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Friday 2 May, 2008  

Good morning

Time for a mini-Microsoft rant again, I'm afraid (skip down to the color change if not of interest, or if I'm 'preaching to the converted').

With Frontpage crashing on me as regularly as once an hour some days, I feel I'm owed some venting.  But my frustration isn't only about Microsoft's Frontpage program.  It is also about Microsoft's Outlook 2007, which has major performance problems that Microsoft knew about (but decided not to worry about) before releasing the program.  It is about Outlook 2003 (I had to downgrade my Outlook 2007 back down to 2003 in a desperate attempt to get something that works the way it should again) and the way Microsoft's latest updates broke its spam filtering.  It is about Internet Explorer program, which now semi-randomly stops showing some but not all images on webpages.  And then there is Microsoft's Vista OS, which is, to put it politely, problematic in many areas and a backward rather than forward step - something that is, alas, far from unique when Microsoft 'upgrades' its operating system.  It is about the whole architecture of Windows, whereby you can rarely truly uninstall programs, which leave performance sapping clutter behind, and it is about so many other things that we've become used to and have forgotten to question/complain about.

No, the solution - for me and many others - is not to switch to a Mac.  I have specialized software that only runs on a Windows computer, and even if Macs were to provide a viable alternative, I have probably ten thousand dollars or more invested in Windows based computer hardware and software, and tens of thousands of hours of learning about how best to work in a Windows environment.  Would I get refunds for all this money?  Would I get years of my life returned to me?  No, and no.  And if I have this much investment, imagine how much more is invested in large corporations with tens of thousands of computers, and hundreds of millions of dollars in investment, plus staff training, etc etc.

For most of us, the concept of switching from Windows to Mac computers makes as much sense as telling a Delta Million-miler who lives in Atlanta to switch to AirTran.  Perhaps what we need, for computer users, is the same thing we need with airlines - a computer users' bill of rights.  Oh - wait - there is such a thing already.  The implied warranties for fitness of purpose implicit in any sale transaction when you buy something give any consumer/purchaser a set of rights, and impose obligations on the seller.

But, wait again.  These warranties are expressly excluded when buying software, as are all liabilities that might otherwise exist for consequential damage caused by bad and buggy software.  Does that sound fair to you?  You've more rights buying a dollar's worth of goods at the local supermarket than you do when you spend $200 or $2000 on new software for your computer.

Is it any wonder that software piracy is rife and socially acceptable, when the products being pirated are so substandard, and when paying money to own them - ooops, sorry, you don't own anything, you merely get a revocable license to use the software, subject to a bunch of terms and conditions and exclusions and limitations, conveys no added benefits of any kind.  Really, given full free choice, who in their right mind would pay several hundred dollars to buy a piece of software that promises nothing except heartache and heartbreak?  A person who buys a pirated copy of a software product is sending a message to the manufacturer about what that software is truly worth.

And, for added insult, if you call to report a bug and ask for help solving the bug, you'll find that's not possible unless you're prepared to pay for it.  Yes, you pay good money for a support call, which may or may not resolve your problem.  First we pay for the software, then we pay more to buy a manual, then - when we have problems with it - we pay more for support, then when a new version comes along that promises to fix all the problems in the earlier release, we gullibly rush to buy it.  Microsoft has a financial incentive to sell us bad buggy software.

Talking about money, at least the airlines can hide behind their chronic lack of profit as partial excuse for the bad service they give us.  And, sure, Microsoft's profit was down too for its latest quarter, ended 31 March.  It made only $4.4 billion, on revenues of $14.5 billion - an amazing 30.3% net profit margin.  There's no way that Microsoft can claim that it can't afford to spend more money on better quality control, testing, and support of its products.  What other massive (and near monopolistic) public company makes a 30.3% net profit margin, and gets away with zeroing out its liabilities while delivering massively flawed products?

Even the oil companies, currently being criticized for their extraordinary level of profits at present, don't get anywhere close to Microsoft's profit margins.  Earlier this week Exxon, BP and Shell posted quarterly profits, all up, but Exxon's profit margin was 9.3%, BP's was 8.5% and Shell's was 8.0%.  Microsoft makes 3.5 times the net profit percent that these oil companies do - why is no-one accusing Microsoft of rapacious pricing while everyone is so quick to levy such accusations at the oil companies?

Comparing Microsoft again to the airlines, if the airlines had the same quality control approach that Microsoft does, we'd have dozens of planes crashing and burning every day.  The airlines have the FAA to ensure their adherence to quality control, but Microsoft has nothing and no-one overseeing its products.  We need an FAA equivalent to police Microsoft.

Okay, so maybe it might 'slow down the pace of software innovation' if Microsoft was required to make its products less buggy and better supported - but who here is desperately waiting for Microsoft's next new innovation?  We've all become unpaid Beta testers for each new Microsoft product, and for that reason, many of us still haven't yet upgraded to Vista, and those of us who have often wish we hadn't.  It is the same with their application programs - many of us haven't touched Office 2007 (and I have downgraded my 2007 back to 2003).  Many users are still very happy using Office 2003, Office 2002, Office 2000 or even earlier versions.

Software 'innovation' these days is more usually cosmetic changes that interfere with what we've learned and become familiar with, while adding no really useful extra features.  Software innovation these days is as useful as the fins that sprouted and changed each year on the 1950s designed cars.

So, let's see Microsoft slow down its pace of so-called software innovation, and spend some of its tens of billions of profits in making the products it sells more reliable, and the support it offers more available and less expensive.

Phew.  Now that I've got that out of my system, what next?  Well, there's nothing like an upcoming absence from the office to concentrate the mind, and I've been very busy this last week doing some 'housekeeping' on the website, updating articles, and preparing articles to offer while I'm out of town the next few weeks.  I'm excited about several of the things I'll be writing about, including, at long last, a positive update on my ongoing struggle against spam, and it has been a difficult decision as to which article to get completed and to you first.

Last week I wrote about a Bluetooth headset - the Cardo S-800, and it was the first time I felt able to give a Bluetooth headset a fairly unqualified recommendation.  I had several readers write in and ask how it compared to the well known and highly regarded Jawbone headset.  My answer necessarily had to be 'I've no idea, because I've never tested a Jawbone' but after a series of repeated requests, my answer changed to 'wait until Friday'.

An overnight order/delivery from Amazon saw a Jawbone in my hands on Tuesday, and after extensive trialing, I'm going to gift you with two articles rather than one this week.  And so :

This Week's Feature Column :  The Aliph Jawbone Bluetooth Headset :  Correctly hailed as a best-of-breed product when it came out in 2006, the Jawbone has garnered a loyal following of devotees and continues to be popular.  But how good is it when measured against state-of-the-art 2008 technology, something that is appreciably better than it was in 2006?

After reading the Jawbone review, you can click over to the Jawbone vs Cardo comparison page that highlights the differences between the two units and helps you choose the better unit for your needs.

Dinosaur watching :  Another airline goes bust.  Eos - the all first class airline flying between London's Stansted airport and New York/JFK closed down last Sunday.  Bizarrely, it had announced just a week earlier that it had secured a new round of funding that would be sufficient to see it through to regular profitability next year, then it had to eat its words - the funding fell through and the airline collapsed.

Why did Eos collapse?  Well, for once, the failed executives didn't trot out the tired 'high fuel cost' excuse.  They were actually very silent, particularly about the mysterious last minute disappearance of the new funding.  But you'll not be surprised to learn that I have some thoughts on the subject.  Indeed, I've a great many thoughts, too many to include in the newsletter.  So as a bonus for this week :

Bonus Feature Column :  Is Airline Competition Always Fair?  :  Should established carriers be allowed to sell tickets below cost, and below startup carriers' fares, so as to starve the startup carrier into bankruptcy?

As a positive side note to the sad failure of Eos, the remaining independent all-business class airline operating between London (Luton) and New York (Newark), Silverjet, happily announced it had secured $25 million in new capital from an unnamed investor in the UAE, with the possibility of up to another $75 million if needed in the future to fund the airline's expansion into new markets, particularly in the Middle East, Far East and Africa.

So hopefully we'll still see Silverjet on the route for the next some time.

The counterpoint to airlines failing is airlines merging.  People got very excited for a few days at a possible link up between United and Continental, but then that receded away, and currently most of the gossip is about a three way 'closer working relationship' between AA, CO and BA.

AA and BA are long-time suitors, and a 'closer working relationship' would be a proven way around the regulatory minefield of merging a domestic and a foreign carrier.  The addition of Continental is a surprise, and rumor has it CO would necessarily join the Oneworld airline alliance.

Meanwhile, after being spurned first by Delta and now by AA, United is reputedly once more looking at US Airways, and airline it has of course spectacularly failed to merge with in the past, way back before both airlines had bankruptcies, and before US merged with America West.  But apparently the magic of old romances linger.

It is time to look a bit more closely at the claims underlying the DL/NW merger.  One of the claims that Delta and Northwest are making to support their request to have their merger approved is that their route networks are different.  The assumption is that if the two airlines both competed on a route, then reducing the two airlines to one airline would reduce the competition.  But if one airline flies between a certain two cities, and the other airline flies between a different two cities, merging the carriers wouldn't affect the present level of competition on either route.

The logic of this is good, but only up to a point.  Both airlines are predominantly hub and spoke type carriers, and to get from somewhere to somewhere else, you usually end up making two flights - one into a hub from where you live, and then a second out of the hub and to where you want to go.

So, here's the trick, and here's where the lie is revealed.  To travel from, for example, Seattle to Philadelphia, if I was traveling with Northwest I'd probably fly first to either Minneapolis or Detroit, and then from there on to Philadelphia.  And if I was traveling with Delta, I'd probably fly first to either Salt Lake City or Atlanta, and then on to Philadelphia.  Using the narrow definition of different non-overlapping routes, I'm flying totally different routes between Seattle and Philadelphia and the two airlines aren't competing.

But, the reality is that suggesting NW and DL don't compete on this (or most other routes) is nonsense, as we all know.  Both NW and DL offer fares to travel between SEA and PHL.  It makes little difference to me which hub I fly through (and little difference to NW and DL's fares, either), and for me as a passenger, a NW/DL merger means I've had the number of airlines offering fares between Seattle and Philadelphia reduce.

The key issue, for deciding if the airlines are sharing routes or not, is not to look at single flight itineraries that pretend a passenger is flying only from or to a hub, but to look at total itineraries that transit through hubs on the way from and to other places.

If you do that - and I urge the Justice Department and DoT to do this - then it can clearly be seen that, within the US, the two airlines have an enormous degree of overlap.  Which is, ahem, quite the opposite of how they're trying to spin the situation to us and the regulatory bodies at present.

Let's look at another bit of nonsense being offered in support of this merger.

Delta CEO Richard Anderson said, in support of the merger, 'You can't underestimate the spike in fuel prices and how it is fundamentally changing the industry'.  The previous week he said the airlines needed to increase fares by 15% - 20% to reflect the increases in fuel costs.

Does the need for a 15% - 20% increase in fares sound like a fundamental change to the industry?  It sure doesn't to me - it sounds to me like a mild correction in costs after years where air fares have lagged behind the general cost of living inflationary increases.  So we might end up with airfares costing, in relative terms, what they did at some time back in the 1990s, or the 1980s.

That's not a fundamental change at all.  It's just more of the same.

Indeed, we're pretty much all the way to that 15% - 20% increase already.  Not only do we seem to be seeing airlines going broke on a weekly basis at present, but let's not forget the other thing that is happening every week - airlines raising their fares.

Last week saw United initiate a fare increase of between $4 - $70 per roundtrip fare.  This week Delta started a new fare increase, with either $10 or $40 added to its fares.  Courtesy of Farecompare, here's a table of fare increases so far this year :

1. January 3rd, initiated by United, $10 roundtrip added to base airfare

2. January 24th, initiated by Continental, $20 roundtrip added to fuel surcharge

3. February 22nd, initiated by United, $10 roundtrip added to base airfare

4. February 28th, initiated by Delta, $10 roundtrip added to base airfare

5. March 7th, initiated by United, $10 roundtrip added to fuel surcharge

6. March 14th, initiated by United, $4-$50 roundtrip added to base airfare

7. April 9th, initiated by United, $4-$30 roundtrip added to base airfare

8. April 15th, initiated by United, $10-$20 roundtrip added to fuel surcharge

9. April 24th, initiated by United, $4-$70 roundtrip added to base airfare

10. April 28th, initiated by Delta, $10 and $40 roundtrip added to fuel surcharge

That looks like a lot more than 15% - 20% already.

Not only are the airlines increasing airfares every time we blink, but they're seeking other ways to increase their profitability at our expense, too.  Here's an interesting article about the latest disservice being perpetrated on us by the airlines.  They have figured out that if they fly slower, they'll burn less fuel and save money.  As the article tells, Northwest proudly points to saving $535 in gas costs by lengthening a flight from Paris to Minneapolis by 8 minutes.

Sounds like a great idea, right?  No - it is a terrible idea.  Let's do something that Northwest has apparently failed to do, and carefully think through all the ramifications of this longer flight time.

It is far from clear how much money NW actually saved on this flight (why is it that I, who has never worked for an airline, have to explain fundamental elements of their business to them?).  Let's start off by accepting their claim that they did indeed save $535 in fuel costs, and that the flight was lengthened by 8 minutes.

But there are counterbalancing costs incurred by the longer flight time to be considered.  First of all, the crew on the plane will have to be paid for 8 extra minutes of flight time.  Let's just guess that the crew on what was probably an A330 costs about $1200/hr in total.  So there is $160 in extra crew costs.

Now, secondly, the airplane has just moved 8 minutes closer to needing its periodic maintenance - most of the maintenance schedules are triggered by flight hours.  I'm going to guess that an average cost of maintenance works out to perhaps $1200 per flight hour.  That is an extra $160 in maintenance costs.

Now, thirdly, the passengers aren't just sitting still doing nothing for those 8 minutes.  Some of them will be using the restrooms, asking for drinks, breaking the seats, and generally accelerating the wear and tear of the passenger compartment.  You can guess any number you like to allow for the extra usages and extra wear and tear - let's say this is a moderate $50 extra for passenger wear, tear, and consumption.

Fourthly, there's an obscure cost that may or may not come into play.  By tightening their schedules a few years ago, some of the airlines were able to get more flights per day out of their planes, saving themselves the need to buy (or keep) more planes, and getting better, more efficient, use out of the planes they had.  Some allowance has to be made for the ownership costs per hour of the plane - I've again no idea what that figure may be, but if we think of a $75 million plane that has maybe a ten year depreciation schedule, and which works maybe 15 hours a day, 350 days a year, then that suggests the depreciation cost alone, per hour, is about $1500.  So we've just added another $200 in depreciation, too.

So, let's add this up, shall we, and see exactly how much money NW saved with its eight minutes.  Golly - look at this :  $160 (crew) + $160 (maintenance) + $50 (passenger wear and tear) + $200 (depreciation) = $610.  Bravo, Northwest.  Your 'saving' of $535 is actually a net loss of $35.  Even if my numbers are drastically wrong, the fuel saving is massively reduced, possibly all the way down zero, when you consider the offsetting increases in costs.

With logic and mythical 'savings' like this, is it any wonder that Northwest lost $191 million in the first quarter of this year?

And there's one more cost that no-one seems to care about, not even the the so-called 'consumer advocate' in the article who said 'If it means that airlines can keep their costs down, keep their ticket prices down, and save a little fuel, that's fine'.

That is the cost of the wasted time of the passengers on the plane, forced to each spend another 8 minutes of their lives in miserable uncomfortable unfriendly conditions.  Let's say there were 250 passengers on the flight.  That's a callous disregard for 33 hours of passenger time.

The airlines are nickel and diming us out of our lives.  The extend the time we have to get early to the airport and early to the gate, they extend the time we have to wait for our bags, and now they extend the time their flights take, too.

Meanwhile, alternatives to airline travel continue to look more and more appealing, and with slower flights, it increases still further the distance that is quicker to drive (to say nothing of being more comfortable and more convenient).

While eight minutes, by itself, doesn't seem like much, it is like the death of a thousand tiny cuts - it all adds up for us as passengers in terms of the total inconvenience factor.  And, also, for the airline, each 8 minute addition means somewhere, some passenger will decide not to fly, and while it might seem impossible to equate a seemingly trivial 8 minutes of extra travel time on an 8 hour flight with someone deciding not to fly between Paris and Minneapolis at all, sooner or later, there will be effects of this nature.  Has NW also thought about its precious $535 'savings' in the context of how losing just one single passenger off that flight might cost it more in ticket income than the entire $535 'saved'.

And it could be possible to lose a passenger on that flight, even with a small 8 minute time increase.  Here's how :  Maybe someone wanted to fly from - well, for example, from Seattle to Paris, and they were presented with a range of different flight choices, on different airlines and with different total journey times (depending on route flown, connecting time in hubs, and, of course, aircraft flying speed).  Many computer fare/schedule displays give priority to the shortest flights first, and, other things being equal, passengers of course prefer a shorter journey to a longer one.  Maybe this 8 minutes might be enough to move the NW itinerary down one or two places in the display of flights, and then they could stand to lose a lot more than just one passenger.

Bottom line?  This is a stupid move on NW's part (and on the part of other carriers, too).  It trades our time and convenience for their profit, and with the 'savings' created by flying slower being somewhere between totally trivial and actually losses rather than savings, it shows the airlines place almost no value at all on providing a convenient service to their customers.  Sooner or later, that's going to come back and haunt them.  Oh, wait - did I say 'sooner or later'?  It is neither sooner nor later - it is now.  Look at the across the board losses suffered by the dinosaurs, the shrinkage of passengers traveling with them, and the frenzied never ending rounds of airfare increases, none of which seem sufficient to return the airlines to profit.

The airlines like to say that fuel and labor are the two biggest costs they incur, with the direct implication being that fuel and labor are the most important two parts of their business.  Wrong!  Very wrong!  The biggest number on their profit and loss is not fuel, and neither is it labor.  While the airlines have been obsessing over these two aspects of their operation, they've taken their eyes off the ball and are overlooking the biggest variable of all.

Passenger income - and how to positively grow it, other than through fare increases and diminished service standards - that should be their core focus and objective.

Talking about flying more slowly, I'd commented a couple of weeks back about the resurgence of turbo-prop regional planes, replacing the previous love affair airlines had enjoyed with regional jets, due to them being greatly more fuel efficient.  Turbo-prop planes fly slower than regional jets (300 - 400 mph instead of 500 - 550 mph)

The latest indicator of this is an announcement by Alaska Air regional subsidiary Horizon Air, which plans to scrap its 20 Bombardier CRJ 700 jets and replace them with Q400 turboprop planes.  But in this case, the savings to Horizon are almost certainly real, not imaginary as with the Northwest scenario.  As are the increased time costs for their passengers.

This will be my last week of commenting on the Southwest Airlines share price.  On Wednesday it briefly touched $13.50 - probably the point where I'd decide to cash in the shares that were initially identified as a good value on 13 March at $11.70.  A 15.4% return in just over six weeks is great and sufficient as to enable one to cash out and feel very pleased with the six week experience.

Interestingly, the main reason for the leap in Southwest's price this week (it closed at $12.70 last Thursday) has been due to an external factor that is actually bad for Southwest.  A reduction in the underlying cost of oil has made all airline stocks go up significantly, but as per my original analysis here, the whole driver of seeing Southwest as a short term opportunity was its fuel hedging.  The more that fuel prices go up, the greater its competitive advantage becomes compared to other airlines; the more fuel prices drop, the less this advantage becomes.

But plainly many investors haven't thought this issue through, which is another reason for thinking it best to cash in one's holding at a time when there's a positive gain to be realized.

A couple of readers wrote in to caution me about issuing stock tips, for fear of exposing myself to all sorts of liability.  I enjoyed the challenge of making a public recommendation and then tracking if I was right or wrong, but can do without the liability, so will probably stay silent in the future.

Oh - a post script to the above comments.  If I'd cashed out at $13.50 on Wednesday, maybe I'd have made a mistake.  Southwest's price continued to firm on Thursday, touching $13.59 at one point, and closing at $13.52.

This week's 'China is an amazing place' statistics :  China expects its airfreight traffic to grow six-fold in the next twenty years, with a requirement for 2,800 new airplanes to be purchased in the next 18 years.

And it opened what it calls the world's 'longest sea bridge' on Thursday - a 22 mile long bridge from Jianxing to Ningbo (close to Shanghai).  It is the world's longest sea bridge because the world's longest (any) bridge is actually on a lake - Lake Pontchartrain - and is 24 miles long.

Perhaps go see the bridge (as well as the new world's largest building - Beijing Airport) when you join our China tour and cruise this June.

Throwing away an old cell phone?  With the rising cost of minerals and metals, there could be some money hidden inside - indeed, as this article explains, an old cell phone yields a 30 times higher percentage of gold than the average gold mine.

This Week's Security Horror Story :  The passenger's name was on the airline's possible terrorist list, and so the airline staff refused to let the passenger fly, no matter how much he tried to persuade them he was not a terrorist.

This is a story that is played out continually, indeed one major airline admits to having 9,000 passengers with 'false positive' problems every day.

But this particular story has a twist to it.  The passenger that the airline refused to allow to board and fly the flight was a Federal Air Marshal, and he had been assigned to fly that flight to protect it against terrorists.

It is impossible to understand the thought processes when an airline calls a credentialed Federal Air Marshal a possible terrorist, and refuses to allow him to fly a working flight that he was assigned to protect.  Details here.

If you take a gun to the airport and through security without permission, you're up for a world of hurt, and possibly federal charges, as well as a TSA administrative fine.  Except, of course, if you are, yourself, a TSA screener, even though you have no authorization for taking the weapon to work with you.

Details here.

Here's a depressing article - pilots are failing the mandatory psychological screening they must face before being allowed to carry a firearm in the cockpit (while still being allowed to fly the plane, a much more danger weapon than any pistol will ever be).

One of the questions that many pilots get wrong is 'Would you like to be a fighter pilot?'.  If pilots answer yes (and, doh!, many airline pilots are ex military, and many more would have loved to have enjoyed the ultimate thrill that is flying a fighter jet) the TSA concludes this shows overly aggressive personalities and disqualifies the pilots from carrying a firearm.

I included an email from a reader last week who wrote about never having toothpaste detected in his carry on bag.  This caused a flood of other readers to write in and say 'me too' and to list other liquids that they've also repeatedly carried in their carry on bags without declaring, and never getting caught.

It also brought an interesting response from someone-who-shall-be-nameless in the industry, who writes

Most x-ray systems can NOT pick up toothpaste.  Why?….  Because the newer packaging is made of light weight and flexible plastic.  The new machines can’t see it.\

In days of old, most toothpaste tubes were made with plastic coatings and aluminum.  In fact some are still made this way.  Colgate is a mixed bag, depending on the product; Crest is best because the smaller tubes are the new packaging.  In short, your reader is lucky based on product design changes and most likely the product he selects.

To be honest I hate the Crest products, but I carry it on all my business trips.  Ahem, with the same result as your readers.  Also the ingredients in the tothpaste make a difference as well.  Some products are more dense and will always get nailed.

There are other tricks as well with other liquid and gel products…

Which makes one think there's a different reason why the TSA not only limits the liquids you carry, but demands you take them out of your carry-on and show them separately.  Could it be they require you to take them out because, if you don't, they can't see them on the X-ray machine?

And one common misunderstanding - several readers also reported that their nail files were never being detected either.  Ummm - nail files are no longer forbidden.  Here's the current list of what you can and can't take in carry on.

I hope to get a newsletter to you next week at more or less the normal time, but will be in Barcelona, immediately prior to going on the South of France river cruise.  Meantime, with the three articles and this long newsletter, you've way over 10,000 words of new material this week, should you choose to read it all!

Until next week, please enjoy safe travels

David M Rowell aka The Travel Insider

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