Monthly Archives: February 2013

A Few Quick Ones for Thursday…Larry Ellison Buys an Airline & More

I’m back from a quick work trip to Palm Springs, and I thought I’d catch up on a few things:

– I was upgraded on 3 legs on United, but on 1 leg on an A320 I sat coach in the exit row. The exit row in coach had the most legroom of the 3 aircraft I flew on in business class (A320, 757, CRJ). Am I crazy, or is that exit row a more comfortable experience? (especially with the middle seat empty).

– Larry Ellison, the founder of Oracle, has purchased Island Air, which will fit in nicely with the island of Lana’i, which he also owns.

– Frontier flights are no longer for sale on Expedia because the two parties cannot agree on costs.

– California Pacific, the Carlsbad-based startup that has been trying to launch for a year now, has requested an extension until March 10th from the FAA to finalize some paperwork and hire a operations director. They hope to be flying by the fall.

– United Airlines has officially canceled all 787 flights through June 5th.

An Open Brief Note to the Person Sitting Next to Me in the United Club at LaGuardia

Dear Person Sitting Next to Me,

It is absolutely a marvel of technology that people around the world can Facetime each other. Amazing, no? You can have a video conversation for free with someone who (apparently) is in Israel while you’re in the airport in New York. That is just the most amazing thing, no.

You know what else is amazing? How AMAZINGLY RUDE it is to have a conversation over Facetime at full volume in a roomful of people.

I’m truly happy about your nephew’s Bar Mitzvah in Jerusalem, and about the family’s preparation for “Purim in Yerushalayim” as the person on the other end keeps saying. Really, that is wonderful.

You know what else is wonderful? Me not listening to you blabbering to your grandkids for 25 minutes.

Oh wait, it’s Jack’s birthday? Ohhhh, that completely excuses how unbelievably inappropriate it is for you to have this conversation at full blast (remember, with Facetime EVERYONE ELSE can hear both sides of the conversation). But you said how happy you were that he was able to celebrate the birthday with you over Facetime.

You know what else is happy? Me, when they call your flight so you’re no longer sitting next to me.

It just got better! She’s repeating the whole conversation to her husband, who was SITTING NEXT TO HER, as if he did not just hear the entire thing (which would be impossible, as both of us are 2 feet from her and heard every “wait – you’re breaking up!”.

Whew, she had to go to the bathroom. Finally some peace.

2 Things to Remember about So-Called “Loyalty Programs”

With the Hilton Hhonors devaluation (and some smaller devaluations in other hotel programs), I wanted to pass along 2 quick thoughts about these so-called “loyalty programs.”

First, they are not loyalty programs. A loyalty program would reward loyalty. Airline and hotel points programs do not reward loyalty; they issue a currency. For example, to earn 30,000 Starwood points I would (as a base level member) need to spend $15,000 in Starwood hotels – or roughly 100 nights in a $150/night Sheraton. Or in August I could open an SPG Amex credit card and get 30,000 points. They are issuing a currency, they are not rewarding loyalty. On American Airlines I could fly 20 round trips to Florida from New York and earn about 50,000 miles. Or I could open a credit card. Again, they issue a currency, they do not reward loyalty (I could probably argue that their Elite Tier programs are loyalty programs, as most airlines and hotels actually require you to earn Elite status, and then they reward you for your flights or stays). They are issuing a currency, and, like all currencies, they can be devalued (or overvalued) over time. We are always surprised, shocked, and offended when airlines and hotels change the value of the currency, and on some level I blame them for it — if these are loyalty programs, is our loyalty now less valuable? Well, no – because they’re just issuing currency, not rewarding loyalty. Starwood is basically the Central Bank of the Republic of Starwood.

Second, please spend your points. I’m at least as guilty as anyone when it comes to this – I’m sitting on a few million points in various programs. But your points are not getting more valuable over time (as we have seen time and time again). For the foreseeable future, credit cards are allowing all of us to replenish our points stashes pretty easily. Please make yourself happy and use those points.

A Few Days in Harbour Island, Bahamas

I’ve just returned from 4 days in Harbour Island, Bahamas, and I thought I’d share a bit about our trip for anyone thinking about going.

Whenever I mentioned the Bahamas to anyone, everyone thinks of Nassau. Or Atlantis. Which is like thinking of, oh I don’t know, something awful when I’m talking about something not awful. The island is small, quaint, laid back, and basically devoid of anything to do. I mean that in a good way.

We dropped our kids off with the in-laws in South Florida and flew over on Silver Airways (United Express) from Ft. Lauderdale to North Eleuthera. Tickets are $350 for the <1 hour flight, which is annoying, but there's really no other option. I used Ultimate Rewards points to pay for that because you get a 25% bonus. Many people will tell you that that's not a good use of those miles, but those people are wrong, as I saved myself $700. Also, as we've learned from the Hilton devaulation, it is always better to use miles than to sit on them and watch them become less valuable. You land at North Eleuthera airport and take a quick 10 minute ferry to the island. We stayed at the Rock House, which has 10 rooms, a nice little pool, and cabanas around said pool (which, unlike every other hotel I’ve ever stayed in, were free to use). And since it was basically empty while we were there, we pretty much had the place to ourselves. I’m not a big chain hotel guy (which begs the question of why I’ve been hoarding Hilton HHonors points if I’m never going to use them), so this was exactly what we were looking for. Our room (Palm Room) had views of the harbor (as did the Pineapple room). The other rooms are larger, but they’re out back behind the pool and have no view. I would recommend the smaller room with the view.

The island is walkable, though most people get a golf cart to tool around in. There’s not a ton to see, which made it easy to sit at the pool or at the (somewhat?) famous Pink Sand beach – which, truly, even if you’re not a beach person, is a sight to see. The sand is powdery and there was no one on the beach. Delightful.

A note about the food: there are essentially 2 types of restaurants – those that are freuqented by a mix of locals and tourists, and those that are geared solely to tourists. The latter included the restaurant in our hotel (as well as the restaurant at 2 other hotels – the Landing and the Dunmore). The food was fantastic, but entrees approached (gulp) $50. I don’t even want to talk about it. The more low-key restaurants were more our speed. We ate (if you’re keeping track at home) at a little shack on the water called the Conch Queen; at a homestyle place called Avery’s; and at a fantastic little bakery called Sugar Rush. Those places all had food that was between reasonably priced and somewhat above reasonably priced. We also loved a bar and tapas place called Blu Bungalow. Again, food not cheap but I loved the vibe, even if it was primarily empty (like most everywhere else).

On a final note, North Eleuthera Airport does not have x-ray scanners at security. They half-heartedly opened our bag and waved a wand over us. I’m quite surprised that anywhere in the world still has this level of security (or lack thereof) but it was both horrifying and refreshing. And horrifying. Yet refreshing.

Oh, and we saw Dave Matthews and his family hanging around (gratuitous celebrity spotting).

A few photos below, if you care:

People like (blurry) pictures of airplane seats. These are on a Silver Airways Saab 340b.

He did not tell me why he was crossing the road.

Hm…how to flip this image? Just know this restaurant is advertising both Pigs Feet AND candies.

It’s a nice beach.

Pool at the Rock House.

View from our room.

Bungalow at the pool.

View from the restaurant at Rock House.

Before 1767 God was certainly very, very, very good.

Global Entry Members Can Now Skip the Line in Australia As Well

Nice perk for Global Entry members (that’s apparently been available for a bit, but I just received an email about it): Since late last year, Australia has been allowing American Global Entry members to skip the passport line when they arrive in Australia. Members of Global Entry, NEXUS and SENTRI can participate in Australia’s SmartGate program, which allows for expedited entry into the country.

This program is available to those flying into Australia who are 16 years of age or older and possess an e-passport (if you received you passport after 2007, you have an e-passport, as there is a chip embedded in there someplace).

To take advantage of this program, you don’t need to enroll in SmartGate – simply skip the line upon arrival in Australia. Details here.

New York – Santiago (Chile) $900 Round Trip in Business Class on AA/LAN

(Thanks, Flyertalk)

American Airlines has a $900 roundtrip fare in business class (taxes included) for flights between New York and Santiago, Chile. These route through Dallas or Miami — for the Miami flights I’m seeing some availability on a LAN 767, which features lie-flat seats in Business (I flew it a few years back and they’re great). I do see 1 nonstop leaving JFK May 9 and returning May 13th — that’s on LAN metal. This is a ridiculous fare that I’m sure will disappear soon. Keep in mind that you’ll need to get a $160 visa to visit Chile.

The flights book into A for the domestic legs and I for the international flights.

Looking at Kayak there’s not a ton of availability, but it’s there. Saturday night stay is required.

New York to Honolulu, $365 round trip

I’m on vacation, but I wanted to pass along that Hawaiian Airlines is offering last minute(ish) round trip tickets from JFK to Honolulu for $365 round trip through mid-March. Other islands are about $25 more. It’s an amazing deal if you don’t mind 11 hours in coach.

(Thanks, Travelzoo)

Where I Add My Inevitable Two Cents to the Discussion about US Airways and American

Oh, the Chicken Littles have been out in full force for the US Airways – American Airlines merger. The sky is falling for US Airways frequent flyer members, they say. The sky is falling for consumers who like cheap airfare. The sky is falling for American Airlines customers because US Airways runs such a low frills operation. And on and on – perhaps I’m reading more of this from bloggers than from anyone, but if I were to believe everything I’ve read about this impending link-up, absolutely everyone involved will be screwed over.

Fortunately, that’s simply not true.

Although we think of airlines as a consumer business (and airlines have – quite unfortunately – sold themselves to consumers as a service business), they are, depending on how you look at it, either a manufacturing business or, more simply, a utility.

I remember interviewing at Northwest Airlines a zillion years ago, and someone I met with said that Northwest’s then-CEO (I can’t remember who it was) described the airline as a manufacturing company – they manufacture connections at hubs. If you look at the decisions they made in the late 90s and early 00s, that philosophy explains how the airline was run — they put off replacing their then-25-year-old DC9s because, well, why replace them when they were low-cost and allowed them to make connections in Minneapolis between Minot-originating passengers and flights going to Milwaukee.

They’re also quite a bit like a utility – specifically, the telecom industry. Without blah blah blahing about it here, think back to the history of the long distance companies – starting as small regional players which then came together as AT&T, which the government broke up into smaller companies before re-merging and settling on 3 or 4 groups with a national footprint. Or cell carriers, which developed similarly with smaller regional companies combining into a handful of large national players with a few primarily-low-cost-focused regional players. Sound familiar?

My point is that the US Airways-American merger was inevitable. Following deregulation the US probably needed 3-4 national carriers with a handful of niche players focused on the low end. It took a while for that to happen – I guess because funding was so easy to come by for new airlines for so many years (good luck raising money to start an airline today). But it was ultimately putting off the inevitable consolidation that one would expect in either the utility or manufacturing industries (especially commodity manufacturing, which is pretty much what we’re dealing with in an airline).

Dozens of airlines started up in the US after deregulation and we’re left with JetBlue, Spirit and Allegiant (Frontier will be gone soon enough, no?). That’s pretty much it. Spirit and Allegiant lowered their costs enough to thrive as a low-priced commodity provider. JetBlue is an interesting case where (at least initially) they de-commoditized the product and kept costs low, allowing them to provide a low cost, high value product in a commodity marketplace. Nicely done.

In so many industries we see crowded markets evolve into 3-4 major players, and that’s where we’ll end up with United, Delta, American and Southwest driving the industry. (This probably begs the question of what happens to Alaska Airlines – conceivably someone would scoop it up to build out their West Coast presence, but more likely they’ll enjoy their deep Northwest footprint while continuing to innovate operationally and will be left alone for the foreseeable future).

When an airline merger is announced I always see articles suggesting that airline mergers fail because the combined entity will have too much route overlap; or too many hubs; or too many aircraft types. That’s all nonsense. If there’s too much overlap, the combined carrier can redeploy those aircraft elsewhere. Airlines used to focus on 3 or 4 hubs (if that), but the world has changed and carriers are thriving with many hubs — Delta has a significant presence in Atlanta, Detroit, Minneapolis, Salt Lake City, New York City, whatever’s left of Memphis, and a handful of focus cities. Why is it a concern that US Airways and American will have sizable presences in New York, Philadephia, Washington, Charlotte, Miami, Dallas, Chicago, Phoenix and LA (I feel like I missed one)? If Phoenix doesn’t make much sense they’ll downsize it until it does. Is that a reason not to merge? No.

So-called “consumer advocates” complain that consolidation leads to higher fares. That’s probably true for flights between the hubs of two merging carriers (for example, in United’s case, between Chicago and Houston; or between Newark and Chicago). But according to the Wall Street Journal, airfares have dropped an inflation-adjusted 15% since 2000. You simply cannot argue that consumers are worse off because of consolidation. A healthy set of lowfare airlines keeps prices in check (complain about Spirit all you want, but people in Dallas and Houston should be thrilled they’re adding flights there). And you know what’s worse for consumers than slightly higher fares? No flights at all, which is what you would end up with if all of the airlines that have merged out of necessity over the years disappeared. Check out a route map from 1973 some time –you think we haven’t benefitted from nonstop flights? Consolidation has brought dozens (if not hundreds) of new nonstop flights while at the same time providing customers with cheap fares. This merger is just the final piece of that.

Finally, on the frequent flyer front. I can understand why there may be some concern, especially from US Airways Dividend Miles members. The tie up with Star Alliance (which will end at some point after the merger) provided some amazing fuel surcharge-free international redemptions. And you can kiss that 90,000 mile business class Asia award goodbye. But US Airways also had some annoying quirks (no one-way redemptions). Like with everything, there will be good and bad. And honestly, it doesn’t really matter what you think because this merger is going to happen, and Dividend Miles will disappear and in 18-24 months you can enjoy whatever the AAdvantage program has to offer. Northwest Worldperks had some pretty good awards too, and that’s gone and no one talks about it anymore. In 36 months no one will miss Dividend Miles, trust me (well, except for those of us who churned that credit card over and over).

That’s a lot of words to say this: consolidation is inevitable; US Airways has some of the best managers in the industry and will make AA a successful airline in a way that their own management could not; you won’t lose any service; your fares won’t go up; and you’ll still collect a ton of frequent flyer miles. You think there’s really anything bad about a world where you can print frequent flyer miles through credit card signups and then use them on alliance carriers to go wherever the hell you want for free? We’ve got it pretty good.

Tuesday Short Hops: Virgin America, Sunwing, United

– Virgin America announced they will launch once-daily nonstop service between San Francisco and Austin (remember when American Airlines flew San Jose – Austin in 2000 or so because supposedly there was so much tech-related business travel between those two cities? that was cute…) beginning May 21st. They will also launch 6X weekly service between San Francisco and Anchorage during the summer season, competing on the route with United.

– A Sunwing Vacations charter flight from Toronto to Costa Rica & Panama sat on the tarmac in Toronto last Friday for 13 hours because of the snow, before finally departing 17 hours late.

– United is offering 40% off the regular ridiculous price for purchasing miles when you buy at least 20,000 miles – so you’ll only pay an absurd $451.50 for 20,000 miles.

– And Delta is cancelling one of its odder routes, eliminating its 4X weekly flights from JFK to Georgetown, Guyana, beginning May 9th. Anyone wanna go before they close that off? So many random airlines have tried to make the JFK-Guyana route work, but to no avail.

Southwest Airlines to Offer In-flight Movies & TV

Southwest Airlines, which has always been viewed as a no-frills lowfare carrier, puts just about the final nail in that coffin when it rolls out in-flight on-demand movies and TV shows this week on the 75% of its aircraft that are currently equipped with wi-fi.

Rather than install seatback TV, Southwest has decided to make their inflight entertainment available as streams to passengers’ laptops and tablets. Southwest opted against seatback TVs because they believed they would add too much weight to the aircraft. That seamed like a slightly goofy decision 5 years ago, and seems like a brilliant decision now.

Southwest is no longer the lowest fare provider in many of the markets it serves, it has wi-fi on most of its fleet, it will soon offer a wide array of in-flight entertainment options, and offers ways for passengers to pay to board early. Their AirTran unit offers a business class cabin. That does not sound like my father’s Southwest (I use that figuratively — I’m not sure my father has actually flown Southwest). In fact, Southwest is now, gasp, a full-service provider compared to many of the aircraft flown by so-called full service carriers. My wife flew out to Vegas last week on a United 757 that had no in-flight entertainment, no wi-fi and, of course, no free food. Full service, my butt.

In addition to the on-demand TV shows and movies, Southwest also offers 8 channels of live television. Movies and TV are $5, wi-fi is $8.