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Friday 11 March, 2005 

Good morning

Thanks to everyone who answered last week's survey to see if you knew and/or cared which airline was continuing to serve food on its flights.

Newsletter readers would be the people to best know this, because they (you!) are frequent fliers.  Each year, the average reader flies at least five times within the US on business, at least twice internationally, and at least three times on vacation.

And so - the results :  37% of readers accurately named Continental as the airline that decided to continue serving food on its flights as a way to win more business.  33% of readers had no idea at all, and another 39% named other airlines (multiple answers were allowed).  The airline that received the most guesses (other than CO) was Alaska Airlines (11% of responses), and the third most commonly named airline was JetBlue - an airline that provides no food at all, but which was probably named due to the general perception of high quality this airline enjoys.

As for how important the provision of food is when you make your decision which airline to fly, this chart shows the spread of answers.

As you can see, a quarter of people rated food as completely unimportant, and the average reader rated food as slightly less than a 10% factor in their selection decision.

Some readers also wrote in (thank you) to offer comments to the effect that the longer the flight, the more important food would be.

So is this a good move on Continental's part?  They have yet to strongly promote their distinction, but these numbers give little reason for optimism, and every reason to anticipate, in a year or so, Continental will quietly give up on their free food, while blaming 'lack of support' from travelers - much the same way that American Airlines, after keeping their 'more room in coach' product close to secret, gave up and added back as many seats as they could squeeze in, blaming lack of passenger support.  Time will tell.

Some people love the sea, others hate it.  I love the sea, and many years ago even worked at sea, but it hates me and makes me, all too often, seasick.  I'm currently considering buying a boat, and the thought of more self-inflicted seasickness is one of the reasons delaying my decision (along with some lingering shred of self-control and common sense).  The subject is surprisingly complex, and seemed to call out for treatment as a feature column, and so :

This Week's Feature Column :  The Causes of Seasickness : Forewarned is forearmed, so this week I tell you more than you probably wanted to know about the causes of seasickness. If you know what causes seasickness, you can act to prevent it.

Dinosaur watching :  Delta places itself on death watch.  On the basis of bringing out all the bad news at once, DL told us this week about the following developments :

  • It will remove pillows from all domestic flights

  • It will increase the price of drinks from $4 to $5

  • It will discontinue selling food on flights and instead will offer snacks

  • And mentioned that it might have to liquidate

The big item being, of course, the last.  What it actually said was in several parts, in a regulatory filing with the SEC.  The key comments are

We believe that we will record a substantial net loss in 2005 and that our cash flows from operations will not be sufficient to meet all of our liquidity needs for that period


A restructuring under Chapter 11 of the U.S. Bankruptcy Code may be particularly difficult because we pledged substantially all of our remaining unencumbered collateral in connection with transactions we completed in the December 2004 quarter as a part of our out-of-court restructuring

Join those dots together, and what pattern emerges?  Well, most likely they will simply sell off some assets to raise the cash they need this year, but note the second comment that implies a Chapter 11 bankruptcy would be difficult to engineer.

DL lost $2.2 billion in Q4 and $5.2 billion for the full year, 2004, so the mind boggles a bit at what they might mean by a 'substantial' net loss for this year.

The airlines peculiarly delight in these scare tactics, probably as a precursor to beating up on their unions one more time.  US Airways earlier said it doubted anyone would give them more money if they had to go back into Chapter 11, but they did go back into Chapter 11, and they have found financing.  And poor old United continues to bleed cash out of every orifice, while somehow still keeping the lights on and their planes flying.

The other thing these comments point to is DL setting the scene for walking away from their pension plan commitments (see the table of respective airline liabilities here).

So don't feel a need to book away from DL.  But, if you work for (or worked for) DL, I'd recommend you don't take on any new financial commitments any time soon.

There's something funny with this math :  Continental is reconfiguring its 737-500s, reducing its first class seats from 10 to 8, but adding 12 more coach class seats.

It is fair to say that US Airways is presently being kept alive by taxpayer money (and its $740 million federal loan guarantee keeps being made more liberal).  So it is particularly galling to learn that one of the probable reasons for the increasingly liberal interpretation of the conditions of this loan guarantee - safeguarding US jobs - is not actually happening as it should.  Contradicting earlier claims that it was moving reservation agent jobs from Green Tree, PA to Winston-Salem, NC; it now seems that at least 200 jobs - and perhaps as many as 700 - will be going to a contract call center in either El Salvador or Mexico.

US Airways already handles lost bag calls through a contract call center in El Salvador.  And they're not doing a very good job, either.  During the Christmas mess, 55% of some 88,197 calls from passengers about missing bags or reservations were completely unanswered.

Reservations agents earn $17/hr working for US Airways in the US; contract agents in El Salvador earn $2.20 an hour.

Lightning strikes twice.  Or, in BA's case, engine failure.  I wrote in terms of muted outrage last week at BA's stunning decision to fly a 747 all the way from 100ft above the runway at LAX to Britain with a failed engine last week.  Guess what happened six days later?

The same plane, this time flying from Singapore to London, had another engine failure, on the same (# 2) engine mount.  And - incredible as it may seem - BA proved itself 100% insensitive to the outrage their actions provoked several days before, and flew this plane for the remaining 11 hours of its flight to London, too.

BA would have you believe that the two incidents are totally unrelated.  If engine failures are commonplace on BA's planes, then this may be true.  But if engine failures are as rare as BA would probably like us to believe, surely there may be some type of common systems fault that caused the failure both times.

Since last week's newsletter, the FAA has sharpened its tone - last week it said it was 'concerned' at BA's actions, this week it is claiming jurisdiction over BA for the flight from Los Angeles, and is threatening legal action for alleged "careless and reckless operation of an aircraft."

For an interesting contrast in safety standards, a Singapore Airlines 747 had two tires blow out when taking off from San Francisco yesterday.  Unlike the loss of an engine, it goes without saying that a tire failure in no way compromises the safety of the flight; although it does somewhat raise the stakes when the plane comes in to land.  What did the SQ pilot do?  Press on to Singapore as scheduled?  No.  In perhaps a surfeit of caution, he chose to turn around and land the plane at SFO.

Suggestion :  Any time you have a choice between BA and SQ, choose SQ.

American Airlines has lowered their free baggage allowance for international flights, down to 50lbs per bag rather than 70lbs.  It always pays to check my three articles on carry on and checked bag policies for domestic and international airlines before you next fly somewhere with a bag that might attract an excess baggage fee.

Some airline good news.  Air Canada reported a fourth quarter net profit  of C$15 million, and anticipates a good profit for 2005.

More airline good news.  Cathay Pacific reported its second best year ever, with a US$568.1 million profit.

And, you'd sort of expect the same thing from the US carriers, too.  According to data released this week, in total for 2004, US airlines recorded a 9.9% growth in revenue passenger miles (RPMs) in 2004 compared to 2003.

And looking a bit further at the numbers, the sporadic claims that the industry is suffering from over-capacity again fail to withstand scrutiny.  RPMs increased by 9.9%, but available seat miles increased by only 7.3%.  This meant that load factors climbed up 1.8%.  As you've surely noticed, this means there are more people on each flight than there used to be.  If there was too much capacity, you'd be seeing fewer passengers on each flight.

The airline carrying the most passengers was again Southwest (81.1 million passengers), and the busiest US airport was Atlanta (37.7 million passenger boardings).

But, notwithstanding increasing passenger numbers and improving loads, the latest industry forecast from AeroEcon predicts an aggregate loss of between $2 - $2.5 billion (after tax) for 2005.  The forecast predicts growth in passenger traffic of 6% and growth in capacity of 4.25%, meaning still further increases in average flight loadings.  Total revenues will increase by about 5.25%, from $128 billion in 2004 to $135 billion this year.

My prediction :  The loss will be worse.  I don't think anyone is realistically allowing for the high cost of jet fuel.

Talking about airports, Boston's Logan Airport is considering an interesting strategy - it is thinking of charging airlines operating flights later than scheduled a penalty.

Still talking about airports, A380 skeptics like to say that one of the problems with this wonderful new plane is that airports can't afford the cost of improvements needed to handle the new plane.  Maybe so.  And maybe not.  Guess how much San Francisco Airport say it is costing to become A380 ready?  $20 million.  And if you think that sounds like a lot of money, appreciate that this is part of a $2.1 billion dollar overall airport improvement project.  Less than 1%.

One very real problem Airbus are facing with the A380 is the strong Euro and weak dollar.  This makes Boeing planes comparatively cheaper, although not by much, because Boeing's costs are increasingly based on foreign suppliers rather than domestic manufacture.  However, the reduced effective Euro price for each A380 (if keeping it at the same US dollar price), and some cost over-runs, means that the company will now have to build 300 to break even, rather than the 250 earlier projected.  So far, they have sold 154, with only a low ongoing rate of sale.

Airbus projects a market of 1600 planes for the A380.  Boeing says the market is no more than 500 of such planes.

There was a very surprising announcement from Boeing on Monday morning.  Its CEO, Harry Stonecipher, had been asked (and agreed) to resign, based on 'some issues of poor judgment' arising out of an adulterous affair with a colleague (coyly not named in the US press, but there's plenty of detail in this UK article if you must know).

It is surprising that two mature adults can not have a private and consensual relationship without one of them losing his job over the matter.  And it seems doubly surprising that only one of the two people has been forced out.  Currently Boeing will say no more than it is 'investigating' Debra Peabody (the woman in question) and has no timetable for completing the matter.

One could wonder, at ribald length, exactly what the company needs to investigate, and why it would take more than 10 minutes to do so.  Perhaps the best headline was on an AP release which said 'Boeing probes ex-CEO's lover'.

Analysis :  We should focus not so much on the affair as on the peculiar reference to 'some issues of poor judgment'.  And what is very intriguing is how the anonymous informer was appraised of the matter, and how emails that were apparently intended to be private came to the attention of Boeing's investigators and board.  Until these issues are understood - and they probably never will be - it seems the company's actions, in firing its CEO at a time when it has no-one suitable to replace him, for a victimless and regrettably common act that is not a crime, have harmed rather than benefited the company.

And while it is fussing over what goes on in private bedrooms, it seems that Boeing is about to give up on its 767 and close down the 767 production line, while still holding out hope that the Air Force might bail it out and buy some as tankers.

With each passing month, the concept of the Air Force (or anyone else) buying such dated planes when vastly more efficient technology is now available (eg in Boeing's own 787, designed to replace the 767) seems increasingly inappropriate and foolish.

And here's an interesting mini-fact about the demise of Boeing.  According to this Sydney Morning Herald article, in 2001 only one Airbus plane was operating in the South Pacific.  Today, Airbus is raking in 58% of airplane sales in the region.

Ooops.  Perhaps he was tired out after an assignation the previous night.  But, whatever the reason, an air traffic controller at Nice fell asleep at his post, causing a cargo aircraft to circle for half an hour, waiting for a reply from its request to land.  The controller was eventually awoken by security guards.

Here's a must-read article on cell phone safety.  As regular readers know, this article mirrors my own view on this profoundly serious matter.  I'm actually working on an exciting device to improve cell phone safety myself, and - subject to satisfactory testing - hope to have something to pass on to you in the next month or so.  Until then, use your cell phone sparingly.

This Week's Security Horror Story :  The Coalition of Airline Pilots Associations published a report on aviation security.  Plenty of F - failing - grades were awarded, and only one B - good - grade (for strengthened cockpit doors).

It is unacceptable that three and a half years after 9/11, and untold billions of dollars later, we don't yet have a more consistent and robust security model to protect our aviation system.

Meanwhile, the US Homeland Security Chief defended a proposed $3 increase in the security fee now added to every ticket.  At present the government collects about $2.3 billion a year from this fee, the extra $3 would bring in another $1.5 billion.

The Homeland Security Secretary described the increase as costing about as much as a coke and a newspaper while waiting around in an airport.  He said '... it's not a huge marginal cost.  So I think this is an economically sound idea. I think it will ultimately be something passengers I would think would fully understand...'

What I don't understand is where the present $2.3 billion is going, and what I doubly don't understand is what value we're receiving from it.

Until we know we're getting good value from our present $2.3 billion, it seems foolish to simply throw more money at the massive problem that is aviation security.  Let's spend our money more wisely, not more extravagantly.

I wrote in December about the embarrassment of the fake/test bomb at Newark that made it all the way onto a flight to Amsterdam.  The TSA have now completed an investigation into the matter and fired two supervisors and disciplined three other employees.  But was this test really a failure, or perhaps an embarrassing success?  Didn't it brilliantly succeed at pointing out shortcomings in the bomb screening process - shouldn't the people who arranged the test be commended rather than fired?

Seems to me their major mistake was embarrassing the TSA, and setting up a test that wasn't rigged to succeed.

Do as I say, not as I do, seems to be the motto of this State Supreme Court Judge, who willfully attempted to smuggle a pocket knife on board a flight between Harrisburg and Philadelphia.  Fortunately, being a judge, he was only briefly detained, and no criminal charges were filed against him.  Perhaps no-one thought much of the chances a fellow judge would 'throw the book at him'.  But don't try this yourself - you might not be so fortunate.

A man was detained for an hour on suspicion of carrying a nuclear device in San Diego last week.  His passing by a fire truck triggered some type of nuclear bomb sensor.  It turned out he had recently undergone radiation treatment at hospital.

Lastly this week, thanks to reader Eric for passing on this delightful catalog of intriguing gadgets.  I'd love to be able to review some of them in weeks to come, but their shipping terms don't inspire me with much confidence in placing an order.

Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

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