Hello from CASMA in the Ritz-Carlton Berlin! We’re at the Fall session of CASMA, which basically means “not in North America”. The theme this year is “Breaking Down Walls” – which kind of makes us cringe a bit. We think it must be tough for an entire city to be associated with a wall that was TAKEN DOWN like 20 years ago. At least some of the Chinese one is still there!
Anyways – your intrepid FMV bloggers are on the scene and here are some notes from day one:
- The buzz-word of the conference is “Ancillary Revenue” and it seems that everyone is trying to figure out extra revenue streams, and trying to copy the Air Canada model- either by creating a family of fares, or charging for extras. We’re talking cars, hotels, baggage, insurance, and others. And YES - someone did crack a "charging for the bathroom joke" - that seems to never get old.
- The best new revenue ideas we heard was the selling of airline gift cards on board, the ability to pay a fee to reserve an empty seat next to you (if available), and taking a portion of currency exchange. For example, some airlines let you pay in US Dollars or Euros – and a bank facilitates that change. Why not use a 3rd party and split the commission fee made on that transaction?
- There was an interesting point that Ryanair may actually be the best airline in world at delivering consistent customer service!! Yes, that sounds totally wrong, until you also remember that they are very clear to the customer that they only do two things: They get you there on time, and they get you there for rock bottom prices. Ryanair consistently has the best on-time metrics of any airline in the world.
- A few airlines like Ryanair and AerLingus are set to get their costs of distribution to turn NEGATIVE. Yes, you read that right – this is set to be a revenue opportunity for some since they already recoup the costs of credit cards and certain channels by charging extra. It was reported that a GDS asked the #2 at Ryanair at a prior conference what it would take to get Ryanair to list in the GDS and the response was “not until the GDS pays us 5 Euro for each ticket”.
- Finally – we think the tide is turning on alternative forms of payment. It looks like Paypal is finally gaining traction in the Airline market (with US Air, Southwest, Northwest, and Midwest) and it looks like other forms of Direct Connect payments are being explored. All this sets the stage for a big war on Credit Card fees – if you think the GDS battles were bad a few years ago – you haven’t seen anything in the upcoming credit card battles !!
Ok – we’re about to go out and check out Check-Point Charlie, and hope there is more to the city than a defunct wall...
Thursday, October 25, 2007
Actung Baby !!
Sunday, October 21, 2007
We use miles for magazine subscriptions
Another article in The Wall Street Journal to fuel passengers' frustrations with frequent flyer plans ("Mileage Plans Add to Flier Ire", 10/17/2007). There are some nice factoids in there to illustrate just how pervasive, yet useless, plans have become (e.g., Northwest Airlines has 510 partners for WorldPerks, including 41 new partners this year).
The best gem comes from American Airlines. To support their argument that reward seat availability is NOT declining, a spokesman notes that frequent flyer travellers actually increased from 2005 to 2006, from 7.2% of passengers boarded to 7.5% of passengers boarded.
That sounds impressive, but it's actually misleading. Especially if you take a look at two other facts:
1) If you look in the American Airlines' 2006 Annual Report - it tells you that the number of award redemptions was actually FLAT for the period at 2.6 million [tickets].
2) During the same period, AA's "Passenger Boarded" (segments) volume increased 0.1% (per Airline Business Magazine statistics).
All this tells you is that the Frequent Flier Passenger-Boardeed has increased - but NOT the number of actual tickets. This suggests that frequent flyer availability is tighter, and these fliers are having a tougher time booking direct fligts. But kudos to American for representing the numbers to their favor.
OK - Extra credit for Airline Numbers Nerds follows. AA's PB's in 2006 were reported to be 98.139 million. 7.5% of that means 7.360 million PB's were associated with 2.6 million reward tickets. This yields 2.83 PB's per reward ticket, which is a bit higher than a common industry assumption of 2.5 PB's / Ticket.
FMV has learned long ago that you have to go into the numbers to get the real story - Any time you need a peek behind the WSJ's numbers, you know where to find us.
The best gem comes from American Airlines. To support their argument that reward seat availability is NOT declining, a spokesman notes that frequent flyer travellers actually increased from 2005 to 2006, from 7.2% of passengers boarded to 7.5% of passengers boarded.
That sounds impressive, but it's actually misleading. Especially if you take a look at two other facts:
1) If you look in the American Airlines' 2006 Annual Report - it tells you that the number of award redemptions was actually FLAT for the period at 2.6 million [tickets].
2) During the same period, AA's "Passenger Boarded" (segments) volume increased 0.1% (per Airline Business Magazine statistics).
All this tells you is that the Frequent Flier Passenger-Boardeed has increased - but NOT the number of actual tickets. This suggests that frequent flyer availability is tighter, and these fliers are having a tougher time booking direct fligts. But kudos to American for representing the numbers to their favor.
OK - Extra credit for Airline Numbers Nerds follows. AA's PB's in 2006 were reported to be 98.139 million. 7.5% of that means 7.360 million PB's were associated with 2.6 million reward tickets. This yields 2.83 PB's per reward ticket, which is a bit higher than a common industry assumption of 2.5 PB's / Ticket.
FMV has learned long ago that you have to go into the numbers to get the real story - Any time you need a peek behind the WSJ's numbers, you know where to find us.
Wednesday, October 17, 2007
Popcorn, Candy, and a "Big Front Seat"
Yesterday's Wall Street Journal Middle Seat column by Scott McCarthy had a tidy summary of carriers' strategies to reduce fares by charging extra for various services. You know, checked baggage fees, fees for more legroom, etc.
There's an analogy in there attributed to the CEO of Spirit Airlines B. Ben Baldanza, who notes that such fees are NOT "Nickel and Diming" as some consumers claim, but rather on par with movie theatres that sell you a ticket and then gouge you at the concession stand.
As Tyler Durden once asked, "How's that working out for you? Being clever?".
Interestingly, Baldanza tells us.
Per the article, Spirit's average one-way fare is $100 yet the carrier collects another $15 per passenger via "Non Nickel and Diming" We must say, 15% seems like a pretty good premium. However, note per our post below that Continental Airlines is collecting at least $125 per one-way (based on $250 per round trip) on comparable leisure sales vs. Spirit's $115.
Whoa, so Continental is doing 8%+ better on revenue than Spirit using good old fashioned airline gimmicks like free warm soda, a strong network, and a loyalty plan.
Baldanza says, "you either need to compete on price or compete on product. You can't do both." However, we wonder if Spirit is really saving enough by checking a few less bags to compete with low fares. How much does it cost Spirit to become a flying minimart selling newspapers, magazines, and aspirin?
Note to Spirit passengers - sneak some Junior Mints onboard in your baggage. It works at the movie theatre, doesn't it?
There's an analogy in there attributed to the CEO of Spirit Airlines B. Ben Baldanza, who notes that such fees are NOT "Nickel and Diming" as some consumers claim, but rather on par with movie theatres that sell you a ticket and then gouge you at the concession stand.
As Tyler Durden once asked, "How's that working out for you? Being clever?".
Interestingly, Baldanza tells us.
Per the article, Spirit's average one-way fare is $100 yet the carrier collects another $15 per passenger via "Non Nickel and Diming" We must say, 15% seems like a pretty good premium. However, note per our post below that Continental Airlines is collecting at least $125 per one-way (based on $250 per round trip) on comparable leisure sales vs. Spirit's $115.
Whoa, so Continental is doing 8%+ better on revenue than Spirit using good old fashioned airline gimmicks like free warm soda, a strong network, and a loyalty plan.
Baldanza says, "you either need to compete on price or compete on product. You can't do both." However, we wonder if Spirit is really saving enough by checking a few less bags to compete with low fares. How much does it cost Spirit to become a flying minimart selling newspapers, magazines, and aspirin?
Note to Spirit passengers - sneak some Junior Mints onboard in your baggage. It works at the movie theatre, doesn't it?
Tuesday, October 16, 2007
Eye for Travel - Tuff Second Day
Uggg. Late post about the 2nd day of the Eye for Travel Conference.
You would have thought that organizers of conferences in Vegas would understand by now that the second day is just pure torture. You’ve already spent two hard nights in Vegas, and truthfully, you're really just trying to figure out which sessions you can skip to get an early flight home. It shows in the attendance as well – we bet the attendance is cut by half from day one.
But we're good troopers and are staying. It's all good since FMV actually feels vindicated in two ways:
First – We feel pretty good about our craps play the last two nights. We rode some hot rollers when they couldn’t lose - and then immediately shifted to the “Don’t Pass” betting line when the tables turned cold. The result: our biggest winning night in Vegas in a long while.
Second – We finally got some data on Meta-Searchers to bust the myth that Scrapers serve to “commoditize” airfares. Chris Degroot of American Airlines stated that the top players that they work with (Sidestep, Kayak, Mobissimo, etc.) all show higher airfare yields than their top OTA’s. In addition, they are pretty happy with the conversion rates of referrals from Meta's that sign up for the AAdvantage program.
In fact – Degroot has the money quote of the conference “Currently, AA is more aligned with the Meta’s than with the OTA’s”.
Wow. Almost makes the 2nd day of the conference worth attending…..
You would have thought that organizers of conferences in Vegas would understand by now that the second day is just pure torture. You’ve already spent two hard nights in Vegas, and truthfully, you're really just trying to figure out which sessions you can skip to get an early flight home. It shows in the attendance as well – we bet the attendance is cut by half from day one.
But we're good troopers and are staying. It's all good since FMV actually feels vindicated in two ways:
First – We feel pretty good about our craps play the last two nights. We rode some hot rollers when they couldn’t lose - and then immediately shifted to the “Don’t Pass” betting line when the tables turned cold. The result: our biggest winning night in Vegas in a long while.
Second – We finally got some data on Meta-Searchers to bust the myth that Scrapers serve to “commoditize” airfares. Chris Degroot of American Airlines stated that the top players that they work with (Sidestep, Kayak, Mobissimo, etc.) all show higher airfare yields than their top OTA’s. In addition, they are pretty happy with the conversion rates of referrals from Meta's that sign up for the AAdvantage program.
In fact – Degroot has the money quote of the conference “Currently, AA is more aligned with the Meta’s than with the OTA’s”.
Wow. Almost makes the 2nd day of the conference worth attending…..
Wednesday, October 10, 2007
FMV is back in Vegas Baby !!
We’re at the Eye 4 Travel conference this week. Generally we dread these conferences – but this one is in Vegas so it’s all good. You may not have noticed – but we love Vegas.
Eye 4 Travel is boasting that they have like 800 people, but they are totally cheating because they are combining three pretty unrelated conferences (distribution, revenue management, and CRM) to get these numbers. We think we have to face the fact that E4T is really stretching their limits of being relevant…
There is an interesting dynamic happening here this year. At conferences, there is always a main villain (GNE’s, Metasites, etc), and this year it’s the Online Travel Agents. FMV loves that – we’re totally on that bandwagon!
John Slater of Continental took the first speaking position and simply told the airline point of view when it comes to distribution. Slater has a great way of telling you bad news in such a reasonable way that you find yourself wanting to apologize. You kinda feel like it’s your dad explaining why you are grounded. Anyways, we think he had 4 interesting points.
1) Continental.com accounts for 67% of online revenue while OTA’s account for 33%. This is a pretty good penetration of the large supplier sites and we wonder if this is their plateau.
2) OTA’s average fares are around $250 – we’re talking pretty cheap fares here folks. Slater was pretty blunt that they don’t really need much help in selling these fares to Orlando.
3) International issues are next on the reduction of distribution costs war. While the last round centered on North America – it didn’t address the overseas markets – where costs remain pretty high.
4) Interestingly – Slater mentioned that OTA’s buying their brand name for searches on Google is really starting to chap their hide. They consider this poaching and follows American airlines actually suing Google for the same thing. So much for “Do No Evil” huh?
OK – Off to the Craps tables – man we love Vegas !
Eye 4 Travel is boasting that they have like 800 people, but they are totally cheating because they are combining three pretty unrelated conferences (distribution, revenue management, and CRM) to get these numbers. We think we have to face the fact that E4T is really stretching their limits of being relevant…
There is an interesting dynamic happening here this year. At conferences, there is always a main villain (GNE’s, Metasites, etc), and this year it’s the Online Travel Agents. FMV loves that – we’re totally on that bandwagon!
John Slater of Continental took the first speaking position and simply told the airline point of view when it comes to distribution. Slater has a great way of telling you bad news in such a reasonable way that you find yourself wanting to apologize. You kinda feel like it’s your dad explaining why you are grounded. Anyways, we think he had 4 interesting points.
1) Continental.com accounts for 67% of online revenue while OTA’s account for 33%. This is a pretty good penetration of the large supplier sites and we wonder if this is their plateau.
2) OTA’s average fares are around $250 – we’re talking pretty cheap fares here folks. Slater was pretty blunt that they don’t really need much help in selling these fares to Orlando.
3) International issues are next on the reduction of distribution costs war. While the last round centered on North America – it didn’t address the overseas markets – where costs remain pretty high.
4) Interestingly – Slater mentioned that OTA’s buying their brand name for searches on Google is really starting to chap their hide. They consider this poaching and follows American airlines actually suing Google for the same thing. So much for “Do No Evil” huh?
OK – Off to the Craps tables – man we love Vegas !
Monday, September 17, 2007
Put it on Credit -
A few months ago – we profiled a new company called Yapta.com, that tracks specific flights, and alerts a user if their flight(s) have dropped in price. The beauty of this service was that you can actually get money back if you’ve already purchased your trip. Some airlines would issue a credit voucher for the entire price drop difference, or charge you a $100 fee if you wanted cash back instead. However, according to a Wall Street Journal article (subscription may be necessary) - it looks like some airlines are switching practices and treating credit the same as cash:
"[I]n mid-July, US Airways quietly changed its policy on vouchers for price changes after you purchase tickets. The carrier now charges a $100 change fee regardless of whether you want cash or a voucher… American, Delta and Continental airlines also charge change fees in these cases; Alaska, JetBlue, Southwest and United airlines all offer vouchers for the full price difference…
Yapta says even as airlines tighten up rules on refunds when they cut prices, its service is still useful in tracking price changes before you buy tickets. Yapta President Tom Romary says 78% of all itineraries tracked by Yapta are pre-purchase -- people get alerts from Yapta when prices change so they can make better buying decisions."
A few points on all of this:
1) This doesn’t seem the optimal result for the airlines. By charging a $100 fee no matter what – they are effectively forcing people to ask for their money back, rather than settle for credit (why would you choose credit over cash??). As a result, they lose some stickiness on getting people to fly their airline again, and they will lose the breakage potential on these credits. Seems like there is a definite advantage for the airlines that they are forgoing here.
2) We note that United is currently an airline that allows the full difference back through a credit voucher. FMV predicts that this will change before the turn of the year. United’s corporate theme song is U2’s “I Will Follow” – and if the major carriers are starting to lean one way – we think they will eventually follow.
3) No matter what they say – we think this really reduces the value proposition for Yapta. 78% of all itineraries are pre-purchase?? Wow. It then becomes a bit mixed with Orbitz’s Deal Detector, SideSteps’ FareTracker and others - and probably underperforms without a related travel product (i.e. actually allowing you to shop for and/or book flights).
4) FMV is waiting for Expedia's Fare Alert and Travelocity's FareWatcher Plus to step it and get a better set of names! (FYI - Fare Market Value can be bought.....)
"[I]n mid-July, US Airways quietly changed its policy on vouchers for price changes after you purchase tickets. The carrier now charges a $100 change fee regardless of whether you want cash or a voucher… American, Delta and Continental airlines also charge change fees in these cases; Alaska, JetBlue, Southwest and United airlines all offer vouchers for the full price difference…
Yapta says even as airlines tighten up rules on refunds when they cut prices, its service is still useful in tracking price changes before you buy tickets. Yapta President Tom Romary says 78% of all itineraries tracked by Yapta are pre-purchase -- people get alerts from Yapta when prices change so they can make better buying decisions."
A few points on all of this:
1) This doesn’t seem the optimal result for the airlines. By charging a $100 fee no matter what – they are effectively forcing people to ask for their money back, rather than settle for credit (why would you choose credit over cash??). As a result, they lose some stickiness on getting people to fly their airline again, and they will lose the breakage potential on these credits. Seems like there is a definite advantage for the airlines that they are forgoing here.
2) We note that United is currently an airline that allows the full difference back through a credit voucher. FMV predicts that this will change before the turn of the year. United’s corporate theme song is U2’s “I Will Follow” – and if the major carriers are starting to lean one way – we think they will eventually follow.
3) No matter what they say – we think this really reduces the value proposition for Yapta. 78% of all itineraries are pre-purchase?? Wow. It then becomes a bit mixed with Orbitz’s Deal Detector, SideSteps’ FareTracker and others - and probably underperforms without a related travel product (i.e. actually allowing you to shop for and/or book flights).
4) FMV is waiting for Expedia's Fare Alert and Travelocity's FareWatcher Plus to step it and get a better set of names! (FYI - Fare Market Value can be bought.....)
Thursday, August 30, 2007
Chip Shots on the Fare Way
FMV didn’t get the memo – but it looks like it’s “new gadget” time for Metasearchers:
1) Kayak’s new “Weekend Feature” –
We actually think this is really a clever new idea to display the upcoming weekend trips. In one quick snapshot at the upper left corner – you can already see the cheapest weekends to go to.... say... Vegas and learn about statistics in a realtime environment (Hint: Backup bets are at true odds!). And seriously - anything that gets you to Vegas easier is a great addition.
2) FareCast predicting Hotels –
Farecast now has a “Hotel Rate Key” that lets you know if your hotel rate is a deal or not a deal. We think a natural extension of “past information informing the present”. The only problem MIGHT be that we think special rates are becoming more common on the hotel’s website rather than common public rates. Starwood and Hyatt seem prime examples. However, nice addition non-the-less.
3) SideStep’s “FareTracker”
SideStep launched “FareTracker”, which monitors price changes on fares on particular routes and offers fare alerts as well as some historical prices. However, the alert is not for a specific flight – but rather for the route. Oh Yeah – the alert isn’t for a particular day – it’s +/- 7 days. Oops, one other thing – how generic is the name "FareTracker"? Come ON !! Some marketing creativity would be nice - we're not asking for a lot here.
4) FMV’s Applause-Meter
OK – we feel left out so we need a gadget too – and we’re launching our own Applause-Meter™. We haven’t really worked out the scale – but we know that the Rating for "FareTracker": “Polite Golf Clap.”
Functionality?? Ehh. This is nice and all – but this is going up against the new guy Yapta – which pegs EXACTLY what you’ve said is interesting to you. Faretracker seems to take the opposite approach and kinda, sorta gives you information that MIGHT be useful.
Lots of innovation are coming out of these brands - more to come...
Thursday, August 23, 2007
We've Got Spirit, Yes We Do !!
Not what you would call a "good PR day" for Spirit.
This is going viral around the nets since FMV picked it up at Upgrade: Travel Better and it's now everywhere - The Spirit Airlines CEO Ben Baldanza accidently (we hope) hit “reply to all” to a customer that was requesting the expense of their entire trip (hotel, parking and all) be reimbursed - sending this snappy email back:
Please respond... but we owe him nothing as far as I’m concerned. Let him tell the world how bad we are. He’s never flown us before anyway and will be back when we save him a penny.
Read the whole exchange posted by Alex Rudloff here:
Now, we understand the frustration that airlines go through when customers complain about delays. It's a fact that customers have unrealistic expectations when it comes to flying and taking for granted all that has to happen to make a plane go from Point A to Point B. But this from the CEO?? We thought it couldn't get any odder than their Fibonacci sale.
WOW.
This is going viral around the nets since FMV picked it up at Upgrade: Travel Better and it's now everywhere - The Spirit Airlines CEO Ben Baldanza accidently (we hope) hit “reply to all” to a customer that was requesting the expense of their entire trip (hotel, parking and all) be reimbursed - sending this snappy email back:
Please respond... but we owe him nothing as far as I’m concerned. Let him tell the world how bad we are. He’s never flown us before anyway and will be back when we save him a penny.
Read the whole exchange posted by Alex Rudloff here:
Now, we understand the frustration that airlines go through when customers complain about delays. It's a fact that customers have unrealistic expectations when it comes to flying and taking for granted all that has to happen to make a plane go from Point A to Point B. But this from the CEO?? We thought it couldn't get any odder than their Fibonacci sale.
WOW.
Thursday, August 16, 2007
United We Sell !!
United just posted a new Miles Plus promotion:
Offer: Pay $20 and receive 1,000 bonus miles on your next qualifying United, United Express or Ted roundtrip.
Now, FMV is all for elite status on airlines - so we can see this "bonus" working out if it can help you reach or maintain elite tier status. Sign us up! But wait, there's more. United inserts this kicker of a clause:
"Bonus miles do not count toward elite qualification"
Excuse me? No thanks. Granted, this promotion does accelerate your earnings toward a reward. As a Premier Executive it might take only eight ORD-EWR trips instead of 11 to accrue a 35,000 mile reward. Yet that acceleration costs you $160! We GUESS this is a deal relative to the normal offer to "Buy Miles". United generously offers to sell miles every day, at an even suckier rate than this promotion: 1,000 miles for $64.57, and 5,000 miles for $182.82.
Yet the ONLY instance where we can see this promotion making sense is the case where you know your travel plans for the next several months and you know when you're done you'll be a few thousand miles short of the award ticket you want.
Otherwise, this is a blatant whoring of miles and lends more ammunition to the argument that the most profitable part of United is the Mileage Plus Program. There has even been talk that analysts believe United is preparing to divest the program - much like Aeroplan and Air Canada. If Mileage Plus were sold or taken public, it could be worth about $7.5 billion, compared to the airline itself with a total market value of around $5.5 billion.
Maybe this promotion helps UA demonstrate the consumer market price for miles? It certainly helps demonstrate that "there's one born every minute".
Offer: Pay $20 and receive 1,000 bonus miles on your next qualifying United, United Express or Ted roundtrip.
Now, FMV is all for elite status on airlines - so we can see this "bonus" working out if it can help you reach or maintain elite tier status. Sign us up! But wait, there's more. United inserts this kicker of a clause:
"Bonus miles do not count toward elite qualification"
Excuse me? No thanks. Granted, this promotion does accelerate your earnings toward a reward. As a Premier Executive it might take only eight ORD-EWR trips instead of 11 to accrue a 35,000 mile reward. Yet that acceleration costs you $160! We GUESS this is a deal relative to the normal offer to "Buy Miles". United generously offers to sell miles every day, at an even suckier rate than this promotion: 1,000 miles for $64.57, and 5,000 miles for $182.82.
Yet the ONLY instance where we can see this promotion making sense is the case where you know your travel plans for the next several months and you know when you're done you'll be a few thousand miles short of the award ticket you want.
Otherwise, this is a blatant whoring of miles and lends more ammunition to the argument that the most profitable part of United is the Mileage Plus Program. There has even been talk that analysts believe United is preparing to divest the program - much like Aeroplan and Air Canada. If Mileage Plus were sold or taken public, it could be worth about $7.5 billion, compared to the airline itself with a total market value of around $5.5 billion.
Maybe this promotion helps UA demonstrate the consumer market price for miles? It certainly helps demonstrate that "there's one born every minute".
Wednesday, August 15, 2007
OK OK - This Time We're Serious !!
OK - It's been two MONTHS since we've posted. We know we've been slacking. We feel bad about abandoning our loyal readers. Trust us - it wasn't you, it was us.
To tell you the truth - we just kinda got into a lazy rut with the onslaught of summer. The combination of travel, work, and vacations just got the better of us.
But we're over it now - and we've rededicated ourselves and from here on out - It's on (like Donkey Kong)!
To tell you the truth - we just kinda got into a lazy rut with the onslaught of summer. The combination of travel, work, and vacations just got the better of us.
But we're over it now - and we've rededicated ourselves and from here on out - It's on (like Donkey Kong)!
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