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Friday 11 July, 2008
Good morning
It is lovely to be home once more after
three weeks in China. This week's newsletter is in large part a
mini-travelogue of impressions and thoughts I have after my time away.
A normal newsletter will of course follow next week.
Our Beta Test tour of China was an
interesting experience, but perhaps more grueling than we had expected,
with two of the dominant memories being high temperatures and humidity
that sapped our energy, and hundreds (actually, in total, thousands) of
steps that needed to be climbed.
On the positive side, we certainly did
experience a massive kaleidoscope of different sights, sounds, places,
and people. My own favorite was probably Guilin, an area of
extraordinary natural beauty and less ravaged by pollution than much of
the rest of China, and a good final note to end our time in China.
And the overwhelming impression, after
visiting a huge diversity of different places, from the largest
metropolitan area in the country - a metroplex of 32 million people that
you may have never even heard of, Chongqing - to small towns along back
country roads, is the impossible to comprehend growth that is
occurring in all parts of China. For example, our cruise down the
Yangtze river was continually punctuated by brand new bridges being
constructed across the river - every one of which was being lavishly
constructed, with probably six or more lanes and an expensive showy
rather than utilitarian design. Every town and city we saw had
masses of cranes on the horizon with new office and apartment buildings
sprouting wherever we turned. And living standards - while less
visible - are massively improving. For example, one of our guides
told us of how she and her family were moved from their former apartment
to a new apartment as part of a resettlement project in the Three Gorges
area, and one measure of the comparative luxury of the new apartment
they moved to is that the family went from an apartment with no indoor
toilet at all to one with two indoor toilets.
China, today, is a curious land of
contrasts, with Mercedes Benz automobiles swishing by on super
highways while just a few feet from the road you can see farmers in
paddy fields tending to rice by hand, and on the sides of the super
highways there are people on powered tricycles motoring along at 15 - 20
mph with a small load of produce on the back of the trike. Some
apartments and houses are of western standard and close to western
price, but a short distance away from these will be housing areas that
we'd view with distaste and horror and consider to be terribly
slum-like. Which is the real China? The answer seems to be
that both are part of the real China, and that the under-developed
aspects represent the potential and the evolution into the developed
China.
China's growth seems to know no bounds or
limits, and the country as a whole is moving from a net recipient of
international investment to now being a net donor of investment in other
countries - just today on the radio I was hearing details of the
multi-billion dollar projects China has revealed in 35 different African
countries at present (mainly on the basis of 'we'll develop
infrastructure for you in return for access to your natural resources').
Somewhere in the next ten to twenty years, it is predicted that China
will have the world's largest economy.
It already has the world's largest
population, and one of the world's largest landmasses. Move over,
USA - the new world leader is rapidly coming up from behind and getting
ready to overtake us - China. Its growth and the certainty of its
future dominance seems inevitable and unstoppable, and when you consider
that China will have the resource and ability to become not only the
world's largest economy but also the world's dominant military power, it
seems that the geo-political axis of the world as we know it at present
is about to undergo a dramatic shift.
But, after spending almost five weeks in
China over the course of two visits this year, I can't pretend to
really understand the country and its people at all, and to have
very little or no comprehension about what its real world plans may be.
While I presume to have an understanding of Russia, I can't claim any
such understanding of what it is that motivates and drives China.
It truly is a mystery - to me and to most of the rest of us too.
But it is a mystery which we'll all need to solve before too long,
because of the way it is vaulting to pre-eminence on the world stage.
China is of course still some strange
sort of amalgam of communist controlled dictatorship and free enterprise.
I was reminded of this in two interesting ways. Firstly, China now
censors parts but not all of The Travel Insider website - don't ask me
what I've said or done to upset the Chinese government, but apparently
some of my articles are not to be viewed by Chinese people.
Secondly, one of the tour guides was giving
some commentary and she included the line 'and in 1947, the communists
under Mao Tse Tung liberated China'. This begged the question
which I boldly asked her - 'Who did Mao liberate the Chinese from?'.
Her answer - 'He freed the Chinese from the
former Chinese democratic government'. I assumed a look of
intelligent uncertainty and asked 'So the communist dictatorship freed
the Chinese people from the former democracy?', whereupon the guide
started to realize the nonsense of what she'd just said, and hastily
added 'Oh yes, and from the Japanese, too'. We both chose to
politely end the discussion at that point and to overlook the fact that
the end of the war with Japan, courtesy of the US and
Hiroshima/Nagasaki, happened back in 1945.
There was another puzzling inconsistency
that I could never get a good explanation for. Many of the new
super-highways that have been built are toll-roads, with the costs to
drive on them being fairly steep and in line with what we'd pay on a
turnpike or on a toll-road in Europe. This seemed strange to me
and at odds with the country's communist philosophy. A guide was
proudly telling us that the cost to go through the locks at the Three
Gorges Dam project was free because the dam and its locks were built by
China for the Chinese people, so I asked her 'but aren't the new
expressways also built by China for the Chinese people - why do people
have to pay money to drive on them?' but she wasn't able to answer this
question.
I also got varying answers about the extent
of free healthcare in China. It seems that, rather similar to
Russia, people can choose between almost free/heavily subsidized but
lower quality government healthcare, or they can pay extra for private
healthcare of a higher quality.
The censorship thing has two dimensions - a
control on external news and information flows into China, and also a
control on what is published and said about China, internally and, to a
lesser extend, externally too. You have to take anything you
read about China with a grain of salt.
Here's an interesting example -
this article talks about a new law in China that prohibits stores
from giving away plastic bags as of 1 June, and
this article from the Chinese People's Daily Online proudly claims
that reductions in plastic bag distribution of 80% - 90% are now being
experienced. But, during the almost three weeks I was in China,
and in the course of buying all manner of things at a wide range of
stores, ranging from major department stores to street-side market
stalls, I never noticed anyone refuse to give me a plastic bag to put my
purchases in, and neither did anyone charge me for a bag either.
The article reporting the massive success of this new law is completely
at odds with my observed reality of what is happening.
There's a fascinating article on the BBC
website about China's growth
here (and the earlier two parts in the series provide a terribly
depressing contrast between the dynamicism of China and the torpor of
much of the US - something I couldn't help but notice myself; every time
I saw a new bridge going over the Yangtze, I was reminded of Washington
State's inability to replace/extend a desperately needed bridge across
Lake Washington in Seattle - a problem that has been growing for a
decade or more, and for which no solution is expected for at least
another decade).
After the Chinese tour, I went and spent a
couple of days in Hong Kong. This was the first time I'd visited
Hong Kong since its 'independence' in 1997 - although the term
'independence' is an Orwellian term that doesn't accurately describe its
transition from British rule to Chinese rule. Most people who have
visited Hong Kong since then have told me that nothing has changed since
1997, and for sure, my favorite bar on Nathan Rd is still exactly as I
remember it, more than ten years earlier.
But I think people who believe nothing
has changed in Hong Kong are somewhat simplifying things. My
tailor (such a grand way of describing a person who once made a suit for
me before and who did so again on this visit!) tells me that many
tailors have gone out of business and that his own business is down at
least 50% since 1997. While he agrees the city still gets lots of
tourists, he says the mix of tourists is changing, and there are now
fewer westerners visiting and more Chinese (who are less motivated to
buy suits from him at comparatively high prices for them rather than
comparatively low prices for westerners). He says that with plenty
more direct flights to China, fewer people need to transit through Hong
Kong.
I also caught an interesting glimpse of
how the locals might feel about now being part of China again.
To understand the story that follows, you need to understand that the
Chinese people in Hong Kong speak Cantonese - a language that is as
different from the language that Chinese people in China speak
(Mandarin) as is, eg, English different to Russian. Needless to
say, if one refers to someone speaking 'Chinese', the chances are the
person means Mandarin, for the simple fact that perhaps 1.3 billion
people speak Mandarin, while there are probably no more than 50 million
speakers of Cantonese.
I was on a harbor cruise and the guide was
telling us a bit about Hong Kong. He included this comment 'We
speak Chinese here, and many of us speak English too. These days,
some of us are also learning Mandarin.' I found it very telling
that he referred to his language as 'Chinese' and the language of
mainland China as Mandarin.
I also noticed in one of the major chain
stores that they disdained accepting Chinese currency other than at a
1:1 exchange rate (the actual rate being about 1:1.13) whereas they'd
happily accept dollars and Euros at fair exchange rates. You'll
not get anyone to admit this, but I think there are mixed feelings among
the Hong Kong people about returning back to Chinese rule.
One thing that hasn't changed in Hong
Kong - there are no bargains to be had there, and haven't been for
several decades. Most electronic items can be purchased less
expensively at Costco, Walmart, or Circuit City, and you are more
certain that you're getting the product you're paying for if you buy
locally. Food prices were much higher in Hong Kong than in
mainland China, too - meals are a relative bargain in China (you can
have a very good meal for $10) but are priced more inline with US prices
in Hong Kong (I was recommended to go to one restaurant by the hotel
concierge; he described the food prices as 'moderate' but when I saw $50
for a steak, I disputed the concept of moderate!).
Hong Kong somehow manages to straddle a
curious line between east and west, with elements of both juxtaposed
alongside each other. I'll be doing a feature article on it in the
next few weeks in which I'll try and answer the question 'why go to Hong
Kong' - a question that has never had a clear answer in my mind.
One last thing about touring - our always
very popular Christmas Markets cruise
is filling, and one thing I can absolutely promise you - there's no
danger of it being too hot and too humid, unlike our Chinese tour just
now completed! Although, to be far, the weather for the last
several Christmas cruises has not been inhospitably cold or rainy,
either, so you should have no real weather problems to be concerned
about in either extreme.
There is now only one junior suite remaining
on the ship, only one of the best value C cabins, and only two of the
lowest price E cabins. There are still A, B and D cabins - my
favorite cabin category being the A cabin, but if you're looking for a
C, E, or junior suite, please hurry to
confirm your interest.
There have been lots of changes to
airline checked luggage policies over the last few months, with
airlines first starting to charge for a second checked bag, and then
some airlines starting to charge for a first checked bag as well, as
well as some increases in charges for excess weight and size and other
less publicized changes too. It seems the dust is now settling and
the airlines have generally reached a stable point, for now, having
matched or countered each other as they wish, so I've updated my three
pages on domestic airline policies on checked bags and carry on bags,
and international airline policies on carry on bags.
It has been interesting to see how the
airlines have changed their policies. From one extreme - Hawaiian
who have not made any changes at all in four years or more - to the
other extreme, with some airlines changing everything, and with some
puzzling changes - for example, Alaska Airlines, changing their bag size
limit from under 63" to now being a maximum of 62". And JetBlue,
who have reduced the maximum weight of bag they'll accept from 100lbs
down to 99lbs.
There were also some interesting - or,
perhaps I should say, astonishing - changes the other way, most notably
British Airways, who have not only increased the size of allowable
carry-on items, but also increased the weight from a former miserly
13lbs up to a massive 51lbs per carry-on bag. Wow.
It is also interesting to see how some
airlines now flat-out refuse to accept heavy or big bags - for example,
Northwest will not now accept bags over 70lbs (formerly it was 100lbs)
no matter how much money you might offer them to take your bag.
Another policy change with some airlines (such as US Airways) is
reducing the maximum size of a bag - they would formerly accept bags
with a combined dimensional size (length plus width plus height) of
115", and now it is reduced down to 80". Anything larger has to be
sent air freight.
It is also interesting to see some airlines
now defining the size of the 'personal item' - typically airlines allow
one carry-on plus one 'personal item' to be carried on to the plane, and
the undefined size of the personal item has been a loophole for many
passengers to exploit. Some airlines are now limiting the size of
this personal item - for example, Air Canada limits it to 17" x 13" x 6"
(compare this to the standard limit for a carry-on bag of 22" x 14" x
9").
Overall, it is surprising how much
divergence there is in baggage policies, and if you're planning a trip
with big/heavy/many bags, the difference in bag charges might more than
compensate for any difference in air fares. When planning your
travels, you now really need to consider the cost of your bags as well
as the cost of the fare by itself.
There has also been a clarification of what
was formerly a vague situation - fees are generally cumulative. So
you might end up paying three times - for an extra bag, for it being
over 50lbs, and being over 62" cumulative size. Which leads to :
This
Week's Feature Column : The $300 checked bag : With
changes to airline luggage policies every which way, you can now find
yourself paying up to $300 to check a bag; even worse, sometimes you'll
find the airlines now refuse to carry a bag entirely for being too big
or too heavy. Here are three pages of information showing the widely
varying airline policies on carry-on and checked bags.
Dinosaur watching : So what's
been happening in the several weeks I was away? More of the same,
alas. There were two more airfare increases - one on 26
June that was initiated by Southwest and matched/exceeded by all the
other carriers, and one on 2 July, initiated by United, and again
matched by the other major carriers. Surely the airlines are
getting closer to the point where they can now start to be profitable,
high fuel costs notwithstanding?
Talking about high fuel costs, I received a
fascinating email from an Alaska Airlines pilot (who prefers to be
un-named). Apparently as an interesting way to pass the time on
his flights, he figures out the actual real fuel used on the flight and
matches it with the passengers carried to get a passenger miles per
gallon figure. Here's his email :
I’m a B737 pilot for Alaska Airlines,
and have recently been computing our actual fuel mileage using our
actual fuel burn, (pounds to gallons) converting nautical to statute
miles, and multiplying by actual number of passengers. I’ll
also go a slightly different direction and compute the number of
gallons used per passenger, multiply by current fuel prices and
determine the fuel cost per passenger. Interesting!
Our mpg ranges from .45-.55, depending
on headwinds or tailwinds, fuel tankering (which also reduces cruise
altitude, increasing fuel burn) etc. With a full load of 172
pax on a B737-900 about the best we could do would be 95 mpg/pax,
but actual values I’ve seen range from 65-80 mpg/pax, across the
range of 737-400/700/800/900.
Regarding fuel tankering : Our
Fuel Management people determine fuel costs at different airports
and the cost of tankering that fuel to the destination. If the
math works out in our favor, and we are not operationally limited
due to takeoff or landing weights, we will tanker fuel. The
fuel costs do not reflect fuel hedges. Alaska has ~50% of our
fuel hedged at $76/bbl for the remainder of 2008.
And still talking about high fuel costs,
the airlines have now worked out who else to blame for their problems
(other than themselves). They are now telling us that the
reason oil is so expensive is due to speculators somehow bidding up the
price of oil.
In a letter to passengers, the CEOs of all
the major US airlines ask us to support legislation to control oil
speculation. They claim that
twenty years ago, 21% of oil contracts
were purchased by speculators who trade oil on paper with no
intention of ever taking delivery. Today, oil speculators purchase
66% of all oil futures contracts, and that reflects just the
transactions that are known. Speculators buy up large amounts of oil
and then sell it to each other again and again. A barrel of oil may
trade 20-plus times before it is delivered and used; the price goes
up with each trade and consumers pick up the final tab. Some market
experts estimate that current prices reflect as much as $30 to $60
per barrel in unnecessary speculative costs. Over seventy years ago,
Congress established regulations to control excessive, largely
unchecked market speculation and manipulation. However, over the
past two decades, these regulatory limits have been weakened or
removed. We believe that restoring and inforcing these limits, along
with several other modest measures, will provide more disclosure,
transparency and sound market oversight. Together, these reforms
will help cool the over-heated oil market and permit the economy to
prosper.
Well, that sure sounds serious, doesn't it.
But is it true? Probably not - at least, not the
conclusions they draw.
If oil trading/speculating is - as this
letter suggests - almost a guaranteed way to profit, then why don't the
airlines (and why don't we) all do it? If it is so simple as they
say, how come they're not so rich? And why should the airline be
at the end of the chain - why not buy the oil at the top of the
speculation chain, rather than at the bottom?
The answers to these questions - or, at
least, the questions themselves - indicate that the situation is much
more complex than the airlines would have us believe. Not
everyone makes money when speculating in oil, and not every trade has
both buyer and seller profiting. Or, to explain it in the form of
another question - if the buyer is sure he will make a profit when
buying oil from a seller, why is the seller selling it at a less than
fully realized profit? Why doesn't the seller keep the oil and
sell it for a higher price to whoever the buyer is planning on selling
it to?
One more question. If the US restricts
or bans oil speculation, what happens to the US oil supplies? The
US can't control speculation elsewhere in the world. So, at every
step along the oil supply chain, sellers will find themselves with the
choice of who they sell to - a speculator somewhere in the world, or a
US oil company, and if the speculator is offering them more money than
the US oil company, who do you think they'll sell their oil to?
And, similarly, if the only source of oil that a US company can obtain
is from an international speculator, what will they do? Pay the
going rate, or let their refinery run out of crude?
Not quite a merger, but notable nonetheless
is the announcement that Southwest and Canadian carrier WestJet will
partner to offer code-share flights between the US and Canada.
Southwest's idiosyncratic way of doing business has always made it seem
the least likely airline to partner with other carriers, and its earlier
arrangement with ATA (mainly for flights to Hawaii) didn't prevent ATA's
demise earlier this year. But apparently Southwest continues to
adopt more of the mantle of the mainstream carriers, and their CEO, Gary
Kelly, refers to a 'perfect fit' with WestJet.
But don't expect new codeshare flights
anytime soon. The two airlines hope to announce more details by
late next year. Why so slow?
Incidentally, Southwest's current market
capitalization is about $2.4 billion more than that of the nine
other largest US carriers combined.
As part of my China trip, I flew four
internal flights within China on Chinese regional carriers. All
four flights were positive experiences, and all four featured
advertising on the headrest napkins, which I thought to be an
interesting thing not commonly seen in the west, and was amused that in
some respects, China is already a more developed marketplace than
even the US.
This article talks about such things that are coming to western
airlines, too.
Britain's Guardian newspaper reports that
Heathrow's terminal 5 is still losing more than 900 bags a day.
The trade union says the baggage handling system still needs improvement
and travelers on connecting flights have a 1 in 12 chance of being
separated from their checked luggage. These figures are higher
than all the other terminals combined.
Transfer bags from T4 have to be manually
transferred to T5 because there is no mechanical system for loading the
bags. Airport owner BAA says there is a baggage link under
construction between the two terminals. It takes some 18 minutes
by bus to go between the two terminals so add time to unload, move and
load bags and some people are suggesting you need a minimum of two hours
for connections, and more is better.
If your flight is late and your connection
time reduces, your chances of getting your bag at your destination are
slim at best.
As the airlines continue to increase their
fares and cutback on their services, there is one quiet beneficiary.
Amtrak. Although Amtrak's ridership continues to grow, it
has a huge amount of catching up to do, and major resource constraints
in its ability to do so.
Ignoring commuter rail services, and
considering only intercity ridership, last year Amtrak carried 25
million people and this year it might reach 27 million people (an 8%
increase). But the airlines, combined, carry about 680 million
people a year; if Amtrak were an airline, it would be the eighth
largest, behind Continental and US Airways, but larger than Airtran and
JetBlue. Here's an
interesting article with some facts and figures about Amtrak's
current size and constraints.
Talking about Amtrak and airlines, it is
unlikely that any US carriers will be emulating the concept that Air
France/KLM is considering. Air France/KLM confirmed last Friday
that it was looking at offering high-speed rail travel as an alternative
to air services between some cities in Europe.
The airline is in discussion with Veolia, a
French utility that runs several rail connections but is not yet active
in high-speed travel. The two companies are looking into a partnership
to create a new high-speed rail player in Europe. The move could mark
the beginning of a decline in short-haul air travel on routes such as
Paris-Frankfurt that have good rail service. Veolia Transport, part of
French water utility Veolia, could run trains under the Air France KLM
brand from their hub at Charles de Gaulle to destinations across Europe.
But don't expect to find your next European
'flight' is on a train any time soon. The airline has already been
exploring the possibility of such a service for the past four years.
Talking about France, guess who the
world's worst tourists are considered to be?
Still talking about tourists, here's a
depressing article about the US's shrinking share of global
tourism. We're a country with an enormous capacity for inbound
international tourism; we've got a huge range of tourism attractions,
and with our low dollar, we're a low cost destination for much of the
developed world. We've brilliant infrastructure to support
increased inbound tourism, and we're a relatively safe, friendly and
honest destination. We should be getting more and more tourists.
But, while the people here are friendly once
visitors get into the country, getting in to the country is a terribly
harrowing experience. The insulting, expensive and inconvenient
procedures that most people elsewhere in the world have to subject
themselves to so as to get a visa to visit the US just discourage too
many people from coming here, when so many other countries provide
simple or visa-free travel opportunities and a friendly welcome upon
arrival rather than rude questioning by a hostile armed border guard in
the US.
We really have to rethink so much of how we
perceive our country in order to see us as other countries see us.
Here's just one other small example - we pride ourselves on American
justice being fair, impartial, and high quality, while we sneeringly
deride 'banana republics' and the ridiculous notions of justice and
jurisprudence in such countries. Try telling that to the lady
victimized by a judge in Houston, in a situation that is so wrong as
to defy comprehension.
The value to our country of inbound
tourism is enormous. It is a major employer, and it brings in
foreign exchange, helping us with our trade imbalance. Much of
tourism is 'sustainable' and uses renewable resources, and we don't need
major capital investments or developments. We just need a friendly
welcoming smile. How difficult should that be?
Here's an
interesting article about a new form of clinical delusion - 'climate
change delusion'. It also has some fascinating statistics in it
that compares Australia's contributions to 'climate change' with those
of China. If you don't want to read the complete article, the
quick summary is that Australia's plans to cut its greenhouse gases by
20% will be balanced by a mere 28 days of increased emissions by China.
As I said above, the growth of everything in China is beyond anyone's
comprehension.
This Week's Security Horror Story :
The US Inspector General for the State Department has issued a report
criticizing the US State Department passport records system saying it is
wide open to abuse and unauthorized access that cannot be detected or
prevented.
The system contains personal data and
information, including Social Security numbers, dates and places of
birth and passport numbers on more than 127 million US citizens.
The IG said there was a lack of security control as more than 100
celebrities' files had been looked at by workers in the department, who
were not punished. The records of 1500 high-profile Americans
whose names were selected from Forbes and Sports Illustrated magazine
lists and Google's most-searched names were examined. The records
of 855 of those names had been accessed a total of 4,418 times, strongly
suggesting attempts at unauthorized access.
Some 20,500 people have access to the system
and 800 of those are outside the State Department working in other
agencies.
We all know how common it is to leave a cell
phone behind in a taxi. But how about leaving a laptop behind at
the airport? According to
this article, 2000 laptops are lost at airports every week.
Which perhaps makes
the plan by the TSA to approve various custom-designed laptop carry
bags as acceptable to go through the X-ray machine without needing to
take the laptop out of the bag a great idea.
Here's an
interesting story and security camera video on what seems to be
excessive use of force by the TSA and local airport police.
While it is true that the people who pay the
big bucks to fly first class don't get to their destination any sooner
than the people in the back of the plane, it is also true that they
expect to be allowed off the plane first once the plane has finally
pulled up at the gate. And, if they find this not happening (which
is surprisingly common - sometimes an airplane opens a door behind
business class, which can lead to business class passengers getting off
before the first class passengers in the very front) the first class
passengers can get somewhat annoyed.
But to do what
this gentleman did is a relatively uncommon response.
With the increasing unpleasantness of air
travel, and increasing cost, maybe
this
guy has a good idea for an alternate form of air transportation?
Lastly this week, Ryanair's CEO, Michael
O'Leary, is known as a somewhat foul-mouthed man and a straight talker
who doesn't hesitate to abandon any pretense of political correctness in
his criticisms of competitors, government bureaucracy, and anything else
that attracts his ire.
Here's a
Youtube video of
O'Leary giving a press conference in Germany. Not suitable for
younger readers.
Until next week,
please enjoy safe travels |