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21 April, 2006  

Good morning

It is now sixteen days since I emailed Alaska Airlines asking them to explain how it was they didn't discover, until after all passengers had boarded, that the plane they planned to use to take us to Las Vegas was un-airworthy and unflyable, and asking them to further explain why it took them two hours to tell us the truth about what the problem was and four hours before they could arrange an alternate plane.

Last weekend my two previous newsletters on the topic were forwarded by a reader to a 'very senior' executive at Alaska, but there's still no reply at all from anyone at any level of Alaska Airlines.

The suggestion last week, put forward by a former FAA supervisor, that the flight crew get paid from the minute the front door is closed, and continue to get paid, even if the flight is interrupted, was apparently wrong.  One ex-pilot said the key issue was when the rotating beacon was illuminated, and that would not have occurred in this case.

Did you see the special newsletter on Thursday about a Russian river cruise between Moscow and St Petersburg this July?  Already eight people have registered to join me on this cruise, and we can certainly grow this number further.

It seems that some of the current group like the idea of - after the cruise ends in St Petersburg - taking an overnight sleeper train back to Moscow and flying home out of Moscow.  This can sometimes considerably save on the airfare cost, and adds another archetypal Russian experience - a train journey - to the overall experience.  Fortunately the overnight trains between these two cities are Russia's best trains, and we'd have two-berth private sleeping compartments for the journey.

If enough people wish to do this, I'll be pleased to act as escort for the return journey by train back to Moscow, making it easier to enjoy.

Please do consider this cruise as a great way to spend your summer vacation this year.  More details here.  And remember, the cruise features a $250 per person special Travel Insider discount, plus free Russian visas.

I've been publishing this newsletter for 4.5 years now.  During that time I've written many hundreds of critical things about airlines and other companies involved in travel and travel related technology fields.  One time I made an important mistake that caused me to unfairly cast American Airlines in a bad light; a mistake which prompted a fast but good-humored note from their people, pointing out my error and politely asking for a correction (thanks again, AA, for being decent about that).  In all this time, no-one has ever threatened me with a lawsuit.

Until now.

Bizarrely, the oblique lawsuit threat comes from Harry L Nolan jr, the author of a book full of close-to-the-edge criticism of Delta's CEOs.  But while he can dish out the criticism, apparently he can't stand it in turn.  I gave him the opportunity to comment and correct my review of his book as he might feel appropriate, but instead of responding with sensible commentary, he waits until 2.34pm on Thursday afternoon then sends a vaguely worded threat about referring my review to his attorney and urges me to delete rather than publish the review.

I believe my review to be fair, and also believe I've fairly given the book's author ample opportunity (seven days) to rebut and respond to my comments as he might wish.  And so I'm choosing to publish the review rather than allowing myself to be silenced and censored by his threat.

This Week's Feature Column :  The Book Review the Author Didn't Want You to Read :  Harry L Nolan jr's book, Airline without a Pilot contends that Delta is a once-excellent airline that was run into the ground primarily as a result of actions by ex-CEOs Ron Allen and Leo Mullin.  While I don't disagree with the general concept, I find Nolan's book inadequate and sadly lacking in the facts needed to support his assertions.

I had a very bad system in place last year when I was giving out free international cell phones in return for donations, and it completely collapsed under the level of response.

I believe everyone who asked for a phone and donated did indeed receive one, but if anyone was overlooked, please would you let me know so I can rectify the situation.

Dinosaur watching :  As predicted, after all the public posturing, Delta and its pilots' union managed to reach agreement shortly before the arbitration panel was due to rule on whether Delta could rescind its current agreement with the pilots.

So who won and who lost on the deal?  We don't yet know - and neither do the pilots.  Their union negotiators have yet to advise their members on the terms of the proposed settlement; meanwhile the Wall St Journal is reporting that Delta ended up getting about $280 - $290 million of the $300 million it was asking for.  If this is true, it is a major win for Delta and a massive climb-down by the pilots.

Meanwhile, Delta has adopted a novel strategy to keeping its staff costs down.  It is asking staff to volunteer to clean aircraft at night, on their own time.  Staff will be incentivized with free T-shirts, reward points that can be redeemed for merchandise gifts, and 'a chance to show their pride in the airline'.

Participating employees will be asked to work four and eight hour shifts to clean interior walls and windows, scrape gum off floors, and clean out the lavatories.  You'd have to have a lot of pride to want to do that.

While Delta's pilots may be the losers in their deal, over at United, Douglas Hacker must be smiling quietly to himself.  Hacker, a UA employee since 1993, was named Executive VP-Strategy two days after UA filed for bankruptcy in December 2002, and now is ending his fulltime employment on 1 May, after suing the company in March to recover bonus and incentive payments he says he was owed.

Although apparently leaving United, his settlement records that he will continue to be employed by United and will 'perform services by being on call until the earlier of Oct. 31, 2010, or the termination of his employment' (whatever that means).

In return for these nebulous duties, and for dropping his claim, he will receive the following (it is a long list) :

  • From May 1 until Nov. 1, 2006, he will not be paid any salary but will receive his accrued and unused vacation at a rate of $8,588 per month.

  • From Nov. 1, 2006, until Oct. 30, 2008, he will receive a monthly salary of $43,500, 'amounts he was previously entitled to under UAL's executive severance policy.'

  • Also on Nov. 1, he will get a lump-sum payment of $2.1 million 'for his services in connection with the sale of MyPoints.com,' a UAL subsidiary.

  • Hacker will be entitled to further payments of $24,630 per month for the two years beginning Nov. 1 in lieu of his participation under the Success Sharing Plan.

  • That figure will fall to $560 per month from Nov. 1, 2008, through Oct. 31, 2010.

  • Beginning Oct. 1, 2008, and continuing through Oct. 31, 2010, he will be paid a monthly salary of $1,000.

Add it all together and it looks like the high side of $3.25 million, in return for which he will be 'on call'.  Care to guess exactly how many hours of service he'll be called upon to contribute?

Northwest is modifying its controversial $15 charge for better seats on its planes.  Frequent flyers who travel more than 25,000 miles a year with NW will now have access to these seats for free up until 24 hours prior to departure.

Winners and Losers :  First quarter results are coming out.  AA is reporting a $92 million loss, an improvement on their $162 million lost in Q1 2005.

Despite losing $92 million in the first quarter, American gave away 20,000 vouchers for roundtrip flights out of Love Field to everyone who attended a Dallas Mavericks game earlier this week.   The vouchers must be used to book a flight within 10 days and are good for six months.  Is American so unable to compete with Southwest that it is reduced to giving away tickets on its flights out of Love Field?

Southwest's first quarter result shows a $61 million profit, slightly up on last year's $59 million profit.

Continental reported a loss of only $66 million, compared to a $186 million loss last year.

I mentioned last week that JetBlue is planning to start service in Charlotte in July.  But what impact will their few flights a day have on US Airways?  On the face of it, you'd think this would be a pinprick.  However, there's an interesting example of the ripple effect underway.

When JetBlue announced their upcoming presence and lower fares, dinosaurs Delta and American dropped their fares to match the JetBlue fares.  And so US Airways finds itself alongside not just JetBlue's new low fares, but similar fares from Delta and American too.  The pressure to match fares, and on a wider basis than would have initially been needed, must be substantial - especially as a result of US Airways' public vow to 'compete aggressively'.

Competitive forces on US Airways continue to mount, with Southwest announcing the addition of seven more flights every day from Southwest's Philadelphia hub.  The new services start in July.

The price of oil continues to spiral upwards, breaking through $72 earlier this week.  With concerns about Iraq and current production maxed out in a desperate attempt to meet world demand, any glitch in the overstressed system, anywhere from well-head to petrol pump, could easily see the $100/barrel price I'm predicting being reached in very short order.

But what impact has this had on the airlines?  Here's a chart showing the airline share index for the last year :

As you can see, this index has dipped recently, but is far from trading outside its current range.  (The big dip in September was when both NW and DL declared bankruptcy.)  Investors seem moderately unconcerned.

The reason for this rather complacent reaction on the stock market is because, no matter how much airlines love to publicly complain about rising fuel costs, in reality rising fuel costs give the airlines an excuse to raise their fares, in the form of increasing their long-standing fuel surcharges.

These fuel surcharges are a sham and a scam.  I wrote last week about the mysterious and selective way in which fuel surcharges are applied and increased, and suggested fuel surcharges are competitively market/price based, not fuel/cost recovery based.

More evidence for this claim comes this week, when British Airways announced yet another increase in fuel surcharges on their long-haul flights (from US$55 to US$65 each way), while leaving short haul flight surcharges untouched and then the next day announced it was slashing its fares for short haul flights within Europe.  Do BA's short haul planes use cheaper fuel than their long haul planes?

Here are two more charts.  The first shows the price of oil, per barrel over the last two years.

And this second chart shows BA's longhaul fuel surcharge over the same time period, in pounds.

Note that although crude oil prices (loosely linked to jet fuel prices) rise and fall, BA's surcharge never drops, only increases.

And also note the two scales are different - the crude oil price starts at $35, not zero, as the bottom line, greatly exaggerating the apparent increase in oil prices.

The FAA has proposed placing limits on how old and worn an airplane can become and still be allowed to fly commercially.  It is concerned about potential metal fatigue on older planes that have completed many take-off/landing cycles, and would probably define maximum airplane life based on these cycles rather than simple age alone.

Sounding a bit like a new car salesman, the FAA has said the cost of mandatory retirement of heavily used planes wouldn't be as great as the airlines might think, because the forced replacement of older planes would bring with it a savings in maintenance costs on the new planes.  The airlines are, as yet, unconvinced, while Boeing and Airbus are struggling to adopt an approach that doesn't involve making admissions about the finite lives of their planes, while still encouraging the FAA to enact this regulation, which would of course help their sales of new planes.

Don't expect anything anytime soon, though.  The FAA can be glacially slow in passing such regulations, and the underlying motivation for this proposed new rule is probably the Aloha Airlines problem when a large part of the upper fuselage ripped off one of their 737s (although that problem was probably as much due to corrosion as metal fatigue alone).  This 'problem' occurred 18 years ago.

Congratulations to my home airline, Air New Zealand.  They are about to become the only airline with round the world service on their own planes.

Here's an interesting article about 'medical tourism'.  Over 100,000 people traveled to India last year so as to benefit from high quality healthcare at rock bottom prices.  Maybe you should, too?

More on cold remedies :  Reader David writes :

This company’s product has become the #1 seller in Canada over the past few years. I was initially sceptical, but now swear by it. It can be bought over the counter in Canada, and the company (CV Technologies) is currently seeking FDA approval.

He also passes on a very useful tip for frequent travelers to Britain - the IRIS expedited immigration clearance program is back in trial operation and accepting new registrations at  Heathrow and Manchester.  Details here.

This Week's Security Horror Story :  Atlanta Airport was closed for two hours on Wednesday after TSA screeners observed a suspicious bag on an X-ray machine screen, but couldn't then locate it.  The Bomb Squad was called in, and passengers had to wait outside the airport.

A day later, the TSA confessed to the cause of the problem.  There was no bag.  It was a dummy computer generated image automatically inserted into the X-ray machine's video feed as a test to see if the screener was alert.  Due to a software glitch, the 'this is a test' message didn't immediately follow the test image.

The FBI has been massively retasked with fighting the 'war on terror'.  But this is not without a major cost - the lack of resource to apply to other types of crime.

Drug related cases have declined 40% between 2001 and 2005, as have white collar crime prosecutions.  Overall, annual prosecutions declined from 19,000 in 2001 to 14,000 in 2005.  At the same time there's been this massive decline in 'normal' crime related prosecutions, the increase in terror type convictions has been only 252 cases a year.  Details here.

I wrote about the lovely Bentley Continental Flying Spur last week, so here are some car related items.  Do you get frustrated when it seems that every traffic light is red?  Well, don't do what this gentleman did.

Do you have a GPS unit?  If so, don't place your complete trust in the unit, unlike these drivers.

And here's a suggestion that will strike fear in the heart of Bentley, and Bentley drivers.  One does wonder how it is this concept has never yet been enacted.

Here's a surprising possible explanation for the next time your flight is delayed when landing at its destination airport.

And here's a surprising use for an old 747.

Until next week, please enjoy safe travels and do svidaniya (please consider joining me on the Russian cruise)

              David M Rowell aka The Travel Insider

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