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Friday 18 January, 2008  

Good morning

It has been a very busy week since I last wrote, but the fruits of my labors will hopefully be evident to you below.  It is a long newsletter, although only on a very few topics.

But first, it is always nice to be appreciated, and to know that some of the material I offer is indeed helpful.  I received the following note from reader John :

Thank you very much for your article on positive complaints.

I followed your advice this past week with United Airlines.  My only request to them was that they address a situation where their departure displays did not match up with what was really happening at the gate (they showed a one hour delay when in fact the flight was departing on-time).  I did not ask for any compensation as I did not feel any was due to me.

Well, they sent me a polite note thanking me for bringing this to their attention and also forwarded along a $200 travel certificate.  I was floored.

Clearly, positive complaining sometimes can and does work.  Well done, John - and also thank you very much.  He very kindly sent in a $50 donation as well, a much appreciated 'sharing the wealth' of his positive response from United.

I also received, myself, a complaint letter that was almost a textbook example of a great complaint.  Unfortunately the person sending it didn't want their note to appear in public, but I'll share the opening with you, which is a perfect embodiment of my suggestion that you should always start of a complaint positively :

Hi David,

Welcome back from China - it sounds like you had a great trip.  Thanks for all your hard work on the Travel Insider each week.  I read every issue from beginning to end.

After reading today's Insider, I could not help but reach out. ...

Wow - 'I read every issue from beginning to end' and 'thanks for all your hard work'.  Imagine the warm glow those comments gave me.  After such a kind and positive opening, you can be sure I was more than keen to respond in similar positive vein when it came to the actual issue politely raised in the balance of the note.

The letter closed with a similar polished final paragraph :

I would not bother you if this wasn't important, and hope this proves useful.  Please don't hesitate to contact me with any questions or if you need any further information.

What a polite way of encouraging me to take notice and respond.

I should perhaps disclose that the writer is a senior member of an airline's public relations team and is obviously very skilled at her job.  The unnamed airline, which not coincidentally generally enjoys a very positive public image, is very lucky to have her on staff.

Talking about airlines that generally enjoy a very positive public image, pity poor Sir Richard Branson, founder of Virgin Atlantic - he who seems to so ardently pursue the limelight and press headlines wherever it takes him.  He is currently on a mission to China with other UK business leaders, politicians, and their Prime Minister, and the group's flight to China was on his arch competitor airline, BA.

One of the press, traveling with the group, asked him about his experience on BA, and he replied 'For the first time ever when someone asked me to turn and wave as I boarded, I ignored the call and ducked and ran'.

Understandably, Sir Richard does not want a picture of him cheerily boarding a BA plane.

My proposed 'Beta test' China tour, mentioned last week, met with positive interest (thank you), and so I've firmed up the tour, its itinerary, and its price.  There are several elements of good news in all of this - I've managed to increase the inclusions, improve the hotels, and also trim some dollars off my guesstimated price last week.

The tour/cruise (six days and nights on a river cruise down the Yangtze; the balance of time touring before and after the cruise) is now available for rates from $2795 per person share twin, including all taxes, port fees, fuel surcharges, exchange rate adjustments, and other nefarious fine print supplements that sometimes sneak into tour pricing (although, same as always, please note your airfare to/from China is not included).

While it still remains a 'beta test' tour because it includes places and activities I've not done myself before, I'm excited by the itinerary and the experiences it offers us, giving us far more than just a basic tour of Beijing, Shanghai, and rushed three night river cruise.  Please do go have a look at the tour details and itinerary, and please then do choose to come with us, June 18 - July 1 (plus or minus a few days at each end depending on how you may wish to customize your tour experience).  And so :

This Week's Feature Column :  Fourteen Day Grand China Tour and Cruise :  Join me this June on a wonderful Chinese experience, featuring a broad abundance of different experiences and sights in the amazing and varied country of China.

Dinosaur watching :  It was a very good year in 2007, with only two airlines going bankrupt, neither of which were central to most travelers - Kitty Hawk Aircargo (announced 10/15/07) and Maxjet (announced 12/24/07).  This is similar to 2006 (Independence Air and Florida Coastal).

But can you guess how many airlines have gone bankrupt since the end of deregulation, thirty years ago in 1978?  As a hint (albeit possibly misleading), you know that four airlines went bankrupt in the last two years.

The total?  Probably 170 (assuming my source hasn't overlooked any).  This includes 'repeat offenders' such as US Air and Continental.

Some commentators might view this as an indictment against and failure of the deregulation policy.  But there are several positive elements to consider when contemplating this number.  The first is that airline failures tended to be 'hidden' in the previous regulated airline industry, with industry failures being masked under the cover of airline mergers and buyouts.  In other words, airline failures aren't a new development.

The second is that, on the face of it, a market that has had an average of six failures a year for the last thirty years has also clearly had a great number of new startups, indicating that free competitive forces have been much more active than they had been previously - an indicator that is confirmed by the way-below-inflation levels of airfare increases since that time.

On the other hand, such a high failure rate (almost 100%) indicates there's something wrong in the industry, too.  Could it be oligopolistic and anti-competitive pressures from the major incumbents, forcing startups out of business unfairly?  Oh no, absolutely not.

Talking about oligopolistic and anti-competitive pressures, in a classic maneuver perfected by the dinosaurs, Alaska Airlines is responding to startup carrier Virgin America's announcement of new service between Seattle and Los Angeles.  In the real world, when new competitors enter a mature market place, the usual result is commonly less marketshare and sales for every participant.  But, in the airline world, when a new competitor enters a market place, the established dinosaurs suddenly discover previously unknown market demand, and start feverishly adding flights (as well as standard trick number two, discounting their fares way below the levels at which they were previously sold).

And so Alaska Airlines is increasing its flights to Los Angeles from 12 to 15 each weekday, plus adding an extra bonus flight to Orange County and even another flight to San Diego.  And, oh yes, standard trick number three - they'll be giving double miles on Seattle - Los Angeles (and SEA-SFO) flights for most of 2008, too.

Virgin plans to start with three flights a day to Los Angeles.

Fortunately we know that Alaska's actions - adding extra flights, dropping its fares, and doubling its frequent flier mileage credits on these routes only - are totally legal, because never, in the past, has the Dept of Justice, the Dept of Transportation, nor any Court found such actions to be anti-competitive, unfair, or anti-trust.

Which brings us back to 170 bankruptcies in 30 years.  These are presumably due to no more than just a string of random bad luck.

If it isn't bankruptcies, it is failure of a different sort, disguised as merger.  The dinosaurs are busy talking up mergers again.  After getting his board's approval, new Delta CEO Richard Anderson is out dating, seeking to merge with apparently United or Northwest.  He hopes to conclude such an agreement in a blindingly short time, with both Northwest and United falling over themselves in efforts to make neutral sounding comments that in no way reveal what is going on in private, and the other dinosaurs watching enviously from the sidelines and making various noises that mean very little.

As I've said before, mergers have seldom benefitted the airlines who are merging, have never been as smooth as promised, and have even more rarely benefitted the traveling public.  At a time with no clear pressures acting on the industry, apart from an equally felt increase in the price of fuel, and with record passenger loads and generally positive profitability, it seems most peculiar that airlines would be wanting to merge.

On the other hand, there are plenty of opponents to airline mergers.  Most unions are opposed, because they see the dual implications of a merger meaning the elimination of jobs for their members, alongside golden handsake payouts for senior executives, and even those who are not outright opposed can be counted on to be fractious when arguing over seniority issues in the new merged operation.

With an ever reducing number of dinosaurs out there, the effects of a merger will be more profound than when there were more major airlines, and this is likely to attract greater scrutiny by both the DoT and the DoJ.

Lastly, with anxious communities eager not to lose hubs, and aggressive competitors such as Southwest eager to exploit 'route rationalization' that might flow from a merger, combined with whatever restrictions the government may impose on a merger, it is clear that any merged airline would end up being significantly less, in total, than the sum of the two airlines' market shares and route systems prior to merger.

One can only assume that the airlines completely don't know any more positive way to grow or gain market share.

The implications for us all are worrying.  Many of us have major investments in an airline's alliance partners and frequent flier program.  If, for example, United and Delta merge, will the resulting airline - and its combined frequent flier program - become a Star or Skyteam alliance member?  Will independent airline associations outside of the major alliance groupings be preserved or lost?  For example, as an Alaska Airlines frequent flier, I currently enjoy benefits from both NW and DL flights, and if NW and DL merged, there'd probably be no loss to me, but if DL and UA merged, there's very little chance the resulting merged airline would still be friendly with UA due to the major competition between AS and UA on the west coast routes.

And if the two major airlines on a given route now merge, what happens to the competitive pressures keeping airfares low?

Let's also understand a possible application of the Domino theory here.  Ignoring Southwest for a minute, and as you can see in the table to the left, the six major dinosaurs have reasonably similar market shares, from a high of 14.9% (AA) to a low of 6.8% (NW).  This combines the now merged US and HP (America West) operations to give 8.3% to them.

A DL/UA merger would not only reduce the six dinosaurs to five, but it would also create a new airline with slightly less than a 22.5% market share.  Whereas formerly the largest dinosaur (AA) was only 28% larger than the next largest dinosaur and barely twice the size of the smallest, the largest dinosaur would now be 50% larger than its closest competitor and almost three times the size of the smallest.

What do you think the smallest dinosaur (Continental) would do in response to this shift in market forces?  It would go from being 52% of the largest competitor, and number five of six airlines, to being now 35% of the largest competitor, and the smallest of the airlines on the list.  Yup, it might be lonely at the top, but it sure is lonelier still at the bottom, and for sure, CO would feel the need to merge with someone, too.

Add to that the fact that US Airways had formerly expressed an interest in merging with Delta, so we know they're merger-friendly, and the fact that (unless all three airlines - DL, NW and UA attempt to merge together) one of the three current talked about airlines is going to feel like a jilted lover when it fails to merge with DL, and factor in the industry's general predilection for copying each other, no matter what the action being copied; and it seems inevitable that if two airlines merge, at least two more will merge as well, and then, all of a sudden, we're down from six dinosaurs to four.  Or three.  Or - how few airlines could we end up with?

So, here we are with more people flying than ever before, higher passenger loads than ever before, and generally profitable airlines, and the future seems to be that instead of more airlines rushing to the overflowing feeding trough, we might end up with fewer and fewer airlines, giving us fewer and fewer choices, and fewer and fewer special deals.

There's another more subtle thing to worry about here as well.  If the six airlines become four 'super-airlines', how much harder will it be for new entrants to squeeze into the market?  The new super-airlines will have nearly impregnable route systems and frequent flier plans, making it impossible for new startups to slip through the cracks and establish toe-holds in markets and grow forward from there.

And these, of course, are the reasons why the airlines wish to merge.  Perhaps, indeed, from the cold hearted accounting perspective of 'shareholder value' merging is the best way for an airline to grow.

The airlines long ago abandoned any pretense of developing win-win situations for themselves and their customers.  In a manner reasonably at odds with one of the underlying tenets of western business culture, the airlines play an adversarial zero-sum game - they profit primarily at our expense.

While some pundits seem pleased to have a new topic to volunteer opinions on and something new to write about, the grim reality for us as fliers is that mergers will do us no good whatsoever.

This Week's Security Horror Story :  The federal government seems to be in a confrontation with some of the states, and neither side is willing to budge.  This matters to us, because we stand to be the victims in this confrontation.

The issue relates to acceptable ID to show when flying.  The federal government is insisting that new drivers licenses be up to their 'Real ID' requirements, while seventeen states, doubtless concerned at the negative impacts this might have on their illegal immigrant and terrorist populations, are refusing to adopt the federal standards.  If you're in one of these states, there's a possibility you'll find your driver's license no longer qualifies as acceptable ID in the foreseeable future, requiring you to perhaps use your passport instead (if you have one), or enjoy hassles while attempting to travel without official ID.

On the list of stupid things to do with ID, I was standing in line behind a passenger who was checking in with a driver's license that had expired about a month ago.  Question - why is a recently expired driver's license not acceptable as ID?  Is the person no longer the same person?  Does the photo and description no longer match?

Sure, an expired license no longer entitles you to drive a car.  But does it make you also a non-person?  Apparently so.

I'm not quite sure how to summarize this situation, other than to say that political correctness is running amok in Alberta and desperately needs reining in.

And while I'm cursing Microsoft for their latest 'enhancement' to Outlook (which has now broken its spam filtering, none of which now gets automatically redirected into my junk mail), here's this scary story of how Microsoft wants to patent a monitoring system that will detect when you, a computer user, get upset or angry, and how the Microsoft program will then automatically intervene and 'offer and provide assistance accordingly'.  Being as how most of my frustrations with Microsoft relate to when it tries to be helpful, I can't see this as being very positive.  But, most of all, who among us likes the idea of our computers monitoring our thoughts and feelings, as well as our keystrokes?  Big Brother is getting closer and closer, all the time.

Here are a couple of interesting tapes of Air Traffic Control at work.  The first shows everything going very smoothly on Concorde's last departure from JFK.  The second shows just about everything going terribly awry, at the same airport.

My biggest impression, from listening to this second tape, was to wonder why, with all the billions of dollars in automation and flight management systems, we seem to end up with an uncoordinated bunch of pilots pushing and shoving their way in line, and a controller who seems to be struggling to keep up with what is happening.  Isn't there a better way?

I mentioned the death of New Zealand icon and hero, and first man to climb Mt Everest, Sir Edmund Hillary, last week.  Two follow-ups for this week. First, Nepal is planning to rename the airport that serves as gateway to Mt Everest after Sir Ed and the sherpa who was second to the top, Tenzing Norgay.

The airport, currently known as Lukla airport, is located about 85 miles northeast of Kathmandu and is one of the busiest in the country during the spring and fall trekking and mountaineering season.  Some 20 flights a day, carrying people and equipment, land on the sloping airstrip in the foothills of Everest, showing that climbing Everest, these days, is big business.  The renaming is more than appropriate, because it was funding from Sir Ed's Himalayan Trust that allowed the airport to be built, back in 1964.

And talking about naming things after Sir Edmund Hillary, here's a rather delicious 'porky pie' (Cockney rhyming slang for 'lie') told by Mrs Clinton and offered also by her husband.  Mrs Clinton's first name is, of course, Hillary, and both she and Bill have claimed that she was named in honor of Sir Edmund.

A nice story.  But, alas, untrue.  In 1947, the time that Hillary's mum was allegedly making this decision, after, it is said, reading about Sir Ed, he was completely unknown outside of New Zealand, and of no note within New Zealand.  This self serving myth is very gently - but thoroughly - debunked at Snopes, with the debunker giving Hillary the benefit of the doubt and saying it might be her mother lying to her, not Hillary lying to us.

But, if enough of you believe this, my guess is we'll be having a woman as our next President.

Until next week, please enjoy safe travels

              David M Rowell aka The Travel Insider

(This is the traditional Chinese depiction of 'David' - getting custom carved name stone stamps make a fun and inexpensive souvenir or gift when visiting China - be sure to check out our June tour to China and get your own name stone stamp on our tour.)

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