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Good Friday 25 March, 2005 

Good morning

I'd hoped to spend my Easter in lovely Malaysia, having received a last minute invitation to attend Malaysia Airlines' unveiling of their $200 million cabin upgrade program, but alas, was unable to re-arrange things in time.  But I do hope to try out one of their planes one of these days - either an existing 747 or 777, or a new A380, once their exciting new cabin upgrade program is complete.

Instead of being in Kuala Lumpur today, history is repeating itself, sort of.  Last week I started by recording both our impressive Alexa score, and expressing dismay at a computer crash forcing me to redo the week's feature column.

And, this week, more of the same.  Our site's ranking, which was 28,927 last Thursday night, has increased still further, and this week is shown by Alexa as the 27,173rd most popular site on the internet.  This increase is puzzling, because, as soon as I gently boasted to you last week, daily website visits promptly dropped by 5-10%!

The other similarity is, alas, another computer crash; this time two hours into this week's feature column, which was to be a review of this device.  This time it wasn't so much Frontpage playing up as it was the device I was reviewing causing the entire computer to reboot itself unexpectedly when I plugged the unit into a USB port, with the review disappearing into the electronic ether.

The more I had been testing the unit, the less I liked it, and so rather than rewrite a negative review of an unnecessary product (and risk further crashes), let me just say it is an expensive multi-function device, difficult to understand and use, and which does none of its five things well.

I continue to hope to uncover a good quality miniature digital camera.  But this almost-reviewed device is clearly not it.  Here is a sample picture, taken out the window of my office at home.  As you can see, it is not really any better than this picture taken from a product I'd reviewed before, with the key point of quality reference being a picture in the review from a four plus year old digital camera (my new digital camera being much better still).

Next week I hope to be in a position to tell you what I've been doing with low tech biscuit tins and high tech special test equipment imported from Germany.

Dinosaur watching :  I expressed my astonishment last week at UA's CEO being paid $1.1 million (including an inexplicable $366,000 bonus) in 2004 for running his airline deeper into the red during the second year of its ongoing bankruptcy.

This week United's flight attendants' union demanded the CEO and other executives all return their bonuses from last year.

And the mechanics' union said

We do not understand Tilton's view of 'Success'.  Neither do we get his concept of 'Sharing'. AMFA Local 9 members take the news of this pay grab as a sign of arrogance, greed and a complete lack of respect for the hard working employees...

The union pointed out that CEO Tilton's bonus was 262 times greater than the average bonus given to its union members.

Mr Tilton's bonus is all the more puzzling when contrasted with United's latest financial results.  In Q4 of 2004, the airline lost $819 million, up from 'only' $630 million in Q4 of 2003.  This number is all the worse if you look at the underlying basic operating loss - $655 million, nearly three times the $231 million lost in 2003.

And in February 2005, the airline had an operating loss of $179 million and a total loss of $291 million, including $92 million in continued reorganization expenses.  Strangely, none of the press releases on Thursday contrasted this loss with the 2004 loss, with the probable implication being that it is worse.

Northwest has apparently come up with an interesting approach to stemming its losses.  If you can't make money in your core business by flying planes and carrying passengers, what should you do?  In NW's case, the obvious solution is to, ummm, stop flying the planes!  It is grounding 30 planes, mainly old DC-9s.  Needless to say, it blames this action not on its own ineptness, but instead points to the three 'usual suspects' - high fuel costs, competitors' low fares, and excess capacity.

Some brilliant airline executive will soon work out that if you can save money by grounding 24 planes, you could save even more by grounding all the planes.  And, the surprising thing is that they'd be right - a totally closed and liquidated airline can no longer lose any more money.

Perhaps NW is pursuing a sensible course of action after all.

Whether this be sensible or not, NW's mechanics would have you believe that hiring outside contractors for airplane maintenance is compromising the airline's safety standards.

The chances of there being a fatal crash just go up with every takeoff [of a plane serviced by non-NW mechanics], according to their union President.

NW management of course disagrees, and not unreasonably points out that all maintenance work is under the supervision of FAA inspectors.  NW also threatened its mechanics, saying they'd be fired if they disparaged the 'safety, security or quality of NW's operations'.

In reply, the union president claimed the public needs to know, and tried to suggest that he wasn't actually trying to discourage people from flying on NW....  Oh no, of course not.  He was just - as he puts it - letting the public know that the airline was using maintenance contractors who are doing questionable work; draw your own conclusions accordingly.

Straight talk from AirTran's CEO, Joe Leonard.  In a speech on Tuesday, he described airlines in bankruptcy as getting by on handouts and riding on the back of the taxpayers, and claimed that airlines were using bankruptcy as an ordinary part of their business plans, with no talk of actually making money.

"They can duck years of credit obligations and live to fly another day" he said.  Pointing out that his airline has completed six profitable years, he complained at taxpayers having to subsidize failure and called on the government to step aside and to let free-market competition work as it should, allowing failing carriers to exit the market.

Well said.  He must have been reading back issues of this newsletter.

Why we hate the airlines, reason number next :  Because they're greedy and give close to zero value for outrageously high fares.  Example - but soon to happily disappear :  United charges more than $1500 for a walkup roundtrip fare between O'Hare and Sacramento, a charge of almost exactly 50c/mile, or close on six times United's average operating cost per mile.  How can anyone possibly feel good at an airline with such predatory pricing tactics - tactics based solely on 'we'll price as high as we can get away with until a competitor forces us to adopt fairer pricing'.

Good news :  As part of a seven city expansion from Chicago's Midway Airport, Southwest is about to start service on the Sacramento route, with fares capped at $598 maximum roundtrip.  Say goodbye to $1500 fares.  Hopefully.

Southwest's new routes will put pressure on O'Hare's two dominant carriers, United and American.  If the dinosaurs can't make a profit when they try and gouge us for $1500+ fares, what will happen when another part of their route systems become competitively pressured by Southwest?

Updated statistics from Southwest's new operations in Philadelphia show the 'Southwest effect' at work again, which goes a long way to explaining how Southwest succeeds while other airlines fail.  On the first six routes that Southwest started flying from PHL, traffic has increased more than 51%, while average fares dropped more than 37%.  The first part of that equation is good news for Southwest.  The second part is bad news for US Airways.

One of the constant airline excuses being offered at present is that they are paying too many taxes, making it impossible to make a profit.  This excuse fails to withstand scrutiny just as spectacularly as their claim that there is too much excess capacity.  This failure is not only due to the fact that the airlines pay none of these taxes (they pass them all on to us in the fine-print) but also due to the fact that their calculations about the tax levels are plain wrong.  Read more in my blog entry 'Lies, Airline Lies, and Statistics'.

Another interesting case of a mathematically challenged airline was raised in Britain this week.  Britain's Air Transport Users' Council, a passenger watchdog, has just published a report that wonders why BA charges 41 in taxes and other charges on a flight between London and Amsterdam when Easyjet charges only 10.

The ATUC says that this is an attempt by BA to lower its visible fare price while still clawing extra money out of us passengers in the fine print.  They advocate - and I agree - that airlines should quote airfares inclusive of all taxes, surcharges, fees, and everything else, so as to make it easy to compare fares.

One of the other big excuses the dinosaurs like to trot out is the increased cost of jet fuel.  This is a valid statement of fact - jet fuel prices are rising - but to just passively sit back and watch the increased cost of fuel destroy your airline's viability isn't very pro-active.  Fortunately, the airlines have just in the last couple of weeks realized this, and in fits and starts, they are increasing fares to allow them to cover their increased costs.

I've commented before at the ridiculousness of industry analysts basing their 2005 projections on unrealistic guesses about the cost of oil.  What very few people understand is that the ground rules for oil pricing have changed, completely and irrevocably (with or without drilling in the ANWR).  Crude oil prices have risen $14 this year, so far.  I'm predicting a price of $100/barrel for oil in 2006, and increases continuing steadily into the future.

This will change our lives.  Read more in my blog entry 'Be Thankful :  Gas is still only $3 a gallon in Malibu'.

Speculative suggestion for medium term profits :  Invest in alternative energy companies.

With jet fuel such a rising and important part of airlines' cost structures, perhaps they should be more careful and not waste any of it.

Last week I wrote about how some companies feel they had no choice but to lend money to failing airlines, in an attempt to protect their own exposure to the airline.  Here's an excellent analysis by Gary Leff that adds a lot more to this concept.

We're now officially in Spring, and so Hertz have their annual sale on one way rentals out of Florida and up the east coast, re-positioning cars for where there's most demand in the summer months.  Cars are available from as low as $9.99/day (plus a heap of taxes and charges, of course).  Pick up from any of 14 different locations in FL and return to Hertz locations in any of 26 different states between 1 April and 15 May.

Where's the best city in the world to live?  No prizes for guessing the worst (Baghdad), but the top city might surprise you.

Right for the wrong reasons?  Very few people are publicly supporting the concept of allowing cell phones to be used on board planes.  The Professional Flight Attendants Association has now come out against the concept.  And why exactly do they argue against allowing us to use our cell phones?  The union's biggest concern is that folks would be gabbing on their cell phones while ignoring 'critical safety directives' from flight attendants.  Critical directives like, I guess, 'please put your tray tables up'?

Next thing you know, we'll be tested on the safety demonstration and required to pass with a perfect score before the flight attendants will allow the plane to depart the gate.

Polluted cabin air is making pilots sick, according to the British Airline Pilots Association.  Never mind the pilots - they can (and do) reach for their standby oxygen masks.  What about those of us trapped in the main compartment of the plane?

Perhaps it was polluted cabin air that befuddled the two pilots on an American Airlines flight from Miami to Quito and caused them to lock themselves out of their cockpit.  Reader Dave tells the story of how both the captain and co-pilot left the cockpit, fortunately prior to takeoff, and the door closed and automatically locked behind them, due to a new security lock.

Did I say security lock?  Fortunately a large screwdriver, wielded by one of the ground crew, managed to beat the lock on the security door (that probably cost over $100,000 to fit) and allowed the pilots back into the cockpit.

This Week's Security Horror Story :  An American Airlines frequent flier complained about poor service on his flight from Los Angeles to JFK.

So, fearing that 48 yr old William Lee might be a terrorist, seven other passengers (apparently members of a rugby group, perhaps even from NZ, I'm embarrassed to say) killed him.

More details on this enormously under-reported outrage here.

Security versus cost :  Usually, security has triumphed all battles with cost (and, alas, with common-sense, too).  But bad news for LAX pax.  Despite warnings by security experts that long lines at Los Angeles International Airport are vulnerable to a terrorist attack, airport officials have concluded that the staff cannot be added to significantly shorten queues in the next few years.

And why can't more staff be added?  Because it would cost too much, and no-one is willing to pay for them.

Average waits at ticket counters are now about 40 minutes during peak travel times.  A Rand study found that a mere 5% increase in airline employees would reduce lines to a 5 - 7 minute wait.

Long lines don't just mean inconvenience for us.  They create dense groups of people, often outside the secured parts of the terminal buildings (and even outside the buildings themselves, spilling onto the sidewalk), making them vulnerable to terrorist attack.  Aviation consultant Billie Vincent, a former Federal Aviation Administration security chief told the LA Times long lines at airports are 'the single greatest vulnerability that we have in the domestic U.S. at the moment'.

Why is no-one doing anything about this?

What is the world's ultimate tourist attraction?  Some historic ruin?  An area of outstanding natural beauty?  One of the many world heritage sites?  No - none of these.  In the Ultimate Destinations poll commissioned by Pringles Chips the London Eye was voted the world's best tourist attraction.  This surprising result probably tells us more about Pringles Chip eaters than about the world's ultimate tourist attractions.

Thanks to reader Tom for passing this puzzling item on :  A Japanese youth who wanted to go to Tokyo's Haneda airport boarded a bus heading there before threatening to hijack it unless it took him to ... the airport.

The unemployed 19-year-old bought a ticket for the early morning bus on Monday. During the journey he stood up and shouted to the driver that he was going to hijack the bus.

The youth was drunk and wasn't carrying a weapon.

Until next week, please have a pleasant Easter and enjoy safe travels

              David M Rowell aka The Travel Insider

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