View from the Wing

I usually post from wherever I’m traveling, but I plan to seclude myself on a cliff overlooking an ocean for the next several days and hope against hope not to establish an internet connection while I’m there.

Look for new content on Tuesday, February 3rd.

I’m flying USAirways today, and plan to burn my last 40,000 miles with the carrier for a flight later this month. Since Randy Petersen’s AwardGuard is currently not open to new members and the status of USAirways is questionable, I’m making use of my miles while I can.

There’s a chance, of course, that the airline will survive. And even if it doesn’t, the Dividend Miles program certainly has value and another airline may find a way to exploit that value — and potentially honor the accumulated miles in the program. These are all probabalistic. I wouldn’t go burning miles just for the sake of doing so — but as the opportunity is arising to get some good flights now, I’m making use of them.

Truth is that I’m not redeeming more miles than I otherwise would. So there’s no firesale going on in my mind. Instead, I’m choosing to burn USAirways miles instead of miles with other carriers.

This is a good strategy for me anyway because USAirways miles are perhaps the most easily replaceable. They’re a partner with American Express Membership Rewards (where I have hundreds of thousands of points parked). Amex points transfer to USAirways more or less in realtime. And USAirways allows you to hold an award reservation for three days on the website without having miles in the account. So there’s no reason for me to hold their miles — I make a reservation when I need it and then transfer the points into the account. I’m keeping my USAirways balance around 750 miles.

Why am I so nervous about the carrier?

I recently noted that partner lounge access is being restricted for USAirways Club members and that USAirways was considering selling off assets to raise cash. Even after bankruptcy their cost structure remains incredibly high. They renegotiated leases and lowered some costs bust their labor expense remains high. While they seem to be filling their planes they are doing so at low fares.

The latest development comes from reports that several airlines have made bids for the assets that USAirways is considering letting go of. The Northeast Shuttle should fetch somewhere north of $100 million, and the gates and slots at LaGuardia (and Washington Reagan) have value. That’s because the assets have the potential to earn a profit. While the airline will be able to raise cash and potentially stave off the end, without those assets it will also be harder to recover.

With no clear new business plan, losses are likely to continue — exascerbated by the departure of profitable assets. USAirways has problems that only liquidation may solve.

Take a Southwest Airlines survey for 1 Rapid Rewards Credit.

(Link via Gary’s Steiger’s Free Frequent Flyer Miles.)

Priority Club has a survey offering 250 points for rating their program. The bonus points only post if you stay at a Holiday Inn, Crowne Plaza, or other Priority Club property by the end of April.

(Thanks to Gary Steiger’s Free Frequent Flyer Miles for the link.)

The U.S. is looking for open skies talks with Canada which would allow US carriers to fly routes within Canada and vice versa. Currently US and Canadian airlines are free to fly cross-border routes without restriction but can fly domestically point to point only in their home coutry.

There are barriers to change, of course.

First the Canadian government needs to check with its special interests.

Mr. Collenette’s successor, Tony Valeri, has indicated he would like to negotiate the possible easing of restrictions on cargo flights into Canada, but wants to consult with Canadians before going any further.



“Minister Valeri has said this is something he would like to discuss,” Mr. Cellucci noted. “He wants to see what people around Canada think.



“We think it’s probably a good time to start discussing things like the cargo issue, as well as things like the cabotage and other issues involving open skies.”


Mr. Valeri said he has already started meeting with various industry stakeholders, and those discussions would have to be complete before he begins any serious negotiations with the United States.

And Canada’s transportation minister is particularly beholden to the current arrangement.

De-regulating cargo flights would be a politically sensitive issue for Mr. Valeri. FedEx is currently forced to land at the airport in the transport minister’s backyard in Hamilton, Ont. Canadian carriers pick up FedEx’s cargo from there for distribution across the country.

US carriers may not be behind a change, either.

If open skies does ultimately come, it will be an interesting example for public choice economics to try to explain.

MSNBC carries a piece on hotel chain efforts to move bookings to their own websites and away from the likes of Orbitz and Expedia.

The piece cites the trend to refuse to honor elite benefits on third party bookings and to offer ‘best rate guarantees’ for bookings made on their proprietary sites. It doesn’t evaluate those guarantees for fine print and ease of processing claims, however.

The stakes are huge:

PricewaterhouseCoopers estimated that the Web last year generated an extra $715 million in hotel business. But increased price competition spurred by the Web cost hoteliers $2 billion in potential revenue, meaning the Web on the whole cost hoteliers about $1.3 billion in revenue.



And the shortfall for hoteliers is growing, said PWC analyst Bjorn Hanson. “There is no question that we are losing the battle,” Starwood Hotels and Resorts Worldwide President and Chief Operating Officer Robert Cotter said, pointing to deals that gave the Web merchants 18 percent to 30 percent of revenue for a room sold mid-week.



He predicted that 75 percent of hotel travel would be on line within 3 to 5 years and that the changes in loyalty programs and better company-owned sites could retain customers. Only about 10 percent of hotels were booked online last year, according to PWC.

Sign up for a free subscription to Forbes magazine.

The Sydney Morning Herald reports that the Sydney Airport Corporation is negotiating to buy Qantas’ terminal at the international airport.

The interesting notion is that the Sydney Airport is privately owned (most of the equity is publicly traded) and it is immensely profitable.

The start of negotiations to acquire the Qantas terminal comes as the airport is on track to post earnings before interest, tax, depreciation and amortisation (EBITDA) of $420 million for the year to June 30 as it benefits from the restoration of full operations at the former Ansett terminal and continuing cost reductions.



In the six months to December 31, the airport posted EBITDA of $206.2 million, up 12 per cent, on revenue of $271.5 million.



Securities analysts had forecast EBITDA for Sydney Airport of $420 million to $440 million for 2003-04.

Perhaps airport financing and development could learn something from the Sydney experience.

Comair paid a $3,000 fine in November for a burned out light bulb (the FAA had wanted $44,000).

The light the illuminates the no smoking, fasten seat belt sign was out. An off duty FAA inspector noticed it while flying on the plane. He reported it to a flight attendant who told the pilot. The pilot forgot to write it up in his log, and it wasn’t noticed again for four flights.

The fine was for flying the aircraft when it was “not in an airworthy condition.”

Qantas and Virgin have acquired new slots at London’s Heathrow airport, paying record prices to low cost carrier FlyBE.

Qantas has paid nearly

The Wall Street Journal ran a Scott McCartney piece on mileage runs. The value proposition is this:

When the deals are good enough, mileage-runners can arbitrage airline tickets, paying less than two cents for each mile, but cashing them in for first-class tickets or upgrades that would cost far more per mile. Two carefully played mileage runs, costing a total of maybe $700 or so, can yield enough miles for a free business-class ticket to Europe — priced at roughly $7,000 these days.

Nothing new to readers of this website, but perhaps to readers of the Journal. It’s a great ride we’re on, isn’t it?

There’s an interesting article in the February issue of Travel and Leisure on the trend towards making elite status a perk for higher fare passengers and increased mileage requirements for award redemption.

Naturally, in this fast changing, erratic world of frequent flyer programs, this article is already out of date:

Top-level elite fliers on Delta will get free upgrades when buying tickets in Y, B, and M classes; these upgrades, if available, can be confirmed when reserving. Second- and third-tier elite Delta fliers will get free upgrades for tickets in Y and B classes, but will have to wait until 100 or 72 hours before departure, respectively, to request the upgrade.

In mid-December, Delta announced that it was moving to a complimentary upgrade model for all elites.

And the piece mischaracterizes upgrades on Northwest and Continental:

Northwest and Continental passengers who want domestic upgrades from discounted coach fares will now have to part with 15,000 miles, up from 10,000, each way.

True the upgrade award has gone up in price, but that’s just for confirming an upgrade at booking (subject to availability). Elites still get space available upgrades for free.

Still, the article makes many useful and interesting points. While award prices may be going up (more miles to redeem the same award), airline alliances mean that a mile can take you farther than before and to more destinations.

And while award prices are going up, which means that current miles held in an account become worth less, the cost to acquire a mile has gone down substantially. It’s easier than ever before to keep up with award price increases by accumulating more miles.

JAL has introduced frequent flyer points for traveling pets. Believe it or not, this isn’t a new idea.

As I noted last year, Virgin has a program to reward pets themselves. In contrast Continental just gives 1 frequent flyer mile per dollar spent shipping Fido as cargo.

Alaska Airlines and American Airlines are moving to expand their codesharing relationship. Alaska also partners with Continental and Northwest, as well as Qantas, Cathay Pacific, Hawaiian, KLM, LanChile, and British Airways.

Normally I’d just interpret this as an expansion of their broad partnerships across the board. One item struck me, though.

Alaska and American, which since 1999 have had reciprocal frequent flyer programs, also plan to co-locate certain airport facilities “wherever possible.”

If “wherever possible” just means where they aren’t colocated with, say, Northwest then this would be nothing new. But does it signal that Alaska is becoming closer to American, to the exclusion of its other partners?

Tyler Cowen wonders why iTunes charges the same amount — 99 cents — for all songs.

While there may ultimately be a good reason for it, I hope that Sony doesn’t fall into that trap with their new partnership with United that is said to allow redemption of Mileage Plus miles for music. The price in miles is as yet unknown. I hope they get creative and experiment with their anticipated spring launch.

First, they could offer some sort of ‘introductory pricing’ to stimulate interest. Each song could be 100 miles (or 50 miles?) at the outset, perhaps for a week or a month or two. This should build a user base not just of mileage plus members but of mileage plus members that are both interested in music and technically savvy enough to be interested in the service. Then that smaller group could be marketed to and even potentially charged higher prices.

Second, it isn’t clear that all songs should or would have the same price. CD pricing generally (and pricing for many differnet forms of entertainment) has long been a puzzle because it seems so disconnected from quality and interest. Presumably quick access to the latest songs might bring a premium, or on the other hand if the database offers an extensive or near universal library of music perhaps hard to find tunes could be priced higher. Regardless there would seem lots of opportunity for experimentation with price and this service shouldn’t feel constrained to a single mileage or dollar price.

Third, perhaps music could be bundled with tickets in some way, such as receive X download credits for buying a United ticket on the United website. It could be in addition to or an option instead of bonus miles for booking online, could provide a way to encourage more people to book at united.com and lower UA’s distribution costs. In other words, think of more ways to leverage the relationship.

If Sony experiments and innovates, this could be a huge advance in e-commerce. If they just offer miles as a payment option (and even set the mileage price high at, say, 1000 miles per song) then this could easily go down as another uninspiring or even stillborn internet adventure.

United has a schizophrenic, love-hate relationship with Washington-Dulles airport. United and United Express have operated a majority of flights at the airport but United Express partner Atlantic Coast Airlines is going its own way, forming a low cost carrier. So speculation has been rampant about what the airline would do — replace Atlantic Coast or bail on the hub?

Dulles has been United’s primary transatlantic gateway, and operations have been focused on late afternoon departures to Europe as well as substantial flights to the West Coast, especially the Los Angeles and San Francisco hubs. United’s Europe flights, though, are unlikely to succeed without regional feed. When the airline first went into bankruptcy there was speculation that the Dulles operation would be shut down entirely. That hypothesis was a far cry from the earlier attempt by United to acquire America West Airlines (prior to attempting to acquire USAirways). The America West acquisition was billed as a means to obtain aircraft quickly and build up the Dulles hub when it was under attack from an expanding USAirways low cost subsidiary that has since failed, MetroJet.

Now United has signaled its intentions by announcing that it will spend up to $22 million on a new terminal for United Express operations. Once completed, the facilities will be tied to United’s C and D concourses, so will be markedly more convenient than Atlantic Coast’s operations have been.

David Rowell also reviews a neat $5 gadget to give an extra hour of talk time to a cell phone with a dead battery.

I’ve been relatively uninterested in a new mileage earning phenomenon discussed in the media, on Flyertalk, and in David Rowell’s newsletter. But perhaps I’m neglecting an important opportunity. Read David’s full and detailed account on getting virtually free points by buying and depositing gift cards.

JetBlue wants to start service at New York’s LaGuardia airport. Their operations are currently focused at New York’s JFK airport.

Assuming that the flights JetBlue would operate would be relatively short hauls (of, say, less than 800 miles) — long haul traffic is concentrated at Kennedy — and assuming that the routes compete against mainline carriers (a safe assumption, as the move is billed as a shot against American and Delta) rather than regional carriers, this strikes me as a bad move.

As I’ve observed on these pages before, JetBlue’s great advantage in customer preference is on long haul routes where their leather seats and satellite television drive customer preferences (fares being equal). On shorter routes these advantages mean less. (JetBlue has competed successfully on short haul routes, primarily when their major competition is flying turboprops.) The majors will have a decided advantage on short haul routes out of LaGuardia, in this writer’s opinion.

The TSA has successfully settled only a few dozen (out of more than 15,000) claims for damaged baggage or items missing from baggage. The airlines want the job of adjudicating these claims back, and are willing to pay most of the compensation costs.