clothing was wrong.

So if you wanted to read more about these marvelous new fabrics and see the pictures that show just how wrinkle free they truly are, here is the corrected link.

These days I get to see a lot of cell phones as a result of people mailing them in to be unlocked.  I've increasingly been tempted by the lovely new Motorola V600, and eventually ended up getting one for myself.  Warning - after reading this review, you might want one too, but the good news is they can be had for as little as $50-$100 if signing up for new cell phone service.

Because you can simply move your existing cell phone number to your 'new' cell phone service, there is no inconvenience in signing up for new service any time your present contract has expired and you want to upgrade to a newer phone.

This Week's Column :  Motorola V600 quadband cellphone :  This state of the art cell phone is capable of working in over 200 different countries.  I test one out - but not in all 200 countries.

Dinosaur Watching :  Many of us have been joking that US Airways seems headed into a 'Chapter 22' - this being the name we use to refer to a second Chapter 11 so soon after their previous one.  But few of us made the stunningly negative prediction their own Chairman did on Wednesday, when he said if employees don't agree to new income reductions within the next 30 days, the airline might have to be liquidated completely - ie, go into a Chapter 7 closedown.

He explained why this could happen by saying there are no investors who are interested in funding another bailout for the airline.  Last time, his own pension fund, Retirement Systems of Alabama, became the major investor in US Airways, sinking almost a quarter billion dollars into the company, but he says he won't invest any more in another Chapter 11 filing, and predicts no-one else would either.

This is an interesting statement to make, with several underlying issues.

Making this statement is playing about as desperately hardball as possible with the employee unions, and the very short time frame for the threatened closing down of US Airways changes it from a vague threat to a very real and certain projection.

I have an interesting feeling of deja vu whenever I read a comment like this.  I'm unavoidably reminded of the first column I ever wrote for The Travel Insider, in which I commented on the inappropriateness of United's then Chairman making vague allusions to United perishing 'some time next year' unless things were done to prevent this.  He was forced out of his job after making such a negative statement, but now it has become common for airline senior executives to regularly predict the failure of their airline.

I had a discussion with a US Airways pilot, who said he and many of his fellow pilots completely do not believe this threat would come to pass.  He pointed to the fact that systemwide loads are at all time highs (and bumped passenger levels are also rising), he pointed to the fact that the airline is spending lots of money to promote new routes that won't even start until after the mid September deadline, and he pointed to the fact that the airline is regularly taking delivery of new aircraft as factors that suggest there is a definite ongoing plan for the business to survive.

As for more salary cuts, he is now earning only half what he was earning a couple of years ago, and had a negative attitude to the concept of giving still more money back; indeed he claims he has had five salary cuts in the last two years.

What do you think?  In the past I've been telling people 'don't worry - if US Airways does re-declare Chapter 11, it is almost unthinkable that you'd lose out on your accumulated frequent flier miles'.  And I've also said 'don't worry, in Chapter 11, they'll continue to honor the tickets they've already issued'.  But what about a Chapter 7 total closure of the company?  Your tickets won't be worth the paper they're written on - indeed, being electronic, they don't even have any existence outside of the airline's computer system, which will presumably be switched off.

I have written before about your rights if an airline ceases operation.  It might pay to refresh your understanding of these issues.

And what happens to your frequent flier miles?  There's no government legislation to protect you or to force other airlines to honor them.

So how does a rational traveler respond when an airline's chairman threatens that the airline will close down completely in a month?  They sure don't rush to book and buy more tickets on that airline, and one has to wonder how much harm Chairman Bronner has done to his airline by making this statement.

More to the point, one also has to wonder why he said this in public.  One possible answer is to apply the ultimate pressure on the unions.  But could there be another reason, too?

In a NY Times article, Bronner said he agreed with a Pilots Union report that warned the airline could go out of business entirely if it didn't trim costs.  He added that he and other investors would potentially be better off with the airline in liquidation, where they could snap up its planes, gates and routes at pennies on the dollar and not have to take on labor contracts.

'It's a whole lot cheaper for me to have the assets and start over than to have the liabilities,' Mr. Bronner said, before acknowledging that such a dire situation would be tragic for the airline. 'I don't know why anyone would want to do it.  That's terrible for the employees. It's what you want to avoid.'

Doubtless all 28,000 of US Airways employees find such comments reassuring, and they surely accept that Mr Bronner is more mindful of doing what is best for them than what would be best for himself and the other investors.

Milestones on US Airways' road to its uncertain future :  15 September when it must make $110 million in payments to its pension plans.  30 September, when the US government's loan guarantee requires them to show satisfactory progress on cost cutting.

From time to time, I hear on the grapevine of proposed new airlines about to start operations in the US.  Some people seem to think that simply heading a business plan with the words 'Low Cost Carrier' are enough to guarantee plenty of investors and success.  This has never been true, and remains untrue today.  If anything, the US is close to suffering from a glut of low cost carriers (as well as dinosaur carriers) and it is relevant to note that not all of the current crop of low cost carriers are prospering.

And whereas dinosaurs take a long time dying - just look at United or US Airways, for example - low cost carriers are more ephemeral.  They don't have enormous cash reserves, and they don't have major assets or route networks they can sell off to buy more time.

One current example is ATA.  They warned this week they will likely run out of cash in early 2005.  They lost $91 million in the first half of this year and finished the second quarter with $150 million cash.

'Under current operating assumptions and absent any changes to existing aircraft lease obligations, the company does not expect to have sufficient cash to meet its cash obligations in the first quarter of 2005,' ATA Holdings Corp. said in its report to the SEC for the quarter ending June 30.

So what are they doing about it?  Asking for pay cuts from their employees, same as the dinosaurs.

They're also hoping to implement two other strategies that may be more positive.  They'll add business class seating to their planes next month in the hope this will attract some higher fare paying customers.  And, if they're still surviving, they're looking at adding service to Europe next year.

The international route systems have been the ace card up the dinosaur carriers' sleeves thus far.  Operating costs are much lower on a long distance flight, and the ability to ask for higher fares is often much greater due to the lack of a fully free open competitive market.  The clearest example of this was seen last week when I wrote about the Italian government forcing other airlines to raise their fares so as to enable Alitalia to hopefully make a profit.

ATA had been talking about flying to Germany.  Perhaps they should look to Italy, instead.

Not all is doom and gloom in the airline industry, and Australian airline Qantas has just announced a full year (to June 04) net profit of A$648.4 million.  This is the airline's best ever result, and a 90% increase on last year's $343.5 million.

Qantas CEO Dixon, while making the de rigueur references to tough trading conditions, increased fuel costs, etc etc, also predicted an even better result for the current year.

Amazingly, while shouldering cost cuts, Qantas has managed to preserve its wonderful service, and is in the process of its latest round of cabin upgrades, improving still further its international services.

No wonder Qantas is one of Australia's most respected companies.

Qantas celebrated its result by giving all staff members a $1000 bonus, representing an almost $50 million cost.  This bonus, which was neither promised nor expected, was greeted coolly by union representatives who, unable to bring themselves to say 'thank you' instead said that it was not enough.

Australia suffers from the worst elements of British style militant trade unionism, and Britain is bracing for an attack of strikes by airport and airline staff, who are seeking pay rises.  This strike is scheduled for Friday 27 August - the start of a British 'bank holiday weekend' that is usually the busiest travel weekend of the year in Britain.

The strike, initially directed at BA, now looks like it might impact on UA as well.  Their UK unions have voted to strike after rejecting a pay increase offer from the airline.

I bet UA's staff in the US - struggling to minimize the latest rounds of pay cuts - are very puzzled by the UK staff rejecting a pay rise.

Eurostar services are also expected to suffer strikes that weekend.

BA is offering passengers (at least in the UK) a no-cost change to their travel dates if they are traveling prior to 4 September.  If your own travels will have you flying in or out of Britain the weekend of 27-31 August, you might want to consider adjusting your plans, too.

An example of diversification that some airlines might wish they could emulate has been set by Hooters.   They now not only have an airline but a Las Vegas hotel as well.  The Hotel San Remo has signed a management contract with Hooters to rebrand the hotel into a Hooters Casino Hotel.   Hooters said it had been looking for a hotel in Vegas for over three years.   They plan to enlarge the pool area to three times its size, build new restaurants and remodel the hotel to give it a 'Florida casual' look. Hooters has also applied for a Nevada gambling license.

Depending on your perspective, the following may be good news or bad news.  Experts at Lufthansa and the German Aerospace Center subjected all of the systems on a Lufthansa jet to radio signals 25 times stronger than those coming from a cell phone, and found all systems operated perfectly normally.  They are now suggesting cell phones don't actually pose any risk on planes at all.

Further testing will be conducted on airborne planes later this year.

This does not mean you'll soon be allowed to use your cell phone on flights, however.  It is an FCC not an FAA regulation that currently bans cell phone use in the air, and it also seems that cell phones don't operate reliably on fast moving jets above about 10,000 ft.  One proposal is to equip planes with their own very small cell sites on board, so your phone would only need to talk to a stationery cell on the plane, not to many cells 7 miles below the plane and moving by at 9 miles per minute.

This Week's Security Horror Story :  Another US citizen found himself unable to take the flight he had booked due to his name being on the 'no fly' list.  However, this wasn't just any ordinary citizen - it was the senior senator for Massachusetts.  So, unlike the ongoing nightmares that other citizens face when their names are wrongly on the list, Ted Kennedy was able to make calls all the way up to Homeland Security Secretary Tom Ridge and get his name removed from the list, after having the same problem on another flight several days later.  Even so, it took him several weeks (and three calls to Tom Ridge) before his name was finally removed from the list.

Us ordinary folks don't have much chance, when it takes Ted Kennedy three weeks to get his name removed, do we.

Not all hoax bomb threats are successful.  During a period of heightened alert at Rome's Fiumicino Airport, a bomb threat was emailed to the security office.  Unfortunately - or perhaps fortunately, no-one read the email for over a day, and when it was finally read, the threat had already expired.

The airport in Fort Wayne was shut down for several hours on Wednesday after liquid spilled from a broken bottle in a piece of baggage off an American flight from Chicago.  The bag was unclaimed on the carousel - apparently the passenger traveled on a different flight than his bag.

Six people became sick - two paramedics and four airport employees.  The terminal was evacuated and the FBI was called in to investigate.  It turned out the bottle contained a perfume ingredient with a strong aroma.

Good job this didn't smell, too :  After it went dark, earlier this evening, I noticed in a corner of my office a flashing red light.  Intrigued, I followed it to its source.  Something solid inside a padded air courier shipping pouch that I'd received earlier that day was flashing a red light.  If you were an airline/air courier service employee and saw this in a package you were loading onto a plane, you'd probably call for the bomb squad and evacuate the terminal.

Fortunately, I recognized it for what it was.  A cell phone shipped to me to be unlocked had been bumped in transit.  The power came on, and  the battery had almost gone flat so it was flashing a red 'low battery' warning light!

Apparently the X-ray machines used to screen suitcases can be good for spotting more than just bombs.  A security guard at Gatwick has been sentenced to 18 months for using the X-Ray screening machine to spot - and then steal - passenger's valuables in luggage he was screening.

Lastly this week, a new tour is causing controversy in Germany.  A tour company purchased what was formerly communist East Germany's largest women's prison, and now plans to sell overnight prison experiences, giving visitors the chance to spend a night like a prisoner, complete with appalling food and sleep deprivation, all in a tiny spartan cell.  The price - $125.  Former prisoners say this is riding rough-shod over their feelings and profiting from the misery inflicted during the country's former communist dictatorship.

I have no plans to review the 'tourist attraction' anytime soon.

 Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

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