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28 April, 2006  

Good morning

It is now 23 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.

It is also 12 days since the issue was brought to the personal attention of a 'very senior' executive at the airline.

The obvious conclusion from their continued silence?  They absolutely don't care.

Travel Insider Cruise News :  Our Christmas Markets cruise is essentially now sold out, but there is an opportunity for one single lady.  We have a single lady confirmed on the cruise who is looking for someone to share an A category cabin with her.

If you are (or know of) a 'mature' and non-smoking lady who'd love the chance to enjoy this cruise without having to pay a single supplement, then please let me know and I'll introduce you to the other lady.

Our Russian River cruise this July is still available to accept a few more people, and is now definitely being extended to include an optional overnight sleeper train journey back to Moscow after the cruise ends in St Petersburg.  I'll probably be repeating this tour in 2007, but why force yourself to wait?

Although it is only 2.5 months before the cruise departs Moscow this year, it is really simple for you to join and doesn't require a lot of arrangements or planning.  I'll take care of the visa arrangements (and even pay for them) and Amadeus Waterways are offering a $250 discount off the cruise price.

Let me know if you have any questions about this great opportunity to visit a country that can be otherwise challenging for travelers to enjoy without the type of all inclusive service provided by this river cruise.

Still talking about travel, I continue to occasionally add to my series on how best to travel to my home country of New Zealand (and continued thanks to Qantas for their help in research for this series).  This week sees a fifth article :

This Week's Feature Column :  Self-Drive Touring in New Zealand :  The best way for you to see and enjoy New Zealand is to hire a car and drive yourself. This article tells you all you need to know to do this successfully.

Dinosaur watching :  More first quarter financial results have come in, with disappointments for both JetBlue and AirTran.

JetBlue announced a loss of $32 million for the quarter, compared to income of $6 million in Q1 2005.  This loss was expected, and JetBlue says it anticipates net profits in the remaining three quarters, but an overall net loss for the year.

Of course the price of jet fuel was mentioned prominently as a factor in the poor result, but it is interesting to see - at a time when dinosaurs are all trimming their operating costs - JetBlue had a massive 6.7% increase in its operating cost per available seat mile (CASM), excluding the cost of jet fuel, as compared to Q1 2005.  By comparison, its increase in fares received - the 'yield' per ASM was only 3.3%.   Increasing costs are bad; increasing costs without matching increasing revenues are terrible.

Much worse, if you include the increase in jet fuel costs (which of course you must), the CASM increased by 16.3%.  A 16.3% increase in costs with only a 3.3% increase in matching revenues is a catastrophic situation which demands urgent correction.

The airline is now scrambling to respond to its weakened financial position, and as part of a 'Return to Profitability' plan has already announced the deferral of some new A320 deliveries, and the possible sale of 2 - 5 of their existing A320 planes.

It is certainly possible that the driving need to continue expanding to meet the delivery schedule of new planes - both the A320s and the smaller Embraer E190s - may have caused some poor decisions about the new routes JetBlue has been opening but not profiting from, and a period of slower growth could allow the airline to catch its breath and do a better job of managing its future expansion.

JetBlue will also be cutting back on its trans-continental flights - many of these have not been financially successful.

It is also true that JetBlue will need to become more protective of its operating cost advantage or else it too may become a dinosaur, at least as regards its operating costs.  Meanwhile, there are worrying (and very dinosaur like) sounds coming out of JetBlue about how they will be shifting their focus from filling their planes to maximizing the income they receive from each ticket sold.

In talking about his airline's optimistic outlook for the future, CEO David Neeleman said this is based in part on a newfound reliance on yield management to sell more fares in the middle range. Neeleman called it part of a 'new mindset' for the airline, in which it is more focused on increasing its average fare than filling as many seats as possible.

In saying this, Neeleman and JetBlue are walking into a trap that has snared many dinosaurs in the past.  The two strategies - increasing average fares and/or selling as many seats as possible - are often viewed as exclusionary, but they need not be.  Certainly, it makes sense to charge the most you fairly can per ticket sold, but there also comes a point where an airline sees itself looking at flights that are still significantly unsold, and their choice then is either to not sell those remaining seats at all, or to accept lower fares to fill the unsold seats.  The better choice is the latter choice, but many times airlines fail to appreciate this.

Airlines can sometimes get fixated on measures such as average value of fare and find themselves in a situation where they'd rather sell, say, 100 seats on a 150 seater plane with an average price of $100 instead of 120 seats with an average price of $90.  The latter scenario brings in 8% more revenue overall, and as long as the variable cost per extra passenger traveled is below $40, the airline makes more profit by selling 120 tickets at $90.  But sometimes blinkered bean-counters can't see beyond the average fare value, and so lose out on extra revenue and miss a boost to their ultimate bottom line due to an insistence on managing only one of the many variables involved.

Bad news also from another low-cost carrier success story, AirTran.  They reported a $4.6 million loss for the quarter, but this was still better than their first quarter result last year, which saw an $8 million loss.

Delta's last minute agreement with its pilots appears headed towards likely ratification by the pilots - no big surprise there.  Union leaders voted 12-1 in favor of the agreement last Friday; the union members have until late May to ratify the proposal.

I expressed dubious surprise last week at Delta's plan to ask its staff to clean its planes for free.  One Delta employee wrote in to proudly tell me he was volunteering to do this, and he knew of many others who were also volunteering.  Might I have been too cynical for once?

Apparently I wasn't the only person expressing doubt because Delta issued a clarification to say that this initiative was not a cost cutting measure and no night cleaning crews would be eliminated.  So, apparently, getting your staff to do extra work for free does not reduce your costs?

I'm glad Delta clarified that misunderstanding.

An airline that has no worries about profitability is Emirates Airlines, which a couple of days ago announced its 18th consecutive year of profitability.  Although its net profit was up on the previous year, at US$674 million compared to US$637 million the year before, its percentage profit dropped slightly.

Emirates is one of the world's fastest growing airlines, and last year saw a 16% increase in passenger numbers, with the airline boarding 14.5 million passengers, compared to 12.5 million the previous year.

Jet fuel costs had an impact, even on an airline based in Dubai.  Jet fuel represented 27% of the carrier's costs last year, up from 13% five years ago.  But notwithstanding ongoing costs in jetfuel, the airline predicts an even larger profit for the current year.

No word on what impact increasing jetfuel costs might have on startup international airline MAXjet, but while their competitors have been adding to their fuel surcharges, MAXjet announced this week a $1000 roundtrip fare on its all-business class planes between New York or Washington and London.  Not only are there no fuel surcharges to be added to this fare, but neither are there taxes.  Everything is included in the $1000, making it an amazing deal and not much more than coach class on a regular airline.

One thing seems fairly certain - MAXjet can't be making any profit with these low fares.  Enjoy them while you can.

There is an interesting article in the NY Times about the evolution of frequent flier programs.  A couple of particularly interesting points :

  • It is estimated there are about 14 trillion unredeemed miles outstanding at present.  Even if each of those miles is only worth a cent, the $140 billion value exceeds that of all US currency currently in circulation.

  • In the 1990s, a study suggested that business travelers would pay a $170 premium to fly a 1000 mile journey on the airline which hosted their main frequent flier program.

The article's conclusion is also interesting - the success of frequent flier programs is leading to their downfall.

Another interesting NY Times article was Chris Elliott's story about Airbus offering standing room only 'seating' as an option on its planes.  Equally interesting was the Airbus rebuttal, referring to the suggestion as crap - an unusually vehement denial and almost methinks they doth protest too much.

Chris Elliott maintains he has sources who contradict the official Airbus denial.  I guess we'll have to wait and see.

Five years ago author Charles McCool published a book 'Winning the Airfare Game'.  It has remained in print ever since, and I have a copy myself.

While some parts of the book haven't aged gracefully, and there are a few factual errors plus some matters of opinion I disagree with, all in all it is a meaty compilation of various ways to shop smart when buying travel.  His publisher has just announced a special price to mark the book's five year anniversary - the next 555 copies of the book can be purchased for only $5.55 (regular price $13.95) from their lowerfares.com website.

$5.55 is much less than what most travel agents charge as a fee these days - not that McCool advocates avoiding travel agents.  Indeed, ASTA (strangely McCool speaks highly of ASTA while ignoring the much more effective ARTA organization) has just released a survey showing what travel agents charge as fees.

But - oooops.  If you want to know the results of their survey, you'll have to pay $25 if you belong to ASTA, and $350 if you don't.  From ASTA's teaser, I do know, for free, that the average travel agent now charges $27.30 to issue an airline ticket, and 96.6% of ASTA agencies charge fees.  These days, service fees represent about 15% of a typical agency's income.

If you've been thinking about becoming a travel agent, did you know that as well as traditional working in a travel agency type jobs, there are also opportunities to be a self-employed travel agent, working for yourself, and from home?  One such company that specializes in training and supporting home based travel agents is Global Travel International (they are a member of ARTA).

Unlike some companies that promise unrealistic nonsense but provide nothing to would-be novice travel agents, GTI has a comprehensive training program to help people become travel agents.  More than 35,000 agents are currently affiliated with the company.

But note the company is also proudly reporting 'over $125 million in annual revenue'.  Sounds a lot, but this translates to a mere $3600 per agent - don't expect to make your fortune with such a concept.

Someone who might be looking at getting into the retail travel business - but probably not with a GTI affiliation - is Google.  Russell Shaw, a columnist and blogger at ZDNet saw a classified ad from Google on a job-listing site, looking for a 'Senior Account Executive, Travel'.

Google denies they are interested in setting up a travel portal but it seems inevitable, because travel is one of the biggest search categories.  Yahoo already has a travel portal (FareChase) so it is not out of the question that Google will eventually get into travel.

Talking about Google, I was reading an article about Amazon this week.  What really struck me was that for the last year, they spent an enormous $451 million in technology and content development, leaving 'only' $359 million for profit.  The most amazing part of this was that in 2005, the $451 million investment was a 59.4% increase on the previous year, while their net profit suffered a 38.9% drop.

Bravo to Amazon for not thinking they can save their way into increased profit, and bravissimo to CEO Jeff Bezos when he says not all the company's important decisions can be made in a math-based way. And though Amazon uses data, analysis and math to craft strategy, he says sometimes 'the prime ingredient in these decisions is judgment.'

'Any institution unwilling to endure controversy must limit itself to decisions of the first type,' he wrote of math-based decisions. 'In our view, doing so would not only limit controversy ... it would also significantly limit innovation and long-term value creation.'  Airlines - please take note.

My lonely crusade about the dangers of cell phone use is no longer feeling quite so lonely, with a slow but certain trickle of studies now reporting various unpleasant issues associated with cell phone use.  The most recent one, from Australia, shows that mobile phone use harms the brain's functioning, and the effects are cumulative.

However, the professor conducting the study wasn't too worried by it all.  'It's such a part of modern society ... and we haven't established that there's negative health consequences. That's a different type of study.' he said.  'We're just showing that the radiation is actually active on the brain.  But the impairment is small. The convenience and the way that we communicate now these days outweighs that effect.'

Speak for yourself, Professor Stough.  Maybe you have brain cells to burn, but these days I need all the remaining ones I still have.

Product recall :  I wrote about the Evac-U8 smoke hood last October.  It seemed like a worthwhile device that could save a life in a plane or other fire.  All Evac-U8 units sold between September 2000 and March 2006 have now been recalled due to a problem with CO buildup.  Details at the top of my review.

This Week's Security Horror Story :  Fire departments are using Homeland Security grants to buy gym equipment, sponsor puppet and clown shows, and turn first responders into fitness trainers.  This article reports on these and other inappropriate uses for the Homeland Security Department's billions.

Does that make you feel safer?  Does that make you feel better about the taxes you sent to Uncle Sam last week?

The TSA is (again) advising that private jets may be targeted by Muslim terrorists.

Art mimics real life :  The Iraqi actor (resident in Britain since 1995) who plays a hijacker in a new film about 9/11 has been denied entry into the US for the movie's premiere, he told a newspaper last Friday.  Like almost all adult male Iraqis, he had earlier served in the Iraqi army.  He escaped in 1993, and entered Britain seeking asylum in 1995, but the US feels him too potentially dangerous to allow him here.

And here's an actor who perhaps should not be allowed to return to the US.  But goodness only knows what type of damage he might not cause at Heathrow if he were to be refused permission to return back home.

Lastly, this week, here's the correct link in an item featured last week :

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

Until next week, please enjoy safe travels, with or without a GPS

              David M Rowell aka The Travel Insider

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