Ryanair: Ouch.

There are a lot of things to find pretty entertaining and arguably admirable about Ryanair. For example, when they issued a press release calling travel agents "deadwood" and "rip-off middlemen". We think it's pretty awesome that they've been so aggressive with their direct distribution strategy. But - It's not without risk.

The downside of their position becomes startingly clear with the news today that Ryanair will have to go without selling tickets for 73 hours later this month, while they migrate their booking platform in order to comply with new UK requirements regarding the proper presentation of fares, taxes, fees, etc. to consumers. We're pretty sure that 73 hours is more than 3 days, even across the Atlantic. That's almost 1% of their selling opportunity for a typical year. Fortunately, the migration falls during leap year!

We've heard some pretty astounding anecdotes of consumer deception in their marketing, so no real sympathy that they need to take this hit. However, there had to be some pretty dour planning meetings as the reality of the migration details became clear. No worries, they'll make it up with a 73 hour 1 Euro fare sale (some restrictions apply, fare not valid on most days ending in "y", seating additional, passengers subject to cabin door use fee).

Ancillary Revenue: Not Just for Pillow Sales

All too often, when pundits talk about airline ancillary revenue, it's all about selling snacks on board or charging passengers to use the bathroom. Today, a special thanks to a yawner article about JetBlue for reminding us that ancillary revenue can come from the most basic form of nickel and diming: change fees.

Today's ATW Daily News reports that JetBlue expects a 50% year-on-year increase in ancillary revenue in 2008, bringing annual nonfare income to over $250M. For comparison, 2006 "other revenue" was $139M, and we estimate the 2007 number will be around $190M (based on JBLU 3Q07 Form 10-Q). That got us wondering exactly how they make that money.

It turns out, that for the third quarter of 2007, their filing footnotes explain that most of the other revenue increase was "primarily due to higher change fees and excess baggage fees...resulting from more passengers and increased change fee rates". Sweet! That is so old school! Hundreds of millions of dollars from simply selling nonrefundable fares, and then charging people to reclaim the purchase after their plans change.

Sports cliche: Sick to the fundamentals, Take it game by game, Give it 110%, don't get fancy.

If you actually read that article, it also turns out that JetBlue will try to boost passenger revenue by, we paraphrase, copying United's EconomyPlus seating model. But they WILL NOT, we repeat WILL NOT, emulate United's 2nd bag policy. Hip, nimble, JetBlue can't go for that legacy carrier stuff.

But Look On The Bright Side...

It’s no secret that many airlines have recently started to add luggage fees for checked bags in an effort to raise revenue. Some airlines do it modestly, some do it very blatantly. Spirit Airlines, a pioneer in baggage fees, has now increased their fee – charging $10 per bag if you pre-reserve your luggage online, or $20 per bag if you check your bag in at the airport.

However, you have to really admire the ability of Spirit’s PR department to spin a simple luggage fee. In their recent press release of the luggage fee – Spirit claims that adding the fee is really a GREAT thing for their customers!

“Instead of raising every fare across our entire network in response to ever increasing fuel prices, we are proud to introduce our new luggage policy, which gives our passengers the opportunity to control their cost of travel by packing lighter,” said Barry Biffle, Spirit’s Senior Vice President and Chief Marketing Officer.

Biffle PR Translation: Yes - we’re adding a luggage fee… but hey, we’re not raising fares. So there’s some good news out of all of this!!

Biffle FMV Translation: Hate the Game, Not the Player.


And seriously – this is a great statement that is mentioned TWICE in the PR: “Our luggage policy… gives our passengers the opportunity to control their cost of travel by packing lighter”

Huh?? This basically says “Passengers will get charged for a bag – but you have the option of not checking in a bag… Man we’re great!!”

After all this, FMV management has decided to fire its PR firm and find a new agency that can spin like Spirit’s new luggage claim carousel. However, rest assured, we will also give the firm the option of packing lighter….

UA Baggage: The People Have Spoken

Lest you miss it, America's Finest News Source, The Onion, has some fairly comedic public feedback on the new United Baggage Fees. Yes, it's a parody - but we suspect if you asked enough real people in ORD Terminal 1, eventually you'd get these exact responses. OK, maybe you'd need to hit the United Express gates in T2 to get the fireworks response.

Overhead Bins: Prepare to be Very Full

This move has been a long time coming, so it shouldn't come as any surprise to FMV readers that approximately every media outlet in the nation is reporting that United Airlines will begin charging $25 to check a second bag on May 5.

The Chicago Tribune reports that UA expects a $100 million annual benefit from the move (combined cost savings and revenue boost). We would kill to know exactly how McKinsie computed that benefit. Consider that UA lifts about 25 million tickets per year. That would mean at least 16% of passengers would have to pay the fee, assuming no cost savings. However, it's actually got to be much higher than that, considering elites, premium cabins, gov't/military pax, international itineraries, etc. are exempt. Are there really that many hayseeds dragging two bags to the counter? We say no; hence, we conclude there has to be a big cost savings benefit anticipated.

There is also a gaping loophole in the policy, for those that enjoy gamesmanship. There is no charge to gate-check a second bag! Hence, you can go to the counter and check one bag then check the second at the gate. Certainly a nice strategy, and one that also diversifies your lost baggage risk portfolio.

We think the UA spokesperson says it best, "We will keep [the baggage fee] as long as customers want low fares". Oh, SNAP! Take a suck at that, Mr. Consumer. You brought this on yourself, with your demand for low fares without recognition for premium services.

That quote is airline-speak for "don't hate the player, hate the game".

In related news, United traffic fell 5.3% in January on a 3.4% decrease in capacity.

JetBlue: Labor Strife in Marketing Dept.?

We normally try to stick to the facts, but in this case we'll start a rumor. Something is amiss in the Marketing Department at JetBlue. It simply has to be.

Here is the skinny. As we understand it, the carrier observed that certain customer segments frequently change their travel plans, and may pay a premium for a fare that allows changes or refunds. On Monday, the carrier announced that, for those customers, there would be a new product offering flexibility and convenience that is cleverly named "Refundable Fares".

Hoo boy, that's rich. Refundable Fares? Seriously, someone please tell us they did not pay somebody to brand that? Is there a whiteboard somewhere with TrueRefund, BlueRefund, FlexBlue, and RefundaBLUE scratched out? What kind of a world do we live in, where a straightforward proposition does not need a snappy name?

Anyway, you get 4x TrueBlue points if you buy a Refundable Fare. So at least we know the marketing department is there. They just don't seem to be functioning at peak.

Book Direct. Because You Want To.

At the end of January, looks like United will become the latest airline to pull their mileage bonus for booking direct. It's pretty clear that carriers are feeling confident in their abilities to draw consumers to direct bookings without such incentives.

What are the key drivers of this change? The short list looks something like this:

• The popularity of meta-searchers such as Kayak, Farecast, Sidestep, etc.


• Lack of perceived consumer value in the on-line travel agent space.


• Carrier surrender in the battle to drive share away from corporate TMC's.


• Save Booking Fees over the agencies.

It could also be that carriers are positioning themselves to employ other stick-type penalties (i.e. rather than current carrot-like incentives) for booking away from their sites. That's a great conspiracy theory, but not likely to happen until current GDS deals expire.

The most realistic hypothesis is that consumers are pretty satisfied with the carrier sites. Most offer good shopping tools, a low-fare guarantee, ancillary travel services (e.g. insurance, car/hotel booking, etc.), and other tools like flight alert and on-line check-in. Why bother going anywhere else, especially for a preferred carrier?

This is kind of like any mature relationship. When you first start, you start giving neat trinkets and surprises. But then that starts going away, and the pair get kind of comfortable and content being with each other on the couch eating ice cream and watching "Terminator: The Sara Connor Chronicles" (editor's note: Tonight on FOX!). Just be wary if one of them gets all frustrated that it's not special anymore, sees some other hot young thing out there, and dumps their old standby. Because you can bet that it's going to take more than a handful of devalued miles to win back the mate...or attract a new one.

In-flight e-mAAil

Yesterday's WSJ reported that AA is going to begin testing inflight wireless on their 767 fleet.

Unlike JetBlue's wireless gimmickery, this service will not be free. Passengers will pAAy $10 for WiFi during short hops or $12.95 for flights over 3 hours. We immediately wonder, do you pAAy $22.95 to keep on surfin' LAX-BOS if you stop in ORD? Hmmm...

We kind of hope so, because this service sounds pretty sweet, and AA can probably print cAAsh with it. Passengers can reportedly use any device (e.g. BlAAckberry, lAAptop, iPhone), and access any web site (e.g. company intranets, Fare Market Value, etc.). Plus it sounds like they got some other sucker to pick up the tab for providing the service (i.e. no CapEx).

Mostly we wonder if passengers will be able to purchase the WiFi service at the time of booking their trip. Somehow we doubt it, at least to start. Though we see a day when Elites may get the service for free, or the service is bundled with a premium fAAre. In the meantime, a kind word, hearty handshake, and Shout Out to the first FMV reader that sends us an e-mAAil from 30,000 feet!

SITA tries Ideating...

SITA ponies up huge for R&D – sinking $110 million on an R&D budget. However, it looks a big chunk of that budget goes to B-School consultants. Check out this article from Eye 4 Travel (Yeah yeah, we know they are a PR Newswire) describing the research:

SITA's CEO Francesco Violante said: "The pace of change in developing technologies continues unabated from Web 2.0 to Cloud Computing to new mobile applications and virtualisation. The speed of new technology development requires a dedicated focus on how these technologies can be incorporated into SITA's portfolio of solutions for the air transport industry."

The SITA Lab will deploy an Innovation Knowledge Management system to support the generation, capture and evaluation of new ideas. The system will be open to employees, as well as customers and partners, in order to create an Innovation Ecosystem for the air transport industry.

SITA's Chief Technology Officer, Jim Peters, who said: "Emerging technology is now driven more and more by the digital lifestyle of today's consumer rather than by traditional business-focussed IT solutions. SITA needs to be continually watching and learning from what happens in the consumer digital market to understand key trends and to be able to adapt and adopt consumer-driven technologies to create innovative solutions which address air transport industry problems. "


So they are creating: “An “Ecosystem” for “Innovation Knowledge Management” in order to capture the “virtualization” of “Web 2.0” as a result of “Consumer-Driven Technologies”

Heh heh, You can’t make this stuff up!!

Oh wait – maybe you can….(check out video link below...)


Ideating...

We're Giddy for Alaska (and so are they)

Alaska Airlines has long been touted as one of the pioneers of airlines web sales, largely credited with being one of the first airlines to sell tickets on the web. It looks like some significant milestones were reached a few months ago


"During October, Alaskaair.com generated 50 percent of [Alaska/Horizon] total revenues for the first time. The site also passed the $1 billion annual sales mark in October, earlier than the mark has ever been met in previous years."

"Having finally broken the 50-percent mark, Mark Guerette and his E-Commerce team have their sights set on generating 60 percent of AAG's total revenues. "Unless we completely change our business model, that may be our high-water mark," Guerette said. "Many big companies still prefer to book through their own managed corporate travel arrangements and there will always be a certain percentage of customers who prefer the high-touch service provided by our reservations sales agents."


That's actually a pretty interesting comment and pretty shrewd on the part of Alaska. They recognize their customer mix, and their customers' preferred distribution channels, but have done what they can to maximize their direct distribution.

One thing FMV has to point out - If there is a story about Alaska Airlines and the Internet, it’s federally mandated that two things must be mentioned. We’re serious about this – happens every year:

1) It must be mentioned that Alaska Airlines was the first airline to sell tickets on the Internet to the legendary “Family of Four” from Olympic Peninsula.

2) There has to be a quote telling us how they happy they were when they remember the good ol' days…

- January 9, 2008 - Looking back to the launch of alaskaair.com in December 1995, "I remember all of us high-fiving because we sold 50 tickets in a week over the Web," said Guerette. "Now, we average more than 10,000 per day.

- December 15, 2006, - "We were ecstatic and high-fiving each other when we sold 50 tickets in a week," said Guerette, remembering an early milestone in the Web site's progress.

- December 28th, 2005 - "When Mark Guerette and his information technology crew at Alaska Airlines saw the first online reservations trickle in over their servers 10 years ago today, they were practically giddy with accomplishment."


So hats off to Alaska, and the travel journalism industry, both for maintaining a solid track record of consistency and success. Trust us, we are ecstatic and high fiving each other here at FMV HQ in your honor. We maybe haven't been this giddy since Flavor Flav hooked up with Bridgett Neilson on Surreal Life. Also, we're printing up some T-shirts, "Web Sales We'll Never Remember, Friends We'll Never Forget". Let us know what size you all need.