Monthly Archive for April, 2009

An Interesting Suggestion…

Published
by
Dan Webb
on April 30, 2009
in Humor and Random
. 0 Comments

I have to thank my friend Kyle for sending this over to me. Every now and then, bloggers have just hilariously-written travel stories. In this case, the author was flying United, and the airline lost his bag. Now, the author did make the experience harder for himself as he left his car keys in said lost luggage, but some of the writing is just hilarious. For example:

…I wait hopelessly by the phone like a girl who puts out on the first date, for that call from United that will never come (traveler’s tip #438: when they try to take your roll-on bag at the ramp, go ahead and dump it in the trash can, because destroying the contents yourself at least preserves a modicum of dignity).

The author compares his experience to parenting, and notes that yelling at his children isn’t always effective, but providing incentives can work very well:

So how about this with the airlines. Instead of paying them the full amount right up front, we pay them 90 percent of the fare. The remaining 10 percent comes due once we have all our belongings in hand. I wonder if then it will occur to someone at United to start using those little sticky bar codes to track luggage, the way UPS tracks boxes. Or give ground crews bonuses based on luggage successfully delivered. Or, who knows, to simply start acting like they care when they lose a man’s luggage.

The idea about paying part of the fare, while unpractical, is both interesting and funny. But this story does make me think of bag fees. These have been added with no benefit to the customer. At all. My logic is that if the airline is going to charge $15 for the bag, it should get there on time. At least Alaska has added on “perk” to their fee by offering a voucher or miles if the bag doesn’t arrive promptly.

Today’s Random Graph

Published
by
Dan Webb
on April 30, 2009
in Delta, Northwest and Random
. 1 Comment

Here at Things In the Sky, we (okay, I), like to keep you informed with the most cutting-edge industry data, and here’s our (fine, my) latest valiant effort. :D

In all honesty, I hate the word synergy with a burning passion. Yes, it has its uses, but it has been completely overused, making it devoid of meaning. Personally, I think Delta has used this word way too often in regards to its merger with Northwest, so I decided to figure out how many times synergy and its forms (synergies, synergize, etc.) were used by executives, analysts, etc. in recent earnings calls (and there was one call dedicated to the merger itself). Thanks to SeekingAlpha.com transcripts, it was easy to figure it out.

Usage peaked during the second quarter call, at 37, though usage has increased (albeit slowly) of late.

There, now you all have some fresh random, useless knowledge. You’re welcome. :D

Was Southwest’s Mystery City Sale Deceptive?

Published
by
Dan Webb
on April 29, 2009
in Southwest
. 3 Comments

For four days, Southwest has revealed a city (or in yesterday’s case, an area) that would have a 50% discount on Wanna Get Away fares on all flights. Friday was Philadelphia, Saturday was Nashville, Sunday was Albuquerque, and Monday all Bay Area airports (SFO, OAK, SJC) were on sale.

But was it really a half-off sale? It appears that after a thorough (and continuing) discussion on FlyerTalk, that it was not.

If I am reading this excellent post from ftnoob correctly, it appears that the inventory for some of the cheapest fares was set to zero during the sale. In another post, he shared some screenshots of AUS-BNA fares before, during, and a couple of days after the sale, which shows what happened very well.


So take a look at May 12. Before the sale it was $79 each way. During the sale the price went up to $140, so when BNA went on sale the price went to $70,  only a savings of $9, or 12.9%. Meanwhile, the price after the sale was lower than the actual price!

Another interesting example I found was SFO-LAX. During the sale, the discount was applied to a $69 fare for a price of $35.

FareCompare has a very handy tool that allows one to graph historical fares on a route, so let’s take a look.

For some reason, the increase shows up the day before the 50% off sale (I think it might be a timezone issue), but it makes a point. Before and after the sale, the roundtrip price was $72, or $36 each way, and right in time for the sale the lowest fare available is $138 roundtrip (or $69 each way, then discounted to $35). So, in the end, the discount during the “sale” was a mere one dollar!

I played around with some other routes and found similar results. There were certainly discounts better than $1, but definitely not 50% off.

So, was Southwest deceptive with this sale? I certainly think so. I understand Southwest’s desire to not lose too much revenue, but the way it did so doesn’t sit right with me at all. Sure, the prices charged were 50% of the fares for that day, but clearly it looks like Southwest played with inventory for this promotion, and made the cheapest “Wanna Get Away” fares unavailable.

While fliers definitely could have found some decent deals during this promotion, they don’t seem to be nearly as good as Southwest’s marketing made it sound. I really do hope that Southwest doesnt do something like this again, and I just think that it sends a bad message to customers.

Once again, I’d encourage everyone to follow the discussion on FlyerTalk about this.

It Would Be Nice If Other Carriers Followed Allegiant

Published
by
Dan Webb
on April 28, 2009
in Allegiant
. 1 Comment

Yes, it would be nice if all the airlines had the financial performance of Allegiant, but in this case I’m talking about how the carrier formats its income statment.

Take a look at the revenues section:

And compare that, for example, to AirTran:

Allegiant records ancillary revenue as its own independent section, while other carriers just put that into the “other” category, and we’re left guessing exactly how much of that “other” revenue is from fee intiatives.

It would just make the lives of insignificant bloggers like myself easier if other carriers did what Allegiant did. :D

Timing Fail: Southwest Tells You It’s Easier to Book Flights on Volaris

Published
by
Dan Webb
on April 28, 2009
in Southwest
. 0 Comments

Yesterday, Southwest announced that it would be easier to book flights on Volaris by placing a link on its website, just like the current arrangement with WestJet. This makes sense, as Volaris will start service to Oakland and Los Angeles later this year, making connections between the carriers easy. It also gives both airlines a chance to benefit financially off their partnership before the formal codeshare is in place.

OK, that’s good. I’m still excited that Southwest is trying to get an international reach. But, really, why announce it yesterday, when so much bad press is circulating about traveling to Mexico because of the swine flu outbreak? Just seems like a case of bad timing to me.

What Do First Quarter Earnings Say About Fees vs. No Fees?

Published
by
Dan Webb
on April 27, 2009
in Southwest and US Airways
. 0 Comments

One major point of discussion during the Southwest earnings call was it’s no-fee approach and its effect on revenues. It seems that many of the analysts think that Southwest not charging fees is cutting off a big source of revenue, while Southwest sees it as an opportunity to attract some new customers. I decided to take a crack at the debate by comparing the results of US Airways and Southwest. I chose US Airways since the carrier has touted the benefits of the a la carte pricing model, and how extra fees can bring it a good amount of revenue.

Extra fees are recorded as “other” as revenue on the income statement, and that would account for the 38.7% increase in that category for US Airways. But, passenger revenue decreased over 10 points more than Southwest, and I decided to play with the numbers further.

First, I calculated yield, which is generally calculated by dividing passenger revenue by revenue passenger miles (RPMs). US Airways’ first quarter yield was down 10.2% compared to the first quarter of 2008, while Southwest’s was down 2.8%.

Then, I decided to toss in other revenue into the yield equation. What that was factored in, the US Airways yield was down only 4.7%, while Southwest’s decrease worsened a bit by 0.1 points, to a 2.9% decrease. These results showed me that the fees are indeed giving US Airways a nice revenue boost.

After that, I calculated PRASM (passenger revenue per available seat mile), and even invented some new measurements (at least I think I did). What I deemed ORASM was just other revenue divided by ASMs, and PRORASM was passenger revenue and other revenue divided by ASMs.

The results in this area were similar to yield numbers, as expected. US Airways’ PRASM was down 10.9%, but PRORASM was down 5.4%. Meanwhile, Southwest’s decline was 2.8% for both statistics.

So, what does this mean? Well, first I think it shows that Southwest’s decision to go with the no-fee approach isn’t hurting the carrier as much financially as some may have feared. In fact, compared to US Airways, Southwest saw a lower decline in yield, even when extra revenue for fees is considered.

But, does this mean that Southwest is getting new passengers because of its no-fees approach? I’m not sure so sure about that. The airline did see a lower decrease in RPMs than US Airways and actually saw an increase in load factor despite cutting ASMs less than other carriers, but that doesn’t say anything about revenue. Southwest just might have been more successful with fare sales during the quarter.

Of course, I’m just talking about the revenue aspect here, and there can be a cost side to this analysis. For example, the bag fees can theoretically lead to cost savings in labor and fuel for US Airways. Meanwhile, Southwest has spent money on advertising the fact it isn’t charging as many fees as other carriers.

Another thing I’d like to point out is that it’s going to be hard to compare carriers when it comes to fee revenue the next couple of quarters, simply because they were added at different times. For example, let’s say Carrier A added a bag fee in May 2008, while Carrier B did so in June 2008. Carrier B could see greater fee revenue growth in the second quarter of 2009 (compared to Q208) than Carrier A because there was less fee revenue in the second quarter of 2008.

I threw this data together yesterday, and I think I might expand these comparisons to other carriers to provide a better picture of the industry within the next week or two. I especially want to see what happens when I compare Southwest with AirTran and JetBlue, which both turned profits.

JetBlue Decides to Add BOS-BWI

Published
by
Dan Webb
on April 27, 2009
in AirTran, JetBlue and Southwest
. 1 Comment

Well, this one could get interesting. JetBlue has decided to throw itself on the Boston-Baltimore route in September, and will compete with AirTran and Southwest on the route. Could this be JetBlue trying to protect its turf at Logan, now that Southwest has entered the market? Who knows, maybe.

The question is – will this move really affect AirTran and Southwest? JetBlue could certainly take away some O&D passengers from both carriers if it keeps fares competitive. But, I’m not entirely sure if AirTran and Southwest will be affected that much. The city is a transfer point for both carriers, especially Southwest.

So, it will be interesting to see how this develops over the next few months. I’m interested in seeing if JetBlue will add any more routes out of Baltimore, and I’m also wondering how long it will take Southwest to decide if it wants to expand at Logan.

Personally, if JetBlue wants to try to get back at Southwest, I would highly recommend them flying to PVD. (Ok, maybe I’m a bit biased in that recommendation :D )

Sunday Video #22

Published
by
Dan Webb
on April 26, 2009
in Sunday Video
. 0 Comments

Well, today’s video is of a takeoff at Saba, which has a very small airport with a runway of a mere 1,300 feet. This is definitely something I want to experience one day!

YouTube Preview Image

Saturday Links #42

Published
by
Dan Webb
on April 25, 2009
in Saturday Links
. 0 Comments
  1. Delta is launching service from Dallas Love Field to Memphis.
  2. If anyone missed it, I guest posted on Cranky this week.
  3. Boeing saw a pretty steep decline in profits.
  4. Flightblogger, as always, has a good 787 update.
  5. Well, it’s actually happening – Pet Airways. Middle Seat Terminal has the details.
  6. V Australia is delaying deliveries of a couple of 777s.
  7. Anna.Aero has a good list of routes that were recently launched.

Where Do You Think I Should Go?

Published
by
Dan Webb
on April 24, 2009
in Random
. 5 Comments

My school, Bryant University, has a program called the Sophomore International Experience, with a few possible itineraries. Each trip is 10-12 days and costs $3,500 (includes airfare, hotel, some food, etc.). The best part is that I can get three credits out of it! Before applications are given out, the school is giving out surveys to see what itineraries to offer, and I have to select my top two, and I’m looking for reader input. Here are the choices (sadly, these are all the details I have):

Winter:
Communication and Culture in Germany and Greece (Munich and Athens)
Commerce and Culture of London and Paris
Discovering the Real China: Culture and Business (Shanghai, Beijing, and Guilin)
International Business and Sustainable Development (Costa Rica and Panama)

Summer:
Artisans, Innovation, and Design – Perspectives on Design and Innovation in the Italian Arts (Rome and Florence)
Exploring China’s Environment and Natural History (Shanghai, Beijing, and Wuhan)
Economic Development and Culture in East Asia (Seoul, Korea; Beijing and Shanghai, China)

My primary concern is the summer itineraries. I’m hoping to get an internship next summer, and I’d hate to have to cancel the trip because of that, but I’m still open to those (the one that does both Korea and China looks interesting).

If you were in my shoes, which trip would you choose?

Alaska Adds First Bag Fee (Nicely), US Airways Wants You to Pay for Bags Online

Published
by
Dan Webb
on April 23, 2009
in Alaska and US Airways
. 0 Comments

Alaska announced in its earnings release that it has decided to start charging for the first bag, starting July 1 for tickets purchased starting on May 1. Like most of the other airlines, the fee will be $15. I’m not a fan of fees, but I can see why Alaska wants to go this route, just looking at changes to its revenues compared to other carrers (more on that in a future post).

On the bright side, though, Alaska is adding a guarantee along with the charge:

Customers whose luggage is not at baggage claim within 25 minutes after their flight parks at the gate will receive 2,500 Alaska Airlines Mileage Plan miles or $25 off a future flight.

I like this. As a consumer, I feel that if I’m going to pay extra for my luggage, the airline better well have it delivered at my destination and do so promptly, so kudos to Alaska for doing this.

The fee does have exceptions:

First class, MVP and MVP Gold Mileage Plan members, unaccompanied minors, military personnel on active duty and passengers traveling to or from Mexico City and Guadalajara, Mexico, will not be charged for a first checked bag. Customers traveling solely within the state of Alaska also will continue to be allowed three free checked bags.

The fee for the third bag is dropping from $100 to $50. The second bag fee remains at $25.

Meanwhile, US Airways announced today that it will “begin offering its passengers the convenience of prepaying to check their bags online at usairways.com.” More details:

Customers who check in online at usairways.com with tickets booked starting today for flights on or after July 9 will have the option to prepay $15 for their first checked bag and $25 for their second checked bag.

But, this really isn’t an “option” to me, as passengers checking bags at the airport will have to pay an additional $5 per bag. Great.

I can totally understand US Airways wanting to have more of this done online, as it will probably make the check-in process a bit faster, but it would be nice if they tried to steer consumers to this method in a different way, like offering 100 miles or something. Oh well.