Monday, August 11, 2008
Moving Day
Over the weekend Channel 9 completed a transition over to the Boarding Area -- the voice of the Business Traveler. This blog will be found in the Prior to Boarding section. We have a new look and a new address: http://boardingarea.com/blogs/channel9/. Please come check it out and all the other sites over at the Boarding Area.
Friday, August 8, 2008
MKE Pawn
This morning the Milwaukee Journal Sentinel reported that Northwest has written off its investment of Midwest Airlines. One could argue, as Northwest's spokesman does, that this is simply Northwest following the simple rules of conservative accounting. However, it is more than likely another sign of Midwest's impending demise (this has been coming since the end of June).
When this is all said and done, the MJS story goes on, Northwest will have spent a bit over $200 million to protect Milwaukee from AirTran. From a network perspective, it is probably better for the MKE traveler that Northwest felt compelled to defend this territory.
When this is all said and done, the MJS story goes on, Northwest will have spent a bit over $200 million to protect Milwaukee from AirTran. From a network perspective, it is probably better for the MKE traveler that Northwest felt compelled to defend this territory.
BA Microsite: T5 is Working (This Time)
So British Airways has a neat little micro-website out promoting its new terminal 5. It has a daily update on the average check-in time and a generic story about some customer's success story at T5. I appreciate British Airways understanding what it has to do to sway customers. But, sometimes I wonder, if it is just a little too much. See for yourself.
Thursday, August 7, 2008
Time Tackles Fees
Time is out with a survey on the latest round of airline fees attempting to answer "Who is the stingiest?" Their answer: US Airways. The list goes (from stingiest to least stingiest): USAirways, United, American, Northwest, Continental, JetBlue, Delta, Virgin America, Southwest.
A few comments:
1. I love seeing Southwest at the top of this list and USAirways at the bottom. I don't actually enjoy flying either carrier, but, from a business perspective it is a testament to the difference between good management and bad management.
2. I think Continental deserves better. They still have blankets and some meals at meal times. Is that necessary? I'm not sure, but if this is about stingiest then they deserve more.
3. United has a real problem on its hands. It is bad to be fighting to be the next USAirways.
3. I'm not sure what Virgin America is doing on this list. This a list about large carriers dealing with fuel costs. Virgin America is not a major carrier.
A few comments:
1. I love seeing Southwest at the top of this list and USAirways at the bottom. I don't actually enjoy flying either carrier, but, from a business perspective it is a testament to the difference between good management and bad management.
2. I think Continental deserves better. They still have blankets and some meals at meal times. Is that necessary? I'm not sure, but if this is about stingiest then they deserve more.
3. United has a real problem on its hands. It is bad to be fighting to be the next USAirways.
3. I'm not sure what Virgin America is doing on this list. This a list about large carriers dealing with fuel costs. Virgin America is not a major carrier.
Tuesday, August 5, 2008
$7 Pillows and Paying for Seats
Tom Parson's, CEO of Bestfares.com, did a solid job today refuting the non-sense that MSNBC was trying to report in regards to the JetBlue $7 pillow. If you ask me, the only reason this is a big story is because New Yorkers are semi-obsessed with JetBlue and thus the media, the majority of which lives in New York, is just naturally curious. Air Canada has been charging for a pillow for 3 years and I don't remember such a big deal being made over that, even in the Canadian media.
Regardless, I caught something at the end of interview which either got cut from the video or possibly occurred during a separate interview segment. Parson's was discussing how Spirit charges for all seat assignments and how that could be problematic for families traveling together -- Pay extra cash or roll the dice and see if you can get seats at the airport.
As more airlines charge for seat assignments (mostly for premium seats right now), it is important to keep in mind how this actually plays out in the market. Most people do not pay for seat assignments. Seats assignments matter to those that travel often, essentially business travelers, not families. I flew an Allegiant flight once where only 3 out of over 100 people paid for early boarding. I was on a ClickAir flight last month where only non-premium seats were occupied after everyone had boarded. Sure, these are anecdotal, but the point remains that the penalty is not on families. It may be nerve-recking but it is still way more likely that the status quo of close accommodations will occur rather than a family scattered amongst the plane. Disclaimer: This does not hold for families that pay no attention the specific check-in rules of its airline and those that choose to check in at the last possible moment. You still need to be aggressive.
Regardless, I caught something at the end of interview which either got cut from the video or possibly occurred during a separate interview segment. Parson's was discussing how Spirit charges for all seat assignments and how that could be problematic for families traveling together -- Pay extra cash or roll the dice and see if you can get seats at the airport.
As more airlines charge for seat assignments (mostly for premium seats right now), it is important to keep in mind how this actually plays out in the market. Most people do not pay for seat assignments. Seats assignments matter to those that travel often, essentially business travelers, not families. I flew an Allegiant flight once where only 3 out of over 100 people paid for early boarding. I was on a ClickAir flight last month where only non-premium seats were occupied after everyone had boarded. Sure, these are anecdotal, but the point remains that the penalty is not on families. It may be nerve-recking but it is still way more likely that the status quo of close accommodations will occur rather than a family scattered amongst the plane. Disclaimer: This does not hold for families that pay no attention the specific check-in rules of its airline and those that choose to check in at the last possible moment. You still need to be aggressive.
July Traffic
A couple interesting things regarding July traffic:
1. Allegiant posted a ridiclious 95% load factor for July up from 91% year over year. That is a crazy number. The stock is up 14% up over the past week, jumping 11% today.
2. You might be seeing this headline out there: Traffic rises at AirTran, falls at Southwest. So you get the gist of it. However, I find the crucial number in this report to be Southwest's load factor which dropped 5.1 percentage points year over year, as LUV's capacity went up and it carried less passengers. Hey, they are paying below market value on fuel, but it is something to keep an eye on.
1. Allegiant posted a ridiclious 95% load factor for July up from 91% year over year. That is a crazy number. The stock is up 14% up over the past week, jumping 11% today.
2. You might be seeing this headline out there: Traffic rises at AirTran, falls at Southwest. So you get the gist of it. However, I find the crucial number in this report to be Southwest's load factor which dropped 5.1 percentage points year over year, as LUV's capacity went up and it carried less passengers. Hey, they are paying below market value on fuel, but it is something to keep an eye on.
Monday, August 4, 2008
Shopping at usairways.com
These turbulent times have led to some amusing marketing messages on websites. So if you happen to go check out usairways.com, you'll see some super relevant News. In case you missed it, US Airways has some new fees for bags, ALL beverages now cost money in coach, and, oh yeah, if your not busy, help fight skyrocketing oil prices now. After all that, you can meander over to US' new worldwide website.
I'm not a marketing genius, but it seems like it might make sense to leave at least one positive press release in the queue. None of the story's currently listed make me happy or confident in buying a US Airways ticket. A quick click on the News link and there is easily one recent release they could use. US Airways Leads Industry in Sustained On-Time Reliability. Business and leisure traveler alike could appreciate this. Especially, if they are going to be busy fighting the skyrocketing oil prices.
Ups and Downs
Quick note: You'll notice the chart at the top right of the page has been falling (near $120 today) and, thus, the chart below it is full of green today.
Friday, August 1, 2008
August 1999
On the first day in August 2008, I thought we'd take a look back nine years ago to August 1999. The airline industry was on the rise, hitting a stride that would carry it for only two more years.
In early August 1999, United unveiled plans for Economy Plus. The plan was simple. Rip out a row or two of seats and provide about 36 inches of pitch to the best customers: Mileage Plus status members and full fare coach passengers.
The full New York Times report from August 6, 1999 can be read here. And you can't help but think United was a little ahead of the game. Sure, the plan did not explicitly call for increased prices for the seating. But, they understood that business passengers were valuable, as the article notes, "Frequent business travelers make up about 9 percent of United's customers but account for 46 percent of its sales, not 36 percent. "
Today, as all carriers try to raise revenue, business passengers are the target. We have Southwest's Business Select and Virgin America's recently announced Main Cabin Select. This is about getting more money from the people (or their companies) that have it. And, although it didn't help keep United out of bankruptcy, they at least understood what the game was about.
In early August 1999, United unveiled plans for Economy Plus. The plan was simple. Rip out a row or two of seats and provide about 36 inches of pitch to the best customers: Mileage Plus status members and full fare coach passengers.
The full New York Times report from August 6, 1999 can be read here. And you can't help but think United was a little ahead of the game. Sure, the plan did not explicitly call for increased prices for the seating. But, they understood that business passengers were valuable, as the article notes, "Frequent business travelers make up about 9 percent of United's customers but account for 46 percent of its sales, not 36 percent. "
Today, as all carriers try to raise revenue, business passengers are the target. We have Southwest's Business Select and Virgin America's recently announced Main Cabin Select. This is about getting more money from the people (or their companies) that have it. And, although it didn't help keep United out of bankruptcy, they at least understood what the game was about.
AirTran Followup
It looks like I might have been a little hard on AirTran a couple days ago, kinda. It seems like they have a stronger cost-cutting plan than originally reported. Instead of parking planes, they are selling them off. The article somewhat oversells the strategy as it is really almost common sense to dump the 737-300s like everyone else. Read more here if you are interested.
Update (8/4): My mistake, per the comment below...AirTran only has 737-700s.
Update (8/4): My mistake, per the comment below...AirTran only has 737-700s.
Thursday, July 31, 2008
The Disaster that is US Airways
I missed this while I was gone but thought it worth reposting here. US Airways is removing its in-flight entertainment system from all domestic flights. US claims they will save $10 million in fuel from the weight reduction of not having the systems on-board. The main thrust of the argument is that people don't pay them $5 for headsets anymore and, here is where it gets good, the studios don't give US Airways the movies for free.
This is just sad. It shows just how unfocused an airline can be when they A. Are try to complete and a merger and B. Are trying not to go bankrupt. Let's be clear: FUEL IS NOT RESPONSIBLE FOR CHANGING CUSTOMER BEHAVIOR. The charging for headsets gimmick has been going down the drain for a long, long time. First, you can use your headset. Second, the IPOD. If US Airways didn't have the foresight to tackle this consumer change, then what will they be able to tackle?
In October, they say they will be testing a lightweight fiber optic system to deliver entertainment. My bet is that US Airways doesn't last long enough for this to be rolled out.
This is just sad. It shows just how unfocused an airline can be when they A. Are try to complete and a merger and B. Are trying not to go bankrupt. Let's be clear: FUEL IS NOT RESPONSIBLE FOR CHANGING CUSTOMER BEHAVIOR. The charging for headsets gimmick has been going down the drain for a long, long time. First, you can use your headset. Second, the IPOD. If US Airways didn't have the foresight to tackle this consumer change, then what will they be able to tackle?
In October, they say they will be testing a lightweight fiber optic system to deliver entertainment. My bet is that US Airways doesn't last long enough for this to be rolled out.
Wednesday, July 30, 2008
Stayin' Alive
This post is a bit circumstantial but it is a topic worth pondering. Yesterday, AirTran announced a $13.5 million Q2 loss. Aside for the obvious hit to the balance sheet, this type of hemorrhaging forces AirTran -- and many other airlines -- into survival mode. If you read the linked Atlanta Journal-Constitution story will see a detailed description of everything AirTran is doing to stop the bleeding: attempting to renegotiate contracts with the Teamsters, slashing flights and securing an agreement with a credit card company with an acceptable line of credit.
That's all great. But, the main issue here is that none of the above activities are revenue generating and only one -- flight slashing -- was successful in lowering costs. As you get to the end of the story you see that AirTran's Q2 year-over-year revenue was actually up 13%, but costs jumped 37%. So, yes, cost-cutting is great, but airlines stuck in these position have to spend a tremendous amount of human resources negotiating deals with 3rd parties to save money. And all while that is happening it is a difficult dynamic to also concentrate on getting that other side of the equation up.
That's all great. But, the main issue here is that none of the above activities are revenue generating and only one -- flight slashing -- was successful in lowering costs. As you get to the end of the story you see that AirTran's Q2 year-over-year revenue was actually up 13%, but costs jumped 37%. So, yes, cost-cutting is great, but airlines stuck in these position have to spend a tremendous amount of human resources negotiating deals with 3rd parties to save money. And all while that is happening it is a difficult dynamic to also concentrate on getting that other side of the equation up.
Tuesday, July 29, 2008
Premium News Roundup
Two updates on premium travel:
1. My post yesterday regarding the disappearance of all premium aircraft is no longer valid, as OpenSkies announced today they would be removing the 30 economy seats on its aircraft and replacing them with 12 Prem+ seats. This had been long rumored and the timing is not surprising. The seats will be in place by October 1st just as OpenSkies enters the peak period for premium traffic.
2. Continental unveiled a new Business product. They are going lie-flat and it will be a huge upgrade. It is a wider seat and extends to 6'6 when fully flat. However, as Cranky points out, window passengers are going to have climb over their aisle counterparts to get to the bathroom. This a let down. Most premium passengers travel alone and thought of paying $4000 for a ticket and then having decide if your bathroom needs are urgent enough to risk waking the person next to you isn't the most appealing proposition. On the other hand, it is probably easier to jump over a flat bed than an angled seat.
1. My post yesterday regarding the disappearance of all premium aircraft is no longer valid, as OpenSkies announced today they would be removing the 30 economy seats on its aircraft and replacing them with 12 Prem+ seats. This had been long rumored and the timing is not surprising. The seats will be in place by October 1st just as OpenSkies enters the peak period for premium traffic.
2. Continental unveiled a new Business product. They are going lie-flat and it will be a huge upgrade. It is a wider seat and extends to 6'6 when fully flat. However, as Cranky points out, window passengers are going to have climb over their aisle counterparts to get to the bathroom. This a let down. Most premium passengers travel alone and thought of paying $4000 for a ticket and then having decide if your bathroom needs are urgent enough to risk waking the person next to you isn't the most appealing proposition. On the other hand, it is probably easier to jump over a flat bed than an angled seat.
Airport Domino Part II
Back in June I cited a report out of Canada regarding Ottawa's decision to reduce its airport landing fees to help reduce the impact of rising fuel on the airline's that serve the city. Now, we have the opposite story out of LAX.
The airport board projects "Airline projections indicate that flights will decline by almost 17% at LAX in November while the number of available seats will drop by slightly more than 11%." As result landing fees are going up $0.50 at LAX and $0.27 at Ontario. It is a small change -- only $300 or so for each 747. Still, as the article's airline expert du jour notes, these charges will likely be passed on to the consumer.
As a side note, the story notes that LAX will be hit harder by the downturn since it is not a hub for any carrier. Last I checked, United still had a hub there.
The airport board projects "Airline projections indicate that flights will decline by almost 17% at LAX in November while the number of available seats will drop by slightly more than 11%." As result landing fees are going up $0.50 at LAX and $0.27 at Ontario. It is a small change -- only $300 or so for each 747. Still, as the article's airline expert du jour notes, these charges will likely be passed on to the consumer.
As a side note, the story notes that LAX will be hit harder by the downturn since it is not a hub for any carrier. Last I checked, United still had a hub there.
Monday, July 28, 2008
Classism Wins Out
The deal is done. On Friday, British Airways announced that it has completed the purchase of L'Avion and will integrate it into OpenSkies by early 2009. Over the past three years we saw 4 airlines attempt to fly across the Atlantic with only business class seating. It is now official -- if you want to fly business class you are going to have to share the plane with people flying in a "lesser" class. Ah, the humanity.
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