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12 March, 2010

Good morning

I offered two articles last week on the topic of decreasing airline competition, with the promise of two more this week to conclude a four part series.

This week I revisited the second of the first two articles and added two new charts to make some of the data more visual.

Here's one of them - an interesting chart that plots billions of miles flown in Q3 of 2009 against the cents/mile operating cost (source Bureau of Transportation Statistics) of the 14 major US airlines, and adds a 'line of best fit' to show the trend.

In other words, it simply measures airline size against operating costs.

The 'bigger is better' concept - if correct - would mean this line should slope from the top left to the bottom right - in other words, highest miles flown should have lowest costs, while lowest miles flown should have highest costs.

But, as you can clearly see from both the plot points for each airline and the Excel calculated line of best fit, the slope is exactly the opposite.  Smaller airlines are more efficient, with lower costs, than bigger airlines.

This strikes at the heart of the paradox - why do airlines merge, if their lofty promises of operational benefits and savings do not translate into any measurable improvement in their costs?  And why do they keep promising that a merger will reduce their costs, when there's no clear indication that this happens?  (Perhaps also, why does the DoT keep accepting this claim....)

Could it be the airlines are doing this to, in a Borg like manner, assimilate their competitors?  That is one of the manifest behaviors of oligopolies, and in the next two parts of my series published now, I examine the oligopolistic nature of airlines today, and attempt to reconcile the fact that air passenger numbers have doubled in the last 15 years (internationally) or 25 years (domestically) while there's been a net reduction rather than increase in airlines.

Something is clearly wrong with the airline marketplace, something which threatens us all as passengers - threatens us in the form of higher fares and poorer service than would be the case in a more perfectly competitive marketplace.

How does the Department of Transportation respond to this marketplace that is way out of balance?  Oh, it continues approving airline mergers and requests for anti-trust immunity.

Will we have to wait until the last two remaining airlines seek permission to merge before the DoT starts to view these requests with concern and stops blessing the mergers as promoting enhanced competition and being for our benefit?

My promise of a four part series has now grown to six parts.  Of course, reading the article series is optional, and there are hundreds of other articles on the site for your amusement if you prefer (I'm offering you some 'blasts from the past' below), but I feel it important to complete this series, because it seems I'm straying into analytical territory that very few others have ever chosen to visit.

So, for those who find lots of tables and charts interesting, here this week are the next two parts of what is now to be a six part series :

This Week's Feature Column(s) :  More Passengers, Fewer Airlines :  Occasional downturns notwithstanding, airline traffic continues to grow, everywhere in the world. But the number of independent airlines continues to reduce.  How to reconcile these opposing trends, and does it really matter?

Scotland trip :  We had another couple (repeat travelers who've been on Travel Insider tours before) join us this last week.  I'll accept two more people, but then must close the tour, full, at that point.  So if you'd like to come on this lovely tour of Scotland's Islands and Highlands, now would be a great time to put your name on the list.

Blasts from the Past :  This time in 2002, I was launching a new series of articles on international cell phones.  Eight years, in the cell phone marketplace, is a very long time, but much of what I wrote back then remains true today.  Only a limited number of US mobile phones work internationally, and call rates are expensive when you're making or receiving calls internationally.  If you're planning international travel this summer, what is your best approach to remaining in contact with family, friends, and business colleagues?  I'll try and update this article series with a definitive answer in the next few weeks (particularly after attending a major trade show on mobile technologies in two weeks time).

This time in 2003, I was writing an article that proved positively prescient a year ago when the US Airways plane landed in the Hudson river.  Its title - What Happens if an Airplane's Engines Fail?

And in 2004, the topic du jour was an introduction to what was then something of a novelty - USB flash drives.  I've had to update the article several times to reflect the ever growing capacity and ever reducing price of these handy little devices, and to recommend ever larger 'sweet spots' where you get the best trade off between capacity and price.  I've updated the article again now - whereas in 2004, I was recommending a 256MB drive (costing $50), today I recommend an 8GB drive for $12 or so.  In terms of dollars per GB, that is a move from $200/GB in 2004 to $1.50/GB today.  The oft quoted/misquoted/extended Moore's Law is being exceeded - this 'law' would imply a halving of cost every 1.5 yrs or so (down to $100 for an 8GB drive today).  In actual fact, the rate has been halving more quickly - every year or slightly less.  Yay for progress.

Dinosaur watching :  It is official - things are getting better for the airlines (but merger and anti-trust requests will doubtless continue).  IATA just revised its 2010 forecast, halving its projection of an overall worldwide airline industry loss of $5.6 billion, now down to 'only' $2.8 billion.

IATA says that in 2009, passenger demand dropped by 2.9%, but in 2010 it is expected to grow by 5.6%, and cargo is expected to grow by 12%.

Some regions will show overall profits in 2010, but European carriers are projected to lose $2.2 billion in total, and US carriers may lose $1.8 billion, even after a regional growth rate of 6.2%.

Something I've been advocating pretty much from my first ever newsletter in 2001 is now being implemented, albeit on a very limited basis, by AA and US - roving check-in and customer service agents, with wireless handheld terminals, who can roam around the terminal, helping passengers and responding to peaks and long lines.

It is a great idea, although one has to laugh sardonically at one way the airlines are now enthusiastically using this new 'customer service' capability.  They have agents stationed at security checkpoints, and are intercepting passengers trying to bring too many bags through security (and onto their flight), and requiring them to check their bags instead, charging them a fee i the process.  'Hello, we're from the airline and we're here to help you'....

More details here.

You surely know there's a huge difference between the maximum penalty for any offense and the penalty actually imposed.  Whether we're talking about murder, jaywalking, or something inbetween, the maximum penalty is only imposed in the most aggravated and repeated of situations.

Nowhere is this more so than with airlines.  The FAA and DOT are very sparing with the level of fines, and with FAA fines in particular, it is common for the fine to be in two halves, with the second half often waived if the airline doesn't reoffend.

But as part of their Chicken Little approach to the soon to start new situation where the DOT has said it will fine airlines if they strand people on planes on the ground for more than three hours, the airlines are pretending as if the maximum possible fine would also be the normal everyday fine they are hit with each time they strand passengers for three or more hours.

They are also pretending that they might/would offend regularly, and so, after this double layer of pretense, they are saying the only option they have is to cancel thousands of flights any time there's the chance of any type of flight delay.  Yes, they'll cancel thousands of flights, rather than mismanage two or three that might lead to violations.

With logic like that, is it any wonder the airlines are projected to lose 'only' $1.8 billion this year?

Here's the reality.  Airline CEO's, please read carefully.

The DOT can indeed fine airlines up to a truly impressive $27,500 per passenger in cases of delays exceeding three hours.  For a plane with 200 passengers on board, that could be as much as a $5.5 million fine. And that's absolutely something the airlines don't want to have happen.

But, there's no chance in the world the DOT will immediately fine any and every airline the full maximum amount for every smallest offence.  Would a flight that traps passengers for three hours and 1 minute be fined at the same level as a flight that traps passengers for ten hours?  Of course not.

For that matter, will the DOT even fine the maximum amount to a first time offender with a good excuse (yes, there may sometimes be good excuses)?  Again, of course not.

Most of all, surely, 99 or more times out of every 100 tarmac delays, can't the airline actually do something to deplane the passengers before the 3 hour time expires?  Of course they can.

What we're seeing is a ridiculous amount of public and political posturing by the airlines, because they don't want to be accountable at all.  Rather than accept the challenge and create a fair system that saves us from being stuck on planes with no recourse, they want to leave things as they currently are - massively messed up, and with no obligations or liabilities on their part to behave decently and responsibly.

The airlines are active participants in the current ridiculous system that is clearly broken.  Currently, airplanes have to physically queue up for takeoff, in a long line, on a taxiway, on a 'first in, first out' basis.  This was a very simple system and used to work back when the line of planes to take off might be no more than one or two or three long.  But it doesn't work in congested airport traffic such as is increasingly the case in this day and age.

Suggestion to airline CEOs.  Go to Baskin Robbins on a busy weekend afternoon in summer, and learn from them.

Baskin Robbins, and many other places, have a very simple concept.  It is called 'take a number'.  Of course you know what I mean.  When they're not busy, you can walk in, maybe wait for a person in front of you, then get served.  But when they do get busy, they have a 'take a number' system and serve people in the order of the numbers people take.

So why can't airplane departures at busy times (or for that matter, all the time) also work on a 'take a number' plan too?  If the high school students working part-time at BR can manage their 'take a number system', you'd think highly trained pilots and dispatchers could do the same thing for airplanes, too.

Here's how it would work.  A flight has (for example) a scheduled 2pm departure.  The pilot knows, at 1pm or earlier, what gate his plane is at, and can be told which runway he'll be assigned to take off from, so he can calculate, to within a few seconds, how long it will take from starting his engines, through pushing back from the gate, turning around, and taxiing to the holding point prior to taking off.  Let's say, for the sake of this example, it is, in total a 15 minute activity.

He also knows, to within a plus or minus three or four minute time frame, how long it will take to load the passengers onto the plane.  Let's say this is a 25 minute activity.  So - do the sums.  To take-off at 2pm means to push-back at 1.45pm, which means to start loading the plane at 1.20pm.

Now for the part of the process the airlines don't comprehend.  What should happen, therefore, is that at about 1.15 pm, the pilot radios the control tower and asks to be assigned his take-off slot at 2pm.  The control tower responds, either approving that slot, or giving him another later slot.  Just as the pilot knows the numbers and lead-times to get his plane loaded and to the take-off point, the control tower knows how many departures they can handle per hour or per ten minutes or whatever, and so they can queue up flights for departure - not physically, but by assigning them numbers, just like at the ice cream store on a summer Sunday.

So, if the pilot gets his 2pm slot, he knows to then authorize the boarding of the plane.  But if he is told 'Sorry, we can't get you airborne until 2.20pm' (or whatever time) he does the sum and works out that a 2.20pm departure means to start boarding the plane at 1.40pm, and so does not allow the boarding to start until that time.

There are some complexities overlooked by this simple explanation, but they can easily be resolved too.  If an airline, or the FAA would like to give me a mega-million dollar consulting contract, I'll scribble out the details on the back of a used envelope and mail it to them.

The beauty of my proposed 'take a number' system is that no-one boards a plane until it has been given a guaranteed take-off time (and, even more emphatically, planes never start their engines or push back from the gate until their takeoff time is confirmed, too).

So - get this, airline executives - not only does that make for massively happier passengers, it also saves you jet fuel (oh yes and protects the environment too due to fewer carbon emissions).  You're not going to have your jet engines expensively running up operational hours, getting closer to major overhauls, and burning jet fuel while powering the plane stuck on the runway.

Most of the delays in the past have been caused by airplanes pushing back from the gate without a guaranteed take-off time, but in a mad rush to get their place in the physical queue, and hoping for the best.  And then the problem gets aggravated, because if an airplane goes out of the physical line of planes, it can't return back to its place in the line, so once the plane is away from the gate, the pilot is determined to protect his place in line.

Rather than use the current unsatisfactory system as an excuse, why not change the system.  Wouldn't that be logical?  And then the DOT can threaten any amount of fine they wish, and you'll not need to worry, because you'll never have a problem with departing flights.

Here's an actual example of a fine - the DoT announced this week it is fining US Airways for failing to disclose the full price of an airfare on the first screen that provides a fare quote on its website.  The website was showing the base fare, but not including the additional taxes or fees, and didn't mention they'd be added later in the booking process, in contravention of the DoT requirement  that internet advertising displays the full fare either on the first screen that provides fare quotes, or with a hyperlink that takes consumers to a page that describes the additional charges.  US said its failure to include the additional taxes was wholly unintentional and the result of a programming error.

And the extent of the fine, from the agency that we're now being lead to believe may be poised to levy $5.5 million fines without warning?  A mere $40,000.

I'm a former glider pilot - even won a 'Silver C' award in New Zealand on my first ever solo flight - and have done some single engine power plane flying too.  One of the things we had drilled into us time after time, as part of our instruction, was how to recover from a stall or spin - things that happen when your aircraft loses its aerodynamic balance and sort of starts to 'fall out of the sky' - either more or less straight down (stall) or in a nasty spinning motion (spin).  With an experienced instructor, and with plenty of altitude beneath us to give us tons of room to recover the plane, we'd deliberately initiate stalls and spins so we could understand how to sense their onset, and practice to a reflexive act how to recover from them.

I forget how many hours of training in total it took to become a glider pilot, but vaguely remember it as being something like about 40 hours to become a private pilot, and a lot less to fly gliders, but I do know we spent plenty of that time stalling and spinning.  We started off learning the easy bits - how to fly straight and level, then how to do turns, how to ascend and descend, then how to take off and land, and then we moved on to things like stalls and spins.

I'd never thought much about this, but had simply assumed that with their hundreds of hours of training, and their ongoing training requirements and testing, commercial airline pilots would undergo similar training for how to recover their aircraft when things went unexpectedly wrong and it ended up stalling and/or spinning.

But exactly how much training do commercial airline pilots get?  Here's a fascinating and must-read article that drops several bombshells on us.  It says 73% of airline fatalities since 2000 could have been prevented with better pilot training.  Out of control airplane accidents are the biggest single cause of passenger fatalities (flying into mountains or the ground being the second biggest).

Whereas when I was learning how to do these things 'for real' - risking (to a very very small extent) both myself and the plane I was in, commercial airline pilots can do this risk free in a simulator.

A classic example of pilot error is the Buffalo crash a year ago, where the pilot did exactly the wrong thing - he pulled the stick back instead of pushing it forward, making the airplane more out of equilibrium, and instead of recognizing his error and then pushing the stick hard forward, he kept pulling the stick back until the plane crashed into a house on the ground, killing all on board and a man in the house too.

The National Transportation Safety Board wants to see pilots get training in how to respond to these situations.  But the FAA, never fast to implement any recommendation of the NTSB, says 'It is too early for us to make a determination whether we need to change something'.

Let's see - 50 people killed last February due to the pilot doing the wrong thing.  317 people in total killed since 2000 due to the pilot doing the wrong thing.  Ummm - what is it going to take?

The FAA's line is they'd prefer to focus on training that helps pilots to avoid losing control in the first place.  Hello!   Anyone home?  Sometimes control is lost not due to something the pilot did, but due to some external issue (like the Air France crash off Brazil, which also is mysterious in terms of why the pilots did not seem able to recover their plane after losing sensor data).  And sometimes even the best trained pilot will lose control due to flying 'too close to the envelope' or some other problem.

The numbers point to the fallacy of the FAA's attitude.  How many more lives need to be lost before the FAA turns around and mandates that pilots need to be trained in what to do when their plane misbehaves?

If you're interested, you should read the comments appended to the article as well.  There's an interesting series of very different comments - some apparently experienced airline pilots say they are regularly trained and tested on such techniques every six months, other apparently equally experienced airline pilots say they are not adequately trained and tested.

But the bottom line is clear - if we're to accept the analysis in the article, better pilot training could have saved, in the US alone, 317 of the people who died in airline accidents since 2000, and pilot loss of control is the leading cause of airline deaths worldwide.

Again, I marvel at the disconnect between the government's instant (and ill-reasoned) responses to failed/foiled acts of terror, and their subsequent massive roll-outs of onerous and expensive new security measures on the one hand, with their passive leisurely response to demonstrated and repeated vulnerabilities that risk our lives as passengers 'the old fashioned way' due to airplane and pilot problems.

Why is it worse to risk death at the hands of a terrorist than at the hands of an ill-trained pilot?  Why do we respond more to a failed attempt by a terrorist to blow up a plane with a crotch bomb (with no deaths) than we do to a crash with all passengers and crew dead due to both pilots not being able to correctly recover their plane from a loss of control that should not have caused it to crash?

Oh - as an aside - here's a fascinating article about testing to see if the crotch bomber's bomb would have blown a hole in the plane.  After testing a similar explosive on an old 747 hull, it seems that even if his bomb had exploded, it wouldn't have blown a hole in the side of the plane.

Talking about training and accidents, my ridicule last week of people concerned about the child who made some transmissions on behalf of his father, an Air Traffic Controller in New York, drew some angry replies.  There seemed to be three lines of response.

The first were several people who compared this scenario to the Aeroflot flight that crashed while the pilot's son was at the controls.  Call me lacking in vision if you will, but I can't see any similarity at all between having a child at the live controls of a plane in mid-air, who accidentally switched off the auto-pilot, such that it descended and crashed without the two pilots noticing (as unlikely as that sounds - another pilot training issue, I think!) on the one hand, and an air traffic controller plugging another headset into his control board and having his son recite, parrot like, several short phrases to planes going about their ordinary business.

The next line of reasoning was 'something could have gone wrong and lives could have been lost'.  But when pressed, no-one could offer the specifics of what could have gone wrong, and (although I might again be lacking in vision) I once more can't comprehend the risk that creeps into the system when a child says something like 'United 102, climb and maintain 10,000 ft' - an instruction that the pilot then repeats back to ensure that it was understood, all the while with the child's father listening in on another headset and ready to intercede if any problems arose.

The third line of reasoning was 'it is an easy step from children being allowed to do this to children subsequently being allowed to do (something more serious)'.  I don't see or accept any linkage or progression.

This was what it was.  A harmless treat for a controller's son, and a bit of fun for the controller, his colleagues and supervisor, and the pilots, all of whom seemed to enjoy the change immensely.  Nothing went wrong, because nothing could go wrong.

Amtrak, eat your heart out (yet again).  I wrote six weeks ago about the nonsense claims our politicians were proudly making when explaining how they were wasting a mere $8 billion in pursuit of the lofty objective of making the US the world leader in high speed rail.

Let's look at two other examples of true high speed rail development, and remember that it seems unlikely that the $8 billion investment in the US will actually give us a single workable high speed rail line.

In Britain (albeit in a desperate pre-election bid to bolster their support) the government announced plans today to spend £30 billion (ie $46 billion - nearly six times more money than here) to build 335 miles of high speed rail to speed London's connections to Birmingham, Manchester, Glasgow and Edinburgh.  Initially, 14 trains would run every hour, with each train capable of carrying 1100 passengers at speeds of up to 250 mph.

More information about this massive proposal here, including a fascinating map showing the present and future high speed rail lines in Europe.

And in China (where else!) there are plans to build not just more high speed rail within the country, but to extend it internationally, calling it a new 'Silk Road'.  Trains would operate on several routes through 17 countries, including all the way Beijing to London (5100 miles in under two days) at speeds in excess of 200 mph.  China already has trains that run at 220mph.

Could I ask President Obama and Secretary of Transportation Ray LaHood to give us some more information on their respective comments 'there's no reason Europe or China should have the fastest trains' and 'I assure you that one day, not too many years from now, ours will be the go-to network, the world's model for high-speed rail'.

I'm not going to delight in pointing out the latest exposť pointing out the fallacies of the global warming pseudo-science this week.  Instead, let's play a game of pretending it is all true.  Let's look at 'the law of unintended consequences' and examine some of the so-called solutions being offered to the problem, because even if global warming were true, we're not doing the right things to resolve it.

As I've pointed out before, spending money on birth control is five times more effective at reducing carbon emissions than any other type of green/eco strategy at all, and the book Superfreakonomics points out a number of different solutions that could resolve any/all impacts of greenhouses gases on the planet, costing mere pocket change.

This article is full of excellent commentary, but the point which stands out is its reference to this research paper from Spain which analyses the impact of 'green jobs'.

Prior to the report's publication, President Obama has approvingly cited Spain as a model of good prudence in its approach to greenness.  But it turns out that each green job created directly destroys 2.2 regular jobs (and then there are all the flow-through losses of further jobs that were dependent on the 2.2 jobs lost, etc).  President Obama has now stopped referring to Spain, but has yet to acknowledge this analysis or its ramifications.

There's no need to read the full research paper, but the executive summary is easy to understand and stark in its analysis.

Now, as you know, I'm far from persuaded about the reality of global warming.  But I'll definitely urge you to conserve gas as much as possible.  But not out of concern for carbon emissions that may or may not do something to the planet at some distant future time.  Instead, it is based on a very real concern that we're reaching the phenomenon known as 'peak oil' - a concept variously definited either as the point where global demand for oil outstrips the planet's ability to extract it in sufficient quality, or more simply at the point where annual production starts to decline.

When peak oil finally occurs - and we've got close to that already, but not quite reached it - we'll remember fondly back to the days where oil was only $150/barrel and almost $5/gallon, and freely available any time we wanted some.

According to this study, peak oil (in terms of max production) may be upon us in as soon as four years time - ten years earlier than previously projected, and we're no longer discovering new oil reserves at a rate to match or exceed our extraction rate, but instead, world oil reserves are now being depleted at an annual rate of 2.1%.

This is truly scary.  We got a taste of how high oil prices can go when supply is struggling to match demand in 2008.  Now that the global economy seems to be starting to recover, and the demand for oil is picking up again, we're seeing oil prices testing the $80/barrel point and showing plenty of strength to keep inching up again.  Where will it stop?

This Week's Security Horror Story :  We've all known the 3 ounce limit per bottle of liquids is ridiculous, as is the limit on the total number of containers of liquid we can each carry with us, because there's nothing to stop two (or ten, or however many) terrorists pooling their liquids together once they've passed through security (or on the plane itself).

But now there's another reason to recognize the fallacy of these limits.  A Dutch reporter managed to smuggle 200 ounces of liquid onto an international flight from Amsterdam to London, and then on from there to Dulles.

This article explains how he did it.

I wonder if Muslims have an equivalent of our Christian expression 'The road to hell is paved with good intentions'?

The US government sponsored a fact finding trip for six Pakistani politicians, hoping to improve the rather strained relationship between ourselves and Pakistan, a country viewed as an essential but rather uncertain ally in the fight against Muslim extremists, and a country which struggles to feel good at our regular bombing of their nationals.

Alas, these VIP politicians, on their 'feel good' tour of the US, got to enjoy the heightened security procedures prior to boarding a flight from DC to New Orleans.  They were asked to submit to secondary screening.

They refused, cancelled their flight and stormed off back to Pakistan in high moral outrage, and have been telling their story to the Pakistani media - not of what a nice country the US is, but of how nasty it is.  Their refusal to submit to US security screening has them being hailed as heroes back in Pakistan.

Couldn't we have bent the rules, just a teeny tiny bit, for these six politician/VIPs?  Who in their right mind would think these six hand-selected political leaders were about to run amok on their flight to New Orleans?

Wasn't there some State Department lackey walking them through the airport and running interference for them?

Bottom line - our attempt to improve relations with Pakistan has massively backfired.  Details here.

Flight attendants want to receive martial arts combat training, and they also want to have walkie talkies so as to be able to get in touch with the pilots (apparently the internal phone systems aren't sufficient).  Question - will they have to turn their walkie talkies off during take-offs and landings?

Details here.

A reminder to people from Visa Waiver countries planning to visit the United States.  These days you need to get an electronic pre-clearance prior to traveling - it is recommended you complete the online form and get the approval back at least three days prior to departure (sorry if you have a sudden urgent need to travel....).

Apparently many people are neglecting to do this, with the result that some people are being turned away from their flights and not allowed to board.

Oh, another reason for doing it soon - the formerly free approval is soon going to start costing money - up to $17.  But, truly, we really want to welcome you to the US.  We just have a funny way of showing it.

Details here.

I've written before about our country's last remaining link to the grand old days of trans-Atlantic ocean liners, - the SS United States.  The grand old lady has been languishing, unloved, for too long, moored alongside a wharf in Philadelphia, while its owner, Norwegian Cruise Lines, has been uncertainly talking about restoring her to service.

NCL are now saying they can't afford the ongoing cost of owning the vessel, and have no plans to restore her to service, and are instead seeking to sell the ship for its scrap metal value.

There's an organization dedicated to attempting to save the ship, and it is desperately/urgently trying to secure sufficient funding to buy the vessel and preserve her.  If you've any spare cash after giving, giving, giving to Haiti at every turn, you might want to visit this website and consider if this is a cause you'd like to help as well, or just simply go straight to the donation site here - contributions are tax deductible.

I was talking about delayed flights earlier in the newsletter.  Air Canada had a recently delayed flight from Vancouver, due to passengers ignoring the increasingly urgent requests for them to board the plane.  The reason?  They were watching the end of the final Olympic hockey game on monitors in the terminal and didn't want to miss its conclusion.  The flight waited for them.

Lastly this week, here's a lawsuit that the plaintiff absolutely deserved to lose.

Until next week, please enjoy safe travels

David M Rowell aka The Travel Insider

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