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Friday 29 February, 2008  

Good morning

It's a leap year, and today's the leap day.  It was also my grandfather's birthday - poor soul, he died a very young man, having only recently celebrated his 22nd birthday when he passed away, albeit some 89 years after he was born.

It is also the day women are traditionally allowed to propose to men.  Egads.  I'll be answering all calls - just in case.

The dollar continues to weaken, and earlier this week passed through a watershed point, with the Euro now costing over $1.50 to buy (it closed at $1.52 on Thursday).  It is sure hard to remember the 'good old days', a mere two years ago, when it cost 'only' $1.20, and a bit further back, when it cost under $1.10.

The Euro has gained almost 15% in the last year and almost 30% in the last two years.  This sure makes a massive increase in the cost of European touring.

Or does it?

Yes, it does, if you're going to Europe and doing your own thing, paying for everything in Euros.  But if you're buying travel items in US currency, you might be benefitting from the tour operator having hedged and bought currency for the year at a lower rate.  And the more you can buy in US denominated values rather than in floating Euros, the better off you might be.

The best example of this is a river cruise, where almost everything is included - accommodation, touring, meals and even some drinks.  For example, compare the cost of our popular Christmas Markets cruise.  In 2006, it was $1499 for the entry level 'E' cabin.  In 2007, it was $1599.  And this year it will be $1699.  This year's price increase was a mere 6.3%, and the two year price increase was 13.3%.  In both cases, these increases are less than half the currency movement (and that's without considering normal ordinary inflation, increased fuel prices, etc etc).  The value of the Christmas market (or any other Amadeus) cruise is shifting from being good to being extraordinary.

To work the numbers, if we say the $1499 base price in 2006 should be increased by 30% for the currency movements and then if we add another 10% for general inflation and fuel related increases, this year's lowest price should be $2144.  So, with the actual price being only $1699, it is clear that you're getting a tremendous bargain.

With that in mind, there's an extraordinary value cruise that I perhaps haven't made clearly enough known to you - our May Travel Insider Cruise in the South of France, with optional extensions before the cruise in Barcelona and after the cruise in Paris (I'm doing both).

This is an extraordinary value because it is offered with a 15% discount off the published price, plus it has exclusive Travel Insider extras that no-one else will get.  Mid May is a gorgeous time of year, and Provence is a gorgeous place to visit; so why not consider joining us on this wonderful value and lovely cruise.

The ship is almost completely sold out - only ten cabins remain on this sailing.  Now you might wonder how is it possible for us to discount an almost full cruise by a massive 15% - there's an interesting and amusing explanation, which I'll tell you over a glass of French wine, on board, if you're interested.  Bottom line - you can benefit hugely from this quirky circumstance.

I'm continuing my ongoing review of Bluetooth headsets.  We've come a long way since the early Bluetooth headsets of 5+ years ago - ungainly devices costing $150 - $200 and selectively working on only some but not all Bluetooth equipped phones.

But I still find most headsets disappoint, even from name brand companies such as Motorola.  Here's a namebrand headset for this week's review :

This Week's Feature Column :  The Plantronics Discovery 650E Bluetooth Headset :  This is the tenth Bluetooth headset I've tested.  Is it a hero or a zero?  Does it displace the Jabra BT125 as the current value champion?  What about its special new features - are they of any use to 'normal' people?  Read the review to find out more.

Dinosaur watching :  Latest figures for international air travel show a 4.3% increase in passengers worldwide for Jan 08 compared to Jan 07.  Most businesses would be delighted, in these currently difficult times, to report a 4.3% growth in customers, but the airlines are calling this a very disappointing result, because the 4.3% growth is down on the 6.7% growth in December and the average growth during 2007 of just over 7%.

Is the airlines' glass half-full or half-empty?

For the North American airlines, international passenger numbers were up 5% while domestic passenger numbers were down almost 4%.  Perhaps the drop in passenger numbers in the US might be due to what is euphemistically termed 'our slowing economy' or perhaps - with airfares increasing happening at least once a month - passengers are finding air travel becoming just too expensive and unpleasant, or perhaps there's some other factor at work.

Now, if your business is showing a significant drop at a time when other related businesses are growing, and after you'd been heavily increasing the price of your product and cutting back on its quality, what would you do if you were a business manager?  Well, if you were an airline manager, apparently you'd increase your prices still further.  And so, notwithstanding half a dozen or more price rises in as many months, the airlines are slapping yet another $10 onto their fares.

I guess the airlines' ultimate objective is to reduce the numbers of their competitors, their flights and their passengers down to as close to zero as possible, while increasing the fare that the one remaining single passenger pays up to as close to infinity as possible.  And with their continued cutbacks in flights, and continued increases in fares, they're heading in the right direction.

But, when it comes to reducing the number of competitors, the big wave of airline mergers has yet to commence.  That's not to say that it won't, but the airlines are moving more slowly than they'd earlier promised, with everyone blaming the pilots, and even the pilots themselves somewhat proudly accepting that culpability.

It all revolves around seniority, it seems.  Astonishingly, for a job that the pilots proclaim as requiring such highly developed and highly valued skills as only they can provide if paid enormous salaries, promotion is based not so much on demonstrated ability, proven success and meeting specific objectives and targets. as it is based on something that comes straight out of a nineteenth century factory union's demands - simple seniority.  Advancement (and money) is based largely on how long you've been in the job, rather than exclusively on how well you do the job.

Strangely, both the Delta and the Northwest pilots fear they'll be the losers if the two airlines merge; with each pilot group fearing that the other pilot group will somehow get priority access to more senior slots.  There are various arcane and convoluted rationales for these fears, but it does seem to us outsiders as extraordinary that both sets of pilots worry they'll be the losers.

If both will be losers, surely it only takes a bit of imagination to flip that around so both become winners?  Or if one side is unfairly favored over the other, surely it is possible to identify the elements of unfair favoritism and adjust them more fairly?

Apparently none of this is as simple as it would seem to you and me.

The airlines have come up with a new excuse for needing to merge.  Current excuses have been things such as fuel prices, excess capacity, and the fact that the other airlines are going to do it so they need to too.  The latest excuse is that the new 'Open Skies' agreement with the EU will expose the US carriers to increased competition in what has become their main profitable area - international travel, thereby forcing the US carriers to merge to meet this new threat.

Here's an example of this line of reasoning, complete with the nonsense claim that European carriers are far ahead of US carriers in terms of merging operations and cutting fat.  In just one of many possible responses to that laughable claim, I offer just two words.  British Airways.

I say BA for several reasons.  First, because it is perhaps the largest carrier across the Atlantic at present, with probably the largest single market share.  They are already the strongest largest competitor, and right behind them are other major competitors such as Air France/KLM and Lufthansa.  They're still going to be there after deregulation, and however our airlines have been competing with and against them in the past will presumably continue into the future, largely unchanged.  Open Skies will not drastically reshape the trans-Atlantic market.

Secondly, BA is as much crippled by inefficient work practices, fractious unions, bad staff, and all the other problems that our own dinosaurs have.  Is BA far ahead of US carriers in terms of merging operations and cutting fat?  Not that I can see.

And note also the laughable suggestion in the article that these largely mythical airlines are going to 'invade' with transatlantic flights for as little as $15 one way.  Even the Ryanairs and Easyjets of this world - airlines that delight in giving away 'free' tickets (and making their money by charging for every possible remaining part of the travel process) will have difficulty on transatlantic flights.

A short haul flight from a cheap secondary airport in one European country to a cheap secondary airport, less than two hours flying time away, in another European country has a much lower underlying cost per passenger than does a 5 to 12 hour flight across the Atlantic, and likely from and to more expensive airports at each end.  Charging $10 for this and $10 for that and so on to create a decent return on a short haul low cost European flight self evidently works, but to do the same thing across the Atlantic, the charges would have to be $50 for each item rather than $10, and at that point, passengers will modify their behavior to avoid incurring the charges.

The 'threat' of the Open Skies agreement is, for all reasons, as much nonsense as the other justifications for merging, of course.  The Open Skies arrangement only exposes the US carriers to increased competition across the Atlantic.  Their other international routes are unthreatened, as is most of their domestic business too.

The claim that merging is the only solution to increased competition also has the unaddressed assumption that in some way a larger merged airline would be more competitive and more efficient than two airlines would be independently, pre-merger.  I'm unaware of any specifics being offered by any pro-merger advocate that gives clear examples of the real benefits enjoyed by a post-merger combined airline operation.

I've been saying for years now that the US carriers neglect their home markets at their peril.  I've said that the international routes where they've made easier profits due to greater degrees of protection are at risk and that sooner or later, the US carriers will face similar competition - whether from other US airlines or from international carriers - on these routes as they do on domestic routes.  And I've opined that if they allow the core of their business to rot, sooner or later the rot will spread to the shiny routes on the periphery of their business too, and then they'll find they're left with no remaining competitive strengths to build from or retreat to.

Most of the big traditional European flag carriers are every bit as inefficient, protected, and unionized as are even the dimmest of our dinosaurs.  Strongest competition will come not from the highly visible Euro-dinosaurs, but from the new breed of low cost carriers, whether American or European (or Asian or from anywhere else for that matter) and whether they be airlines that start operations in a newly liberalized air market or whether they be airlines that break in to relatively controlled markets.

Yes, there may be competitive threats out there - but what else is new.  Who of us, in private industry, works in a business that isn't buffeted by variously the threat and reality of competitors?  And how many of us have seen our greatest competitive pressures come not from major established conglomerates, but from new players who quickly identify and occupy a niche and then grow out from that?  For many of us, our greatest competitor is the new startup that has yet to open its doors for business.

Sure, all industries buy out competitors, for various reasons, at various times.  But only the airline industry seems so focused on merging itself down to the absolute minimum number of competitors possible, and only the airline industry has such a contradictory love/hate cozy/arm's length relationship with its competitors; only the airline industry has basically reduced itself down to a generic product with no differentiation between one brand and the next other than price and frequent flier loyalty ties.

Can such an inept group of companies somehow improve by circling their wagons and becoming fewer?  Some would think that the bigger and more monolithic they become, and the more they feel they're insulating themselves from competition, the more that, in truth, they are actually opening themselves up to competition.

But does that mean the Justice and Transportation Departments should just rubber stamp every merger request without concern or comment?  Should they just let the free market work without interference?

Maybe I'm having my cake and eating it too, but I think mergers will not benefit either the airlines, the traveling public, or the country as a whole.  All our needs are best served by multiple strong diverse carriers, growing their brands and their competitiveness in the furnace of hot competition, rather than becoming lazy and inefficient (ie expensive and vulnerable) while far from any competitive threats, and using their enormous marketplace strengths to unfairly kill competing airlines almost before they start operations.

We need a clear statement from the Justice and Transportation Departments, perhaps to the effect that they will not approve any airline merger that gives the merged airline the lesser of either a greater than 15% market share or an increase of more than 25% in its current business volume, ever.

Our government needs to accept the possibility that some airlines might go broke if they can't merge, but where's the harm in that?  We're told that investors will lose money, and employees will lose jobs.

Well, speaking as an investor who has lost plenty of money over the years, I see no harm in allowing investors the ability to continue losing money in the future.  Why should airline investments be given special protection?  And as for job losses, why do airline employees have a special right to job protection that people in other sectors don't have?  Besides which, if an airline closes down, the people who used to fly that airline will switch to other airlines, all of whom will grow and need to hire more staff.  The final outcome should be close to a wash, job wise.

There's one more interesting thing.  If the airline managements are told 'sorry, but you've got to make money the old fashioned way - through successful hard work and good business practices'; then just possibly, management might shift its focus from the 'easy way out' and instead start to run their businesses focused on making real profits from business operations, rather than paper profits from mergers.

Here's another and negative side-effect of merging airlines into mega-carriers.  If that were to happen, the unions would get a massive increase in their bargaining power.  We've most of us probably traveled at a time when an airline has been experiencing an employee strike - I've flown on airlines while their own pilots have been on strike several times, for example, and in such cases, most flights still seem to operate somehow, more or less, and for the flights that are cancelled, there are plenty of choices on competing carriers.

But what would happen if the number of competing carriers drops?  For example, pilots with American Airlines, which has a partnership agreement with British Airways, said yesterday they would 'unequivocally support' the BA pilots' union, who is threatening to strike over BA's decision to set up a separate division called Open Skies. About 68% of all traffic between Heathrow and the US is carried by the two airlines and a strike by the two unions would have major impacts on transatlantic travel.

American pilots are worried that US airlines could try and follow BA's lead and outsource pilots, hence their willingness to join the fight with a foreign airline on this issue, as a warning shot across the bows of AA.

So, if you can't fly on BA or AA across the Atlantic, maybe you take Continental instead?  What what is CO has merged with AA?  Your choices dwindle even further.

If I were the DL and NW pilots, I'd rush to settle our differences about seniority, because once the airline has merged, and once another few dinosaurs have also merged, I'd then be able to have a true 'come to Jesus' meeting with management and explain to them the new facts of life, and the shift in bargaining power from management to the employees for the future.  Megalithic merged carriers threaten themselves as well as us all.

US Airways has become the first airline to match United's policy of charging $25 to check a second bag.  And they're also increasing some of the cost of a third or subsequent bag from $80 up to $100.

Interestingly, whereas United says a quarter of its passengers check a second bag, US Airways says only 8% of its passengers check a second bag.  United, an airline 50% larger than US Airways, and with three times the rate of passengers checking second pieces of baggage says it expects to generate $100 million in extra revenue.  Doing the sums would imply that US Airways will get $22 million in extra revenue, but strangely, US Airways projects $75 million in 'revenue and cost savings' as a result of the new charge.

Something doesn't add up.

There was an initial rush of fuss and criticism earlier this week about an incident where a passenger died on an AA flight, with relatives claiming the plane had no oxygen in its oxygen bottles and its defibrillator wasn't working either.  More reasoned and better researched articles came out a day or so later, indicating that there probably was oxygen in the oxygen bottles, and the defibrillator probably was working, but the passenger didn't have the type of condition that a defibrillator could cure.

My point is not to direct blame any which where, but rather to observe that, yet again, once the passenger had died, the body was upgraded to first class and left lying on the floor (covered with a blanket), in the aisle of the first class cabin.

What is it with airlines?  Why do they upgrade dead bodies to first class?  Am I peculiar in thinking that on those occasions when I'm flying first class, one of the things I seek to avoid is sharing my space with dead bodies from coach class?

If you've got any old airline tickets at home, you might want to save them.  They'll soon become collectors' items, and perhaps in a few years time, might be something you can sell for a profit on eBay or Craigslist.

IATA announced that in 100 days (ie on 1 June 2008), all its 240 member airlines, located all around the world, will become 100% electronic ticketing based.

Beijing's new Terminal 3 opens today (Friday) when a BA flight arrives this evening.  It has become the world's largest terminal, with 10 million square feet of floor area; and when you add in the ground transportation center, it becomes 14 million square feet.

How big is that?  Well, it is bigger than all four of Heathrow's terminals - and it is still bigger than Heathrow when you add in the new soon-to-open Terminal 5 at LHR too.  The Pentagon is the world's largest office building, but it has only 6.5 million square feet (of which a mere 3.8 million square feet are occupiable).  The new terminal is 1.8 miles from end to end, and will include 64 Western and Chinese restaurants, 84 retail shops, and a state-of-the-art baggage system.

Part of the airport expansion project is also a high-speed commuter train to take passengers into the city.  The terminal, its runway, and most of the related infrastructure, was built in under four years.

Need I add that if you'd like to experience this amazing new terminal for yourself, a great opportunity might be when arriving in Beijing in June to join our China tour and cruise.

Continuing the theme of the extraordinary boom in China at present is this article about Hong Kong, which expects to have a budget surplus this year twice the level of last year and four and a half times the amount projected.  Its response?  To cut taxes and to abolish duty on beer and wine.

Apparently our economic ills have reached Hong Kong yet.

The never ending story which is the battle over Amtrak's funding continues, as detailed in this story.  How can we impress upon our political leaders and Amtrak's paymasters that the solution to Amtrak's woes is to massively invest in creating a viable functional high speed rail system, not to cut back on Amtrak's teeter-totter level of unreliable sparse service still further.

To be blunt, 'normal' people never consider riding Amtrak at present as a normal means of travel (with a few notable exceptions, mainly on the East coast).  But, if we were to create the same type of high speed, reliable, comfortable, and regular service that is being offered in much poorer countries elsewhere in the world, countless millions of people could be taken from expensive polluting inconvenient air travel, and/or from slow dangerous freeway travel, and put onto efficient trains instead.  Rail fares can be lower than air fares, too.

High speed rail service can reduce 500 mile journeys to four hours in duration (including the time for several intermediate stops along the way), and can make the four hours comfortable and pleasant rather than uncomfortable and cramped.  Traveling by air would take as long after allowing for getting to the airport, an extended checkin time, possible delays, waiting for baggage at the other end and then getting from the airport to you final destination.  In such a situation, wouldn't you rather take the train?

Draw a 500 mile radiused circle around most major American cities (other than in the midwest) and the chances are there are several other major cities  that would benefit from high speed rail links.  If the Spanish can do it, if the Chinese can do it, if the French can do it, if the Argentinians can do it, why can't we do it too?

I mentioned the new high speed rail link in Spain last week.  Here's a lovely video showing the train and the route - compare that with flying in a cramped plane!

Where and what is the best, most complete and most trustworthy source of travel information about a destination, a region, or a country?  Surely it is the official tourist information website, operated by whatever applicable tourist body is primarily responsible for promoting the place?

Well, you could be forgiven for thinking that, but you might be wrong.  Many of these websites are operated as profit centers by the tourist body involved, and if the actual tourist operators, hoteliers, etc, wish to get mentioned on the site, they need to pay sometimes exorbitant fees for the privilege (and often get dubious results in return, but are sometimes almost 'strongarmed' into doing so by the tourist authority).

Most of the time the underlying business arrangements that these websites are based on seldom see the light of day.  But we can get a slight glimpse behind the scenes through this article about the official VisitScotland.com website, and its massive loss-making failure as a 'for profit' partnership with private enterprise.

It is interesting also to read back in the archive of past stories and see, for example, this item in July 2006 which would seem to have then implied that the website and its business plan were growing from strength to strength.  Someone was being a bit overly optimistic with their spin.  And if you go back all the way to this September 2004 story, well, all you can do is shake your head and wonder at the lack of accountability these people seem to have.

Taking a different perspective on the complicated topic of how to promote tourism is this long article.  Interesting, but lengthy.

More on global warming cooling.  Will someone please explain to me why the same people who have cited the previous de minimus trend to possible global warming now refuse to accept the latest data showing a plunge in global temperatures in 2007?

Why do the 'global warming is all our fault' people feel happier accepting (and passing) blame for this prior phenomenon and refuse to acknowledge the massive role of the sun in the changing temperatures of our planet?

This Week's Security Horror Story :  Here's a 'must read' article from Bill McGee, appearing in USA Today.  His article is itself a summary of a more complete article on the Consumer Reports website (membership required to access it) and has a link to another teaser story with more horror stories.

I'm not going to summarize the article.  You should go read it all.

This article speaks negatively about the TSA for having a 20% staff turnover rate.  I think I'll actually defend the TSA on that charge.  There's no doubt that working for the TSA is a stressful job - both physically and emotionally - for many people, and a 20% rate, while appreciable, is much less than many of the former private contractors had.  Having an average of five years of employment per employee in a job that is only semi-skilled is probably not out of line with what other industries experience with similar types of staff.

But I'll definitely join with this article in criticizing the TSA for their peculiarly myopic refusal to more diligently screen everyone who has access to planes and the 'secure' parts of airport terminals.  And what a ridiculous excuse put forward by the TSA, that screening airport employees would divert resources away from passenger screening.

If you were a terrorist trying to sneak a bomb or a gun on a plane, this is how you'd do it at present.  You'd have your actual terrorists go through security totally clean, and then rendezvous in the secure part of the terminal with unscreened airport/airline employees, who would simply hand over the weapons needed.

This is dead simple, but the TSA doesn't seem to get it.  What is the point in screening passengers if the 'secure area' they then enter after screening is not in reality at all secure, because other unscreened people have free access to it as they wish?

And this article is notable for, among other things, reminding us that for 565 days (well, now it is 569 days) our airports have been continually at a high state of 'orange' alert (the second highest of the stupid five color scale).

A year and a half at the second highest state of danger?  Doesn't this make a mockery of the entire alert system.

The TSA is quoted in the article as conceding 'there are thousands of ways for terrorists to attack'.  One might wonder then why the TSA is so single-mindedly focused on just a handful of those thousand ways.  One might also wonder where on earth are all the terrorists that we're spending billions of dollars (and man-hours) every year to protect against?  Couldn't we at least catch a few, every so often, to justify the orange (or any other color) alert.

Are we not catching terrorists because we're terrified them all and cowed them into submission?  Are our security programs actually spectacularly successful?  Let's hope so, shall we.

Southwest has done it again.  The prudes that now make up the one-time fun airline have banned a couple of college co-eds for no apparent reason other than, they claim, being too pretty to fly.

And notice the scary way that flight attendants can ruin your day if they take a disliking to you.  The two 18 year old girls were escorted off their flight by four policemen (perhaps there were so many policemen because they all wanted to be with the girls?) and then 'interviewed' by the FBI for two hours, before all charges were dropped and the girls released.

But although the authorities found no fault, the girls have been banned for life from flying Southwest.

Dead pilots.

Naughty pilots.

And - ahem, very naughty pilots.

Lastly this week, another video, but on a different topic.  Thanks to Linda for this comedy video on the topic of what sometimes happens to your luggage when flying somewhere.

Until next week, please enjoy safe travels

David M Rowell aka The Travel Insider

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