Joe Sharkey At Large

Nah, just kidding about the $20 fee, though not about the scorpion.

Some poor guy got stung by a scorpion that dropped down from the overhead bin on a Southwest flight out of Phoenix. Man killed scorpion with his shoe. TSA investigating shoes as weapons potentially to be banned. Nah, just kidding about the TSA, though not the guy killing the scorpion with his shoe. In fact, that’s the recommended method.

###

Domestic airline passenger revenue fell 26 percent in June 2009 versus the June 2998, marking the eighth consecutive month in which passenger revenue has fallen from the prior year, the Air Transport Association said today.

The number of passengers boarding U.S. airlines in June fell 6.5 percent, while the average price to fly one mile fell 20.7 percent, a sharp decline surpassing even those that occurred during the 2001 recession and the aftermath of the 9/11 terrorist attacks. Revenue declines extended beyond the mainland U.S. to trans-Atlantic, trans-Pacific and Latin markets flown by U.S. carriers.

The decline occurred “despite extreme price-discounting,” said the trade group’s CEO, James C. May.

That is, the airlines’ frantic attempts to bring customers, and cash, in the door through fare sales have not worked.

Next step, in my opinion: Airlines will announce further capacity cuts in a desperate attempt to bring supply down below the sunken level of demand.

Somebody’s gonna get hurt before this all shakes out.

###

To the surprise of no one except people who bet money on this doomed venture (or bought tickets), the startup airline JetAmerica has folded before takeoff.

I could never quite figure this one out. It was hyped by credulous airline reporters when the “airline” first announced a start-up with $9 come-on fares in May, with a hodgepodge of planned routes including Toledo, South Bend, Ind., Melbourne, Fla., Minneapolis and … Newark. Something about charter flights.

At the time, I noted that a local newspaper, the Columbus Dispatch, was doing what newspapers should be doing, digging out the facts and putting the story into context. Here’s a link to the Columbus Dispatch story on JetAmerica and its genealogy.

And here’s a link to JetAmerica’s jive announcement trying to hold off the inevitable last week.

[UPDATE: Here's Mike Boyd's amusing take today on this "doomed-from-the-start airline," which as he notes had some airports among its gullible believers. Says Mike: "Ray Charles could have seen the danger signs" here.]

###

Starting Monday, United Airlines plans to require some travel agencies to eat the costs of credit-card processing fees on tickets (2-3 percent of the purchase price) sold by the airline to the agencies, which of course will pass the extra charges on to travelers.

The move — in which agents will be required to pay United cash for the tickets themselves, even though their customers charge them on a credit card — is being called a huge fare increase by air-travel consumer advocates, who think that other airlines hope to follow United and reduce their own costs of ticket-distribution through third parties.

It isn’t clear which agencies are affected, though speculation is that United chose smaller travel agencies at first to see if the scheme will fly. United, which is considered to be the most financially weak of the network airlines, is desperately trying to cut costs amid an industry-wide plunge in passenger revenues, as air-travel demand continues to languish.

It also appears that United is hoping to reduce its exposure and potential liability to credit card companies, which typically hold back substantial sums of payments on advance ticket purchases.

Kevin Mitchell, the chairman of the Business Travel Coalition, which represents corporate travel buyers, called the move “wholly unacceptable.”

It is “not just a price increase, it appears to be a potential price increase targeted at those travelers that use the services of travel agents and travel management companies — with corporate travel programs at the front of that line,” Mitchell said.

Travelers booking directly on the United web site would not be affected, of course.

Mitchell said, “The most troubling aspect of this scheme is that this attempt to shift airline sales costs to travel agents and on to their customers would only work if the airlines act in concert with United Airlines to affect such a radical change; something in which the U.S. Department of Justice should take great interest. The way UAL pre-announced its cost-shifting scheme to an unspecified number of travel agents, with an effective date 30 or so days out, leaves it the ability to run this back down the flag pole if its competitors do not agree to match.

Thus, this scheme looks like the previous signaling behavior on airfares by airlines using the Airline Tariff Publishing Co. (ATPCO). That action caused DOJ to sue eight airlines and ATPCO in 1992 alleging that airlines used the ATPCO electronic fare submission and dissemination system to fix prices, which the Division concluded had cost consumers up to $2 billion.

If UAL’s sales cost-transfer scheme were to be matched by other airlines, the
potential impact to consumers and corporate travel programs would likewise be in the billions of dollars,” Mitchell said.

United said that the move will affect only a small portion of travel agencies, but has not discussed whether there are plans to expand the requirement for travel agencies to pay United cash for tickets.

###

The third across-the-board domestic fare increase in six weeks may be falling into place as the weekend arrives. Some competitors, including Southwest, are matching a $10 round-trip increase put into effect last night by Delta Air Lines, says Rick Seaney of Farecompare.com

According to Seaney:

—Delta, Southwest, Alaska, Midwest, Frontier have increased fares $10 round-trip, $5 one-way over “the bulk of their route systems

—US Airways is doing “selective matching” on various routes.

—United Airlines is “dabbling in some limited matching.”

—American and Continental remain “on the sidelines so far.”

Seaney said, “The Southwest increase of $5 one-way was on mid/long haul routes and $2 one-way on short-haul routes (outside of sale fares).”

He added, “It is very difficult to get an exact read on this hike as there was some late week off-peak travel discounting that is mixed in with the increase activity.
Typically we will know if the hike attempt sticks by Monday afternoon.

“It appears at this point that the hike has a very good chance of surviving – I have never seen an airfare hike in 4 years fail when Southwest Airlines was in the mix.”

###

There was another terrorist attack on hotels that cater to foreign visitors, as at least 6 people died in bombings this morning at the Ritz-Carlton and JW Marriott hotels in Jakarta, Indonesia. Both are five-star hotels.

[UPDATE: Here's an update via CNN].

This is the second time the Jarakta JW Marriott has been bombed. The first was in the summer 2003, when a suicide bomber killed 12 and injured more than 150 there.

Here are the Web sites for the Jakarta Ritz-Carlton and the Jakarta JW Marriott. Both hotels are properties of Marriott International.

###

This is starting to sound like a souk. While tossing up weak fare sales here and there, airlines are also trying to hike prices. Come on, there gotta be some buyers out there!

Last night Delta Air Lines (including Northwest) initiated a domestic airfare hike of $10 roundtrip ($5 each way) across the bulk of its U.S. route system, according to Rick Seaney of Farecompare.com

“This domestic airfare hike marks the third attempt in the past six weeks, with the past two tries successfully sticking,” said Seaney, who noted that on yesterday’s second-quarter earnings call American Airlines CEO Gerard Arpey said he did some quick calculations on the back of an envelope and figured the airline “needed about $17 more per one-way customer in the quarter to break even.”

Seaney added, “If this domestic airfare increase sticks it would mean an increase of $20 to $25 each way domestically for the legacy airlines in the past 6 weeks. However, this increase does not include international tickets nor the widely matched off-peak late summer/fall airfare domestic sale initiated by Southwest earlier this week.

“Starting this past November through late May … airfare prices had been in a free fall. In June, domestic airlines popped their chutes with a couple of airfare hikes — the big question is whether or not there is a hole in the canopy as demand in tough economic times is impossible to predict.”

###

Anybody remember when the airline business used to be fun?

AMR, the American Airlines parent company, reported a loss of $390 million in the second quarter of this year, despite a 44.9 percent decline in fuel prices. “Revenues are down sharply from a year ago,” said Gerard Arpey, the CEO. Revenues were down 22.3 percent over last year’s second quarter, in fact.

The other airlines are about to report second quarter earnings, and the expectation is for more gloom and, perhaps, some doom, with some analysts suggesting that one of the network carriers might not make it through the winter.

Meanwhile, as I’ve been saying, stand by for another round of capacity cuts as airlines desperately try to reduce supply below sinking demand. So far they have not been able to do that, meaning that fares remain low on most routes — except some routes where there is scant competition and enough demand.

Overall, that probably means a few more rounds of fainter fare sales as airlines try to raise cash and hold onto market share. But we are arriving at a day of reckoning in air travel.

“There is no longer any need for qualification. This is the biggest crisis the aviation industry has ever known, and it continues,” Martin Broughton, the chairman of British Airways, said yesterday at the company’s annual meeting in London.

The International Air Transport Association has been right on top of this deteriorating situation, issuing regular updates and forecast revisions. And the latest IATA report is glum for the industry.

“Efforts to resize capacity to better match demand and cut costs have helped, but have trailed behind the fall in traffic,” according to the IATA Airlines Business Confidence Index for July. Regarding industry fortunes, “there is renewed pessimism about the outlook ahead.”

###

United Airlines just announced a mileage-award promotion for economy round-trip travel Aug. 18 through Nov. 18.

For travel in North America, award seats are 20,000 miles vs. the usual 25,000 (assuming availability, natch). Hawaii, it’s 30,000 instead of the usual 40,000. Europe, 44,000 vs. 55,000. Asia, 50,000 vs. 65,000.

Here’s the link to the United announcement.

###

A Russian-made Tu-154 jet crashed this morning in northwest Iran, killing all 168 on board. The plane was bound from Tehran to the Armenian capital of Yerevan.

Caspian Airlines was started in Iran in 1992. It has a fleet of six Tu-154s and has 50 scheduled routes, some between cities in Iran and others to destinations in Hungary, the UAE, Syria, Ukraine, Armenia, Belarus and Turkey.

Here’s the Wikipedia entry on the Tu-154 airliner.

Iran has a lot of plane crashes, most of which stay off the international radar.

The Iran crash comes a little two weeks after 150 were killed when a Yemenia Airlines A310 crashed in the Indian Ocean.

The recent crashes, coming during peak summer travel season, highlight an issue that not enough travelers are aware of: The potential perils of flying on little known airlines with safety records that might be questionable at best.

Many of these airlines turn up online on searches for “cheap flights.” International travelers on a budget need to be aware that safety and maintenance standards are not universal.

Here is a link to airlines banned from European and U.S. airspace because of safety concerns. It’s from the European Commission on Transport. (Caspian Airlines is not on the list).

As far as I know, the FAA does not publish a similar list, though FAA bans are noted within the EU list. The EU list is straightforward, naming individual airlines. The FAA list, reflecting the FAA’s reflexive coziness with airlines, merely names countries that have Category 2 carriers (meaning: death trap). Thanks to Walt Baranger for the tip on the list, which is not widely known.

###