Travel Industry

Sen. Chuck Schumer (D-NY) wants to fight the airport security battle on foreign airports, so that it doesn’t have to be fought on  US airports or airspace. To that end, he has drummed up a 5-point plan which is well worth a read, if only for the shock value.

Sen. Chuck Schumer

Before we get to the details of the plan, a short statement from Sen. Schumer – “This incident [Flight 253] shows that more than eight years after the 9/11 attacks, there are still gaping holes left in our aviation security system, particularly overseas. My plan puts forward some common sense solutions to close these gaps in a quick and cost effective way.”

Schumer also pointed out that according to U.S. law, any flight that takes off from a foreign country bound for the U.S. must follow U.S. security procedures,  but the enforcement and monitoring by the TSA is very lax.

And here are the Senator’s proposed solutions:-

1. Call on U.S. Airlines to threaten to stop flying to foreign airports known to have lax security – To this end, Schumer has written to the heads of the major airlines asking them to immediately report any known security issues at foreign airports to U.S. security authorities, and threaten those airports that they will cease service to and from those airports if security isn’t improved.

2. Penalties for foreign airports that don’t comply with U.S. security rules - If the country is part of the visa waiver program, Schumer says it should be considered whether they should be kicked out of the program, if the non-compliance is serious enough. If the country is not part of the visa-waiver program, then it should be added to the list of countries whose incoming passengers and passport holders are subjected to enhanced screening.

3. Immediate review of all travel visas for anyone added to any terrorist database – Schumer said that this review and decision must be made within 14 days of a name being added to the database.

4. Worldwide information sharing of adjudications of visa applications – If any country does not want to share visa info with us, Schumer said no visas for their people coming to U.S. should be granted. Schumer’s statement specifically points out that the British had denied the Christmas Bomber a travel visa based on visa fraud but never informed U.S. authorities, because the denial was not based on a terrorism ground.

5. Foreign travel information sharing – Schumer said that any country with a travel agreement with the U.S. must share the foreign travel information of anyone seeking to travel to the U.S. He added that any country that declines this information should be denied visa-waiver status or should have its citizens prevented from receiving visas to travel into the US.

Read the full statement with more details about Sen. Schumer’s 5-point airport security plan here.

Holiday travel just got cheaper

It’s all over USA Today this morning: the airlines have waived their advance purchase rules, meaning folks can buy their way home this holiday without paying more than those who booked in advance. As the nation’s newspaper points out, American Airlines everyday no-advance purchase airfares between Dallas and New York City were selling yesterday for $1,858 roundtrip. Today, the route is priced as low as $388 roundtrip. (Atlanta to Seattle fell from $1,198 to $258 on Delta.)

That’s excellent news for consumers, of course. No one should have to finance a visit with family over the holiday for the next 12 months.

But this comes on the heels of the airlines swearing themselves blue in the face that wouldn’t happen this year. Travel agents have been spreading the word that capacity is down, prices are up and the old “buy now, or pay more later” adage was definitely in full force for the holidays. Only now it isn’t, and the travel agency segment looks like used car salesmen. My sincere condolences go out to the poor family that paid nearly $1,200 for a ticket yesterday because you, frankly, were screwed.

And good luck, American Airlines/United/Delta/Northwest/US Airways/Frontier/AirTran/ Midwest getting folks to buy seats a few months out on the 2010 holidays, which would be so helpful to your bottom line. You’ve just trained them to wait until December 21 for the deal.

Merry Christmas, travelers!

I certainly don’t have an MBA degree hanging on my wall; my business knowledge comes from two decades as a business reporter and a few years of being a business owner myself. But that gives me enough common sense to wonder if sticking to your guns wouldn’t be worth trying at some point. The airlines have fallen into the couponing trap, and don’t have the strength of will to pull themselves out. Meanwhile, William Maloney, CEO of ASTA, describes 2009 as “miserable, probably one of the worst for the travel industry. Airlines, hotels, tours, cruise lines — everyone saw a downturn in revenue.”

If the definition of insanity is to do the same thing over and over and expect a different outcome, then discounting holiday fares is insanity.

Meanwhile, Arnie Weissman at Travel Weekly is calling this the decade of fear for the travel industry. He points the finger at 9-11 and consumers’ reactions. “For how many years will Americans react to each new perceived danger by canceling travel plans?” Weissmann asks. That goes both ways: how long will suppliers in this niche be afraid to step out and try something new?

Photography: jetalone, uggboy (Flickr)

At 10.27 am on Dec 15, 2009, Boeing’s 787 Dreamliner finally took off on its maiden 3-hour flight from Paine Field in Everett, Wash. and landed safely at Seattle’s Boeing Field. The successful test flight marks a milestone not only in Boeing’s long-delayed delivery schedule for the 787, but also for Boeing stock (NYSE: BA).

Boeing 787 Dreamliner - First Flight Takeoff K64825-01

Boeing Co. has been trending upwards for the last two months, in anticipation of the 787’s takeoff. It started off around $47 at the beginning of November, and had steadily climbed up to $55.67 by Dec 15.

With the successful test flight behind them, and looking forward to the first delivery in 2010, analysts estimate now that Boeing stock is going to hit $60 and keep climbing.

Boeing has bagged 840 orders for the $160 million 787 Dreamliner plane from some 55 airlines, worth a total of $140 billion.

What makes the 787 Dreamliner the fastest-selling new commercial jetliner in history, and so important to Boeing, is the revolutionary improvements in range (9400 miles), cargo capacity (45% more), fuel efficiency (20% more) and noise reduction (60% less). The plane is made of lightweight carbon-composites to reduce fuel consumption.

Even so, Boeing has had a torrid time with it – five delays spread over more than 2 years had kept the Dreamliner program on the ground for an extra 30 months. They were supposed to deliver the first plane in May 2008. The first delivery is now scheduled for the fourth quarter of 2010, to Japan’s All Nippon Airways.

Also, the recession led to the cancellation of 70 orders, and Boeing is in the middle of a round of massive layoffs, seeking to reduce their workforce by 10,000. After Boeing announced a $1.6b third quarter loss, CFO James Bell said in a memo that the 787 Dreamliner’s setbacks were “having a significant impact on our financial performance.”

Another issue at stake is whether Boeing can now use the momentum from the test flight to swing around from research to mass production and stick to the current delivery schedule, inspite of the layoffs and the teething problems faced by the 787 program.

Boeing’s European competitor Airbus managed to beat Boeing to the gate by rolling out its own Jumbo A380, but has since been beset by production issues, and Airbus officials say the production cost of the A380 still outstrips the selling cost. 

Also, inspite of the extended production time, the problems and kinks with the A380 are still being worked out on the go – An Air France A380 flight from New York to Paris was cancelled yesterday due to fuel-tank issues. On Nov. 27, an Air France A380 on the same route was forced to return to New York 90 minutes into its flight because of an unspecified technical issue.

If Boeing can avoid all this and ensure smooth production, delivery and a hitch-free commercial launch by its consumers, then Boeing Co. stock is going to be worth a lot more than $60. Even if there are a few hiccups along the way, the 787 Dreamliner still has what it takes to pull Boeing out of the slump.

Photo courtesy Boeing Co.

Skyscanner’s recent poll of things that irk fliers most reveals some predictable but deep-seated hatreds:

A turn-off turn off

1. Don’t lie about flight times, said 30 percent of the participants. “Telling you a flight will be 30 minutes late, then another 30 minutes late, then another – when they know full well that the plane hasn’t even left its departure airport – is extremely annoying and downright dishonest,” Barry Smith, Skyscanner co-founder and director, said in a press release. The last time the company ran this survey, travelers pointed a finger at their fellow passengers with BO and bad breath. Apparently, being lied to is now more disgusting than poor hygiene habits.

2. “The captain has asked that you turn off all electronic devices including cell phones and MP3 players.” Yah, we know. We’re sick of hearing this announcement over the PA system,  griped 20 percent of those surveyed. Not only is the repetitious phrase annoying to the nth degree, it doesn’t make sense.

“It seems strange that airport security will confiscate an innocent bottle of water, yet we are permitted to board with these potentially lethal electronic devices. If an iPod could bring down a plane, would we really be allowed to fly with them?”  Sam Baldwin, Skyscanner’s travel editor, asked at Travel Mole.

3. If the flight attendant wakes a sleeping passenger to ask if they’d like to buy headphones, an alcoholic beverage or duty-free shopping, she will honk off 17 percent of the plane.

4. “Ear piercing trumpet calls and bragging about landing on time” irritates the snot out of 12 percent of the flying public answering this survey. Looks like a byproduct of #1, in my assessment.

Correct use of bins

5. Long security ques bug the other 8 percent of travelers, although to be fair, I don’t know what airlines could do about that specifically. It’s not their fault more than one flight will be using the airport this afternoon, or that the family in front of you can’t figure out how to take off their shoes and put them in a tray on the conveyor belt.

Frankly, the survey misses a pet peeve common among the folks I travel with. Or maybe it’s just me and my companions nod to shut me up. Airlines should get better control of the boarding process. The overhead bins are for wheeled luggage of the proper size. Briefcases, purses, diaper bags, coats, go under the seat in front of you. I realize the attendants make this announcement every time (see #2 on the iPod ban) but their failure to enforce it gums up the entire procedure. You have folks trying to store luggage 17 rows away because some pig in their row loaded stashed a kid’s backpack or wadded a suit jacket in the the only space the next passenger can use. And the flight attendant is aiding and abetting this behavior by helping the poor soul find an inconvenient place for his bag.

I’d pay good money to see a courageous flight attendant reach up there and start yanking that stuff down, yelling, “Which idiot left his courtesy and common sense at home?” If you haul on two items, then it’s at the sacrifice of your foot space … it’s not like there’s any there even without the luggage.

Now it’s your turn: Spill your biggest traveling peeves — and extra bonus points if you have a solution.

Photography: Brianfit (Flickr), jetalone (Flickr)

Irish budget carrier Ryanair and their CEO Michael O’Leary have cultivated a reputation for controversial innovations and colorful language. An O’Leary press conference is very well covered by the media, mostly because it promises controversy and more than a few unprintables.

Ryanair

Examples include O’Leary recently calling the Copenhagen climate summit (COP15) a ”talking shop for imbeciles.” Asked what he would do if he were in charge of BA, he says he’d be putting out his CV looking for a new job, and that the BA board was more interested in knighthoods than running an airline.

Ryanair reps haven’t been too far behind their CEO in brash talk. Aftar an Irish blogger named Jason Roe posted about an alleged bug in Ryanair’s booking system, one Ryanair rep called him a ‘lunatic’ and an ‘idiot’ and another rep added that Roe had a ‘pathetic life.’

For those who discount all this as mere barking, Ryanair’s ideas bite even harder. Their recent schemes include doing away with airport check-in kiosks and charging for checked-in bags. They’re also mulling charging for on-board toilets and offering standing-room tickets. 

In an interview with the Wall Street Journal, O’Leary explains the method behind Ryanair’s madness. About the baggage check-in charge and toilets, he says it’s not about collecting ancillary revenue.

The baggage charge, he says, helped persuade Ryanair passengers to travel with carry-on luggage only, which meant the airline could do away with airport check-in and shift to a 100% online check-in system. This in turn means that passengers don’t ever get stuck in a Ryanair check-in queue, and this helps set Ryanair apart as more convinient than other airines.

Explaining the toilet charge, O’Leary says that again, it’s not about the money. It will train passengers to use toilets in the terminals before and after flights, which means the airline can replace a few toilets with more seats and reduce fares some more.

The standing-room idea apparently has no ulterior motive, and is simply meant as a way of offering dirt-cheap airfare by ripping off seats in the last 10 rows and offering 100 tickets for standing passengers.

From an investor’s point of view, it’s hard to argue with the results of Ryanair’s pavlovian policies, inspite of what O’Leary says about not being interested in the extra charges.

Ryanair’s ancillary revenue grew from 8% of total revenue last year to 20% this year. Ryanair carried 66 million passengers with a 15% jump in year-on-year traffic, resulting in revenues of €1.8bn with an 80% increase in net profits. As of now, Ryanair is the single-largest carrier of international passengers in the world.

But some things don’t change… At the end of a rather sensible interview, O’Leary partially redeems his reputation by answering a question about what people expect from a Ryanair flight experience. He says “You’re not getting free food. We don’t want your check-in bags. We’re not going to put you up in hotels because your grammy died… It’s a commodity. It’s not some life-changing sexual experience, which is what the other high-fare airlines have tried to convince you that it is.”  

Ryanair photo by Jon Gos

Zagat’s 2009 Airline Survey, covering 16 domestic & 73 international airlines and 30 domestic airports, confirms the decline of air travel, with 33% of respondents saying they’re flying less. In the domestic airline categories, Jetblue, Virgin America and Continental got the highest scores.

Zagat Airline Survey

This is the third annual airline survey done by Zagat. A comparison of this year’s survey with the past two years showed that travelers were taking an average of 19.7 flights per year in 2007, which tanked to 16.3 in 2008 and ended up at 16.6 in 2009.

Comparisons of the relative percentages of business & leisure travel showed that business travel declined from 64% in 2007 to 61% in 2009, while leisure flights gained from 35% to 39% in 2009.

Bookings made by travel agents dropped precariously from 17% in 2007 to 8% in 2009, while bookings made directly through airlines’ websites rose from 60% to 64%. Travel websites showed no change at 15%, while booking through work went up from 2% to 8%.

Virgin America topped the charts for midsize domestic airlines in both the premium & economy class categories, with scores of 24 and 21 respectively, and Virgin Atlantic came in first for international in-flight entertainment.

Jetblue took the awards for best in-flight entertainment and most green airline amongst domestic airlines. Jetblue also topped the large domestic economy class category with a score of 19.

Robin Hayes, executive vice president and chief commercial officer for JetBlue, said that they were excited that “our customers and Zagat’s surveyors have recognized us as their carrier of choice for two years in a row.”

Continental came in first with a score of 21 for large domestic premium class, while Singapore Airlines came in first for both premium and economy class categories under International airlines, with scores of 28 and 24 respectively.  As for the airports, Portland Int’l came in first, while New York’s LaGuardia came in last.

For more information about the survey and to see the full results, visit – www.zagat.com/airline

In the wake of falling prices and fewer fliers, airlines seem hellbent on irritating their customers as a fiscal strategy.

Apparently, the outcry against adding fees to flights on specific high-traffic days during the holidays wasn’t loud enough, because Delta, American and United announced yet more such because-we-can fees in 2010. Delta and United have carved out no less than 41 flying dates between January and May to slap an extra $30 onto the ticket as punishment for going on Spring Break when everyone else does. All three airlines announced $50 surcharges for select flights on February 8. Odd day? Not to those flying home from the Super Bowl in Miami.

Guess getting reamed $12 for a hot dog at Dolphin Stadium isn’t enough insult to loyal sports fans.

“This is becoming kind of a grab” for passengers’ cash, Robert W. Mann, president of consultant R.W. Mann & Co., told Bloomberg. “Nickel and diming in the form of $5 and $10 bills is really where it’s going.” But is it good business? Ask hotels, which are backing off from charging fees for every little service.

And it’s not as if they don’t have other revenue streams to explore. For starters, prices are steadying now, according to FareCompare. Similar travel-management companies are also predicting airfares will continue to rise in 2010, putting an end to the free fall drop in revenue.

American Airlines will dip its toe into retail sales on U.S. to London flights, peddling Heathrow Express train tickets. Its new inflight wi-fi service will promote online buying from SkyMall. After all, if you have the credit card reader on the back of the seat, they will buy. “We wouldn’t invest if we didn’t feel comfortable it would provide a fair rate of return,”  John Tiliacos, American Airlines’ managing director of onboard products, told a reporter from The New York Times. Reportedly, Broadway theaters and the Walt Disney Company want to elbow in on the action to sell their tickets on planes.

This direction fits right in with the snacks for sale, luggage charges and headset fees.

Then there are the behind-the-scenes moves, such as American Airlines and ARC’s partnership to develop an electronic tool that i.d.s duplicate bookings. The airline estimates these errors cost it “huge sums of money,” and considering the sums that pass through these companies in the first place, that figure must be large indeed to rate that kind of label from executives.

Yes, the recession is a bitch. Yes, the airlines weren’t in the black anyhow when the economy tanked. But at some point in your scramble to survive, you have to protect your future. At least these alternative ways of raising cash allow the customer a chance to decline and provide an extra service for their money. Tacking on fees for the heck of it is just tacky.

Photography: Mr. Usagi, jonathanb1989, psyberartist (Flickr.com)

The Institution of Civil Engineers (ICE) has put out a report called Aviation 2040, which postulates four scenarios showing how UK air transport and airport infrastructure could look in 2040. Needless to say, the scenarios paint a bleak picture.

Aviation 2040

Society has become acutely aware of the effects of advancing climate change and air travel has suffered as a result. Those who need to travel by air do so discreetly for fear of vilification. Environmental lobbyists and civil society groups denounce air travel despite technology gains. Video-conferencing has drastically reduced business and personal travel. Oil prices reach a historical post-Peak high… many regional airports close and international airports are nationalised.

They even helpfully provided a timeline:-

2013 – The World reaches official Peak Oil
2016 – “Stay British” media campaign to promote domestic tourism
2018 – Boeing launches aircraft with radically reduced carbon emissions
2019 – UK government introduces personal carbon accounting
2023 – BAA sets up rail franchise
2025 – British Airways re-nationalized
2026 – Boeing and Airbus merge
2028 – Pope uses Easter address to tell the faithful to stop flying
2037 – Boris Island damaged in North Sea surge
2039 – Heathrow, Birmingham, Manchester and Glasgow only international airports in operation within the UK

Peak Oil in 2013 - a bit hasty, perhaps? And why drag the Pope into a discussion about the airline industry? Even more sacriligious – a merger of Boeing and Airbus?

Marcus Morrell, of ARUP Foresight Innovation and Incubation – which participated in the development of the report along with ICE, made it clear that that these were not predictions. He said that instead they “represent a range of possible outcomes that may play out over the coming decades. Although fictitious, they are drawn from the expert opinions of key industry stakeholders…”

You can download the full report here – www.ice.org.uk/aviation2040

Allegiant Air is facing a problem which most travel companies – especially airlines, would love to have. The Nevada based low-cost airline is growing so fast that it now has to make a stark choice in terms of its future direction.

Allegiant Air

Allegiant Air traffic jumped 46.1% in September, with paying passengers flying 292.2 million miles, as compared to 200 million a year ago. If you don’t take into account their charter service, Allegiant said the traffic jumps 59.6%. Morgan Stanley recently bumped up Allegiant’s (NASDAQ: ALGT) price target from $46 to $49.

And in order to milk this growth and keep growing some more, Allegiant has to look beyond a guerilla strategy of keeping costs low by using forty-three MD-83 jets to service leisure travelers on 60 non-competitive routes between small airports and major resort areas.

That and padding the bottomline with a long list of ancilliary fees which apparently accounts for an astonishing 22.7% of Allegiant’s revenue.

The options facing Allegiant are to either play with the big boys in the air and add more popular routes, or to look beyond the air and increase focus on revenues on the ground.

As per their CEO, it looks like Allegiant is more intent on spreading its wings on the ground, with plans to become a full-fledged travel company offering bookings for all your travel needs, by leveraging the popularity of the Allegiant Air website to sell other services.

In fact, Allegiant Air’s parent company is Las Vegas based Allegiant Travel Co. Allegiant co-founder and CEO Maury Gallagher (Maurice J. Gallagher, Jr.) went so far as to tell the Financial times that “the eventual goal is to sell flights from other airlines on the Allegiant site.”

And it makes sense too. Gallagher says that the brand will soon be identifiable to 100m people in the US. Throw in the fact that around 30% of Allegiant’s customers already buy their bundled travel packages which include hotels, car rentals and show tickets. If Allegiant shifts their focus entirely to selling travel packages, you’re looking at a potential travel behemoth in the making here.  

Photo by cliff1066

Related Links:-
Allegiant Sept, 3Q Traffic Report
A low-cost airline staying aloft by always charging

Thanksgiving travel to decrease

When it comes to going over the river and through the woods to grandmother’s house for Thanksgiving, roughly 19 percent of last year’s travelers are rethinking that journey this November 24.

But that’s not the bad news. According to American Express’ latest Spending & Saving Tracker, more than one in 10 young professionals intend to drive instead of fly, 8 percent intend to stay fewer days for Turkey Weekend, and 7 percent of this crowd will use reward points and miles to help pay for the trip.

Comparatively, 7 percent of the general population and 6 percent of affluent demographics say they will drive, 3 percent in both categories are taking the “Hi! Bye!” schedule, and only 4 percent of affluent and 3 percent of the general population will lean on deals.

In other words, we’re training the next generation of discretionary income earners to cut back on travel. And as many businesses know, old habits die hard. 

The short-term picture isn’t that bad. For instance, 78 percent of the affluent expect to spend more or the same over the next 30 days in restaurants, while the general public says it will spend less on groceries — another positive sign folks could be throwing caution to the wind to celebrate. Pamela Codispoti, the American Express senior vice president and general manager of Cardmember Services, agrees.

“These results show that consumers do plan to open their wallets this holiday season, starting with Thanksgiving travel, but many are re-prioritizing those expenses,” she cautions.” If Halloween is any indication of things to come, 36 percent of young professionals said at the end of September they plan to purchase less expensive costumes this year, compared to 16 percent of affluent and 15 percent of the general population that admitted the same thing. In fact, 26 percent are making their own customer or using hand-me-downs — while only 13 percent of the affluent and 11 percent of the general population plan to take that route.

Who needs travel?

Sigh. More of those frugal living traditions forming that could bode ill for the travel industry’s cash flow in the fourth quarter.

So what does the airline industry do in light of this payment skittishness? Just this week, American Airlines, Delta, Northwest and USAirways announced  a $10 per ticket surcharge — each way — for flights on Nov. 29, Jan. 2 and Jan. 3. This is in addition to luggage fees that increased in 2009, and additional charges for specific seats in the coach class. “Yes, it brings in a lot of sorely needed revenue to the airlines — but to the detriment of holiday travelers, who are already paying stiff fares for those high-traffic days,” FareCompare.com’s CEO Rick Seaney told bNet.

While pricing experts will hammer home that discounting services isn’t always the right answer, even in a recession, merging an attitude of gouging with a population losing interest in the product don’t bode well for a healthy profit in this industry down the road.

Photography: CarbonNYC (Flickr), Ali Edwards (Flickr)