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Friday, 12 June, 2009

Good morning

Another week has passed since the Air France crash, and we're no closer to having any certain knowledge of what caused the crash.  The black boxes remain stubbornly elusive, and some people believe they may never be recovered.  What has been recovered however is a large section of the plane's tail assembly, a discovery which suggests, to some people, that the plane may have had the tail break off - perhaps due to over-deflection of the control surfaces in the turbulent weather, similar to what happened to an A300 on an AA flight from JFK in November 2001.

That is however merely one of many theories.  The terrorism theory has also been slightly bolstered with the discovery that two of the passengers may have been terrorists.  Perhaps they chose to be suicide bombers; but the lack of public claims from terrorist groups makes this a strange scenario.

Another theory is that some of the plane's external speed sensors may have iced over, causing faulty speed readings, fooling the plane's computerized control system to do the wrong things, and either flying too fast or too slow; either one of which could be possibly fatal in the crazy turbulent environment the plane found itself.

Meanwhile, to my mind, the biggest mystery remains why the plane was flying into the storm system, rather than flying around and avoiding it, in the first place.

The answer to this last question can probably only come from the cockpit voice recorder.  Let's hope we find it.

There's a segue of sorts from this subject to this week's feature article.  Almost seven years ago I wrote a couple of articles on travel insurance, from the perspective of what it covers, whether you should buy it, and how to shop for the most appropriate and best value policy.

I'm now adding a third article to that series, focused on things that travel insurance may not cover.  You can use this to identify specific risk situations you might be needing cover for, and then check competing insurance policies for the coverage they may or may not offer.  And so :

This Week's Feature Column :  Ten Things Your Travel Insurance May Not Cover :  Does your travel insurance really cover you for the travel risks you're seeking protection from? Travel Insider David Rowell lists ten scenarios that travel insurance often excludes.

Dinosaur watching :  It is my perception that when airlines lose money it is primarily their own fault, and a result of poor management, even though they invariably blame factors they claim to be outside their control.  I still hold to that thought, but am prepared to concede that the present and near future will be very difficult for many airlines, whether they be well managed or not.

The international airline organization IATA has just revised its financial projection for 2009, outlooking an unprecedented 15% drop in revenue compared to 2008, with resulting net losses of $9 billion.  Note this doesn't mean every airline will lose money; it just means that in total, the industry will have lost $9 billion, with an occasional profit more than outweighed by other airline losses.

The financial blow that has befallen the airlines - a drop in business travel due to the difficult world economic conditions - has, until now, been softened by virtue of the plunging price of oil, allowing for an almost matching drop in costs to help offset the airlines' loss of revenue.  But oil prices are now rising again, removing that saving grace.

Alas, my earlier description of dropping oil prices being nothing more than a short term aberration on what is otherwise a steady climb in oil costs up to who knows how much is being shown to be correct.

Oil prices are now around the $73/barrel mark.  Sure, that is half their peak at the end of last year, but it is also more than double the low of $30 only four months ago.  I hold to my prediction of oil breaking through $100 in less than a year, indeed that prediction is starting to look conservative, even though it seemed unlikely at the time it was made.

This article refers to a $250/barrel prediction by the head of Russia's oil giant, Gazprom.  Such a price, at least in the next 2 - 3 years, is probably more wishful thinking than likely reality, and even longer term, it probably is close to a maximum price due to the twin effects of diminishing use of oil if its cost goes way up, and the increasing financial viability of oil-alternatives.

One more thought about oil.  The short term plunge in oil costs has been as beneficial for our economy as any of the trillions of dollars being thrown away by our government on vague and sometimes secret expenditures.  Remember when gas was $4.50/gallon?  For the last six months or so, gas has averaged something more like $2.50/gallon.  The cash freed up for all of us by this $2/gallon 'saving' is substantial.

If we assume a typical vehicle driving 12,000 or more miles/year, and 25 or fewer miles per gallon - this suggests a gas cost saving of $80+ per month; or $500+ over the last six months.  In addition to these direct personal benefits, lower energy and raw material costs for industry (and for airlines in particular) has helped industry as well.

With energy costs and consumption so closely linked into every aspect of our economy, it could be argued that the best form of government stimulus package - and the least invasive into private enterprise - might have been simply to remove taxes on energy and perhaps to replace the taxes with subsidies.

However, and back to the reality of today and the near future, the ugly truth - especially for the airlines - is that with oil prices headed up, up, up again, the incredibly low bargain fares that airlines have been offering us in a desperate attempt to bring in some extra revenue at pretty much any price will become financially impossible to offer.  If the airlines find themselves in the doubly difficult situation of having soft marketplace demand for air travel on the one hand and rising costs on the other hand, it is hard to know what their solution will be.

Bottom line - now is a very difficult time for the airlines.

My thinking is echoed by a recent statement by credit rating agency Fitch, which believes United Airlines could report substantially negative free cash flow for the final three quarters of 2009.

UA faces debt and lease payments of about $655 million through the rest of this year, $1 billion next year and $869 million in 2011.  The company's cash and investment total has slipped to $2.5 billion from $3.8 billion a year ago due to selling off more than $1 billion in aircraft, parts and frequent-flier miles to raise money.

Fitch cautions that UA's remaining $1.7 billion in unencumbered assets may be difficult to sell, making them of dubious value if/when the airline needs to raise further cash.  The rating agency cautioned that 'United's highly leveraged capital structure is unsustainable in the absence of a sharp turnaround in industry operating fundamentals'.  It also questioned UA's ability to finance the large 250 long-haul aircraft order for which it recently issued an RFP.

Southwest's CEO Gary Kelly is also far from bullish about his airline's future.  He said June revenue looks to be weaker than May, and he doesn't yet see signs of a turnaround. 'It's a very, very difficult time, and earnings are going to be very stressed until the economy changes,' Kelly said.

A gloomy prognostication came from Willie Walsh, CEO of British Airways this week.  He said he was meeting with BA's unions to try and reach an agreement on cutting costs using unpaid leave and part-time work to help the airline weather the economic downturn.

He said airlines will never again see the 'golden era' for business traffic that they all enjoyed before the credit crisis.  The continued slide in lucrative passenger traffic, especially among profitable first and business-class passengers is evidenced by BA's premium (first and business class) traffic slumping 17.2pc in May.  Premium traffic has now fallen for 13 out of the last 14 months.

Even stronger rhetoric came from across the Irish Sea, where the chairman of Aer Lingus told shareholders the airline was facing its most difficult time in its history.  Aer Lingus reported a net loss of $152.8 million in 2008.  The chairman declined to provide any financial guidance for the future.

However, even though Aer Lingus may be facing its most difficult time ever, there are some things it refuses to countenance.  Its board rejected two resolutions proposed at its AGM that would have reduced the fees paid to the airline's nonexecutive directors and chairman.  In condemning the board's refusal to adopt these measures, the airline's largest minority shareholder, Ryanair (with a 29.8% stake) said 'This perhaps explains why Aer Lingus continues to lurch from crisis to crisis, losing passengers, losing money and burning through the cash that shareholders provided to Aer Lingus at its September 2006 IPO'.

Congratulations to Qantas.  They have won the 2009 Australian International Design Award of the Year for their A380 Economy seat.  Stephanie Watson, program director of the Australian International Design Awards, said the Qantas A380 seat won the Australian International Design Award of the Year for its innovative, functional and intelligent design.

You can see some photos and get more information about the seat here.  Perhaps the most obviously innovative feature is the mesh net 'footrest'.  It is nice to see some attention being given to the part of the plane where most of us fly.

Now the airlines have almost completely automated the check-in process when we get to an airport, they've shifted their focus to another element of the travel experience where they feel we no longer need to interact with real people.  This relates to lost luggage - no longer will we line up along with twenty other distressed passengers, waiting our turn to point to a 'Type 22' black softsided suitcase with wheels on a grubby laminated sheet of pictures of luggage types and fill out a form that is then typed into the computer by an airline employee while we wait , then emerge holding on to a piece of airline printout giving us a claim number.

Instead we'll go to a self-serve kiosk where we enter all this information directly into the airline system ourselves, and without an airline employee offering insincere platitudes.  Most airlines use the same 'backend' system, SITA's WorldTracer program, for their lost luggage service, and SITA has now released the self-serve kiosk concept.

SITA's VP for Airport Solutions, Catherine Mayer, says 'Our WorldTracer application will be able to provide them [passengers] with instant feedback on the status of their bags, 99.9% of which are successfully traced and reunited with their owners within 48 hours or less.'

So cling to that thought - you're 99.9% likely to get your delayed/missing/lost bag within 48 hours of your flight arriving, although my own experience suggests the wait is more likely to be at the 48 hr end of the scale rather than at the 0 hour point.

More high speed rail in unlikely parts of the world.  While the US congratulates itself on an $8 billion 'commitment' to high speed rail that won't actually see any specific rail line, anywhere in the country, paid for and built, other countries, big and small, prosperous and poor, are quietly moving ahead and creating high speed rail links.  This time it is a link between Helsinki and St Petersburg, to start service next year, which will reduce the rail travel time down from the current 5 hour journey, first to 3 hours, and then down still further to a mere three hours, less time than a flight, after allowing for the pre and post flight lead times and delays.

Passenger numbers (currently almost a quarter million passengers a year) are expected to triple.  Trains will travel at speeds of up to 220 km/hr (140 mph).

If even Finland and Russia can put together a high speed train service, and on a route that is relatively lightly traveled, why can't we do the same?

Remember swine flu?  After a one week brief flash as lead item in the world's news organs, it retreated back to a minor point of happily little interest or impact to most of us.  But on Thursday the WHO finally did what had been expected a couple of months back, and elevated the status of the flu outbreak to phase 6 - this being the top level, indicating a world pandemic has broken out.  This is the first time since 1968 that a phase 6 pandemic has been declared.

Fortunately, we can more or less relax.  The WHO is quick to point out that the continued spread of this flu variant does not also mean a major threat to the world as we know it.  After some initial data that incorrectly suggested the strain to be virulent and significantly lethal was corrected, the ongoing experience to date suggests the flu to be mild, no worse than the regular seasonal flu's that do the rounds each year, and maybe even less lethal.

At this stage, the new pandemic status is not expected to interfere with our normal domestic and international travel plans.  More details here.

I've been making various arrangements to travel to Europe for the Travel Insider group river cruise through Germany at the end of this month.  I'm spending time in England both before and after the cruise.  Some things have been easy to confirm/arrange, but others have been extraordinarily difficult.

The worst thing has been booking a couple of car rentals with Hertz.  I generally like to give my business to Hertz because I view them as a reputable solid reliable company with good quality standards and nice cars.  I know they are a bit more expensive than some of the other car renting companies, but on the basis of 'you get what you pay for' I'm pleased to pay a moderate amount more to rent a car that I'm more likely to have no problems with, than to be potentially penny wise and pound foolish.  Add to that the brilliant convenience of their Gold Express lane service (yes, other car rental companies have copied this excellent idea) and they usually get my business.

So I tried to do a very simple thing on their website.  I wanted to hire a car at Heathrow, drive it around England for a few days, then return it to St Pancras Station in London (this is where the Eurostar train to Europe departs from).  I tried to do this on their website, but couldn't puzzle out which of their many locations in London was closest to St Pancras Station, so decided to use their online chat/help service.

After 20 minutes of conversation with Diane G, she admitted she had no idea, and told me to instead call their (800) number.

So I called their (800) number and waited on hold for 15 minutes before a nice helpful lady explained my options to me.  She offered to book it for me, and I agreed.  But first she said she couldn't find the same car category as was offered online, and then, when she did find it, her rate was higher than was quoted online.  She explained there is an extra cost (in this case, about $26) to book a rental car by phone rather than on their website.

This struck me as ludicrous, so I went back to the website, only to get a peculiar error every time I tried to make the booking.  A popup window would appear, saying "Rental Services Provided By" and an Okay button.  Nothing else, just this cryptic message and an Okay button.  Clicking the Okay button took me back to the original booking screen, and trying to go further forward took me to the popup window again.  I was stuck in an endless loop.

So another 30 minute conversation with online support followed, at the end of which they explained that this message actually means 'We're sorry, but the location you're trying to return the car to is closed at the time you plan to return the car'.

Is it only me, or is there something terribly terribly wrong with a website that says 'Rental Services Provided By' when it means to say 'We're closed at the time/location you want to return your car'?

Add it all up, and so far I've wasted close on an hour and a half, unsuccessfully trying to book a rental car.  Shame on Hertz for having such a ridiculously bad web interface, an unfair surcharge for making phone bookings, and appallingly untrained unresponsive support staff.

Apple has now announced details of its new iPhone 3G S phone, to go on sale in a week.  The new phone will be slightly faster, with slightly longer battery life, now with video as well as still picture capabilities, and have larger memory capacities than present iPhone 3G units.

But is this a reason to rush out and buy an iPhone if you've resisted buying one so far?  Or is it a reason to upgrade from an earlier model iPhone?  Probably not, in either case.  These are tweaks rather than huge advances.

In addition, the iPhone has spurred other phone manufacturers to create more user friendly phone interfaces and to add new features to their phones, and the initial lead the iPhone had over other phones has now dwindled, meaning that if you're looking for a state of the art phone with massive user friendliness and lots of neat features, the iPhone no longer has the market to itself.  Phones based on Google's Android operating system will start appearing more frequently, with perhaps as many as 15 new Android based phones due to be released in the remainder of this year, and Blackberry is rapidly trying to make its phones more user friendly too.  There's also a new Palm phone, but as far as I can tell, Palm is sadly no longer a leading contender in a market it once dominated.

I still like the iPhone, but I also like my Android based G1 phone from T-Mobile and it is the main phone I use.  Don't buy an iPhone without checking out some of the other new smartphones being released, too.

This Week's Security Horror Story :  A University of Washington art professor was frisked, handcuffed and detained by City of Snohomish police after snapping photographs of power lines that were in plain view.  Although there were no signs prohibiting photography, and the power line pictures were taken from public land, police detained her, searched her car, handcuffed her, and generally gave her a hard time.

A court has now stated the obvious - the professor's Fourth Amendment rights against unreasonable search and seizure were violated.  The judge said that generalized, unsubstantiated suspicions of terrorist activity do not give police the right to ignore people's constitutional rights.

Alas, the City of Snohomish seems unswayed by this, describing their decision to pay a settlement to the professor as being a 'business decision' rather than an admission of wrongdoing, and saying they stand behind their police officers' actions.  What part of violating constitutional rights do they not understand?

Expect more of such totalitarian police state type action in Snohomish, and hopefully more lawsuit victories.  Details here.

The left hand doesn't know what the right hand is doing.  Currently we are seeing two opposite events unfolding.  At airport security screening stations, the very sensible and essential move to add X-ray type technology that sees under your clothes to reveal anything else that might be hidden (such as plastic explosives which wouldn't sound a regular metal detector alarm) is the subject of a new Bill in Congress that seeks to limit its deployment.  Note that going through these X-ray machines are optional; if you don't want to, you can request a hand pat-down instead.  Details here.

But, at the same time as Congress seeks to foolishly restrict the use of this sensible technology, the Port Authority of NY and NJ has announced a pilot program to screen all passengers seeking to travel on the trans-Hudson river commuter train system, with screening being mandatory.  Passengers who don't agree to the screening will be refused entry to the stations (not all stations will have screening, however).  Details here.

Are we expected to believe that this essential X-ray screening, which addresses a major vulnerability in current airline passenger screening, should be limited and restricted at airports, but should be encouraged and made mandatory for commuter train passengers?  Maybe someone has been watching the new Pelham 123 movie and taken it all a bit too literally?

Feeling romantic?  Keen to get married in a distinctive location?  How about the balcony in Verona - supposedly the 14th-century Casa di Giulietta, home of Juliet Capulet (as in Shakespeare's play, Romeo and Juliet) and featured in the play's 'balcony scene'.  For only 1000, plus 300 extra for us non-Europeans, you can get married in the house and pose on the balcony.

Verona is offering this and other places featured in the famous romantic tragedy as wedding locations - but I'm not sure that Juliet's tomb strikes exactly the right note of festivity for a wedding location.  More details here.

For those of you who wondered how it is possible to hear Big Ben strike thirteen times (the question posed at the end of last week's newsletter) here's the answer.  Go somewhere that is about 5000 ft away from Big Ben as the crow flies (or slightly less), and where you can clearly hear the clock (draw a radius line using Google Earth to see where this would be).  A good position would be on the other side of the river on the Vauxhall Bridge, south of Big Ben.  At this point, sound takes 4.5 seconds to travel to you, and the clock strikes once every 4.5 seconds.

Now for the clever part.  At midnight on New Year's Eve, when the BBC play the sound of Big Ben, start off listening to the chimes on the radio.  The sound through the radio travels at close to the speed of light, which is almost instantaneous.  This means the second chime on the radio will synchronize with the first chime coming through the air at the speed of sound, and as the chimes continue, fade out the radio, so that you end up hearing the first chime from the radio, then the full set of twelve chimes directly from the clock.  In total, you hear 13 chimes.

Until next week, please enjoy safe travels

David M Rowell aka The Travel Insider

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