Sunday, August 29, 2010

United-Continental deal clear final hurdle

The Justice Department signed off on the United-Continental merger that would create the world's largest airline.
The final hurdle required Continental to divest some slots and gates at Newark Airport. Continental already has over 70 percent of the flights from/to Newark. Adding United to the mix would have resulted in even more. The Justice Department otherwise found that the carriers had complementary routes.

Southwest Airlines is expected to pick up the slots vacated by Continental. It is expected that some of those routes will be peak and non-peak.

Analysts agreed that giving up these slots was a small price to pay for the merger to clear anti-trust concerns.

Thursday, August 26, 2010

FAA Seeks Record Fine from American Airlines Over Maintenance Lapses

Dallas (by Associated Press)--Federal officials are seeking a record penalty of $24.2 million against American Airlines over maintenance lapses that caused thousands of canceled flights in 2008.

American said the civil penalty was unwarranted and it would appeal.

The dispute dates to 2008, when American had to cancel more than 3,000 flights -- inconveniencing 350,000 passengers -- until wiring could be fixed to the satisfaction of the Federal Aviation Administration.

The FAA said Thursday that the improper harnessing of wires on American's McDonnell Douglas MD-80-series jets -- about half its fleet at the time -- could have led to fires and even fuel-tank explosions. It said American flew more than 14,000 flights with planes that didn't meet the wiring requirements.

American has claimed all along that the FAA's concerns were overblown, and that passenger safety was never jeopardized.

Wednesday, August 25, 2010

Airline M & A...More to Come...

M&A activity is in full swing in many industries. The airlines are at the forefront as new challenges appear on the horizon. Airlines must have the liquidity, capital, and lines of credits to acquire new fleets, equipment, maintain aging aircraft and facilities, pay large overhead costs and stay competitive. That's a tall order that requires excellent management skills and the scale to command concessions from suppliers. Japan Airlines could not turn the corner financially and became the most prominent bankrupt carrier in 2010. United is seeking a merger with Continental, TAM and LAN have announced their plans to merge in Latin America. The battle lines are being drawn with three major world alliances.

In the U.S., American Airlines (AMR) and USAirways have been left out of the big dance, but rumors are now swirling that the two carriers may be flirting with a merger of their own. The two carriers are not compatible and such a potential outcome will not be in the best interest of the traveling public. American is the only carrier that has not filed for bankruptcy protection and is now paying the price since it still retains the expensive leases and legacy costs that other carriers were able to reduce or erase.

Monday, August 23, 2010

Latin Merger on the Way: LAN and TAM

A preliminary deal announced last week could create Latin America's largest airline.
Chile's Lan Airlines and Brazil's TAM announced plans to merge. A new LAN-TAM merger would create the scale and size that would make the merged carrier one of the largest 10 in the world and will likely have a profound impact on routes, competition, and pricing.

Regulators in both countries will likely scrutinize this proposed transaction, and will demand concessions from LAN-TAM to give up slots and routes that will be heavily controlled by the combined carrier.
This may take a while to sort out. The fun part will be the new name of the combined airline if the deal goes through.

Thursday, August 19, 2010

United Mileage Plus Makes it Easier to Use Miles

In the past year, Mileage Plus has reinvented the program by making it easier for members to use their miles. New features and benefits introduced over the past year include:
* Hotel and Car Awards
* One-Way Awards
* Miles and Money Awards
* Star Alliance Awards online for Continental and US Airways
* Elimination of last-minute booking fees
* Elimination of the Mileage Upgrade Award Co-pay for elite members
* An improved website
* Any seat for sale on United is available for a standard award. Guaranteed

For booking United, please go to

Thursday, August 12, 2010


As a result of the Transportation Security Administration (TSA) and Department of Homeland Security (DHS) mandate, beginning November 1, all passengers will be required to have Secure Flight Passenger Data (SFPD) in their reservation at least 72 hours prior to departure. This is the next phase in a program that was initiated by the TSA in 2009.

In compliance with this mandate you will be required to provide Secure Flight Passenger Data:
To purchase any ticket on or after September 15, 2010
To travel November 1, 2010, or later regardless of purchase date
You will be unable to travel without providing the following information.
Full Name (first, middle and last name, as it appears on the non-expired government-issued photo ID that you will use when traveling)
Date of Birth
Redress Number (if applicable)
You will need to provide Secure Flight Passenger Data:
If it was not provided when you made your reservation
For reservations made prior to adding SFPD to your frequent flyer mileage program.

To insure that your travel plans are not disrupted or cancelled, please update your traveler's profile at

Travel Suppliers Pricing Disconnect

Airlines seem to have regained the pricing advantage specially over business travelers according to many surveys for the first six months of 2010. On an average, fares have increased 8-10% over the same period of last year. With "deals" and "sales" vanishing, and once you add all those dreaded ancillary fees, the airlines are doing a better overall job managing their bottom lines. A closer look however reveals that the main reason is that airlines have "calibrated" their seat capacity (translation: reduced) to insure that planes are full and cutting off unprofitable routes.

So while the airlines pricing power is in the hands of the airlines for now and all things point to a recovery for the travel sector, hotels and car rental companies do not seem to be faring so well. Surveys show that the average hotel rates have decreased slightly for the same comparable period. Aairlines can "calibrate" capacity by reducing frequency and discontinuing routes, hotels cannot do so. They are affected by commercial real estate values and the fact that projects that were started before the recession had to be completed, bringing more and more inventory to market. The same is true to a lesser extent with car rentals. There is a round of consolidation going on and rental companies are able to reduce the size of their fleets of vehicles available for rent, But the fragmented nature of the business means that there are still relative bargains out there.

Friday, August 6, 2010

Blackberry blackout in Saudi Arabia

Not to be outdone by its neighbor to the east, Saudi Arabia followed the U.A.E. in banning the use of Blackberry services in the kingdom effective immediately.
The U.A.E. ban would take effect in October. Subscribers there were hopeful that a compromise could be reached to address the government's security concerns with Blackberry's encryption.

Saudi Arabia however did not wait, and subscribers are now reduced to using the devices to simply make.... phone calls! Many subscribers describe the reception and quality of Blackberry phones as very good.

Thursday, August 5, 2010

New York City hotel taxes and fees lead the nation

For travelers to Manhattan, the pain of paying for high rates of hotel rooms does not end there. Once you factor in the discriminatory taxes and fees, the final bill is an eye popping 18-20% above the stated rate.
Here's the typical tax breakdown:

New York State Sales Tax = 4%
New York City Sales Tax = 8.375%
Hotel Room Occupancy Tax = $2 + 5.875%
Additional Fee = $1.50

A stay in a 4-star hotel in New York that would go for $400/ night would result in a total bill of about $475 when you include all taxes, fees and surcharges.

Wednesday, August 4, 2010

Airline ancillary fees run amok- a real example

To appreciate how problematic ancillary fees have become to business travel managers and passengers, we thought of providing an actual example of a business trip for a client.

Origin: Washington/Dulles
Destination: Reno, Nevada
Fare Description: Supersaver 21-day advance purchase: Total airfare $690
Action: Company approves travel at the $690 fare quoted.
Electronic ticket: issued
Upon check-in, passenger prompted if he would prefer to "upgrade" to a better seat.
Airline offers a range of $25 for an exit row aisle and up to $89 for "Premium Economy" (each way). Passenger opts for the Aisle exit($50). Checked bag: Yes, adding $50. Onboard "amenities": $7 snack box and $10 for a pillow and blanket. WiFi internet purchased $9.95 each way, plus one cocktail at $8. Passenger was offered but declined the "express security lane fee", and the "priority boarding fee".
Actual cost of the ticket after the added fees: $834.90

The undisclosed fees are causing additional burdens and complications on business travel. Reimbursements can be confusing and awkward as most of these amenities were included free of charge in the past.

Spirit Airlines has tacked on a carry-on bag fee which they claim "expedites" the boarding process.

One airline in Europe is even exploring a bathroom fee.

Monday, August 2, 2010

Blackberry blackout in the Middle East

The U.A.E. will restrict access by Blackberry subscribers to network services. Even visitors to the Emirates will be subject to the blackout. Approximately 100,000 travelers transit through Dubai alone on a daily basis. Other governments in the region are contemplating similar action. This restriction will take effect on October 11, 2010 and will impact at least 500,000 local subscribers.

The government of the U.A.E. contends that some Blackberry features operate "outside the country's laws causing judicial, social and national security concerns". Translation: The encrypted data routed through Blackberry servers makes it difficult to monitor traffic on the networks.

So is this the tip of the iceberg? Will other smart phones be next? Will other governments in the region implement their own restrictions?

Such restrictions will be a setback for Dubai and other Emirates that are hoping to draw more business and tourism.

Are some airlines pocketing the taxes on non-refundable tickets?

When the airlines sell and oversell their flights, and some passengers cancel or no-show, what happens to the taxes collected on tickets? Surely, this is a subject some airlines would rather not discuss. Some airlines claim that they pay the taxes to the taxing authorities, while others decline to talk about it, or give incomplete explanations. Some airlines maintain that taxes are paid regardless, but the theory does not hold water. For example if a passenger does not travel, why should the "passenger facility charge" (PFC) be paid to the airports that did not render any "facility" to the passenger? Or why should a "security fee" be collected when the passenger did not go through security?

With hundreds of millions of dollars at stake, the airlines either have to prove payment of these taxes to the appropriate governmental entities, or they should be refunded to the passengers or their companies.