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10 June, 2005 

Good morning

With Memorial Day Weekend marking the unofficial start of the summer season, and the Summer Solstice little more than a week away, can you believe we're almost at the longest day and soon the daylight hours will begin to wane once more?  Summer has barely started (especially here in Seattle) and we're already about to start losing daylight again.

With that in mind I'm reminded of the concept of New Zealand Winter Homes, and hope to have more to tell you on that topic in the next week or two.  For now, suffice it to say that my silence on this topic the last few months does not mean nothing has been happening.  Yes, it has been very difficult to find an appropriate high quality and high value opportunity, but after a lot of searching, some concepts are starting to solidify (potentially a small ~ 12 unit condo development in one of the nicest parts of NZ).

Mark your calendars for fall - I hope to invite you to travel down to NZ with me then to get a first hand feel for the concept.

Thanks to all readers who sent in votes for our Travel Insider Best North American Airline survey.

The winner, by a whisker, was Southwest Airlines (17.8% of votes), followed in second place by JetBlue (17.2%) and third was American Airlines (16.7%).

Among other interesting things was Alaska Airlines' very strong showing at number 5 (6.7%) - for a small regional carrier, this is an outstanding result, and suggests their percentage of satisfied customers is higher than any airline except perhaps JetBlue.

JetBlue scored, among its other votes, at least three people (that I know of) who worked for other airlines, but chose to vote for JetBlue rather than their own airline (one person each from NW, AA, and VS, although the Virgin voter couldn't vote for his own airline, due to it being a survey of US carriers only).

Poorest showing probably goes to Northwest in terms of votes compared to market size.  On the other hand, the mythical airline 'None' scored strongly.

This is of course a very unscientific survey, but so too are all the others published.  I might try and make a more 'scientific' survey at some future time.

Traveling involves too many frustrations such that anything to reduce any of them is very welcome.  And so -

This Week's Feature Column :  Canary Wireless Wi-Fi Detector : Now you don't need to unpack your laptop and power it up, only to discover there's no accessible Wi-Fi after doing so. Here's a simple handheld device that quickly tells you if there's a Wi-Fi signal where you are.

Dinosaur watching :  This week's least surprising airline news?  United has gone back to their bankruptcy court asking for yet another extension of their exclusive right to file a reorganization plan.  This time they're asking for 60 more days.

I wrote about the Appeal Court's delightfully written decision strongly reversing United's bankruptcy judge's decision to forbid airplane lessors from jointly re-negotiating with United.  And now, the results of that decision are appearing.

United lost four of its planes when lessors took them back last week after UA refused to agree to the lessors' terms for continuing their leases.  Four more planes are still being haggled over.

United has found an interesting new way to save costs - by abandoning its automated baggage handling system at Denver's International Airport.  After more than a decade of trouble with the equipment, the airline said Tuesday it will switch to a cheaper, more conventional manual system by the end of the year.  This is expected to save United as much as $1 million every month.

It is a strange situation where manually handling bags is cheaper than fixing and using an automated system that has already had over half a billion dollars spent on it, isn't it.  Instead of an automatic underground network, bags will now be hauled to a sorting area, where handlers will load them onto carts and haul them to other planes or to baggage carousels.

Strangest of all is taking ten years for United to discover it could save $1 million a month by abandoning the high-tech system and returning to old fashioned labor.

Good news for United.  Their CEO has predicted not only an emergence from bankruptcy this fall but also a profit in 2006.  United will need $2 - $2.5 billion in financing to complete its exit from Chapter 11.

In a classic 'cart before the horse' statement, CEO Tilton said he's convinced the airline will have no trouble finding lenders if its business plan succeeds.  He's doubtless correct about that.  But does he not realize he needs to get the lenders to open their wallets before the new business plan starts, not after it has become a proven success?

United's current total is $6 billion in losses since entering bankruptcy in late 2002.

I've been poking fun at the US Airways/America West potential merger, pointing out the huge discrepancy between the financing they need and the financing they've announced as already secured.  There was a brief and intriguing rumor for a day (last Friday), speculating that Alaska Airlines might buy into the merger, in effect swallowing up both companies and making a very much larger three-way combined carrier.

Mercifully, Alaska issued an official statement denying any likelihood of any such merger/buy-out occurring.

On the other hand, Southwest is denying nothing.  There's a possibility Southwest might make a 'spoiler' bid for some of US Airways.  While officially claiming it has no concerns at all about the competition it might face from a merged America West and US Airways, one must speculate that the reality may be a little different.

And so a hard-ball move to buy a key element of US Airways at any cost merely to eviscerate the airline and diminish its remaining value (ie competitive threat) when merged with America West would make a great deal of sense.  Southwest's CEO Gary Kelly said 'We're going to keep all of our options at this point.  I wouldn't discount the thought of making a bid' (for some parts of US Airways).

One airline's loss is another airline's gain.  US Airways saw its traffic at Pittsburgh drop by 41.2% between January and April this year.  At the same time, competing airlines saw their traffic increase by a combined 48.7%.  And in May, Southwest started service, too.

US Airways, which once called Pittsburgh a hub, now accounts for less than 64% of the traffic at the airport. At one time, it had more than 89% of the traffic.

Congratulations to struggling startup, Independence Air.  They announced their May passenger traffic results this week.  Because they're less than a year old, there are no last year comparisons, however the great news is not just another surge in passengers enjoying this new airline, but also an improvement in load factor, which has been one of the weakest parts of the airline's financial performance to date.

Their load factor in May was a respectable 73%; now if they can slightly improve on their yield, they will truly have turned the corner and be able to stop living hand-to-mouth and start to think about a secure longer term future.

Remember - if you're traveling anywhere they fly, please consider giving Independence Air a try.  They need our support, and we need the competitive pressure they bring to east coast airfares.

On Tuesday a gaggle of airline executives appeared before a Senate Finance Committee hearing, with the CEOs of both Delta and Northwest saying they could go bankrupt if they're not given relief from their pension obligations, the same as has been already given to (currently bankrupt) United and US Airways.

While it is hard to feel good about such requests, it is equally hard to blame other airlines for simply seeking the same deal as has been handed on a silver platter to US and UA.  United's pension default - $6.6 billion - is the biggest ever pension default, and even after this $6.6 billion bailout, it still has another $3.4 billion in unfunded liabilities.  Northwest has $3.8 billion and Delta has $5.3 billion in unfunded pension liabilities.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said 'tinkering' with funding rules was not an acceptable remedy.

But what a difference a day makes.  On Wednesday, he said

We will have to do something special for the airlines

I wonder what changed, overnight?  Lucky old airlines - management ineptness is yet again being rewarded by taxpayer funded bailouts.

Rob an old lady of $500 and go to jail. Rob current and prospective retirees of billions of dollars and the government will cover your takings with no penalty.

In another misdirection of traveler and taxpayer funds into airline pockets, St Louis' airport has announced it plans to spend $40 million out of its capital improvement projects fund in the form of subsidies to airlines.

In a strange process, instead of using the funds to help pay for a new $1.1 billion runway, the airport is charging extra landing fees to airlines, but then is donating $40 million right back to the same airlines it is taking increased fees from.

This makes one wonder what the underlying obscured objectives are.

American Airlines offered a series of suggestions for summer travel that make variously depressing and hilarious reading.

The depressing reading :  A recommendation to arrive at the airport 90 minutes before your flight is scheduled to depart.  Does AA think we have nothing better to do with our time than to spend it standing in long lines in airports?

The hilarious reading :  A reminder that passengers are allowed to take only one small carry-on luggage item plus a personal item onto the plane.

Has the person writing this never stood at a gate and watched people struggling under the weight of multiple massive illegally sized and overweight bags, and then stuffing them into the overheads, leaving no room at all for those of us with lesser amounts of carry-on?

Why can't any airline enforce the carry-on policy it claims to set?

Here's a pilot who'd never qualify for a job with British Airways.  A United 747 from Beijing to San Francisco diverted and made an emergency landing in Tokyo after developing an oil leak in one of its engines.

And why would this pilot never get a job at BA?  Remember back in March when BA twice flew a plane with a failed engine all the way to its destination, more than ten hours away?  I wrote about the first appalling incident here and the second here.

Thanks to reader Jonathan for pointing out the latest excuse airlines are using for why they're losing money.  It is no longer security or 9/11 related.  Neither is it to do with overcapacity.  Even high fuel costs aren't mentioned.  Instead, it is now the fault of all the governments in the world.

Note however that among the litany of complaints, no airline is complaining about governments restricting competition.  In fact, all airlines quietly thank their respective governments for everything they do to keep competing airlines as disadvantaged as possible.

Case in point - with the possibility of frequent travel down to the South Pacific looking more likely, I've been following very closely the unfolding saga of the Australian government's review of which airlines should be allowed to fly from Australia to the US.

A new Australian carrier has half appeared from nowhere, promising to offer service from Sydney and possibly Melbourne to Los Angeles with two 747-400s, if only it would get the rights to fly.  While the Australian government would be very stupid to award rights to this currently non-existent airline, it does vividly show how golden an opportunity the right to fly across the Pacific is to anyone who can get the rights.

Supporting that contention are the results this week of a survey showing that the average airfare cost per mile is 17% higher to fly from Australia to the US than it is to fly from Australia to Britain.  If anything, this survey understates rather than overstates the price discrepancy between the 'Kangaroo route' between Australia and Britain (highly competitive) and the nonstop service across the Pacific (currently operated exclusively by Qantas and United).

Qantas' response to the survey?  Winds and distance make Pacific flights more expensive than flights to Britain.  Winds?  Surely in one direction the winds would be tail winds, compensating for the head winds the other way!

We need more competition on this route, and the leading contender is Singapore Airlines.  Singapore would be a much stronger competitor than is United at present, and this is driving Qantas into a frenzy, so much so that Qantas CFO Peter Gregg says Singapore Airlines is trying to kill Qantas, a move that would cost 38,000 Australian jobs.  It seems CFO Gregg is terrified of what could better be described as ordinary business competition.

Claiming largely government-owned carriers such as Singapore Air did not have the pressure to return high levels of dividends to shareholders, Mr Gregg said 'They drop their return with the sole aim of driving commercial airlines out of business.'

Qantas - the world's most profitable airline, generates a dividend yield of 5.1%.  The publicly listed Singapore Air generates a dividend yield only slightly lower - about 3.95%, suggesting that Mr Gregg may be slightly overstating his case.

Suggestion to the Australian government :  Why not declare an 'open skies' environment and allow any airline to fly to/from Australia and anywhere else.

Here's an interesting lawsuit.  The California State Supreme Court unanimously ruled yesterday that a Los Angeles man could sue over a $3 energy surcharge levied by Harrah's Las Vegas.

The man claimed he was not told of the surcharge when he made his reservation over the phone and that constitutes fraudulent and deceptive business practices.

One of the things I dislike with every week's newsletter are the 'bounce' messages I get back from people with full email boxes.  Nowadays there should be no reason for this ever happening.

Last year Google came out with a 1GB free email service, which caused both Microsoft/Hotmail and Yahoo to massively increase the formerly pathetic small free mailbox limits they offered.  Then Google upped their mailbox size to 2GB, and now they are slowly growing it all the time to sort of mirror how one's stored mail grows.

And now, delivering the coup de grace, America Online have copied an offering already in place by mail.ru in Russia, and say they'll give their members unlimited email storage.  It will also have a free service for non members with a 2GB mailbox limit.

If you have problems with your present mailbox size, I have a few Google mailbox invitations and will be pleased to send you one - let me know if you'd like one.

I've occasionally worried, earlier this year, about the coming oil crisis - one caused by the world's demand exceeding the ability of the oil producing nations to pump and ship the oil needed.  Apparently I was completely, wrong, or so Saudi Arabia's Prince Abdullah would wish you to believe when he says 'The world is more likely to run out of uses for oil than Saudi Arabia is going to run out of oil'.

Does that mean we can look forward to 50/gallon gas again some time soon, Prince?  How come I'm currently paying $2.40/gallon?

As readers will remember, I was very concerned about the implications of placing RFID chips in US passports.  As a result, in large part, of your lobbying, this threat has slightly receded.  But now American Express proudly announces that it will be adding RFID chips to its credit cards, although it chooses to use the new politically correct phrase 'contactless card'.

So what does this mean?  Imagine going into a store and having store sensors detect you've got an Amex card in your wallet.  Without you even realizing, the store could use that information to run an ID and credit check on you, and use the information to influence how they relate to you.

I only want a store to know what I want to tell them about me, and I value my ability to anonymously browse through a store without the sales people being able to do an instant record search and credit check.

I hasten to add that these capabilities are futuristic, but also extremely feasible.  Don't let it happen.  Call the toll free number on your Amex card and express your concern.

On the other hand, not all RFID applications are bad.  The long talked about, but yet to be implemented concept of placing RFID chips on travelers' checked bags is an excellent idea that would quickly pay for itself in the form of fewer bags lost, and more bags found faster.

At present, KLM loses or delays 22 out of every thousand bags it handles.  BA and LH mess up 18 times a thousand, and AF does the same 15 times.  To put this into practical terms, if you fly with KL/BA/LH, and check two bags, and if each journey has four segments, then once every seven journeys you'll suffer a missing bag.

This Week's Security Horror Story :  Thanks to reader William for sending this story in :  280 fully armed soldiers boarded a chartered DC10 to fly from Atlanta to Kuwait.  M-16s, pistols, bayonets and knives were everywhere.  But, as the soldiers made their way through airport security, they had to surrender nose hair clippers, pocket knives and cigarette lighters.

I was supposed to meet a friend at Seatac at 10.20pm earlier this week.  He was flying back from Europe to San Francisco, changing planes, then flying the rest of the way to Seatac, where I'd agreed to meet him and take him home.

Upon claiming his two pieces of luggage in San Francisco, he noticed a bottle of medicine in one of the two bags had broken, causing a medicinal odor to seep through the bag.  This smell attracted the attention of the Customs people, and five Customs officers ended up fastidiously searching every crack and crevice of his bags (and of himself, too!) for several hours.  Nothing suspicious was found, of course, but this caused him to miss his flight to Seattle, and the later United flight he rescheduled for suffered delays, meaning I finally collected him at 2am.  Yuck.

The final indignity was experienced when he opened his bags back home.  Some expensive china he'd carefully packed and brought with him, which was fine when opened by the Customs officials at SFO, had not been properly repacked and so broke on the flight up to SEA.  The airline won't pay for damage to fragile items, and he's got more sense than to try and approach Customs, for fear of future cavity searches the next time he returns to the US.

Meanwhile, illegal immigrants stream across our southern border, free from any Customs inspection at all.

Talking about smuggling, some people smuggle the strangest things. An Australian woman was caught trying to smuggle 51 live tropical fish through Customs in Melbourne Australia, when officials heard flipping noises coming from beneath her skirt.

The officers discovered she had strapped on an apron of plastic water-filled bags containing the fish. She has not been charged with any offense as yet, while officials determine what type of fish she was carrying.

I wonder what it was like, sitting in an airline seat for hours with those fish swimming around her waist.

My closing comment last week introduced an innovative new traveling convenience.  Reader Mike enthusiastically supports this new comfort aid, and references this rather ghastly article as a reason why he hopes it will get widespread use.  Yuck.

Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

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