An Interesting Twist

Air Jamaica has added an interesting twist to the old checked baggage fee. As reported in Travel Weekly (which is online daily), Air Jamaica will charge $25 to carry a second bag on certain routes. However, they may not put that bag on the passenger's flight. Rather, they will get extra bags to the destination within a seven day window [Did they hire a cable installer to consult on this deal?], and the passengers have to come back to the airport to claim them.

Well, upon first read we about flipped reading this. Yet upon further review it seems the carrier is specifically targeting ethnic nationals traveling home for the summer. We guess many will have the flexibility to live with the deal. We can also sympathize with the carrier that may be faced with too much baggage for the flight. However, it would sure be an ugly trend if this were to get traction in a broader application -- so let's hope nobody matches without the fine print.

Turn Back the Clock Month

Continental comes up big today by bringing back a fan favorite: 500 bonus miles for booking online.

The expiration date suggests that this is a response to OTA's pulling booking fees. However, there's no way to tell just yet if it's an offensive or defensive type of tactic. In other words, has CO seen a drop in online bookings that is offset by higher OTA share? Or is it more like Swine Flu, where fear necessitates some sort of action, even if a direct threat is not yet detected?

Either way, you can be assured that if there's a patron saint for the points-obsessed, travellers are praying that other carriers match.

Late to the Party...

Looks like Orbitz is finally joining the "No Booking Fee" Party:

Online travel agent Orbitz Worldwide Inc., moving to boost traffic at a time when recessionary pressures have squashed business and recreational travel, said Tuesday that it will waive its normal booking fees on flights booked by May 31.

- Stay tuned because the interesting stat will be how much keeping the fees affected their market share. FMV originally predicted Orbitz would drop fees on March 23rd, so kudos to them for holding out an additional 2 weeks...

- We also wonder if this now starts a race to the bottom scenario for OTAs. We all know that hotels and cars are where the true money is for these guys - how long until the first OTA starts to subsidize airfares if the customer also buys a hotel product? This may be crazy talk, but let's see what Priceline has to say about it...

- Will low hotel occupancy combined with an OTA revenue drought bring back the glory days of "merchant model" hotel bookings? Will carriers be willing to dial up incentive payments to OTAs under the guise of "share shifting" schemes? Everything old is going to be new again as no stone goes unturned in a hunt for OTA revenue. The OTAs - Orbitz, especially - have bills to pay, too.

Oh Henry !

Dreaded SDC (Second day of conference) update from CASMA.

Energy is definitely lower for the SDC, but we’ve only seen a handful of conferences that’s figured out how to keep momentum going into the second day. Today, Henry Harteveldt gave a keynote speech, and while he was mostly a Debbie Downer in his message, he does have a great message.

One sentence summary: "We are going through a second coming of the Great Depression and airlines must fundamentally change how they look at distribution and embrace Merchandising" .

- Henry (having heard him speak a ton - we think are close enough to be on a first-name basis now) believes that its time to stop looking at “Distribution”, but look at airline industry as an opportunity for “Merchandising” and capitalize on consumer emotion during the selling process.

- Money Quote: “Distribution is passive while Merchandising is active”. It’s the difference between shopping at Wal-Mart (cram the store with products at a low price) vs. shopping at the Apple Store (every detail from spacing to lighting to the shelve color is carefully considered for the shopping experience). The key is to somehow bring emotion into the shopping equation. This is a huge, fundamental shift to selling.

- Example: Many people feel that the check-in / security process is painful, but if you can offer products like United’s Premiere Line (you get to go thru security with the elite fliers) – they will gladly pay.

- "Times are tuff all over" and it’s really the rich people’s fault the airlines are hurting. Families making over $100,000 a year make up about 30% of the population – but they make up 45% of all travelers. However, they are nervous and just not using their money to travel on grand vacations.

Overall, you can tell that CASMA really scaled it down this year. They usually have some pretty fancy off-site event, but this year they simply had a band and dinner in the ballroom. That’s not a bad thing at all given the economic times. However, the best news of the entire conference was the announcement of their next conference location:

VEGA$ BABY!!!!

Can’t wait.

CASMA Dallas - Howdy !

Hello from Dallas where we are covering the CASMA conference for our loyal readers. The conference is definitely a big step up from the last one in New Zealand – both in terms of content and participation. Still down from the good ol' days, but we think you will see attendance down across the board throughout this entire year.

The conference started off pretty strong, with a panel of airlines talking about Merchandising and Ancillary Revenues. And the best part was that they actually had good hard facts ! Or, as they say in Big D, "Yee Haw!"

- Mark Mees of Air Canada stated that 47% of all passengers buy up from the Tango fare class to Tango-Plus class or higher. He didn’t specify the breakdown between Leisure or Business passengers, but that’s still good info.

- A very interesting set of numbers is that Air Canada generated over $245 Million in Ancillary Revenue in 2008. However, AC also allows a passenger to "opt out" of certain services to get a lower price ($5 off if you don’t check a bag, $3 off if you don’t want any miles, etc). Mees stated that passengers opted out to the tune of approximately $500K. When compared to $245 million – that’s not too bad, and they surely earn some goodwill for allowing their customers this simple choice.

- Jim Young of Frontier actually broke down the upsell-rate by channel. 38% of Frontier.com online customers buy up to a higher class; 50% of travelers buy up when they book through Frontier's call center, and only 5% buy up via the Travel Agent channel. The main issue is that travel agents (especially OTA's) are so focused on Low Fare Search that the higher classes are always at the bottom and the customer never sees them.

- This is fascinating to FMV since it means that Frontier actually invested money to redesign their Call Center interface so that 1) their agents can see all of the fares classes, and 2) the call center agents can now convey that information to the traveler. We’ve always thought that airlines, who have a ton of information about the passenger, could definitely increase revenues with just a little amount of extra data for their agents, and this is great confirmation. It may also mean that a call center agent w/ personality persents a better pitch than a static GUI.

- Priceless moment of the day – Sabre challanged Frontier if this means Frontier.com now had higher yields than the GDS channel. Jim Young answered with a clear “Yes”. The look of dejection from the GDS was pretty priceless.

Finally - it’s clear that there is a lot of angst around how airline shopping will be done in the near future with the expansion of bundled fares and attributes. How do you accurately compare a fare class with free bags vs. a fare class with priority seating and a window seat? We think the first site that can do that well with instantly gain massive share with full airline backing.

The Gnome says "Me Too"

WAAYYY back at the end of 2007 – we did a blog post on Priceline announcing that they would be dropping their booking fees for airline tickets. At time we stated:

Don't look for other OTAs to match, because they've invested too much in pitching their service proposition to throw away that revenue stream. Unless Priceline is able to make up some ground in share of course, which may be unlikely, but actually could happen. Especially through savvy partnership with meta's.

Well, Priceline WAS able to make up some market share and it looks like the big boys have had enough. Expedia announced they would drop their booking fees last week, and today the Gnome has also joined the bandwagon. Actually, the Gnome plays marketing catch up in two aspects:

1) They counter the “No Booking Fee” move by Expedia and Priceline, and

2) They counter the “Orbitz Price Assurance” gimmick:

Travelocity also is expected to launch a long-term price guarantee of sorts on vacation packages, promising to refund a price difference, from $10 to $500, if a different Travelocity customer buys the same package for a cheaper price at a later date. The "PriceGuardian" program is similar to an offering competitor Orbitz.com makes on airline tickets called "Price Assurance."

This is well played since it ups the ante by throwing in the holy-grail of “Vacation Packages” as the teaser. So what's this all mean? Here's our takeaways:


- If you wanted to see the short term affects of the recent Meta-Search space growth with Trip Advisor and TZoo, here you go (on top of Yahoo getting out). It really ups the pressure on OTAs along with the incumbent meta's. We think it’s going to start to be a brawl because the entrance of these two is comparable to another Hotwire and Priceline entering the OTA Market.

- FMV starts the betting on March 23rd as the Over / Under for Orbitz to announce dropping their booking fee. They will take the weekend to look at how this affects their bookings, then they'll make a deck and discuss it, but they will eventually need to take action.

- FMV could never really figure out why travelers use OTA’s and pay the fee in the first place. Yes – some OTA’s do provide value and we understand that (especially for flights using different carriers not in the same alliance); but for simple, roundtrip flights, it’s always been a mystery. [Note: That's why the PCLN commercial showing NoFee breaking vases is so perfect].

- Finally, the Gnome's latest moves may also be a tacit admission that 1) the real money is basically in hotels and cars, thus 2) selling airline tickets is now simply a necessary cost of doing business and loss leader for other travel transactions.


In clsoing, back to that service mark, "Price Guardian". Really? That's all you've got? Hopefully no AIG-sized bonuses handed out for that creative gem. Unless they show him slugging it out with Shatner and NoFee in a commercial.

Farewell Farechase - HE GONE !

The meta-search space was starting to get really really crowded since travel-media heavyweights like TripAdvisor and Travelzoo started to crash the search party. However, it looks like field has been narrowed a bit as Yahoo! decided to scrap Farechase five years after they purchased it in 2004.

As reported by Travel Weekly (which is updated daily):

[The decision] coincides with two other developments. Carol Bartz replaced Jerry Yang as Yahoo CEO in January, and in late February Yahoo signed a new agreement that has Travelocity continuing its role as the primary booking engine for Yahoo Travel. In the past, Travelocity sparred with Yahoo over the prominent role that Yahoo gave FareChase on Yahoo Travel.

OK - this is basically the same old Hollywood story of Man - Wife - Mistress.

- Yahoo was pretty much married to Travelocity, but then met the alluring FareChase

- Five years of drama where Yahoo tried to juggle both

- Finally, Yahoo re-ups with a new Travelocity Agreement and realizes its never going to leave The Gnome so it's time to end it with FareChase.

The field is starting to rationalize itself a bit with Kayak / Sidestep as the heavy, Microsoft / Live Search / FareCast as the contender, Mobissimo as the falling star, and Trip Advisor and Travelzoo as the new guys.

FMV's predictions: 1) Mobissimo is the next to go thru a takeout, 2) Hybrids coming to a website near you as media plays try to go into the travel realm, and travel sites try their hand at media plays, and 3) OTA's have a problem, but Expedia may have the answer...

Everyone Take a Deep Breath....

So - we bet that the media will be all over the latest news that seems to come straight out of the Onion:

Ryanair is considering charging passengers to use the toilet on its aircraft. According to the Belfast Telegraph - The airline's CEO, Michael O'Leary, is touting the idea of putting a coin slot on the toilet door as a means of raising "discretionary revenue".

OK - we know that's pretty mind-boggling - but we think this is going to be WAAYY overblown. Let's take a look at what O'Leary actually said, as reported by Today in the Sky:

"One thing we have looked at in the past and are looking at again is the possibility of maybe putting a coin slot on the toilet door so that people might actually have to spend a pound (about $1.43)... in future."

Well, that outrageous statement is actually hedged pretty well. Look - we know we joke about how far airlines will go to make an extra dollar (we even have a tag for "25 cents to use the bathroom") - but we just can't get worked up about it that much. We just don't think it'll happen.

However, if it does happen - FMV will be the first to test how water resistant their air sickness bags are...

Cold Cash Better than Kind Words

We saw a fluffy piece here that's a bit of a backhanded compliment to the on-line travel industry. Apparently, there is an "American Consumer Satisfaction Index". This index suggests that, in general, consumers were less satisfied with e-commerce last year. E-commerce satisfaction dropped from 82 to 80 (out of 100). However, satisfaction with the travel segment of e-commerce did NOT decline.

More specifically:

"Expedia (+2.7) and the All Others category (-2.5 percent) tie for first at 77. Travelocity comes in second place (+2.7 percent to 75) followed by Orbitz (+1.4 percent to 74). Priceline.com falls one percent to 72"

We're not surprised to see Priceline lagging in this index, as their opaque model is a bit more vulnerable to lingering ill will if the consumer has a bad travel experience. In related news, Priceline reported 4Q revenue up 21% last night after the bell. So I guess we'll believe the consumers voting with their wallets rather than those voting in the "index". Even if you were burned by a bad opaque buy, if price is your main driver, you're probably going to go back to their well time and again.

Sonic Is On A Roll

An understated press release recently came out that announced Jetblue has chosen SabreSonic as their new host system. It gives a hint of JetBlue branching out to expand partnerships:

Rick Zeni, JetBlue's Vice President of Change Management-Passenger Service System. "Sabre will allow JetBlue to offer greater revenue-producing codeshare and interline partnership opportunities... "

A few notes:

- Looks like some consultant got the final say to Zeni's title "Change Management - PSS"?

- This is actually the second announcement of Sabre scoring a host win in 2009 – the other being a recent WestJet announcement. We know that Amad-oose is pounding the market with Altea – but Sabresonic has some momentum going for it.

- Even more interestingly – both of these airlines used to be on the Navitaire platform. JetBlue probably decided to look around since they had to migrate to the New Skies platform anyway. It just seems telling that Navitaire wasn’t able to keep Jetblue in the fold despite all of the features New Skies is supposed to add.

- The timing is also interesting right after Sabre's purchase of EB2. We assume that Sabre is planning to incorporate EB2 as their new IBE platform (the Frontier migration to Datalex would have been the first clue they had to do something) – but we wonder if JetBlue will be the launch partner for that platform (or Westjet).

- The press release says that Jetblue will take control of Sonic in 2010. FMV is always amazed at how long integrations projects like this take, so we’ll be watching to see if JetBlue is any different. We'll also see if they can implement the IBE in that timeframe as well.

- Finally, we can’t help but love the name “Sabresonic”. It always reminds us of “Sonic the Hedgehog” which is one of our favorite video games. Any reason to dredge up Sonic once again is ok in our book. Though "Grand Theft Airline" has a snappy, edgy ring to it, too... Maybe next time.