Posted by Seth on February 6, 2012 under News, TSA | 
When the TSA assumed responsibility for screening passengers at airports one of the provisions in the law allowed for private screeners to be used rather than federal employees, should a company choose to bid on the contract to operate such. There are a few airports where private screeners are working – San Francisco is the largest – but overall the number of locations with private screeners is incredibly small. This is, in large part, because the TSA has made it clear they don’t want anyone who they do not directly control working at the checkpoints.
Apparently Congress has decided that they’ve had enough. After issuing a rather scathing report in November 2011 on the 10th anniversary of the establishment of the TSA a few have now stepped up to actually act on the recommendations made in that report. One of those recommendations was that the TSA stop stonewalling private screener contract applications. Not surprisingly, the TSA ignored it. And now they are running out of chances.
The new legislation will reverse the burden of proof, requiring that the TSA demonstrate increased costs and decreased efficacy in order to reject contract applications. Given the incredibly high turnover rates and training costs that the TSA incurs, it shouldn’t be too hard for contractors to demonstrate that they can meet those standards. Of course, this doesn’t necessarily mean that things will get better with the screening process. After all, the private screeners will still have to follow TSA-mandated policies and the ludicrous “state your name” test started at SFO which is privately run. Still, there is a small chance that private contractors will be able to better manage their workforce, resulting in screeners who bring guns to the office or get caught on camera stealing form customers actually being fired and prosecuted rather than sheltered by the federal government.
And, yes, I know that much of the reason the provisions were pushed through was to benefit the constituents in Representative Mica’s (R-FL) district, but I’m willing to put up with that for the sake of maybe getting a bit better service for the billions spent. Maybe.
A guy can dream…Here’s hoping.
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Posted by Seth on February 6, 2012 under News |
The hits just keep on coming with airline bankruptcies this month. Following on the cessation of services from Spanair and Malev in the past several days a US-based carrier has filed for Chapter 11 protection this morning. The company is Global Aviation Holdings, Inc. and they are the largest operator of charter air service for the military, among other things. They also operate under the brand names World Airways and North American Airlines.
The filing comes as the company found itself with very little cash on hand when a customer withheld a $20MM payment. They are also faced with significantly declining demand for services as the US Government is reducing troop movements, meaning fewer charter operations. Combined with declining rates for services the company now sees itself with a glut of aircraft on lease. They intend to reject 16 of 30 active leases, returning those aircraft to the lessors as part of the reorganization.
The net impact of all these moves is pretty minimal on most folks but it does show yet another airline that managed to build an operation on unsustainable ideas and the effects of their failures.
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Posted by Seth on February 3, 2012 under frequent flyer, News |
Kingfisher was dealt a potential death blow yesterday when the airline was suspended from IATA’s ticketing clearinghouse due to reported non-payment. The clearinghouse is used by hundreds of airlines to process payments for interline tickets and other multi-carrier transactions. Roughly 80% of interline transactions worldwide are settled through the system so being suspended is a huge blow to the carrier.
The company claims the suspension was triggered automatically by the IATA systems when a technical glitch prevented their scheduled payment from reaching the clearinghouse:
As a result of a recent internal system failure, certain credits did not hit our ICH account in time, triggering an automatic suspension. Kingfisher would like to confirm that all its dues via ICH have been settled in full and it has absolutely no outstanding due as of date,
Despite claiming to be current it appears that IATA has not yet commented or reinstated the carrier to the systems.
Adding fuel to the fire is the announcement today that the planned February 10, 2012 ascension of Kingfisher into oneworld is being delayed, with no revised date yet announced. FlightGlobal is carrying the story, with quotes from both oneworld and Kingfisher executives on this latest development. Said oneworld CEO Bruce Ashby:
These are turbulent times for the airline industry in India and many other parts of the world. We have been working closely with Kingfisher Airlines over the past months and it has become increasingly clear recently that the airline needs more time to resolve the financial issues it is confronting before it can be welcomed into Oneworld. Will work with Kingfisher Airlines with the aim of setting a new joining date once it is through this current period of turbulence.
This delay is somewhat reminiscent of the frequent delays that Air India suffered in their attempts to join Star Alliance over the past few years. Those efforts were eventually scuttled after multiple delays.
Without access to interline booking revenue is seems unlikely that Kingfisher will be able to realize the revenue needed to pull themselves out of their financial morass. With many unpaid or severely delayed bills the future of the carrier is very much in question. It is not surprising that the alliance is not interested in bringing the carrier on board as their liabilities for interline travel could be significant.
This is a serious blow for oneworld, as another member carrier, Malev, ceased operations today, also under financial pressures they could not overcome.
Not a good day in the aviation world at all.
Hat tip to Flying With Fish for the head’s up on this one.
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Posted by Seth on February 3, 2012 under Internet, News, Review |
JetBlue rolled out an updated website and also launched an iPhone app today, marking the carrier’s first foray into mobile apps and also a significant update to the online presence. The new website is much brighter (lots of orange) and the TrueBlue program gets a lot of love on the new site, showing at least three different places on the main page. I’m not a huge fan of the slide-out menus that move the rest of the page around, but there they are.
Overall the website changes appear to be mostly aesthetic, which is fine. Unfortunately, however, they managed to leave the one bit of the old site that is pretty awful on the old platform. The online check-in process is still the same flash-based mess that it has been since the Sabre migration happened. That was the one bit that really needed help and it didn’t get any. There are other bits of the site, like the airport guides, that have a rather unfinished feel to them. Hopefully those get touched up soon enough.
The mobile app, on the other hand, is a pretty solid offering overall, particularly for a v1.0 product. It offers flight booking, management, tracking and check-in functionality, all the basics that a mobile app should have to be useful. But it also has more.
The flight booking option is a slightly different interface than the other mobile apps I’ve seen, most notably in the seat selection, which comes on a scroll wheel rather than a seat map picker. I’m not sure if it is good or bad, but it is definitely different. It can also use geolocation to display default departure airports based on where you are, which is a neat feature, though not necessarily incredibly valuable.
There are some bugs in the flight booking interface still (remember, it is a v1.0 product), so scrolling down to the bottom of the page can result in seeing things like all the error messages that might be displayed if something goes wrong, but that doesn’t seem to interfere with the actual functionality so not a huge problem. I expect that those will be cleaned up soon enough.
The in-flight entertainment guide is pretty basic, but it includes a list of the DirecTV channels available and the movies showing, along with reviews. The in-flight section also has details on the food and snack options, including wine pairing suggestions such as Sauvignon Blanc with Terra Blue chips (apparently the citrus finish is great with the salty chips).
The highlight of the app, to me, is the "My trips" section. The display of upcoming trips is intuitive and offers up all the appropriate information on a single screen. The online check-in, social media share (Twitter and FaceBook) and "Pick me up" email features are also very nice. The flight review bits on the mobile app are arguably better than those on the main website.
And, there is more available via the trip interface. Tap on the city and you get access to the City Guide section of the app. In addition to airport information the City Guide includes tips on sights, dining and activities in the destination cities. Strangely, I cannot find any way to access that information other than via a scheduled trip, but it is nice to see that the company is working on making that happen. Hopefully they can add more content (it is somewhat sparse right now) and they expose it more directly in the near future. It would also be nice to see this content make it into the main website; it does not appear to be there right now.
Speaking of things that I hope to see in the future, there is a section in the flight booking portion of the site, both on the main website and the iPhone app, called "Add extras." Currently that section only says, "The flights you have selected don’t offer any upgrades," so there is nothing that can be selected but it certainly opens up a number of possibilities for things that might be coming. This is separate from the Even More Space seating option, though that might be something that is listed here. But there could be other things as well. This is definitely an interesting revelation that I’ll be keeping an eye on.
Overall the app is a much bigger leap forward than the website updates. Both are nice, but the app is very impressive, particularly in the my trips section. Hopefully the Android app which is expected soon will be similarly functional and both will continue to improve, fixing the little bugs that are showing today.
Posted by Seth on February 3, 2012 under News |
Hungarian flag carrier Malev has ceased operations following demands from creditors that certain balances be paid immediately or in advance. The carrier has been struggling for many years; those debts finally caught up. The move grounds the airline’s fleet, stranding several thousand passengers and leaving the company’s ~2,600 employees with an uncertain future. The shutdown was apparently precipitated but ground handlers in Tel Aviv demanding payment up front for services. Similarly, a plane in Dublin was not permitted to depart, supposedly citing the company’s accumulated debt as the reason.
The airline is relatively small, but they do hold 27 routes out of Budapest where they are the sole carrier. While it is likely that other carriers will step in to pick up some of those routes such changes will take time and in the interim a number of passengers will be inconvenienced by the service termination.
The move is also a blow to global alliance oneworld, of which Malev is a member. The group is adding other carriers, including Air Berlin and Kingfisher, but those carriers are also struggling somewhat financially.
This cessation follows that of Spanair from last week. Truly a sad time in the skies over Europe.
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Posted by Seth on February 2, 2012 under News |
As part of yesterday’s announcement that American Airlines plans to lay off a whole bunch of employees they also issued new offer sheets to their main unions, stating their opening negotiating position for the collective bargaining contracts. The offer to flight attendants is open to the public for review and it makes for an interesting read. I’d be pretty upset as a flight attendant reading it over.
One of the most talked about bits I’ve seen is the termination of the international route pay scale. Those routes will still draw a minor additional pay bump ($1-3/hour) but not the fully separate pay scale like they do today. I can see this upsetting the FAs but I’m not so sure it is justified. The long-haul flights seem to be the better gigs, with less overall work and they’re easier to max out a monthly schedule without actually flying so many days. Those are real benefits of those trips; getting paid extra to work them seems way too favorable towards the FAs. But I can certainly see why they’re going to be upset with the change. The proposal also cuts the incremental pay that is normally accrued over 70 hours per month.
Beyond that, there are some significant changes to the work minimums that are more serious as I see it. In order to qualify for medical coverage and vacation accrual the flight attendants would be required to work 540 hours annually rather than the current 420. That’s a pretty big jump. It also increases the total minimum number of hours which must be worked annually to remain employed to 200.
The proposed rules would also significantly change the duty hours for flight attendants, making their work days longer, the number of potential hours per month higher and then guaranteed minimum time off between trips lower. Rather than being guaranteed five breaks of two days in a month they’ll get the same 10 days guaranteed, but only in one day increments. Again, all changes that are certainly going to upset the flight attendants.
The company also intends to change the staffing level assignment decisions and hotel choice policies. In both cases the policy will shift from "mutually acceptable" to company-mandated, with input from the union considered. Not a guarantee of downgrades here, but certainly there are some changes the company has in mind where there could be cuts.
Finally, the company plans to cut the pension plan, replacing it with a 401(k). They plan to cut healthcare for retirees over 65, replacing it with a Medicare supplement. The will cut life insurance for all retirees.
All these cuts and yet, when I review the term sheet, nothing in it actually seems all that unreasonable. Yes, the terms are worse than the current contract in many ways. Other than the profit sharing plan there actually isn’t really much in the way of improvements for the FAs in the offer. But it just doesn’t seem that unreasonable to me. Yeah, I know that there are many more hours worked beyond the block time. I understand commuting to the crew base. I get all of that. The numbers still just don’t seem that bad to me. Such is life, I suppose.
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Posted by Seth on February 1, 2012 under News |
In the weeks since American Airlines filed for bankruptcy protection they haven’t really done all that much. There were a few planes retired and that semi-awkward admission about the multi-million dollar housing in London. Oh, and plenty of bonus miles opportunities to keep customers from completely abandoning them. But not much in the way of announcements on what the restructuring would actually look like. That changed today.
Management finally met with the unions and announced their intentions: cuts of roughly 14,000 jobs across the company in hopes of saving about $2 billion annually, 60 percent of which they hope will come from employee costs. The cuts will come across all areas of the company, including 4,600 mechanics jobs, 4,200 ground service positions, 2,300 flight attendants, 400 pilots and 1,400 in management and support services.
Now comes the fun part for the airline and employees, negotiating the details of the actual cuts. Plus, they have to get the bankruptcy judge in New York to actually approve the plan. This was the primary focus of the original filing and now it is clear just how deep the cuts will be.
The real issue, aside from the potential customer service impact of the cuts, is whether trimming the labor force is actually enough to save the company. There are a number of folks who are not particularly convinced, and I’m one of them. Cutting costs is only part of the company’s problem, and it is the easy half to solve. They will dump the old planes, get newer, more fuel efficient ones and also get out of their pension liabilities. And fire a whole bunch of employees. The cost cuts will happen.
The much harder part will be continuing to provide a high level of service (or shifting to one, depending on how you see the service levels today) with 20% fewer front-line employees. It will be driving revenue levels higher on an ASM basis rather than constantly offering discounts and promotions to sell tickets. And it will be growing a route network, with or without partners, that can compete to capture the corporate contracts the airlines need to generate consistent revenue.
Achieving those goals will be just as important to the success of the carrier coming out of bankruptcy as the cost cutting is. And they’re much harder to actually plan and implement than just firing a bunch of employees. In the mean time, best of luck to the folks soon to be unemployed. It isn’t pretty out there, especially in the airline business.
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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 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.
