Southwest = Complete Clarity

Once again, we have to hand it to Southwest. With the US majors struggling to boost revenue and cut costs, not a day goes by without a carrier looking like an anti-consumer enemy of the state in the news. Yet Southwest emerges with their value proposition as clear as ever: Basic air transportation at a decent price with no nickel-diming.

They drove it home with a full page ad in today's WSJ (and likely elsewhere) featuring a coupon (redeemable only on Southwest) reading "DON'T #$*!% ME OVER". The coupon is followed by a list of the various fees Southwest does not impose. The message is simple, and brilliant, and it will resonate not only with Johnny Lunchbucket trying to enjoy some R&R, but also with the coveted business crowd.

They also unveil a new tagline, "Fees Don't Fly With Us". Of course, neither do we (three letters for you, MDW). However, we can understand why people do. And we suspect many more will. Pass the peanuts.

DiAAling up the fees!

The big news today, AA has announced a $15 fee to check a bag. That's for every bag, starting at the first one checked. A second bag is still $25 to check. Yes, yes, some restrictions apply (e.g. Elites, strollers, international travellers, etc.). However, this is a huge step up in the ticky-tack approach we've seen in the market to date.

Consider some of the major ramifications:

• Travellers really can't cross-shop carriers now. This is effectively a $30-$80 fare increase for most leisure travellers that is opaque during shopping.


• Airport operations just got more complicated. It's usually quite a wait to check a bag, so we rarely do. Now every stooge in that line has to complete a payment transaction, too. Not to mention AA probably needs more cash in the drawers at the airport.


• Overhead bin space goes from endangered to extinct. No further explanation required here.


• Gate checking proliferates. This can't speed up the boarding process. Unless AA follows this jab with the haymaker of reduced carry-on size allowance.

This is a pretty strong move by AA. Are they committed if no one else follows? This will be a fun one to watch.

Though possibly not for travellers....

What's in a Name?

We have to wonder what’s going on in the world of naming travel companies. It just seems like there must be a master list of names, or that there is simply too many companies so that naming them is really really hard now.

The latest example is the new airlines from British Airlines called “Openskies”. Yes – it seems to be predicated on the “Open Skies Agreement” that frees up competition for international routes, but it also unfortunately shares the same name as the Navitaire Host system. Painful.

But it gets worse.

Even names that we thought were pretty unique have close twins. Check out the names of YAPTA (known for flight tracking) – and its bizarro-world twins called YATRA (online travel portal). And seriously – check out the logos - even those are similar!!

But it gets worse.

One of the original names WAS Bezurk, an Asian based Metasearcher– but they decided to rename themselves WeGo.com. Which is an awful name to switch to because there is already a WeGoLo.com, which is an European LCC meta. Looks like Bezurk just didn’t go low enough.

There is now TripAdvisor, TripConnect, TripIt, InsideTrip, TripDoor, and CTrip. It’s a complete marketing nightmare. Don't get us started on the fare names. Farelogix, FareCast, FareCompare, etc.

Where is the creativity? Now on the other hand, behold the name Fare Market Value. That's a beaut.

Insurance Against Bad Reporting

We all know that a huge Ancillary Revenue stream for airlines is “Travel Insurance”. Although FMV will admit that we don’t know anyone that actually buys it – we are repeatedly told by airlines that everyone does.
A NY Times article last week explained that people who buy travel insurance tend to think that they are then less likely to lose their bags, get sick or have an accident. The psychology of buying insurance is fairly interesting, but then the NY Times had go and mess it up:

“These results presumably come as no surprise to marketers of travel insurance, which is now purchased by half of American leisure travelers — a fivefold increase since 2001, according to the United States Travel Insurance Association.”

Huh? *HALF* of leisure travelers now purchase travel insurance?? That sounds pretty unbelievable that so many travelers would add this premium to their vacation travel costs. As a result, we decided to do our own research at the US TIA website:

“Utilizing industry and government statistics we estimate that approximately half of Americans who took a cruise, tour or international leisure air trip in 2005 purchased a per trip insurance policy,” notes Brad Finkle, USTIA president.

AHHHH - That still sounds high to FMV, but a little more believable. It's not all leisure travellers, it's the subset purchasing cruises, tours, and international. It's especially logical for tours - because in some cases the cost of travel insurance is actually baked into the package price. However, FMV feels vindicated that the NY times was wrong. We maintain it's going to be a stretch to get half the hapless rubes on the redeye from Vegas to buy insurance. Unless the dealer's showing an ace, of course.

CASMA Panama.... YAWN....

Sigh –

Ok, Ok – A lot of loyal FMV readers have emailed asking us when we'll post our CASMA recap. But, the fact of the matter is that we’ve been lazy to post it because …. Well… there just wasn’t a lot to report.

Yes, there were a lot of panels and workshops, but we bet that you’ve already heard it all. We’re serious. It’s a slow distribution news year – and so there’s basically only one thing everyone talked about at CASMA: “Merchandising”

With the very closely-related popular brother… (Wait for it)… “Ancillary Revenue”

And the 2nd cousin that everyone admires from afar - “Fare Families”.

- Yes, Paypal had yet another lunch keynote speech. And Yes, there were the federally mandated panels about E-Ticketing (Hey – isn’t that IATA Deadline coming up?), Alternative Payment Methods (Credit cards suck), and Agency Booking Habits (Drat them!). These are CASMA staples.

- The Panels this year were seemed LONNNGGGG (90 minutes?! Uggg).. And the major panels were about…. (Wait for it)….. Ancillary revenue! The punch-line of this was that the panel was “moderated” by Maruice Coleman – who seemed to have only two main points. 1) Hey - Did you know he used to work at Aer Lingus (he mentioned this no less than 11 times) and 2) Ryan Air is the BEST AIRLINE EVAH !! (mentioned Ryan Air no less than 28 times).

- The other major panel seemed to be Technology Providers talking about…. (Wait for it)…. Ancillary revenue. The panel can be summed up like this:

Sabre: "Hey - Did I tell you we're great?!... well, we are great!".

Amade-oose: "Industry Buzz Word #1, Industry Buzz Word #2, [Insert a remark about Altea]"

WorldTravelSpanPort: Most Reasonable of the bunch - "We can't expect airlines to be standardized"

ATPCo: "umm - don't know why we're up here"

ITA Software: "This stuff is hard, we'd love to hear what the airlines are looking for"

So there you go readers. Sorry for the letdown – but it can’t be all breaktaking news all the time. We’ll save that for the next Airline that charges for an aisle seat...

FareCast XP

Just remember readers - You didn't read it first at the Seattle PI, You didn't read it at CNN, You didn't read it at MSNBC - But you did read this prediction at FMV !!

It's official: Microsoft is the mystery buyer of FareCast... Microsoft did not confirm the purchase price, but a source says the figure is in the $100 million range.

Looks like the price tag has increased from the previously reported $75 million. Screw drinks - DINNER is now on you guys!

Congrats to the FareCast crew.

FareCast = "He Gone"

Way back in December, when SideStep got taken out by Kayak - FMV posed this nugget of wisdom:

It’ll also be interesting to see what happens now with FareCast and Mobissimo.

Well, it looks like our crystal ball rocks because FareCast just got purchased for $75 million - but here's the wierd part - Buyer unknown:

"Farecast has been sold in a deal that values the Seattle online travel search startup at more than $75 million, according to a source with knowledge of the situation. The buyer was not known and Farecast Chief Executive Hugh Crean declined to comment. "

The rumor getting the most play is that Expedia ponied up the cash to purchase the local site - but to FMV, this seems like an expensive proposition for a million visitors or so a month. Also - doesn't seem like their fare prediction algorithim would mesh for the largest OTA on the block.

Who else then? The only other name we can think of would be MSN - simply because they already have a relationship, they are local, they are always looking for unique content to drive their travel site, and who knows how long they will keep their expedia relationship. It'll be interesting to find out...

But otherwise - congrats to the Farecast crew, not a bad run to clear $50 million or so! Drinks on you guys if we ever meet. Not the kind with cream and sugar. Only so we can stay clear of the Starbucks vs. DD dilemma, of course.

Airline Merchandising 101

If you spend any time at travel conferences, you're going to hear airlines talking about "merchandising". It is quite probably a federally mandated talking point. What does it mean?

We can enjoy Slide 18 from this PPT from United Airlines for a peak behind the curtain. UA is targeting a $1B revenue increase (roughly 5% over current ~$20B revenue) in five years from the following initiatives:

• Seat upsell, $300M/year


• Unbundling product (e.g. Baggage Fees), up to $300M/year


• New products, $400M/year

We wish we knew more about the "new products" (c'mon, pay toilets!), but we speculate that means things like entertainment, buy-on-board, new lounge purhcase plans, etc. Wait and see.

PS, FOR NERDS ONLY:

This is all interesting stuff, but the humor is found in the math error. Note that the slide indicates that seat upsell "can DOUBLE to $300M/year". That means the incremental benefit is only $150M. That means the total target only adds to $850M, not $1B. Not to mention that a $100M range was cited for "unbundling product". Oops, now we're down to $750M. Fine, fine, $250M is a rounding error when you're talking about $20+B in total. However, they may want to hire a consultant to check the other consultants' work (yes, FMV Available)

Another Low (i.e. Gutter) Fare Promotion

You have to hand it to them. They've got a Spirit that just won't quit. From the airline that brought you the MILF sale comes a suggestion that it may be time to score some strange:

"Bored with your marriage to high fares? Spice up your travel with some strange new fares from Spirit. Life is better with some strange!"

If you're not understanding the reference, get yourself over to the Urban Dictionary for some remedial education. If you're not sure why this promo is probably going to be successful, you may not be spending enough time in the bar at convention hotels...

Jump back, what's that sound?

Greetings from CASMA at the Intercontinental Playa Bonita Resort in Panama!! (bonus points to any of you readers that understand the Van Halen reference in this entry's title).

Yes - it looks like conference season has started for 2008 and FMV travels far and wide to keep our loyal readers up to date. This year CASMA has picked a great resort to host the conference - and FMV will highly recommend the Intercontinental. The conference has even arranged transportation to the hotel - which is about 45 minutes from the airport. The only problem is that Panama City itself does not seem very inviting to explore, and there is a general consensus that there is not much enthusaism for going into the city and seeing the sites (which doesn't seem much after you get past that big canal thing).

In terms of attendance - seems well attended in terms of numbers, but not as much in terms of companies and organziations. For instance - out of a total of about 200 people, COPA has 18 people attending (ok, that makes kinda sense since it's home turf for them), ARC has 19 (huh??), and each of the GDSs have 9-10 as well (which also makes sense because let's face it - CASMA is a bit of a GDS love-fest after all...).

Buzz words we predict to watch out for today during the gatherings:

1) Some reference to "4 carriers going under in the same week..."
2) Anciliary revenue (with multiple references to Ryan Air)
3) Price of oil

It's enevitable - airline people just can't help themselves. For those of you that can't be here, go ahead and "ease the seat back", we'll post updates as noteworthy things happen and time permits.