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Friday 11 May, 2007  

Good morning

The dog ate my homework.  Or, to be more specific, Frontpage crashed and lost the week's feature article.  It has subsequently been rewritten, albeit with a bit of angst on my part.

On the good news front, our New Year in Vienna cruise suddenly got a whole lot better today.

In addition to the other special bonuses and discounts, and the generally neat idea of spending 31 Dec and 1 Jan in Vienna with fellow Travel Insider readers as part of a river cruise, Amadeus are offering a free partner airfare from New York or Boston (with addons for travel starting elsewhere in the country).  This could save you $500, maybe more.

And if you decide to extend the cruise on for its second week, going all the way to Amsterdam, you'll get free roundtrip air for both of you (again, from NYC/BOS, addons from other cities).  That's a great deal on a great cruise, and of course, everyone who has already signed up is also eligible for this new incentive.

One of the long standing and generous friends of The Travel Insider is Scott McMurren.  You might already know him as the publisher of the free weekly newsletter on Alaska, the Alaska Travelgram (details and sign up here), as a radio personality in Alaska, and as the man behind the Great Alaskan TourSaver, a must have discount coupon book for travelers to Alaska.

He's now expanding down into the lower 48 states as the next stage in his probable plan for world domination, and has come up with both a Seattle travel newsletter, and a Seattle TourSaver book, modeled on the successful concept of his Alaskan TourSaver.

Frankly, I wish I'd been sensible enough to do what he is doing myself, but now he is here, there's little opportunity for me to copy him.  So, instead, I've taken a careful look at his Seattle discount book and offer the results as :

This Week's Feature Column :  The Seattle TourSaver Discount Coupon Book :  With 42 different 'two for one' or 'completely free' offerings, this is a substantial collection of travel savings coupons, making it a must have for people planning vacation time in Seattle this year.

Dinosaur watching :  JetBlue has been a very different type of airline right from the day it first started flying.  They brought about a renaissance in flying, showing their passengers that it was possible to offer low fares, comfortable amenities, and friendly service.  Simple fare structures, never overbooking a flight (and therefore never having to bump people off a flight) and reliable flight operations added to the airline's appeal, and as a result, it grew both quickly and profitably.

Until a little over a year ago, when it faltered and stopped making consistent quarterly and annual profits.  The naysayers pounced on JetBlue, saying their earlier success was a transient exception to the unavoidable underlying rules of the airline business, and suggested JetBlue's initial success was a result of having new planes still under warranty (and therefore greatly reduced maintenance costs) and/or having a new staff with no long term seniority and higher pay rates.

Both criticisms had some truth to them, but the reason for JetBlue's dip into lossmaking territory was more due to growing too fast and in some ill thought out directions.  Since then the airline has been stumbling its way back into marginal profitability.  And then there was the New York nightmare on 14 February when a JetBlue flight that was stuck in the snowstorm on the tarmac for ten hours became an icon of all that was wrong with the airlines and their poor treatment of their customers.

As it happened, there were many other planes, operated by other airlines, in similar straits that night, but only the JetBlue one was featured in the media, and in further fairness, JetBlue volunteered fair compensation to the trapped passengers almost before they were off the plane.

JetBlue subsequently announced a $22 million loss for its first quarter this year, which it blamed in part on the New York weather issues.  Being based at JFK, the weather in New York probably had a bigger impact on JetBlue than on any other airline.

Why am I recounting this to you now?  Because on Thursday morning this week, startling news came from JetBlue.  Their founder, CEO, Board Chairman and main company icon, David Neeleman, was replaced by current President, Dave Barger, effective immediately.  Neeleman instead moved sideways to the curious position of 'non-executive' Chairman of the Board, whatever that might mean (it probably means he can't do much more than chair board meetings any more and has no involvement in the day to day management of the company).

In case anyone was in any doubt about what happened, it was revealed that this happened at the instigation of the rest of JetBlue's board.  Some industry pundits are now describing the event as Neeleman being summarily ousted by the board, and there's very little to contradict that view.  For example, there was no mention of Neeleman's pending move either in SEC filings or at the Annual General Meeting of Shareholders, held in New York just the previous day (Wednesday).

How wonderful.  Here's a board of directors who aren't passively allowing their CEO and Chairman to mangle things up.  Instead, they've made Neeleman accountable for the mistakes and missteps of the past eighteen months or so, and have acted pro-actively, decisively, and fairly publicly to replace him.

Neeleman has generally been regarded as an excellent ideas person and good strategic visionary who added great value in the startup phase of JetBlue, but his ongoing management abilities of a more stable enterprise are less clear; indeed he is a self confessed and unmedicated ADD sufferer; he says it gives him an edge, which perhaps it does when he needs to juggle lots of concepts around at once, but it may be less helpful when he needs to manage ongoing and more routine issues carefully.

Certainly there's an impressive monument to his successes to date in the form of the large and generally successful airline JetBlue is today, and his two previous startups - Morris Air (subsequently sold to Southwest) and Canada's WestJet are also clear testimony to his ability to get an airline through its initial startup phase.  He is generally well regarded, but perhaps the time has indeed come for him to move on.

Let's hope Dave Barger does as good a job in moving JetBlue forward to its next level of success.  Clearly the market as a whole approved of this measure - JetBlue's share price leapt up 5.3% on the news.

I wrote at length last week about the uncertain future of the major US airlines, and one of my themes was the ill advisedness of US carriers neglecting their home domestic markets while trying to succeed on international routes.  In doing this, they run the risk of copying the Pan Am problem - great international routes, but no domestic route network to feed passengers into their international services, or to transport arriving international passengers on to other places in the US.

Let's face it, if you weren't an, eg, UA Mileage Plus frequent flier domestically, there's no compelling reason to choose UA for your international travels is there - especially when some of the international airlines offer such better service.

Further indications of the abandonment of US routes in favor of international routes can be seen in the news this week.  First, the good news.  The global airline industry shows no sign of reducing its activities, with a 5% increase in the number of flights scheduled for May 2007 compared with the same month last year. According to the latest statistics from OAG, a total of 2.51 million flights are scheduled this month, topping the previous industry high of 2.49 million reported for August 2006.

It is worth noting that even on the world stage, low cost carriers are advancing.  Within this global figure of all scheduled passenger flight operations, the low-cost sector shows a 22 percent increase of over 70,000 more flights year over year and a 26 percent rise in the number of seats available, representing an additional 12 million low cost seats.  So the dinosaurs will be coming under increasing pressure internationally, just as they already are domestically.

One source of that pressure is becoming increasingly forthcoming about its future international plans.  Southwest's CEO Gary Kelly said at a conference earlier this week that by 2009, his airline will have systems in place to accommodate international flying.  The airline expects to expand its current code-sharing agreement with privately held ATA Airlines for international flights, and will look for additional partners to fly to Europe and Asia.

Kelly said more liberal 'open skies' regulations should provide Southwest with additional international expansion opportunities. Down the road, the airline could even 'put our own metal' on foreign routes, he said, although that's not a priority at present.

Unlike the dinosaurs, Southwest isn't losing sight of its home markets.  It plans to continue to grow its US route system at a rate of about 8% a year (which would mean doubling every nine years - no small accomplishment when you're already the largest carrier of US passengers).

And in hinting at some major changes to the Southwest operational model, Kelly said they would continue to raise fares where that makes sense (whatever that means).  And in further confusing comments, he said 'there is a very clear need for increased revenue' which might come in the form of adding paid services such as onboard Internet.

But, contradictorily, he also said Southwest has no plans to nickel and dime its passengers.  Kelly acknowledged that Southwest's customers expect good service as well as low fares, then intriguingly said that Southwest plans to position itself slightly more upmarket, seeking to grow its share of both business and vacation travelers.

Southwest raising its prices, adding extra fees, and going upmarket?  Who'd have thought that!  One thing is for sure, 'going upmarket' and 'good service' are almost certainly code words for providing preassigned seating (as well as who knows what else).

Meanwhile, Southwest's hometown competitor, American Airlines, said it plans to keep to a low-to-negative growth strategy for the foreseeable future, and plans to reduce its capacity by 2% for the full year 2007 compared to 2006.  And Delta proudly said it expected to cut its domestic capacity over the next several years while hoping to grow internationally.  Delta's domestic flights are already massively down on their pre-bankruptcy levels (a 7.3% drop just in the last 12 months).

Highlighting the divide between the dinosaurs and the low cost carriers, JetBlue continues to grow, although who knows - perhaps a statement by David Neeleman on Wednesday may now need to be reevaluated by JetBlue's new CEO.  But assuming no change, Neeleman said that JetBlue is considering expanding into the west coast because west coast fares are now higher than east coast fares.

Did Delta's creditors do the right thing?  US Airways offered to buy Delta for $10.2 billion late last year.  Now that Delta has emerged out of bankruptcy, the true value of the 'new' Delta can be seen in its stock market valuation.  On Thursday's close, DL was trading at $19.70, and with approximately 400 million shares outstanding, this translates to a market value of $7.9 billion.  Most analysts are projecting DL's share price will drop over the next some months, and are giving 'Sell' recommendations.  Target prices in the range of $14 - $17 are being used by some analysts - an average price of $15.50 would suggest a market valuation of $6.2 billion.

So the same creditors who ended up in May 2007 with shares in Delta currently worth $7.9 billion, and probably steadily dropping in value, could have received shares worth $10.2 billion some months earlier if they'd accepted the US Airways offer.

The creditors' loss is someone else's gain.  Although Delta's CEO foreswore any personal enrichment when DL emerged from bankruptcy, the same is not the case for many of DL's other senior level managers.  They received shares worth somewhere between $250 million and $400 million in the new Delta, but would have received nothing (and instead may have faced losing their jobs) if bought out by US Airways.

But of course such considerations are unlikely to have influenced their thinking when they recommended to their creditors that the US Airways offer should be rejected, based on their estimate that their own plan would give as much value to the creditors as a US Airways buyout.

You do have to wonder at the competency of these people, who have clearly misjudged the value of their company by more than 20% already (they claimed it would be worth $10 billion).  What a shame the JetBlue board doesn't run Delta as well - perhaps if they did there'd be some wholesale firings going on today.

There is one thing Delta's board can do.  They are currently choosing a new CEO. Remembering that their duty is to protect their shareholders, they should refuse to appoint any incumbent Delta manager to the position, choosing instead to bring someone in from outside the company.

It happened again.  Nearly 200 passengers were stuck on an American Airlines 757 for more than eight hours in Midland, TX on 24 April.  The flight was diverted to Midland due to bad weather.

Two unrelated news items this week :  Firstly, Emirates and Airbus reached a confidential settlement that compensates Emirates for the delays in receiving their 43 A-380 super-jumbo planes on order.  Secondly, Emirates announced a new order for four more A-380s.

Now you might be thinking that these two announcements were linked in some way.  You might even think that such a massively vital customer to Airbus as Emirates could just simply say 'give us four more for free' and have Airbus agree with relief at being let off the hook so lightly.

But you'd apparently be wrong, because Emirates said the new order wasn't linked to the compensation agreement.

Here's an interesting survey on one's relationship to technology.  In case you wonder, I was categorized as an omnivore (is that a good thing, I wonder?).

This Week's Security Horror Story :  There's been a lot of attention given to tightening up security at airports so that airport workers must be checked through security, the same as passengers and pilots.  But there will still be one category of people exempt from any scrutiny at all - TSA employees.  You've probably seen, as have I, TSA workers walk through metal detectors, setting off the alarm as they do so, not slowing in their stride but simply waving a friendly wave to the other TSA staff and being allowed to pass through unhindered.

I hear from an industry insider that there is a huge vulnerability in the TSA - many employees are not handing back their badges, passes, and other forms of identification when they resign.  It has been suggested there may be as many as 3,000 or more of such items out there; and apparently even workers who are fired aren't compelled to return their ID.

If you're wondering when the promised new detector machines that would replace the current bans and rules on taking liquids onto planes will be put into general use, you'll have to be patient a bit longer.

As this article explains, the TSA are saying variously that the ban will remain 'for the foreseeable future' and/or 'for some time'.  How surprising.

Here's an interesting article.  It opens powerfully with the writer saying he is writing the article at 36,000 ft, on a nonstop Delta flight between Boston and Seattle.  The writer goes on to say that the route isn't competitive.  Sounds good, doesn't it.  But if only it were true.

As far as I can tell from Delta's website, it doesn't offer any nonstop flights to Seattle.  Alaska Airlines and JetBlue do operate nonstop flights, but Delta doesn't.  I wonder how the writer thought he was on a nonstop flight to Seattle, and where he actually ended up landing - it seems to me that's by far a more interesting story than the one he did write.

Boxcutters were discovered on a United flight about to depart from Denver earlier this week, causing it to return to the terminal, the passengers to be rescreened and the plane searched.

TSA spokesman Darin Kayser seemed unperturbed.  'Things like this do occasionally happen' he said.

In case you don't notice this (and I bet you won't), May 12 - 20 is the 24th annual National Tourism Week.  This year's theme is 'Travel and Tourism :  America's Front Door'.  Isn't that nice.

An interesting example of our country's approach to tourism promotion and development was provided in Dubai last week.  Promoters from 64 countries were present to encourage big spending wealthy Arab tourists to visit their countries at what is the Middle East's largest tourism convention.

But not a single tourism promoter from the US turned up.  Instead, the US government sent officials from the Department of Homeland Security to demonstrate its mandatory fingerprinting of foreign visitors.  That's sure likely to encourage wealthy visitors to come and spend their money in our country, isn't it.

Is this you?  A new survey shows that 56% of US travelers did not know they would need a passport to travel outside the USA by air.  22% were not sure of the requirements and 7% said no returning citizen needed a passport.

The correct answer is that all people entering the US by air now need a passport, no matter what country they are coming from.  And, be warned - the Passport Office says it currently averages 10 to 12 weeks to obtain a passport, and because this is an average, not a promised lead time, it is sometimes longer than this.

Lastly this week, there was an unusual form of blockage on a major road going through Mumbai (Bombay) in India.

Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

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