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Boxing Day; Friday 26 December, 2008
Good morning
I hope your Christmas was filled with cheer,
and that Santa made an especially beneficial stop at your chimney.
This is the last newsletter for 2008, of
course, and I hope that the festive season will continue to the New Year
for you, and that we'll all have a great 2009 free of the trials and
tribulations that have assailed us in 2008.
As Twitter followers already know, my main
Christmas present to myself (yes, sad, isn't it - the major source of my
Christmas presents is me!) was a Blu-ray Disc player.
Like most people, I have delayed buying a
Blu-ray player until now. First, there were the 'format
wars' between Blu-ray and the rival competing format, HD DVD. This
was finally resolved early this year, with HD DVD bowing out and Blu-ray
becoming the only high definition DVD type format.
The second reason for delaying purchase was,
ahem, the ridiculously high cost of players and discs, and the very
limited range of movies available.
But with the dropping in price of players -
you can now get perfectly good players for less than $200 - and the
gradual drop in the cost of movies (some can now be purchased for only
$10 each) and the increasing range of movies available, the time seemed
right to buy one.
And, oh my gosh, the difference in quality
between a regular DVD and a Blu-ray disc is astonishing. The Blu-ray
picture quality is massively better - but there's a catch to its massive
improvement.
You have to have an excellent quality screen
to be able to show you the better picture quality that the Blu-ray disc
provides. I have two television sets, and while both are rated
as 1080i capable, the older of the two units offered only a small amount
of quality improvement compared to DVD. But the newer screen came alive when a Blu-ray
disc was played through it.
The even bigger downside to all of this?
I'm now looking at my collection of DVDs, all of which are now obsolete
and so inferior as to detract from the enjoyment I used to derive from
viewing them. And, worst of all, there's a terrible feeling of deja vu to all of this. The same thing happened to me when I
upgraded from VHS tapes to laser discs; and then from laser to DVD.
I have some movies that I've bought in each format, plus on occasion
extra copies for things like 'Director's Cut' or 'Special Collector's
Edition' or who knows what other marketing artifice. Blu-ray
players are backwards compatible - they'll play DVDs too, so that is at
least a blessing, but they can't make a DVD look as good as a Blu-ray
disc.
I was in Walmart earlier this week (as my
Twitter followers already know) and forced myself to walk past their
bins of $5 DVDs, and concentrate only on their $10+ Blu-ray discs.
If you haven't yet bought a Blu-ray player yourself, this is something you'll probably choose to do within the
next year or less, especially if/as prices continue to fall for players
and discs too. With that in mind, three things to consider :
First, if you're buying any new television sets, be sure to get sets
that are capable of displaying 1080p images (important that it is
1080p, not just 1080i). This will allow the set to display the
best possible picture when you do get a Blu-ray player.
Second, ease back on buying DVDs - consider renting or the Netflix
service instead, because any DVDs you buy now are going to be obsolete
from a quality perspective as soon as you get your Blu-ray player.
Third, if you're buying any additional home stereo audio equipment, make
sure it is compatible with the latest 7.1 and DTS surround sound specifications
so as to be able to get the best sound from your Blu-ray player too.
A good sound system changes the viewing experience profoundly - I think
it was Steven Spielberg who said that good sound is as equally important
to a great movie as is a good picture.
Continuing an electronic/gadget type theme, last week I reviewed a
midrange pair of Sony noise canceling headphones, their
MDR-NC60
headphones, costing about $135. This week, it is the turn of the
top of the line Sony noise canceling headphones, their MDR-NC500D
headphones, costing an impressive $400.
The major distinctive feature of these
headphones is they use digital rather than analog electronics to
process the sound and cancel out the noise. Although this is
presumably the reason they charge such a ridiculously high price, I have costed out the components they use and it seems the extra cost of
the digital technology is something less than $11.
For sure, you want to have a very good understanding about what you get
before you agree to spend $400 on a set of noise cancelling headphones,
and so, here's a two part review to hopefully tell you all you need to
know :
This Week's Feature Column :
Sony MDR-NC500D Noise Canceling
Headphones Review : Should you spend $400 on these headphones?
Are they truly the best headphones available? And do they justify
the $100+ extra cost over the Bose Quiet Comfort 2 headphones?
Talking about the Bose Quiet Comfort 2 headphones, thanks to reader Bill
who writes
The price of new QC2 headphones is daunting. However if you already own
the old QC1, Bose will trade it in for a new QC2 for 100 bucks. They
don't advertise this, but it is real. I just traded in two sets. $100.00
is a great price for the QC2, if you already own the QC1. Contact their
Parts and Service department.
One more thing about the Bose headphones - and if you didn't read the
entire two part review of the Sony headphones, let me quickly tell you
that the bottom line is that I ended up recommending the Bose Quiet
Comfort 2 headphones as being a better choice than the Sony headphones.
Normally Bose has an iron-clad retail price of $300 on these headphones,
and does not allow any retailer to discount them.
But while writing the Sony review, I saw them
for sale on
Amazon for only $269, and they remain
available at that price now.
I don't know how long they will stay discounted (the Sony headphones had
been also discounted for a brief while, but when I went to buy them,
they had gone back up to full list price everywhere I looked), but if
you've been toying with the idea of getting a set of the Quiet Comfort 2
headphones (in my opinion the best of all currently available noise
cancelling headphones) it might be worth while treating yourself to a
late Christmas present now.
Dinosaur watching : How about a
nice positive airline story to end the year? So let's talk
about Sun Country Airlines (yes, a very small airline, but - hey
- good stories about airlines are far and few between!).
Sun Country filed for bankruptcy protection
in October, and - as is traditional in such cases - imposed two rounds
of wage cuts on its staff. But it is now profitable again and
expects this quarter to either break even or possibly even make a small
profit. So what is it doing?
It is paying its employees 40% of the money
they lost from the wage cuts, and says that from 1 January, employees
will be back to their earlier full wage rates.
And - get this - the airline will give
the rest of the lost wages back to employees in April, plus a 3%
interest payment too.
Southwest had a bit of year-end fun when
their CEO commented that they might add flights to another major US
airport as early as next fall, an announcement that will strike fear
into the hearts of all the dinosaurs, who will now be wondering/worrying
if it will be one of their key airports that Southwest may attack.
But one airport that perhaps Southwest is
not likely to add further to is LaGuardia, where the airline recently
bought the 'slots' previously owned by now bankrupt ATA.
LaGuardia has the highest number of flight delays of any airport in the
country (and with Southwest's tight scheduling, unreliable airports
are a real problem), and so the FAA has lowered the cap on flights from
75 down to 71 flights per hour in an effort to reduce congestion at the
airport.
On the face of it, this is a sensible step,
although also a backward step (a more positive step would be to improve
air traffic control issues to allow the airport to better handle 75 or
even 80 flights an hour). But it may not succeed, because this cap
is, ooops, a voluntary cap. If the airlines don't agree to
accept this restriction (with AA, DL and US being the three major
carriers at LGA) then the situation will stay as it currently is.
If I had a dollar for every time I've read an article that quotes an
airline executive who says confidently 'We are meeting our goals and are
confidently on target for profitability, with plenty of cash in the
bank' and which is followed, very shortly later, by the airline going
bankrupt, I'd not need to write this newsletter for a living. This
is primarily true of private airlines that don't file public accounts,
but it has been true of public listed companies too.
The latest executive making such bullish statements is David Cush, CEO
of Virgin America (VX). Here's a
very gushy article about him and his airline that doesn't
ask any hard questions or offer any real insights into the airline at
all, but two days before Christmas, it is probably the best the
newspaper can do - all the more so because it is the local cheerleading
paper for San Francisco and therefore VX.
I make these cynical comments not in the expectation that Virgin America
will go broke, and certainly I hope it will survive and prosper, exactly
as CEO Cush predicts. But the airline is understood to have been
operating comparatively light loads on its flights, and certainly in the
'bad old days' of high fuel costs, it must have been bleeding cash out
of every orifice. It is, however, a great little airline, and
deserves our support whenever your travels take you somewhere they fly.
Talking about Virgin, I wrote last week
about the planned commencement of related company V Australia's
flights between Sydney and Los Angeles on 27 February 2009.
The route between Australia and the US has been one of the least
competitive of all routes, with the result being fares are much higher
than for travel to most other places, and it has been one of the most
profitable parts of market dominator Qantas' worldwide operation.
So it is great for us as passengers to see a
new airline start to offer service on the route.
And now, news of yet another airline
about to add service on the route, too. This time it is Delta,
who intend to revive their merged partner Northwest's service to
Australia (Northwest briefly operated then withdrew service to Australia
in the mid 1990s), with a plan to start daily 777 service in July 2009
(hmmm - July - the absolutely slowest time of the year for travel
between the US and Australia. This is the worst time of year to
start service to the South Pacific, although a traditional time of year
to add new service to northern destinations - do you think DL realizes
that air travel patterns to Australia are six months out of phase to
travel patterns to Europe?).
If Delta chooses to make a more substantial
commitment to this route than did Northwest, it spells trouble for
startup airline V Australia, and could lead to a major impact on Qantas'
profitability too, while opening up more choices to us as
passengers, with now airlines from all three major alliances (Oneword =
Qantas, Star = UA and Air NZ, Skyteam = DL) offering service on the
route.
Talking about impacts on Qantas, the proposed
merger between Qantas and British Airways has been
ostensibly called off, although I'd be far from surprised to see it back
on again in the future. Apparently the two airlines couldn't agree
on their respective values to calculate a formula for merging, and so
there's a good chance that pronouncing the merger as dead is equivalent
to bargaining in a bazaar where you walk away, refusing to pay the
price, in the desperate hope that the merchant will run after you and
drop the price some more.
On the other hand, it would a strange merger of two airlines - located at
almost exactly opposite sides of the world, and already cooperating on
the routes they compete on, thereby providing little immediate 'synergy'
(the code word for 'opportunities to reduce competition between us').
And whereas Qantas has been and continues to be robustly profitable,
with a projected $500 million pre-tax profit for the current year, BA
anticipates making a loss and also has the small matter of a £1.7
billion shortfall in its pension fund.
Other airline mergers have been between airlines that share the same
general operational base. A BA/QF merger would have been a totally
new concept, and offering uncertain benefits and many problems to both
merging partners.
This now leaves BA able to concentrate on
its closer-to-home merger with Iberia, and Qantas is now rumored to be
looking at Malaysia Airlines.
The flow-through impacts of DL starting
service to Australia may also cause other alignments and changes.
The several times failed attempts at a merger between QF and Air NZ
may be revisited, and up in the US, Alaska Airlines -
formerly a 'best friend' for both QF and DL/NW - something it could get
away with when there was no competition between QF and DL, may now have
to choose which airline it wants to be best friends with (from the
perspective of code sharing domestic flights that feed into the
trans-Pacific flights to/from Los Angeles.
Good news = airlines continue to reduce
their fuel surcharges.
Bad news = the fares are remaining the same.
The airlines are simply taking the money they formerly charged us as a
fuel surcharge and adding it to the airfare instead. Details
here.
Which makes the entire fuel surcharge
charade even more pointless. Why don't the airlines just simply
adjust their fare as needed, rather than play games calling part of the
fare a fare and part of it a fuel surcharge. Their present
approach insults our intelligence and offends our sense of fair play.
One has to think that the airlines will
be making huge profits in 2009 - at least until such time as fuel
costs rise once more. But
this article reports on an analyst who says the airlines will need
to fly with their planes 78% full next year just to break even.
If you read the article about Virgin America
(which outlooks positive profitability), you may have noticed the
passing mention that their fuel costs dropped from 55% of total costs
down to 20%. The same is happening for all other airlines,
too. So how can any airline fail to become extraordinarily
profitable next year - especially because, as we have also seen, they
are not dropping their fares to match their reduced fuel costs?
Why would an airline need to have 78% load factors just to break even?
Remember that today's airlines are
structured very differently to a few years back. The twin assaults
on them of the post 9/11 crisis and the fuel crisis caused them to
massively cut back on their staffing costs, paying fewer people less
money to do more work. They've phased out older gas-guzzling
planes, and discontinued unprofitable routes. They have lower cost
bases now than ever before.
Why can't they be abundantly profitable (and
oil is currently around $35/barrel) at present?
Reader Bruno reports that he lives
equidistant between SFO and LAX, and so was checking fares to fly from
either airport to Singapore and Hong Kong. The cheapest fare from
SFO routed him first to Los Angeles and then on from there. And
the cheapest flight from LAX routed him first to San Francisco and then
on from there. Because airlines typically charge more for the
convenience of a nonstop flight, this means that in this case, they are
charging less money for considerably more flying.
Do you think such crazy pricing schemes
might be part of the reason why airlines are alleged to be struggling to
be profitable in 2009?
Talking about the positive impacts of lower
oil costs, here's a fascinating factoid : Economists
believe that American consumers as a whole pocket a billion dollars
every time the price for a gallon of gas drops by a penny. With
the gas price today almost $3/gallon down on what it was in July, that's
a massive amount of extra cash being injected into the economy. I
certainly notice it when filling my gas tank now costs only $30 instead
of $90.
Perhaps this explains the drop in sales
of hybrid vehicles. The Nissan Altima saw its sales drop 70%
in Nov 2008 compared to Nov 2007, the Honda Civic was down 68%, the
Mercury Mariner down 53% and the Toyota Prius dropped 48%.
Another fuel related factoid :
1.137 billion gallons of extra gas are consumed each year in the US due
to people in cars weighing more than they should, as reported
here. I must confess, being recently returned from the
Christmas Markets cruise and having eaten way too many sausages and
other food (as Twitter followers know), I needed to let a notch out of
my belt, but having spent much of the last few days shoveling snow,
perhaps I can soon stop worrying about the extra fuel I'm now consuming.
Fast factoid : Tourist arrivals
to Beijing in August 08 (the month the Olympics were held there) totaled
389,000 - a drop of 7.2% compared to the same month in 2007 - an even
more startling drop when you consider that tourism in China is otherwise
growing at an annual rate of 10.4%.
Countries always boast about the enormous
positive impact on tourism that hosting the Olympic Games will bring
(as part justification for the enormous cost of staging the games).
I've yet to see any country point to any convincing tourism benefit,
proud boasts to the contrary notwithstanding.
This Week's Security Horror Story :
Here's an
excellent article on a gentleman referred to as 'The Business Class
Terrorist'.
Reader Cal had his first experience with
the TSA's new three lane approach to getting through security
screening. There are lanes for 'experts', for 'casual' (ie
inexperienced) fliers, and for families. As a UA 1K Million Miler,
he headed for the expert lane, but then noticed there was a long line of
people in that lane with only one scanner, but no-one in the family lane
that was being served by two scanners. So he went over to the
family lane, only to be told that he couldn't go through that lane,
because he didn't have a family with him.
So, the bottom line for the TSA's new
approach to speeding us all through security - it is a dismal failure.
This should not surprise anyone familiar
with the mathematical science of queuing theory. The fastest way
to process a line of people is to have one line fanning out to the
multiple scanners at the end of the line, not to have separate lines for
each scanner. This is very fundamental queuing theory, but
apparently too advanced for TSA's rocket scientists.
Here's an interesting list of 'top
travel stories in 2008' - albeit with a slant to frequent flier type
issues.
And here's an amusing list of the
most annoying types of airline passengers.
Lastly for 2008, I want to pass on some
thoughts about our economy. As FDR put it, we have nothing to fear
but fear itself.
In my (rarely humble) opinion, political
commentators with an underlying agenda talked up the economic problems
earlier this year, so as to advantage the Democrat candidate for the
presidency. I listened, at one time, to an economics professor
being interviewed on a radio show in the middle of the year and he said
'The economy is in such a bad state that we're way beyond a recession;
this is a full blown depression' - even though, as he surely knew, we
had yet to meet the definition for a recession (two quarters of negative
growth) let alone trespass beyond that to depression territory (more
nebulously defined as 'a severe economic downturn that lasts several
years).
Just this week, we're told in doom and gloom
laden terms that the US Dept of Commerce has revised downwards its
measure of our economy for the third quarter. But the actual
statistic? It contracted by an almost imperceptible 0.5%.
That's nothing, and certainly nothing to justify the continued gushing
of emotional rhetoric that is almost literally talking us into the bad
economic times they're worrying about so theatrically.
Except, of course, now that the Democrat is
about to become President, we can expect to see these doomsayers
suddenly become cheerleaders instead. We'll have to wait until
they've finished the classic 'Oh my gosh, things are much worse than we
thought they would be' phase of their propaganda, so they can then
triumphantly point to the major successes of the new administration in
successfully combating the economic crisis.
My belittling of the importance of the
problems we are currently confronting might seem strange when we are
beset by bank blowouts/buyouts, a collapsed share market, and the much
talked about 'Big Three' automaker problems, and I certainly don't wish
to pretend that we don't have problems. We do indeed have
problems. But we're far from the type of apocalyptic events of the
Great Depression. Remember the 0.5% contraction in GDP for our
third quarter? Well, from 1929 to 1930, GDP shrunk 9%, from 1930
to 1931 it shrunk 6.4%, and from 1931 to 1932 it shrunk 13.4%.
Unemployment rose from 3.2% in 1929 to as high as 25% in 1933 (but even
with awful 25% unemployment, that still means that three out of every
four people were working).
My point is simply this. If we all
stop spending, then we will have a financial calamity. I'm not
saying we should spend as imprudently or as profligately as the
government itself is. (Do you have any idea how many trillions of
dollars it has spent in the last three or so months, or on what, as part
of its financial 'bailout' moves? I don't think any of us - and I
don't think even that any of our political representatives either - have
an accurate handle on where and how money is currently being spent.)
But I am saying don't let this become a self-fulfilling prophecy.
Live your life prudently, but reasonably normally.
If you're a home owner, why not refinance
your mortgage - rates can be found below 5% now, and spend the money
that you'd otherwise have paid in mortgage interest on economy boosting
purchases such as - well, a Blu-ray disc player and new big screen tv!
Or the Bose QC2 headphones. Or treat yourself to a nice vacation
in 2009.
Here's
an article from the Washington Post that puts these issues into
excellent perspective.
And so, with these as the last of some
400,000 (!) words I've written this year, please allow me to wish you
an excellent 2009. May our problems be small ones, and our
successes large ones. May our resolutions last at least through
the end of January. And may the airlines become so profitable that
they eliminate all the fees they've imposed on us this year.
Until next year, please enjoy safe travels |