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Friday, 10 July, 2009

Good morning

And hello again from England, where I've enjoyed several days up in North Yorkshire, based in my favorite small town of Pickering.  After an unfortunate last night in London (swelteringly hot hotel room, broken air conditioning, window that won't open more than a crack) I'm flying back to Seattle today, and the newsletter will hopefully return to normal next week accordingly.

The cruise that 25 Travel Insiders enjoyed with me last week was one of the best cruises I've yet taken.  Everything combined to make it a marvelous experience.  The weather was close to perfect, with almost no rain impacts at all, and most days were sunny and warm to hot.  The long evenings and northern latitudes saw it remaining light until after 10pm, something we enjoyed to advantage on several occasions, most notably a special wine festival in Zell complete with large brass band and a presentation to our group by the Mayor of the town.

The 25 of us, from places as diverse as Abu Dhabi, Canada, Madeira, and New Zealand, as well as of course many from the US, were uniformly good people, and the opportunity for group fellowship added greatly to the pleasure of the cruise.  Unsurprisingly, a lot of this fellowship was over the dining table, where the food was the best of any river cruise I've yet been on.

Ashore, the touring programs allowed more versatility and flexibility than other itineraries, allowing people to see as much or as little as they chose, and with plenty of time to simply relax and watch the beautiful scenery go past, replete with grape vines as far as the eye could see, and leavened with the occasional castle or two plus of course, beautiful towns and villages.

All in all, a marvelous experience enjoyed by us all.

Alas, like all good things, it had to come to an end, which in our case was at 4.00am Monday morning by the side of the canal when the boat briefly pulled up alongside a wharf to drop ourselves and one other couple.  We had an early morning flight from Nuremberg on Air Berlin to Stansted (where I waited a mere one minute for Immigration, unlike the 45 minutes or more at Heathrow ten days earlier) and the ship was not due to arrive into Nuremberg until later that morning, so they simply dropped us by the side of the canal.

It was an eerie experience, reminiscent of some 1960s era spy movie, with the harsh searchlights from the ship illuminating a brief patch of canal bank, and nothing else for miles around.  Except, happily, a taxi which arrived to take us on to the airport.

With all this as prelude, I've decided to return to the idea of a Christmas Markets cruise again this year.  I'd been earlier less certain about this, but after this brilliantly positive experience, and after securing a wonderful special rate for this year's cruise, and arranging for it to be on the same ship with the same crew as this cruise just finished, it seems a compelling concept which I hope you'll choose to join me on.

I've slightly tweaked the cruise itinerary and the Prague optional add-on to make it more flexible and appealing, and with lead prices as low as $1399 for an E category cabin (with the possibility for a further $150 discount if you've been on a previous Amawaterways cruise and are an AARP member), this becomes a compelling value proposition on what is the perennial favorite of myself and the Travel Insiders who choose to join me on these cruises.

The combination of the Christmas theming, the wonderful markets, and a group of like minded fellow travelers at a special time of year make these enormously enjoyable.  And so :

This Week's Feature Column :  The Travel Insider 2009 Christmas Markets Cruise :  Please join us on what will be our fifth annual Christmas Markets cruise, traveling from Budapest to Nuremberg along the Danube river, and with optional pre-cruise time in Prague. 

One last thing on the topic of cruises.  I've received a list of about 50 other cruises which are available at special rates.  I haven't had time to update my webpage on these discounted cruises, but if you'd like to receive advance notice of these other discounted cruises during the remainder of 2009, please let me know.

There's not a great deal else for this newsletter this week, but just so you don't feel it is only an advertisement for the Christmas cruise, here are a few items.

Dinosaur watching :  If you can't beat 'em, join 'em.  This again seems to be the message in the airline industry.

Most of us have been delighted at the opening up of competition on flights between the US and the South Pacific.  The former lazy oligopoly, massively dominated by Qantas, has been under attack, first with the commencement of flights by new Australian airline V Australia early this year, and then further by the addition of a daily Delta nonstop to Sydney from 1 July.  The result has been plummeting fares, with so much volatility and wonderful deals that there seemed to be ever present discounts and airfares as low as about $500 roundtrip between Los Angeles and Sydney.  I've never, in my 24 years in the US, or in my time in NZ prior to then, seen airfares that low.

But now, barely a week after Delta started its daily nonstop flights to Sydney, it has announced that it is seeking regulatory approval to form a joint venture with the new Australian carrier, V Australia (which is part of the Australian Virgin Blue group, which is in turn partly owned by Sir Richard Branson's Virgin holdings in general).  The press release proudly claims that joining together will allow 'Delta and the Virgin Blue Airlines Group to compete more effectively in those markets by collaborating on route and product planning, codesharing on their respective networks and extending frequent flyer program benefits and lounge access to customers of both airlines'.

Sure, it will allow Delta and V Australia to 'compete' more effectively - by no longer needing to compete at all.  But will we as travelers benefit from the reduction of true competition that this new alliance represents?  Surprisingly, it is possible that on this rare occasion, the answer may actually be yes.

My fear has been that V Australia will not have the financial resource to survive on the route, and that Delta will also lack the resolve to stay the journey.  There are plenty of past examples of airlines who have tried to break into the South Pacific routes and failed, including Delta's new stablemate, Northwest, who briefly flew the route in the mid 1990s.  By joining forces, these two weak and possibly irresolute airlines may become a more effective and stronger airline, better able to stand alongside market dominator Qantas, and their less effective foil, United/Air New Zealand.

Talking about United, in my last newsletter I wrote anxiously about their move to make it more difficult for travel agencies to accept credit cards on their behalf.  This is a very traveler-unfriendly move with grave significance that goes way beyond the mere addition of extra fees when you seek to buy a UA ticket - you should read my earlier commentary if you haven't already done so.

One of our readers - a UA Premier Executive Mileage Plus member, wrote in to United after reading my earlier comments.  Here's his email and the nonsense platitude laden non-response that United offered back.

First, his email to United :

I've heard that United has notified a limited number of travel agencies that, effective 20 July, the agencies will no longer be allowed to accept my client credit card on your behalf.  Instead, the travel agency will have to charge my credit card directly, then remit the airfare to you via direct bank transfer.

This causes me to lose some existing legal protections if I have a dispute with you.  I will not be able to challenge a credit card dispute with you.  I can only go after the transaction with my travel agency, but the agency has already paid you separately.  You have no incentive to settle a dispute with me.

If this policy is allowed to continue, my wife and I, both Premier members will seriously consider refusing to travel with United in the future.  My company, a major aerospace company dropped you last year as a preferred provider.  That makes it harder to maintain my elite status.  Please don't provide an incentive to completely switch airlines.  Continue to directly charge my credit card, and without a fee.

And now the reply he received, which is either a lie or a complete misunderstanding of the issues he raised.  The emphasis and square bracketed comment is mine.

Thank you for contacting us. We appreciate the opportunity to respond.

The issue you have contacted us about; credit card acceptance is a direct policy of the individual agency not a United policy [This is completely wrong].  Travel agencies may accept the form of payment based on their own discretion.  This being said, some credit card companies have additional security measures which require the credit card used for payment be presented at the time of check-in.  Third party credit card payments are up to the agency for acceptance.

I might suggest you check with the agency you are dealing with to clarify the credit card acceptance policy.  Thank you for doing business with United.

Still talking about United Airlines, here's one way that a disgruntled passenger has chosen to get revenge on the airline.

Here's an article that quotes an airline industry analysis as suggesting that all the industry's problems would go away if they'd simply raise their fares 5%.  The analyst puts it simply - air fares are too low.

But is this correct?  On the face of it, this is a nonsense assertion.  Airlines are not registered charities, and they charge as much as they believe they possibly can for their tickets.  If there was a way they could increase their fares by any amount, they'd surely do it, whether they needed to or not.  So, one can perhaps assume that airfares are always at the highest level possible.

While it may be true that a 5% increase in gross revenue might solve the problems of the airlines, that is very different to suggesting that a 5% increase in airfares would solve their problems.  There are two things to consider, both of which this analyst seemingly overlooks.

Firstly, if you raise ticket prices, you'll find that some people will stop buying tickets.  This is Economics 101 - the 'Elasticity of Demand' - you sell fewer items when the price increases, and more with a lower price.  So a 5% increase in fares might only bring about a 3% or perhaps even only a 2% increase in revenue; indeed, who knows, maybe even less than this.  In such a case, a 5% increase would not be enough.  But a 10% increase in fares might further depress the number of tickets sold, and so on and so on.

Secondly, like most other analysts, this analyst tracks the wrong measure of airline profitability and effectiveness.  While the average fare is an interesting number to track, along with its related measure, the average cents per mile received from passengers, it is not the most important measure.  The most important measure is the total dollars earned from each flight.  Let me explain why, because this is the most important and least understood part of how airlines could be but often aren't profitable.

If we consider a plane with say 200 seats, let's say it can sell 100 of those seats at $100 each, and let's say that the cost to the airline for each passenger flown is $40.  If this was the only fare it offered, it would end up with an average fare of $100, a total income of $10,000 for the flight, and net earnings of $6,000.

But what say the airline could also sell another 50 seats, although at only $60 each.  This would mean that the average value of airfare would drop from $100 down to $86.67.  Most analysts would say this is a very bad thing - 'You should be selling your tickets for more money'.

On the other hand, if it costs only $40 to fly the passenger, doesn't it make sense to sell a ticket for $60 - a 50% markup on the variable costs?

So, consider the full picture, please.  By selling the extra seats, the airline has increased its total income from $10,000 to $13,000 and its net earnings have gone from $6000 to $7000.  While the average value per ticket or per mile flown has dropped, the net profit from the flight has increased 17%.  Surely this is a good thing, not a bad thing?

In other words, measuring airline profitability simply by the average fare price is a deceptive and overly simplistic picture.

This Week's Security Horror Story :  I'm always somewhat troubled by a government that is so in fear of its citizens that it imposes security screening at the entry to its buildings in a manner similar to (and sometimes more extreme than) that at airports.  There's something fundamentally wrong when the government feels so threatened by the citizens who elected it and which the government is supposed to be serving.

But the inconveniences we suffer upon attempting to enter federal buildings may all be in vain.  This report suggests that federal building security is no more effective than airport security, and possibly even less effective.

The pen is mightier than the sword?  That seemed to be the concern of TSA agents when they detained and interrogated a comic book writer/artist.

The TSA may store data on you for up to 99 years.

You're probably familiar with the occasional request we hear on a plane 'Is there a doctor on board' (and usually there is).  But how about this - where a passenger volunteers to fix the plane (and successfully does) after a mechanical problem threatened to delay a UK charter flight.

What next from the airline that is discussing charging for using their onboard toilets?  Ryanair now says it is looking at selling (or giving away) standing room on its flights in addition to regular seats.  This is in response to reports of a similar plan being considered by a Chinese airline.

And lastly this week, a novel way from Air New Zealand to make their flight safety briefing more interesting to its passengers.

Until next week and a regular newsletter from back home once more (yay), please enjoy safe travels

David M Rowell aka The Travel Insider

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