Posted by Seth on January 31, 2012 under frequent flyer, News, points | 
Citibank caused quite a stir a week ago when they started sending out 1099s to folks who had received large quantities of bonus miles for opening accounts. Needless to say, there was quite the uproar, with various opinions being shared, ranging from Congress to bloggers. Well, a week has passed and the IRS have finally clarified its position. Sortof. Things are still not incredibly clear, though it is readily apparent that the IRS sees some miles as taxable and not at a particularly favorable rate.
Michelle Elridge, an IRS spokeswoman is quoted in that LA Times column as offering up three very specific bits of information about points and their taxability:
When frequent-flier miles are provided as a premium for opening a financial account, it can be a taxable situation subject to reporting under current law.
This part is pretty clear, though not necessarily what most folks want to hear. It suggests that Citi was correct to be sending out the 1099s and reporting the tax liability. The particularly interesting bit is the use of the term "financial account." Not only would this apply to bank accounts, but it could also be reasonably interpreted to apply to credit card and investment accounts as well. After all, those are financial accounts and the points are provided as a premium for opening the account. Not particularly good news for folks who are accustomed to churning CCs and Fidelity/Ameritrade accounts for the huge sign-up bonuses.
As for taxing "regular" levels of mileage earning on CC spend or the actual flying, that’s still safe. The IRS continues to see that as a rebate and not income, so no tax liability there.
A common analogy is buying a $500 television at a retail store and receiving a $50 manufacturer’s rebate. It’s not income, just a deemed reduction of the cost of the television.
The most complicated (and oft-debated) part of the debate might be the valuation of the miles. Many insist that the liability should be the fraction of a cent that the banks pay to buy the points from the airlines. The banks disagree, reporting the value at the full retail price as reported by the airlines. And the IRS is somewhere in the middle.
Under the income tax law the amount of income to the taxpayer is the value of the property received, not the cost that the business paid to acquire the property.
The real gray area there is "value of the property received" which is, by the nature of the property in this case, variable. And it could even be argued that the recipient actually never receives property since the T&Cs of the programs say that the points are the property of the programs. There are others who have explained how to dispute the value reported on the 1099s.
Whatever the approach consumers take, it is clear that the IRS sees these sign-up bonuses as a very different beast from the regular spend earning. And the use of the term "financial account" is very open-ended. The CC churn boondoggle may be coming to an end sooner than we all hoped.
Posted by Seth on January 30, 2012 under Flying, News |
I love when our elected representatives decide to speak up and express just how idiotic their thoughts are. I’ve heard a Representative state for the record that she thought Adobe Acrobat should be outlawed, for example, but I’m not so convinced that her view there is more ridiculous than that put forth today by Representative Tom Graves of Georgia. Graves, who represents Georgia’s 9th Congressional District (North of Atlanta, up to the Tennessee, North Carolina and Alabama borders), has announced that he will be introducing legislation which will repeal the DoT rule requiring airlines to list the full price of tickets, including all taxes, when they advertise.
This rule, put forth as part of the DoT’s consumer protection efforts, has come under attack from such legendary consumer advocates as Sprit Airlines, who is complaining the rule violates their first amendment rights because they cannot advertise one number and then charge a completely different number when the customer goes to actually make the purchase. Seems like just the sort of actions that should be protected, right?
The Congressman has a very simple premise for why the rule is bad: It prevents the airlines from indicating what part of the fare is actually the fare and what part is taxes and fees.
The federal government should not be inserting itself in the private sector to limit consumers’ ability to see how much they’re getting taxed. If the American people can’t see these costs clearly, I fear it will be easier these fees and taxes to be raised without their knowledge.
There’s just one problem with this line of thought (two, really, but I’m ignoring that the second line there isn’t a complete sentence): it is completely unfounded in reality. There is absolutely nothing in the rule that prevents the airlines from explaining in excruciating detail how much the taxes are and how much the fare is. There is nothing preventing them from reminding the consumer that there are a dozen or so different taxes and fees on the average airfare and way more on international itineraries. What the rule does, however, is prevent an airline from advertising a $9 fare which cannot be purchased for less than $20, no matter how hard you try. And that’s a good thing for consumers.
Fare listings like these, which are fully compliant with the rules, make it quite clear what the taxes and fees are, without violating the DoT rules:
And, yet, somehow apparently it is actually impossible for the airlines and OTAs to actually publish the information this way, as they are inhibited by the DoT rules. Strange, isn’t it, how they’ve managed to do it anyways??
I understand the complaint that nothing else in the USA is required to be marketed with the all-in price rather than allowing for customers to be surprised at the cash register. Let’s not use the examples of things that are bad for us as citizens as examples of why progress shouldn’t be made. Let’s got the other direction instead. Let’s hold hotels and rental car companies accountable, too. Let’s stop rental car companies from hiding the 50%+ surcharges until the final page of the check-out process. Let’s stop hotels from adding on $15-30 or more, per guest, per night, as a "resort fee" rather than actually including those charges in the fine print. After all, you cannot avoid paying them.
There is nothing wrong with calling attention to the fact that the average airfare has so many taxes associated with it. But pretending that there is some unwritten rule out there which is somehow preventing airlines from actually doing so is just plain lying.
Time to step up and face the facts, Congressman Graves: you’re full of it. Step up and do something that actually helps your constituents rather than lying to them. I’m sure they’ll appreciate it when elections roll around.
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Posted by Seth on January 30, 2012 under Flying, News |
Thai Airways has announced the end of their non-stop service between Thailand and the United States. The flights will be reduced from the current daily service to 5x weekly on February 1 and will shift to one-stop service via Seoul starting in May. At that time the route will also shift from the gas-guzzling Airbus A345, the only plane flying today with the range to make the non-stop trip (Update: I forgot the 772LR can make it, but TG doesn’t have any), to a Boeing 777-200ER, which has lower fuel burn rates but also a much more limited range. This new flight schedule will only operate 4x weekly. Additionally, the change means no more premium economy product on the route as the carrier’s Boeing aircraft are not configured with that seating. The connection will also increase the travel time between Los Angeles and Bangkok by approximately 2 hours each direction.
This move doesn’t come as too much of a surprise given the trend in jet fuel prices, but it is still somewhat disappointing to see the option disappear. Then again, when I flew it last July I wasn’t particularly impressed with either the hard or soft products on board. And that was in business class. So maybe it is for the best that it is going away.
If you’ve got a ticket booked on TG 794/795 now would be a pretty good time to call the carrier and get that straightened out.
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Posted by Seth on January 30, 2012 under Trip Reports |
I had a grand plan for transiting three different cities across Europe on consecutive days. Sure, I’d sleep a couple hours each night, but I was also going to spend most of the 20-ish hours on the ground at each stop exploring the town, eating their food and drinking their booze. It was a grand plan, alright, but the execution was a bit lacking.
My first stop of the hopping was Berlin, a city I’d heard great things about and one I was quite excited to visit. I even sortof knew what I wanted to see while I was there. Sortof. OK, other than the Brandenburg Gate and the Holocaust memorial, nothing at all. But I’d figure it out, right? After all, I always have.
The bus in from the airport was incredibly easy (except the ticket machines don’t make change for bills larger than 10 Euro) and 20 minutes or so later I was in front of the beautiful, towering, modern Hauptbahnhof. I knew my hotel was just a stop or two away from there so I headed inside. Sure, I spent the next 20 minutes or so wandering around lost in the enormous station, trying to find the appropriate S-Bahn train, but I didn’t mind at all. The station truly is beautiful.
And then, after dropping my bag in the hotel I was back out. I had only an hour before I was due to meet a friend for drinks and dinner and that really isn’t much time in a city as grand as Berlin. But I knew the two things I wanted to see and they were only about a 10 minute walk from the hotel; I was doing fine.
The Gate is pretty. They light it up lovely at night. And I even got a couple photos of it that I don’t particularly hate, which is somewhat impressive given that I had no tripod, the exposures were painfully slow and it was pretty darn cold outside so I was shivering a lot.
From Brandenburg Gate I headed around the corner to see the Holocaust memorial. It is beautiful. It is amazing. It is rather intimidating to walk into when it is dark outside. The photo here is a VERY long exposure, making it appear reasonably light outside. Truth is that the sky was the same darkness as the Brandenburg Gate photos above. Still, thanks to the miracles of modern technology I got the pretty cool picture below.
And then my hour as a tourist was up. I had to race to the U-Bahn to meet up with my friend. I found the station, figured out which track and caught the next train going my way. I was rather confused 2 stops later when they made the "Last Stop" announcement (though at least they repeated it in English). Apparently there were track works in progress and I was supposed to find a replacement bus to the next major station. At this point I became acutely aware of just how hard it must be for the tourists in New York City who are forced to navigate the constantly changing construction projects we have, all without the benefit of any communication in their native language. Even with the little bits of English on the signs it was a challenge. I made it, eventually, but it wasn’t easy.
I also had grand plans for the morning, to see more of town before my noon-ish flight onward to Munich and then Ljubljana. Alas, when I awoke I discovered that there had been a schedule change at some point previously and I was now faced with a 5 minute connection in Munich rather than the originally booked 30 minutes. The airport is easy, but not that easy. A panicked phone call to the folks at Continental (this was an award ticket) got me booked on the next earlier Berlin-Munich flight which meant I’d make my connection. It also meant scrapping my plans for a morning in Berlin.
And so, the entirety of my tourist time in town was an hour (plus an awesome dinner with an old friend). I definitely saw a lot in that hour and had a blast, but it also would be a disservice to Berlin to say that I saw the city. Guess I’ll just have to go back.
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Posted by Seth on January 29, 2012 under Flying, News |
What happens when an airline CEO gets ahold of a Twitter account? In the case of JetBlue CEO David Barger, the answer is an entertaining amalgamation of content. And some of it is even about the airline. Actually, this week, a ton of it was about the airline.
In a guest post I’ve got online for Flying with Fish today, I take a look at route scheduling, as seen through the lens of Barger’s Twitter feed. He gives hope to some communities (PVD, I’m looking at you) and dashes the dreams of others (HVN, MSN, LAL and MLB all take a hit). Even better, however, is that he also manages to engage others from within the company.
Then again, maybe "better" isn’t the correct term there. Being told to zip it by your Corporate Communications group probably isn’t the most appealing tweet to read.
Anywho, give the post a read; there’s some interesting stuff in it.
Posted by Seth on January 27, 2012 under News |
Spanish regional airline Spanair is apparently ceasing operations effective immediately, shutting down their network of flights with virtually zero notice. The move comes as Qatar Airways has cut off talks with the carrier about becoming an investor and infusing cash to help keep the airline afloat. Additionally, the Catalan government has decided to cease providing additional loan funds to the carrier. Most reports from Spain suggest that the company will not be flying any more at all, though there are also a few updates trickling out which suggest there might be additional flights tomorrow. Most of the reports are in Spanish and I’m depending on Google Translate to get the gist of the situation but I’m guessing I’m not getting everything completely correct.
This move also cuts out a chunk of service for Spanair’s partners in Star Alliance. The carrier often had good inventory for awards and also generally a good regional network for connecting passengers on the Iberian peninsula. Then again, this is the same company which repeatedly sold codeshare inventory on US Airways metal at ridiculous discounts (or errors) to the point that US Airways cut off their codeshare agreement not too long ago.
Sad to see an airline fail and so many folks newly unemployed (estimates suggest ~4,000). Good luck with accommodation if you’ve got Spanair flights booked.
Posted by Seth on January 27, 2012 under Flying, Trip Reports |
Take a random, tiny airline with a handful of prop planes flying the islands of Hawaii and give them a little bit of encouragement and what happens? Something ridiculous like this. Mokulele is a regional operator in Hawaii, flying a few Cessna aircraft on hops within the islands. And now they’re aiming big, really big.
The company has received approval to operate scheduled charter service from Honolulu to Rockford, Illinois and continuing service to London‘s Stansted airport. Of course, they won’t be doing this with their Cessnas. They are chartering a 767-200 aircraft to run the operations. I cannot imagine that it will be a particularly comfortable in-flight experience, nor a particularly cheap one. We are talking about roughly 18-20 hours wedged into a tight, charter seating configuration with minimal amenities.
Still, the lines and the operator have me pining for a chance. Oh, and I’m going to be in Hawaii anyways at the beginning of June thanks to the inaugural Hawaiian Airlines JFK-HNL service, so I’ve got the opportunity.
Now to see just how ridiculous it prices.
Hat tip to the folks at NYC Aviation for sharing the details on this one.
And, as always, thanks to GCMap.com for the cool maps.
Posted by Seth on January 26, 2012 under News |
There have been a few stories today about the unveiling of the American Airlines 777-300ER cabin interior configuration. Most of them (including Ben’s) have been rather effusive, raving about the new Business and First class cabins. And, no doubt, the press photos of those look pretty nice.
But there is a third photo included in the press release, the shot of the economy cabin:
The good news is that the photo shows a pretty nice individual IFE screen, universal power plugs and a handset to control the IFE, meaning reduced likelihood of someone tapping on the back of your seat the whole flight. And those are all good things, but there’s one really big bad thing, too. The seating configuration appears to be incredibly tight. Based on this point of view it appears that the cabin will have a 3-4-3 configuration, bringing American in line with Emirates and Air France for offering one of the most cramped coach cabin configurations in modern aviation. The aisle actually looks ridiculously narrow, too, making me wonder if this is even a real shot of the cabin, but if it is that looks like a VERY uncomfortable coach experience.
Some back of the napkin math based on the size of the power ports and the representation of things in the image suggests that the seats are about 17" wide, maybe a tiny bit less. That’s quite a bit tighter than their current economy products, especially compared to their current long-haul configurations. And they’re articulating – or "slidey" – seats, which means the legroom gets worse when reclined. Ouch.
There was some suggestion that there is going to be a "Premium Economy" product rolled out as well, but no details on that in these photos or in the release. That leaves me a smidge skeptical. Adding that to match their oneworld alliance partners would make sense in many ways. It is also the fastest growing segment of seating in the industry. Then again, when starting from zero relatively recently, it is easy to make "fastest growing" show up. It would be a first for a US-based carrier, so it is worth keeping an eye on.
The premium cabins look quite nice. Matching Cathay Pacific for the business class seat is particularly nice. But most passengers are going to be stuck in those economy seats and it looks painful. I hope it is better than that makes it appear.
It also seems that American has decided in the past 8 weeks to shift the planes from the originally announced service to London, putting them on the Dallas-Sao Paulo route instead. That’s a pretty inefficient utilization plan for the newest, nicest, planes, so they must think they’re going to drive some serious premiums on the route. Good luck.
Posted by Seth on January 26, 2012 under Flying, frequent flyer, News |
Today’s quarterly earnings conference call from JetBlue had a few interesting bits of information that was unveiled, giving insight into future developments that can be expected from the carrier. The company reported a profit for both Q4 2011 and the full year, but there are also some very real challenges that the company is facing in 2012. As one person said on the call, "The honeymoon we enjoyed prior to this period is over."
A lot of the news which I found most interesting was around the "Even More" products that the company sells. What started with Even More Legroom seats offering additional pitch in the cabin has expanded to Even More Space (offering pre-boarding to ensure overhead bin space) and Even More Speed for access to priority security lines in many airports. This service started in 15 airports and recently expanded to 9 more. And selling the service resulted in $120MM of incremental revenue for the company in 2011. That’s a huge number, more than 20% of the total incremental that the company saw in the year.
Given the high revenue realized from the offering, it is not surprising that the company is expanding the number of seats for which it can be purchased. Specifically, the company confirmed that they will be adding 8 more seats to their Embraer E90 planes in the Q2/Q3 timeframe this year. Full details aren’t yet available on the announcement (seems to be a bit of a pattern there lately) but a quick review of the seat map suggests that they can get away with sliding a couple rows behind the exit row around and not really have to change too much else around, so long as they’re willing to keep the 34" pitch that the E90 has. If they go for the 38" that the A320s have they could also do that behind the exit row with minimal impact to customers, changing the other seats in that section from 33" to 32" pitch. Either way, it looks to be a positive change for the company to make more EML seats available.
Beyond the Even More bits, the honeymoon comment piqued my curiosity. The company had a huge growth spurt a few years back, taking on a bunch of new airplanes in a very short timeframe. Those acquisitions are now hitting the magic point in the life of an airplane known as a "C-Check." The maintenance costs for the C-Check and engine restorations on the aircraft are significant and the number of planes the company has going through that process in the next couple years is quite high. The result is a spike in maintenance costs. JetBlue has worked with their maintenance suppliers to mitigate the costs somewhat, but it will still be a challenge for the company in the coming years. And that’s all with a fleet that is still only 6.1 years old on average with a maximum age of 12 years.
There was mention of the new Hawaiian Airlines partnership, but no additional details shared there. And it was suggested that 5-7 new partners will be coming online in 2012, with links at Boston and Orlando likely rather than just at New York City. I’m betting on JAL being a partner via Boston with their new service there starting soon, but who knows.
Other than those bits, not a whole lot of interest. Plenty of accounting mumbo jumbo but nothing that seems especially significant at this point. And there are still a number of open questions, like where the company stands on rolling out additional benefits for their most frequent customers or many of the partnership details with Hawaiian. I guess patience will have to suffice.
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Posted by Seth on January 25, 2012 under Hotel, Review, Trip Reports |
Booking a hotel on the morning of arrival can limit the options available somewhat. That said, I’ve actually been pretty lucky in general with such an approach, scanning a list of available properties and sussing out a quality hotel at a bargain price. That’s just what I discovered at the Hotel Eurostars Berlin. A beautiful, brand new property with a comfortable room adjacent to the Friedrichstrasse train station in the heart of Berlin and it was less than $100 for the night and earned points in the Welcome Rewards program from hotels.com.
I tend to avoid hotel chains a bit, but this was an exception to that. Partly because it isn’t a chain I had ever heard of and partly because the reason I avoid them – generally overpriced – didn’t apply. I’m glad I did as the hotel was near perfect for my needs.
The property is new construction which opened in April 2011. It is clean and fresh, with a relatively modern vibe. If they installed dimmer switches in the halls and upped the music levels in the lobby I could almost see it being a W hotel. It isn’t quite that trendy, which is a good thing in my book, but the décor definitely has that vibe in some ways.
The room itself was great. Plenty of space to move around (this was definitely the largest room I had through the week in Europe) and the bed was quite comfortable. The TV offered up a pretty good selection of channels and the desk had plenty of outlets, though strangely there was no chair. Not sure if that was an oversight or on purpose. I just used the chair in the corner and it was fine, but that was definitely an interesting discovery.
The bathroom was relatively huge and nicely appointed, particularly the shower.
Add in complimentary WiFi – the front desk clerk asked how many devices I had so she could give me the correct number of vouchers – and being directly adjacent to a major train station only one stop down the line from the Hbf and I was quite happy with pretty much everything about the place. It served as a great base of operations. Walking to the Brandenburg Gate area was about 10 minutes and connections to the TXL Airport Bus at the Hbf were incredibly easy. That’s not to say I didn’t get lost in the Hbf for about 30 minutes on my arrival, but the departure was much less a problem.
Overall, I’d recommend this hotel without hesitation, even for folks who aren’t quite as "aggressive" in their hotel budget efforts. It is a full service hotel in a prime location at a very reasonable price.
Posted by Seth on January 25, 2012 under Dining, Flying, Review, Trip Reports |
A trip from Stockholm to Istanbul shouldn’t take 4 days. That said, it can if you want it to thanks to the joys of airline scheduling and the rather impressive route network of Star Alliance within Europe, I managed to schedule just such a trip, with stops along to way to see friends and also three new (to me) cities. First on that list was Berlin and the flight down was on SAS.
The flight was relatively quick and uneventful. I actually remember very little of it thanks, in part, to a rocking hangover. But nothing really happened that was at all special. I was hungry so I bought the chicken salad snack box during the flight (all food AND beverages were BoB only!). The Swedish version of pasta salad isn’t really my thing, but it wasn’t bad. The chicken and the lettuce part of the salad were pretty good. I’d call it overpriced in general, though not really so bad once you figure in both the Scandinavia and airplane markups.
The most memorable bit of the flight for me was the final approach into Berlin’s Tegel airport. It was right a sunset and that let to some great views of the suburbs, Tegel airport and the general area as we made our way down.
Like most flights, this one wasn’t really all that special, either good or bad. That’s just the way I like them.
Tags: Berlin, Dining, EuroHopping, Flying, in flight, Photos, review, Star Alliance, Stockholm, Sweden, Trip Report
