Posted by Seth on December 14, 2010 under frequent flyer, News | 
Star Alliance is already the largest of the global airline alliances but they appear to be showing no signs of slowing their growth. At their regular CEO summit this week, held in Queenstown, New Zealand, Virgin Blue CEO John Borghetti was in attendance. Only Qantas, a member of OneWorld, is in an alliance currently in Australia so there is room for either Star Alliance or SkyTeam to make a move with Virgin Blue.
Virgin Blue and Air New Zealand have tried to link up already once. Their application to cooperate on trans-Tasman service was rejected by Australian competition authorities in September. Still, the carriers are looking to move forward with a partnership that could benefit both sides as much as possible.
An additional quirk that might come into play with the possible Star Alliance move is that Virgin Blue has some existing partners that could confuse the situation. Their loyalty scheme, Velocity Rewards, is shared with long haul carrier V Australia. V Australia currently is partnered with Delta, a SkyTeam member. Having one half of the Velocity Rewards program working in Star Alliance and the other in SkyTeam would be quite unusual, though it is possible.
If Virgin Blue – and V Australia along with it – were to leave Delta it would be quite a blow to the SkyMiles program. Currently the V Australia option is one of the best redemption opportunities that SkyMiles has.
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Posted by Seth on April 27, 2009 under Trip Reports |
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| Freddie Awards emcee and all-around frequent traveler guru Randy Petersen prepares to take the stage at the 21st annual awards ceremony |
The purpose of last weekend’s trip (as much as I can claim it had a purpose) was to attend the 21st annual Freddie Awards in Ft. Lauderdale. The awards ceremony is run by the folks at Inside Flyer and is designed to recognize and celebrate the loyalty programs of the airline and hotel industries. It operates in association with the Frequent Traveler Marketing Association annual meeting so that brings a lot of folks in to town for the event. Most are associated with one of the loyalty programs, one of the retail reward providers (the folks from SkyMall were a major sponsor, for example) or the folks who actually design and build programs and operate them for the carriers (more on that in another post). And then there was me and about 75 other frequent travelers. Inside Flyer is kind enough to open up the award ceremony to the travel community at large, and that means I got to attend and rub elbows with all of the above industry professionals. I was able to ask a lot of questions and even get answers to some of them. It was very interesting.
Oh, and they gave out some awards, too. Some of the results were very logical and some were quite surprising. Here are some thoughts on a few from each of those categories.
In the Americas Alaska Airlines won the award for program of the year. This was not a huge surprise to me. Their program is great for folks who fly on a variety of carriers (as long as they are an Alaska partner) and that partner network is pretty broad. There is definitely value to be had there.
The surprises (to me) came from the wins in the programs outside of the Americas. Etihad (United Arab Emirates), Virgin Blue/V Australia (Australia) and Jet Airways (India) all won awards; some of them won more than one. These programs all seem to have moved away from what would be considered a traditional reward structure in the United States or Western Europe. Travel rewards are still a significant part of the programs, but the programs are increasingly augmenting their programs by offering retail merchandise and other benefits to their members. The retail rewards may not have the flash and glamour of long-haul premium cabin rewards (generally the best cash value rewards out there) but they are something that they customers can get with smaller numbers of points, without inventory limitations and generally they seem much more readily accessible.
Ten years ago frequent flier programs were much more focused on providing incentives to continue or increase travel on a particular carrier, but they were targeted at the folks who were already traveling a lot. Today the programs have a much broader target audience and that has significantly changed the focus and the types of rewards out there. And if the results from the Freddie Awards are any indication, the masses are not looking at travel rewards as their main redemption target. That is good news for the carriers – the retail rewards are generally actually profitable for the carriers to redeem – but bad news for travelers looking for the high value travel rewards. As more programs shift towards cash-value type reward schemes the premium tickets become ridiculously expensive, even if the inventory is greater.
US-based programs are acknowledging this development in the market in a big way. Virgin America built their eleVAte program around this concept and every indication I’ve see so far suggests that jetBlue’s new incarnation of their TrueBlue program due out later this year will follow this path as well. The legacy carriers are rolling out shopping malls, auction sites and and other retail redemption options. Marriott has long had retail redemption as a prime option for their points and American Express’s Membership Rewards program is geared toward merchandise redemption almost more than they are towards travel rewards. Things are not moving quite as quickly in this direction for the legacy programs, but they definitely recognize the value of this approach and they are certainly happy to get the points off their books while not losing money doing so.
Such a shift does pose a significant risk to the programs, particularly the airlines. For several carriers the best income stream they have these days is their credit card partners and the revenue they realize from selling those points to partners. Billions of dollars are moving around on those transactions. Should the public decide that the value of the points no longer justifies collecting them the airlines will suffer as the credit card companies buy fewer and fewer miles. Of course, with more and more people choosing to redeem their miles for merchandise and the like the risk may not really be so significant. But it is definitely something the carriers have to account for.
The industry is definitely showing trends of shifting and the proverbial writing may be on the walls, or at least starting to appear. Of course, in the mean time I’ll still be redeeming my miles for more travel. After all, I don’t really want more “stuff;” I want the adventures and memories that travel offers me.
Posted by Seth on March 25, 2009 under Uncategorized |
In a word, very. The airline industry has been struggling to find an appropriate balance between capacity, service, fares and costs pretty much since deregulation kicked in and the CAB was retired in the late 70s. Airlines have launched, folded, merged, declared bankruptcy and otherwise been all over the place in terms of staying in business. But over the past 18 months things seem to have hit a new low in terms of outlook and performance. First it was the fuel price bubble of 2008 and now the economic fiasco continues to pressure the carriers.
Here’s a (no so) pretty picture from the Centre for Asia Pacific Aviation that shows just how awful things are right now:
Those numbers are the year-over-year change in passenger loads in the premium cabins on the various routes between January 2008 and January 2009. The load numbers dropping are scary in their own right, but even more so when considered with the fact that many of the long-haul carriers depend on their premium cabin long-haul service to generate the big bucks they depend on to operate their networks. Sure, that may not be the right way to build out a business, but that’s the way they are set up, and these load numbers dropping are sure to cause major trouble in the industry.
If that wasn’t enough, the fares are also dropping like a rock in many cases:
IATA estimates the reduction in average fares and fuel surcharges have resulting in revenues from premium passengers falling by at least a quarter in Jan-2009, which is "wreaking significant damage to network airline yields and profitability".
Along with the 28.5% load drops between the US and Oceania, there are two carriers introducing service this year – V Australia has already started and Delta launches service in just a couple month. With coach fares between Oz and the west coast of the USA now hovering between $500-$700 those flights are not likely to be profitable in the passenger cabin for quite some time. Add on to that the decreases in cargo requirements due to a slowing economy and the increases in cargo capacity pressuring prices down and the numbers look even less appetizing.
Transatlantic travel is suffering similarly. There is the 14.5% decrease in loads in the front cabin and fares continuing to remain very depressed in the back. Want to fly from the west coast to Dublin? Fares in the low $300s are available right up to the beginning of the peak summer season. Historically they’d be higher by now. I just bought a ticket to go to Germany for Easter weekend. The seat map (not an authoritative source but generally a good approximation tool) suggests that the plane is pretty full. Historically in such a situation the fares would be running higher and higher at that point. But only two weeks out I got tickets in the lowest fare bucket available, and at a pretty good price (<$400).
So fares are down. Premium loads are down. Coach loads are stable but not really driving much revenue. This all spells very bad news for the near future. On the plus side, it does mean that I can stretch my travel budget even farther. I’ve been in six countries already this year and have seven more planned already (one will be a repeat). I just hope enough of the airlines survive this mess so that I still have options available at the other end when things start to pick back up.
Posted by Seth on February 23, 2009 under News |
A few tidbits of news concerning flights to Australia this week, all of them good for the consumer.
First up, V Australia is finally ready to start operations. They were originally supposed to start up a few months ago during the peak southern hemisphere summer season, but thanks to the Boeing strike they couldn’t get their plane delivered in time. But that’s all behind us now, and they have their first 777-300ER fully loaded with three classes of service – business, premium economy and economy – and ready to fly. They are starting service this Thursday, with 3x weekly service between Sydney and Los Angeles. Service will go to daily in a few weeks when they receive their second plane. Additional service between Brisbane and Los Angeles will start in April and Melbourne is coming in September (both also dependant on receiving additional planes).
If that isn’t enough to drive some competition on the USA-Oz routes, Delta’s planned start of service between Los Angeles and Sydney on July 1 is certainly going to do so. Delta is going to be flying with a 777-200LR. The plane certainly has the range, but they only have 276 seats on the plane. A 777-300LR has 75-100 more seats on it, and the 747s that United and Qantas use have close to 400 as well. And then there are the Qantas A380s that are running on the route, with 450 seats and even more cargo capacity. I have no idea how Delta is going to be competitive in such a market. They have fewer seats to spread the fixed costs over and the fixed costs on such a route are VERY high. But the net result remains the same – cheaper prices for customers and now all three alliances will have service between the USA and Oz.
Last up on the this this morning is an interesting report that came out yesterday regarding potential changes in trans-Tasman service. The New Zealand and Australian governments have apparently agreed to streamline the operations for immigration, customs and quarantine for the short hops between their countries. This is apparently expected to help ease the travel experience and, according to some carriers, cut ticket costs by as much as 30% on those routes. From the article:
Quarantine, security and immigration issues have to be addressed to make the route a common border, The Sydney Morning Herald website said.
An Open Skies bilateral agreement is already in place, relaxing the rules for carriers flying between the two countries.
After two years of discussions, Australian and New Zealand Customs are planning trials to clear passengers before they board flights between the countries.
Sure, none of this is as cool as the crazy Los Angeles – Honolulu – San Francisco – Sydney round trip flights for $600 (I really wish I had bought one or two of those), but it is still all great news for folks headed to or from Australia. Oh, and there are still plenty of great deals to be had for flights ex-Sydney, thanks to the V Australia fares. Enjoy.
Tags: A380, Airbus, Australia, Boeing, Delta, Mileage Run, New Zealand, New Zealand Trip, Qantas, United, V Australia
