Now Boarding......

FMV is not sure what's going on here - but we flew United last night and it looks like they had the "First Day of the New Program Jitters"

The gate agents were all over the place and therefore they thought the new program allowed Premier Exec AND Premier members as part of Boarding Area 0.5. Question: Who else was left? Nobody. The scene was such that Boarding Area 0.5 was simply the same as previous Boarding Area 1.

We're told that other flights did it correctly, and only Premier Execs were part of the 0.5 - but we also had this thought. By making the Premier Executive benefit so public - you also make the Premier benefits less valuable since you took away something they previously had....

Boarding Zone 0.5 ??

FMV recently recieved the following email from United:

Dear FMV: Beginning November 12, our Premier Executive members and Star Alliance Gold guests will board before Seating Area 1 customers through the Economy Lane.

The new boarding order will be as follows: Global Services, 1K and customers sitting in United First will continue to board first through the Red Carpet Lane, followed by our United Business customers. Our Premier Executive and Star Alliance Gold members will then be invited to board.

After all of our most-valued guests are on board and getting settled, the regular boarding process of seating areas 1 through 4 will begin.

Previously, there wasn't a ton of obvious difference between Premier Execs (50,000 miles flown) and "regular" Premier (25,000 miles) members. Yes, you had priority for waitlists and maybe upgrades, you could book exit row seats, and you had the nebulous Star Gold benefits - but it wasn't very obvious. Especially for international travellers. On the contrary, Seating Area 0.5 changes this and makes a very public benefit.

Most airlines are pretty blatant that their elite fliers matter more than the causal flier. On one hand, it causes some bitterness, on the other hand FMV is Premier Exec so YAY !!

Fed Ex Airlines

WAAYYY back in May, 2007 - FMV had this thought:

FMV considers [the idea of] carriers partnering with the baggage shippers to provide more customer options and deflect complaints about baggage fees.

Well - it's come true courtesy of United, who introduces their "Door-to-Door Baggage" Program:

Stop lugging your luggage around. Instead, send it ahead with Door-to-Door Baggage. Purchase this service at united.com, and FedEx will pick up your baggage from your home or office and ship it directly to your destination. Or if you prefer, you can drop off your baggage at a FedEx Office location or any other FedEx authorized shipping center.

The unique feature about this program is that United has tied FedEx into their passengers' itineraries. Once you sign in to your United.com account and press the "Door to Door Baggage" link - the site automatically starts the FedEx process using the dates and cities of your itinerary.

The kicker is the boastful tagline:

United is the first airline to save you time and money with this simple and convenient service.

Save you money?!! How much do they charge for this?? Starting at $149 !! (vs. $15 for a first bag fee??). Hey, thanks for the money savings United !

Hence, this program isn't really about cash savings. It's about time savings. This is for the guy that kind of wanted to send his golf clubs ahead to avoid the hassle of checked bags. He also didn't trust the airine not to lose his clubs. The same logic could hold for business people who don't want to shlep business materials and simply say "eh, I'll just ship it and expense it".

However, the real winner here is FedEx, who picks up some highly qualified leads over its competitors. If UA can skim some of that value, and spin it as a positive for their customers, good for them. It's time to fly.

Poke in the Eye (4 Travel)

We were at the Eye 4 Travel North American Conference – that now combines 3 conferences into one: Distribution / Ancillary Revenue / Revenue Management. Man has this conference really taken a hit. Fairly brutal in terms of content (weak), speakers (boring) and attendance (low), and there is only ONE thing that saves it from being a complete waste:

VEGAS BABY !!

By our definition – any trip to Vegas is time well spent. And since the craps tables were kind to us this year, we’d probably categorize this as a great trip overall – even if the conference was pretty much a waste.

Basically – the morning has only two items of note, both from Frontier Airlines:

Jim Young – VP Distribution had some actual numbers regarding:

1) Travel insurance. Finally !! It looks like only 0.5% of travelers buy insurance if it outside the booking path, and about 5% if the option to purchase travel insurance in within the booking path.

Finally – some real hard numbers that make sense. 1 in 20 buy insurance – those are numbers we can believe in.

2) Also – Frontier says that 50% of travellers check in a first bag, and 5% check in a second bag (which is down from 11% since they instituted a fee).

Young was asked, if oil continues to go down – will the baggage fees stay? While noting that carriers always have to keep an eye on competition, he believes fees are here to stay now that they are introduced to the market, are big money for airlines, and seem to be accepted as a cost of doing travelling now. Can't beat honesty ! We concur. No one pulls a legit revenue stream (except maybe Blockbuster late fees).

CWT and UA Make Nice Nice

This is mostly to close up an ealier post and let everyone know that CWT and United has once again agreed to be friends. From the Travel Weekly (which is updated daily):

"Carlson Wagonlit Travel and United Airlines have come to terms on a preferred-supplier agreement...CWT spokeswoman Shannon Coughlin said no further comments or deails would be released...."


Sheesh - they made their spats so public, but then take their make up private. How's a blog supposed to make a living??

Afraid of Travelling

FMV gets really irked when companies market fear in order to sell their products. Travel insurance seems to do this – which may explain some of its new-found popularity. Well, as we’ve said – we’re constantly told it’s popular even though we don’t know anone that really buys it reguarly.

Eye 4 Travel (yes, we know it’s a PR wire) had this bit of advertising astroturf (it appears to be a real grass roots story, but it’s fake once you really examine it) that had the shocking, just shocking headline:

"[R]esearch has indicated that one in four Brits (24 percent) still plan to go on holiday this year without travel insurance.

Chris Rolland, Head [of] American Express Insurance Services, said, "As the cost of living rises and there is less money left over at the end of each month, our research shows that one in four Brits are struggling to meet the cost of holiday insurance. If it is a case of people cutting back on travel insurance in order to afford their holidays then perhaps they should think twice before booking. Should something happen, the current economic market means that the last thing Brits need now is an unexpected bill."


A few notes:

1) “Head” is a sucky title for Mr. Rolland

2) This “article” basically says that 76% of Briton’s buy travel insurance on a regular basis. Can that be?

3) We can’t seriously believe that American Express is saying “if you can’t buy the travel insurance, you shouldn’t really be travelling…” Way to advertise fear Amex !!

Interestingly - the article goes on to mention that the "research" was performed by a group called Yougov. Well, we did some digging and found this story:

"A May [2007] survey for Norwich Union, conducted by YouGov, found that a quarter of all British travellers go without insurance. The study also found that while travellers believe that lost baggage is the main reason why they might need to make a claim, in fact medical emergency and cancellation are far bigger risks. And those can be a lot more costly than a missing suitcase."

Hmmmm - Same study performed a year earlier with same results... Great work if you can get it.

Consumers Redeeming Miles for Travel

A woman named Mary Jane Credeur wrote a really nice article for Bloomberg this week that was published in many papers (Greetings from Asbury Park). It explains that consumers are burning miles for travel more than in the past, as evidenced by growing redemption tickets. Awards become more attractive as fares have increased. Further, banks are buying and giving away miles like drunken sailers. [Ed. note - Have we learned nothing from the mortgage crisis?] IdeaWorks is cited as claiming that half of all miles earned are not from flying.

We thought it was interesting to compare the reported increases in redemptions with the carriers' published traffic statistics:


Pretty clearly the redemptions are up much more than capacity, load factor, and passengers carried. Taken as a whole, this table is a roundabout way of confirming that carriers were selling fewer tickets in the first half of the year (ARC transactions were down 3.9% in 1H08). Hence the flurry of capacity cuts announced for 2H08 and 2009.

Interestingly, it also suggests how important banks' money from buying miles is for the overall airline revenue eco-system. If consumers won't directly buy air travel; let them do it indirectly via credit card purchases! As such, we'd like to see carriers continue to invest in tools that make it easier to redeem miles. And get a little more creative about how they manage the "price" of a ticket in miles. We'd also like to see a Cubs vs. White Sox World Series...but there's only so much an airline can do.

CWT QSI on UA ASAP !

According the an article in TravelWeekly.com (which comes out daily by the way) - It looks like CWT is having a spat with United and "continues to move market share away from the carrier"

The Beat is also on it saying that UA canceled its U.S. CWT agreement in June, so CWT in turn cancelled its International agreement - and they have not come to terms on a commission structure.

As a result - "[CWT] have shifted a substantial amount of traffic away from United... We are still shifting business away from United when all else is equal. Where there are markets served by United as well as other major carriers, and scheduling and pricing is as good for our clients, we have taken business away from United in favor of primarily one of the other big four U.S. carriers."

Overall - this seems pretty crazy. We know UA is taking aim at their huge commission costs, but UA also relies very heavily on agency corporate business. CWT being the biggest out there - seems like a tough fight. In addition, IF it's true that they are successfully moving business away from UA - it seems like this will only get worse once CWT starts to broaden the reach of online Symphonie initiatives and can easily automate rules to their clients.

UA used to place a huge emphasis on the QSI metric - the "Quality of Service" that is the marker for how much any agency should be selling on any route. We wonder if they have moved away from this - or if CWT really wasn't selling much of UA to begin with...

We're Back - And We Remember

We've been pretty silent the last few months - Combination of our day job really hitting us hard, and the fact that it was a great summer weather in Chicago. If you're from Chicago - you know you have to really maximize the summers in order to slog it through the 8 months of crappy winter hits.

However, FMV had a really interesting conversation the other day that we thought we should share.

We were flying on Weds (Sept. 10th) and sat next to a older couple who kindly asked "do you fly often?" We said "all the time - what about you?". She responded - "Well, this is our first flight since 9-11 since we were pretty scared about air travel, but they seem to have it pretty under control now.."

It took us a few minutes for that to sink in - and kind of amazing that it took SEVEN YEARS before this couple decided that they should get moving again. Those of us in the airline business prolly forget about things like that.

We actually flew on 9-18, the next week after the attacks - and we can still remember how tense it was. It's a world different now, but we guess it shouldn't be taken for granted. We remember and we guess it's time for us to get moving as well.

We're back to doing posts, and hopefully some interesting stuff will hit so we don't have to work too hard during halftimes of Bears wins !!

Where Are You !!?

Sigh.

Yes - we know thatwe have been absent lately. But to tell you the truth - there is not much going on. Check that - there is - but it can all be boiled down to five math equations:

1) The price of oil is very high = Airlines in trouble;

2) Airlines are in trouble = Airlines cutting flights;

3) Airlines cutting flights = Airlines sell less tickets;

4) Airlines sell less tickets = Airlines charging fees;

5) Airlines charging fees = travellers are not happy.

That's really it. So we're not dogging it - we're just not seeing blog-worthy stuff to bore you with besides Carrier A cutting capacity, Carrier B is losing money, Carrier C now charging fees, etc. Sure, there's higher fares and bankruptcy speculation in the mix - but you can read that anywhere.

The only really interesting thing is the whole AA vs. Kayak kerfuffle - but we are putting a 3 week (subject to change without notice) blogging ban on it because we think it will be all resolved by then. Time will tell...

AA and the High Life!

FMV now has confirmed that there are some people at AA who are smart, rationale – and are willing to put some reasonable limits on the latest round of “fee-mania”.

According to the Travel Weekly (which, by the way, is updated daily):

American Airlines’ new checked baggage fee does not apply to duty-free liquor purchases in the U.S. Virgin Islands, according to Tourism Commissioner Beverly Nicholson-Doty. “It is a great relief and a show of good faith that American granted us this special waiver," Nicholson-Doty said.

Visitors to the USVI can bring home $1,600 worth of duty-free items, double that of other Caribbean destinations, including four liters of liquor (five if one liter is a product made in the U.S. Virgin Islands).

Think about that - up to $1,600 worth of booze. Welcome to the AA High Life!!



BONUS CONSUMER TIP:

Oh, wait - only 5 liters duty free allowed? That must be really good stuff! Let's run the numbers:

• USVI top shelf duty free booze purchased on AA: $1,600 for 5,000 mL is $0.32/mL.


• US Airways in-flight cocktail: $7 for 50 mL bottle is $0.14/mL or $700 for 5,000 mL.

If you're not too choosy - you're better off buying 100 mini-bottles on US and paying the $15 to check them.

US Goes Service Fee Nuclear

Bypassing GO! and collecting $200 for anything that is not nailed down, US Airways has introduced almost too many service fees and cost reduction efforts to list:

• $15 for the first bag. Well played - pioneers get the arrows, settlers get the land. AA has already taken a beating, United has already jumped on board, pretty safe move....


• New fees for certain NRSA employee guests. We get it, if you're dead weight and burning fuel, you're paying for it...


• Boosting the call-center and ATO ticketing fee to $25-$45. Get yourself on the information internet superhighway or pay a toll for the slow call center lane. Makes total sense....


• $2 for a can of soda onboard. Fine, whatever, buy it before you board...


• $7 for liquor onboard. Fine, makes sense, wha - - - WHAT?

This means it's $9 for a rum and coke? What kind of a world do we live in? US AIR - You just lost your right to sell the High Life, is what you did!! This has gone WAY too far now....

Victory for the Lowest Common Denominator

It turns out that UA has "matched" AA's $15 fee for the first checked bag. This to us was a matter of when, not if. We have to assume this charge will become the norm in the market (except for Southwest - who will really start to ramp up the PR machine on this fee now).

If so, then consumers don't really need to worry about cross-shopping confusion. The bag fee is just another necessary expense of travel, like airport parking, little tiny in-flight liquor bottles (hold the ice), and cigars at the duty-free shop...

BetaBlue: Still Free, Less Limited

There was about a 1" tall article in the WSJ this week explaining that JetBlue has expanded their Beta test of inflight Wi-Fi. WSJ subscription required, so link here instead. Here is why you can ignore this progress:

• The service is still only offered on one plane. Not a typo, one plane.


• The service now allows access to one web site, Amazon.com. Not a typo, one web site.

Here's why it's kind of interesting:

• E-mail now available via Gmail, Microsoft, and AOL


• One can conclude that the limited test to date has been successful, allowing [extremely nominal and arguably negligible] expansion of the pilot. Hopefully this means a full and worthwhile deployment may follow in our lifetimes.

We have to assume, given how much convention hotels charge for Internet access, many passengers would gladly pony up say $5/hour or $10-$20/flight (or more) for e-mail access. Corporate travel buyers may not be giddy about that prospect, but certainly Jetblue is. That aside, a nice round of applause for the PR person that padded their release count with this "news".

AA: The bag fee is no biggie

OK - this is the last AA Baggage Fee posting, we promise. But this one isn't our fault because AA is on the PR offensive and is contacting media outlets to explain "The Fee". Our headline paraphrases the situation, that this new bag fee really won't impact summer trAAvel. Per this story:

• They estimate that 25% of passengers will be affected by the $15 first bAAg fee;


• That's because (same story), 75% of summer travelers have already bought their tickets and thus won't be asked to pay the bag fee;
  
• Thus, travellers need not worry about being inconvenienced [oh, and please book on AA ASAP].

Makes perfect sense - until you start looking further:

- Back when the fee was announced, AA said that only half of their passengers check a bag. If true, then only 50% of the 25% percent (of passengers that haven't bought summer tickets yet) may pay the fee.

- Then remeber that a bunch of those pax are international and / or elite and / or bought a full price ticket - so no bag fee applies.

- Now figure that less people will be willing to check a bag because they now have to pay $15.

Now we're figuring maybe 5-10% of summer travellers on AA will pay this first bag fee? Hmmm..

At $15 a bAAg, that's still a lot of money. But AA is certainly getting a TON of bad publicity for this and they don't seem to know how to make a bad story go away. FMV's advice - just zip it already! Don't keep trying to explain it, don't keep trying to justify it, and for goodness sakes - DON'T try to tell your customers that it's actually a "bargain" !!

"The airline defended the fee, saying it was a bargain compared with the cost of shipping a 45-pound bag overnight on a package-delivery company. A spokesman for the airline said the cost of sending a bag from Dallas to New York would range from $150 to $230 or more."

FMV is also thinking of making this a paid site for our new customers for $10 a month. We figure it's a huge bargain compared to paying for online newspapers, CNN.com, espn.com and others! oh wait, those are free too....

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.

Ryanair: Apparently Not-So-Low LCC

Hey, it turns out that high fuel prices really hurt airlines' profits. In fact, especially if you think you can give away tickets and make it up on ancillary revenues, you really need to cut costs. At least that is the current state of affairs at Ryanair, who hopes to cut $621-Million in annual costs in various areas, including labor, due to extraordinary high fuel costs.

Yes, Ryanair also hopes to boost the top line through higher baggage and credit card fees. But we have to say, when the poster child of LCC's is talking about a need to tighten the belt, this is not going to be a good year for airlines. You can save yourself a call to Jamie Baker, Robert Mann, or Terry Trippler. You just read it in The FMV.

Emirates: Thank you very little

We saw this fairly disturbing news last week. Apparently Emirates allowed the "first authorized mobile phone call made from a commercial flight" last Thursday. This follows the several million unauthorized wireless calls, texts, bbery messages, etc. made daily on US flights - - you know who you are.

This was no gimmick - Emirates plans to roll this "service" out on all flights. That's right - - now you can enjoy a trip around the globe while receiving continuous sidestream updates on some blowhard's all-important business deal, Aunt Polly's gout, and how much Pookums misses their Little Boo, and conversations that end with "No, I love you more - you hang up first..." The silver lining? Apparently only six of these goofs that don't recognize the value of a few hours unplugged can talk at one time.

A bit off our core topic, but inevitably carriers will charge for this service, or offer legitimate distribution services via inflight wireless devices, so we figured we'd keep the FMV audience up to date. In the meantime, note to self: remember not to fly Emirates. And also:

From "Today’s Cartoon by Randy Glasbergen", displayed with special permission. For many more cartoons, please visit Randy's site @ http://www.glasbergen.com/. Thank you, Randy!

Some Economy Seats are More Economy Than Others

Since FMV moved it’s headquarters to Chicago late last year – we find ourselves flying United a lot. You may think it’s because of their weird faux-cartoon ads that they plaster everywhere – but it’s really because of their “EconomyPlus” seating with extra legroom. After earlier hints, JetBlue has officially jumped on that bandwagon:

JetBlue will reconfigure its Airbus A320 fleet to offer seats with more legroom, and will charge more for those seats. JetBlue is calling the product Even More Legroom, which will offer 38 inches of pitch in the second to fifth rows plus emergency exit rows 10 and 11... The airline will charge $10 each way for short-haul flights (under 600 miles), $15 for medium-haul flights (601 to 1,500 miles) and $20 for long-haul flights (over 1,500 miles).

That’s actually great – but there is also another kicker:

The airline won't be selling Even More Legroom in the GDSs because of "technological limitations," JetBlue said. But the airline added that clients who book via a GDS can go to the Manage Your Flight link on JetBlue's Web site to purchase the extra legroom.

A few FMV points:

1) OK, we just assumed that JetBlue’s marketing department had a down day when they branded their new refundable fare product “Refundable Fares”. But seriously, “Even More Legroom”? Please try a little harder to imply that the old coach seats don't have crappy legroom. You know who will REALLY hate this name?? The call center agents who face this scenario happening 100 times a day:

JetBlue Agent: “Hello, You have reached JetBlue – how may I help you”

Customer: “Uhh, Hi – I bought a seat for my upcoming trip, and I know I get a roomy seat, but I’d now like to purchase EVEN MORE LEGROOM!! Ha Ha Ha”

2) This also has “Ancillary Revenue” written all over it and kind of goes against the Jetblue vein. Fine – you don’t have a “business class” – but you now have the beginnings of tiered system…

3) Finally – and most importantly - we love the fact that this purchase option is not available in the GDS. It’s the mythical “Fourth Cabin” limitation of GDSs; they cannot inventory control this type of stuff, and therefore can’t sell it. But FMV will bet you $10 (Even More Legroom for a short-haul flight) that the GDSs come out and blame the airline as not being “buyer focused” for doing this to them. It's classic GDS victim-hood at it's best (see Air Canada).

So while you won't catch us flying JetBlue just yet (simply not enough flights from ORD), we applaud them for providing meaningful product differentiation (i.e. not just a seatback TV and faux-hipster vibe). We also applaud mother nature, for dumping a (late) winter storm on Chicago today, giving us the perfect excuse to duck out early to watch the NCAA tournament. For those stuck on a cot at ORD - sorry, but these things happen for a reason.

Ouch Redux: Northern Exposure Edition

What goes on here? Just last month we wrote about Ryanair shutting down their reservations for 3 days to upgrade their systems.

Now comes word that Alaska Airlines will shut down access to their mileage plan systems in April for a week! No redemption, no mile-based upgrades, no signing up for the program, etc.

We suppose the business impact is relatively small. They gave loyal customers a month notice, and most passengers will be able to figure it out and work around the outage. But you can rest assured that some know-it-all customers will be pretty hacked off to find out that they can't redeem their miles right-then-and-there for that all-important dream trip to Anchorage.

It just seems hard to believe that system migrations like these can't happen a little quicker. A few days we get - but a week?? A $3.5-Billion bank like Bear Stearns can teeter on the brink of bankruptcy, get bailed out by the Fed, nearly fail again, then get liquidated by a quasi-partership of the government and an opportunistic white knight in just two days -- and an airline can't migrate a few customer profiles in less than a week? What kind of a world do we live in?

Booking Bonus Days AAre Gone

Well it is official. Mileage bonuses for booking direct on a cAArrier website are just not happening anymore. If any carrier is still doing it, it's probably due to a technical error or a staffing restriction (i.e., the guy that was supposed to pull the promo got laid off). Cue the Little River Band classic, "Reminiscing".

The latest sorrowful news came to us courtesy of the American Airlines DealFinder tool. No more booking bonus at AA.com after AApril.

Sigh. Now how are we going to earn our reward tickets to Tulsa? Hmmm. What to do? Note to self: Pitch ncAA "tournament pool for miles" idea to AA.

Baggage Fees Save Airlines Money

You didn't need Nostradamus' skills to predict that there would be followers to United's fees to check a second bag. Sure enough, US Airways will begin charging passengers if they check a second bag.

What is interesting about the news, is that US states that 8% of their passengers check a second bag. As we noted in our post about United's policy, we estimated that it would take well over 16% of passengers checking a second bag to generate United's targeted benefit. We consider this proof that a big portion (maybe half) of the benefit of the fee is cost savings, not ancillary revenue. Carriers claim the savings deals with fuel, we suspect it's as much about the labor associated with handling the bags.

The ultimate source of the savings is fairly irrelevant. The multi-million dollar question is in fact, will a $25 fee really persuade the general travelling public to pack lighter? It probably depends. Imelda Marcos type shoe fiends? Probably no. Family of four going to Disney World? Probably yes. We'll just have to stay tuned, and see if they dial the fee up to $50 to know for sure.

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.