Archive for February, 2010

American and One World Alliance “Wins” Bankrupt Japan Airlines Prize

February 10, 2010

Monday’s announcement that American Airlines and One World Alliance had won the battle of Japan Airlines – keeping JAL from switching to the Sky Team – ended months of speculation about whether another major airline would shift allegiance and upset the Airline Strategic Alliance Balance of Power.  

A different result could have destroyed the Open Skies Agreement between the US and Japan.  For one thing, protracted anti-trust litigation fueled by American, British Airways and Qantas opposition – would almost certainly have held up any attempt by Japan Air Lines to switch to the Delta led alliance. 

What does the decision mean for US Corporate Travelers?    

In the short run, the status quo will be maintained.  

First off,  American Airlines and other One World Alliance frequent fliers can breath a sigh of relief.   A reallignment of allegiances in Tokyo would have dealt a major blow to interline traffic, ticketing, frequent flier mileage redemption opportunities and revenue flow for the entire alliance. 

Looking five years down the road, JALs decision to maintain financial independence may allow management a wider range of alliance options if it can reverse its financial fortunes.   And the Japanese government has at least temporarily prevented the American Carriers from pumping more than $1 Billion into the flailing, failing carrier. 

Delta, following its acquisition of Northwest last year, acquired a major Trans-Pacific presence with the Northwest mini-hub in Tokyo.  All Nippon Airways is poised to become the largest carrier in Japan.   ANA’s participation in the Star Alliance may spur healthy competition in the US-Japan markets for at least the next five years.  With three major alliances in the mix, there should be at least some pressure on pricing, which bodes well for consumers. 

Business Week’s Justin Bachman concluded, “…No matter how much airlines contend such alliances are for customer service, they truly are about carrier finances.”  

Bachman also observed that the rejection of overtures from Delta and the Sky Team Alliance was more likely a result of the inability of JAL’s new management to restructure during bankruptcy AND switch alliances at the same time.  Switching alliances is costly in many ways, including physical costs required to make a change as well as significant losses of customer loyalty.   

To read Mr. Bachman’s analysis in full, click here. 

One wonders where already shaky US Carriers planned to raise the kind of money they were offering in support of  JAL, but fortunately, the Japanese government has nixed the possibility.  US shareholders and passengers should be grateful!   Why fight to purchase an interest in a bankrupt airline with too much capacity, a moribund route structure, huge liabilities, and customer service ill suited to the international marketplace? 

Delta, still feeling the logistical challenge of integrating Northwest into its vast network, has a gaping hole which resulted from Continental’s defection  to the Star Alliance last year.  

Continental Abandoned Sky Team in 2009 

Unwilling to serve as the “Junior”  US Partner in the Sky Team Alliance, Continental’s  bolted to the Star Alliance carriers, even though it competes with its new partners on most International routes.  Continental has been quite forthcoming about the costs of switching alliances, and has been investing heaving in educating its frequent fliers about the benefits of booking Star Alliance flights.  Switching to Sky Team would have cost JAL a fortune, and would have further eroded market share. 

Japan Airlines’ new Chairman, Kasuo Inamori, faces a wide range of challenges from within his company, from his government, and from the marketplace.  Forced to maintain unprofitable routes by the government, JAL has been hemorrhaging cash.  Many International Flights have lost lucrative business class travelers, perhaps scared away by the impending bankruptcy.   

A Recent Flight Experience 

On a mid-January flight from San Francisco to Tokyo on JAL’s flagship flight 001, we found the business class cabin half empty.  Inflight service appeared to be geared exclusively toward Japanese passengers, reflecting a regionalism  inappropriate in a global economy.    

True, JAL had just finished installing new business class seats and a premium economy class US carriers haven’t matched.   But while Western menu choices were in short supply, we found business class service and catering to be sorely lacking.  Served all at once, (see below) our transpacific dinner (see below) looked and tasted like a coach meal rather than an international business class meal.  

We didn't think much of JAL's Inflight Service

Only time will tell whether JAL can become a truly vibrant global force.  Maybe the change of management will help; installing an outsider to lead the recovery certainly couldn’t hurt. 

In the meantime, unless there’s a significant cost savings, your Summit Team recommends that you consider another choice for your Pacific travel.


Myths and Realities of Internet Travel

February 9, 2010

Confused about the best way to book Air Travel these days?  Don’t worry, you’re in good company. 

“Travelometry” is the science of figuring out the best way for business travelers to get from Point A to Point B, how to get around, meet, and and eat once they get their, and how to get back home — all without breaking the bank.  It’s the process of balancing competing interests to optimize travel expenses and traveler convenience.  And occasionally, good Travelometry can even show how travelers can enjoy the ride.

Our opening column explores the myths and realities of booking travel over the Internet. 

These days, it’s hard to turn on the TV without seeing a catchy ad with a traveling gnome or a hovercraft, extolling the benefits of booking travel online.  When ads become as ubiquitous as new car and beer commercials, you know what’s being sold has become a commodity.  It’s time to dig deeper, but cutting through the clutter is difficult.  As with most facets of the Internet,  information is everywhere, but knowledge is scarce.

As one might expect, the Airlines want you to book your travel directly on their proprietary websites.  Online travel  agencies up the ante and claim to  “guarantee” the lowest fares and hotel rates.  Traditional brick and mortar travel agencies still exist too, and they want to help you “manage” your business travel account. 

Throw in a hotel, airline and car rental loyalty programs to complicate matters further, and you’ve got a receipe for battle, with individual travelers pitted against corporate travel departments.  It’s been said the only thing tougher than managing employee travel is handing out assigned parking spaces in the company lot.

Before we examine the relative benefits of online travel booking sites, let’s first make the observation that employees will often turn up their noses at less costly flight options they would gladly accept when traveling on their own wallet.   Unless your company has a clearly written and well-enforced travel policy, preferably followed by senior management willing to lead by example, attempts to control spending may be doomed to failure.  We’ll address the subject of constructing an effective travel policy in a later columm.

Booking on Airline Websites

Let’s get the easy ones out of the way first.  Airline travel websites are geared towards one thing – getting you to book seats on their planes without comparing any other options.  It doesn’t take a rocket scientist to know that United isn’t going to tell you what American is offering, so it should come as no surprise that United will show you a 6 hour, $266 connection between Los Angeles and Austin and fail to inform you that American and Southwest both offer nonstop service for $188.  We’re not picking on United; all of the carriers do the same thing on their websites.   

Your grandfather may have referred to this simple economic truth as “Would Macy’s tell Gimbels?”   But today, Gimbels is as obsolete as Gladys the local travel agent.   Macy’s is still around, though.  So while times may change the players, buying travel on an airline website doesn’t make sense unless you are only looking to fly that carrier, you know exactly what you want, and what you’re willing to pay to travel the route. 

All of this is fine for leisure travelers or the savvy business traveler.  For business travel management, use airline websites with caution.  What’s saved in booking fees could easily be lost on bottom line fares.

A Better Option  – The Unbiased Website

So called “Independent” online vendors, such as Travelocity, Expedia, Orbitz, Kayak, FareCrawler, Hotwire and Priceline, generally offer a more useful and unbiased display of travel options.  The sites gather their data by mining information from the various airline Global Distribution Systems.  By cumulating this data from multiple sites, the output is more user friendly since it allows the user to specify multiple preferences.  Output can be ordered by preferred airline, time of day, preference for nonstop flights, fare levels, and the number of connections.   There may be times when it’s worth taking a connection to significantly reduce airfares, and that information is readily available from these independent sites.

Others websites use a “bid for service” or blind vendor delivery system, which can be great for travel when the details of a booking aren’t mission critical.   We recently used Hotwire for a car rental in Raleigh Durham, and the process worked flawlessly, providing a Budget car at less than half the rate we could have gotten through traditional online services.  Still, business travelers are reticent to use these sites when they aren’t footing the bill.  Simple human nature shows us that traveler convenience outweighs benefits to the company in the absences of clear direction from senior management.

It’s worth noting that some of the websites, notably Kayak and FareCrawler, invite comparisons with other sites, displaying the results from multiple booking sites simultaneously or as a part of their own output.

Online booking services have greatly improved their reliability over the past five years, especially with respect to International Travel.  As long as the traveler requires a simple roundtrip from Point A to Point B, online booking services should be able to do the trick.

What happens when the traveler is unfamiliar with the main destination, or when a trip involves two or more stops?  In these cases, online booking services become much less helpful, and the traveler can benefit from the use of a good travel agent.  Finding a good travel agent may be more difficult than it used to be, since many corporate agents know little about the world outside of their booking cubicles.  Still, even a novice agent may be able to provide valuable information by tapping a wide range of resources not readily available from online agencies.  

The airlines used to pay commissions to Travel Agents, but for the past 15 years, carriers have successfully shifted this cost to the business traveler and consumer.  While booking charges have more or less disappeared for online bookings, using a travel agent means a fee must be paid as compensation for services provided to travelers.  In a radical departure from normal legal channels, the Travel Agent is in an unusual position of dual agency — instead of being paid as an agent of the seller, payment is made more or less exclusively by the buyer.  (There are circumstances where commissions are still paid by the airlines, but generally, the cost of providing the services is borne exclusively by the Traveler).

In future columns, we’ll examine ways to evaluate the value of services provided by Travel Agents, as well as online booking tools which can be used to minimize travel expenses and the costs of processing tickets.

Quick Review of TSA Security Developments from “Smarter”

February 6, 2010

Just came across this interesting summary of the TSA’s  “No Change” changes instituted since last month’s security breaches.   After braving 4 domestic airports and and international return via Heathrow, I didn’t see any significant changes and if anything, the speed of screening actually seemed faster.   Your results may vary.

Check out Smarter’s take on the situation by clicking here:

Southwest Joins In-Flight Internet Access Rollout Parade

February 5, 2010

Southwest Airlines has announced a rollout of Internet Access on its fleet of 737 Aircraft.  The low-cost Airline leader has steadfastly resisted installing any type of inflight entertainment, but now competition from legacy carriers is dictating the need for business friendly services on long distance flights. 

From its humble beginnings in Texas with average flight duration of less than an hour, Southwest has expanded to become a true coast-to-coast carrier, with trans-continental flights and five hour flights in markets such as Buffalo – Phoenix and Albany – Las Vegas.  Southwest has also recently entered heavy-duty business markets at New York LGA and Boston.  A four-aircraft test that has been going on for nearly a year has seemingly convinced Southwest’s management that passengers are willing to support wi-fi service. 

By this summer, Southwest will ramp up installations to approximately one plane every two days, which means it will take up to two years to fully equip the Southwest fleet.   

Air Tran, one of Southwest’s most aggressive low-cost competitors, already has wi-fi on its entire fleet, joining Virgin America as the first two carriers to offer internet service on all of its planes.  Legacy carriers American, Delta, United, and USAir are already offering various levels of internet service on its flights, with Delta being the carrier most likely to have its entire domestic fleet outfitted first. 

All of the carriers, as well as federal law, prohibit using the internet service for VoIP phone call services, such as Skype, although SMS and e-mail services are both viable.

With Southwest’s announcement that it’s committing to full scale rollout of Internet Access, it’s become clear that Email in the air has come into its own, and only the smallest regional carriers will not be on board.

The Battle of the Lounges at Heathrow – Round 4

February 4, 2010

It started with Virgin Atlantic’s cheeky “ClubRoom” concept back in the 90’s, where for the first time, business class passengers could check in for their flights a bit early and actually enjoy some quality time at what had become an extremely dull and boring airport.  British Airways stodgy Concorde lounge, until that time the lone bastion of exclusivity at the airport, couldn’t hold a candle to the brash Virgin upstart, and soon premium travelers were defecting to Richard Branson’s upstart product.

Last week, we experienced the first phase of American Airlines’ new Admiral’s Club in Terminal 3.  We’ve been accustomed to AA’s ancient lounge for so long that almost anything would be an improvement.  While we expected to still see the old lounge, we were pleasantly surprised to find a major portion of the new facility operational.   Clean, functional and much larger than the old lounge, we were impressed.  But first a few words about recent  historical developments in the Heathrow Lounge Wars. 

British Airway’s Terminal Five opened in mid-2007 to wide critical acclaim, as well as a series of embarassing service failures that made headling news for years.   Despite the opening glitches, British Airway’s First Class, Concorde, and Business Class Galleries lounges were an immediate hit with the traveling public.  Perhaps wisely having conceded the “fun” title to Virgin, the new BA lounges offered a level of premium lounge comfort rarely found in Europe.  The elegance of the BA First Class lounge, which features two serve – yourself Champagne Bars, a wide selection of truly premium wines, and a self-serve buffet, shares an exclusive two level facility with the business class Galleries lounge, which is both spacious and well equipped with a hot buffet that puts some restaurants in Britain to shame.  Even more exclusive is the Concorde Room, which can only be accessed by those traveling on full-fare first class tickets – no self service here, pre-flight meals and drinks are served by bespoke staff in an environment that defines the word exclusive.  (On a recent visit, we spotted Pierce Brosnan and Naomi Sims in corner lounge chairs).

Heathrow has finally begun to demolish some of its oldest buildings (I still think the remains of some luggage I lost 20 years ago in Terminal 2 might be found in the rubble).  Terminal 3 – home to One World carriers American, Iberia, Cathay Pacific, Qantas, Finnair, Japan Airlines, and Royal Jordanian is in the midst of an upgrade of sorts.  Even though it’s theoretically possible for top tier passengers of any of these airlines to use any of the One World lounges, we’ve discovered as a practical matter one is often refused admission unless actually flying that airline.  Citing space limitations, the better lounges are not really open to would-be interlopers, although we’ve been known to wheedle our way in to most of them as top-tier fliers in the AAdvantage program.  Generally, it hasn’t been worth the effort.

Last year, British Airlines opened a Galleries Business class lounge in Terminal 3, providing a cool and inviting atmosphere for travelers on BAs intra-European flights to eight cities while construction on BA’s 2nd satellite terminal in T5 continues at a snail’s pace.  We suspect ultimately this facility will become a One-World lounge for non-AA airlines flying out of T3.  

American Airlines (the largest US Carrier at Heathrow), started revitalizing its Admiral’s Club and Flaghip First Class Suite 18 months ago.  The two year project included absorption of two smaller club lounges of other airlines, and was sorely needed.  Furniture from the 1960’s had never been updated, and looking at the competition’s offerings, calling American’s lounge tired would be kind.

The new Admiral’s Club is reached down a long construction corridor which will no doubt be replaced by a more acceptable entry when the entire club opens later this year.   But once past the makshift welcome desk, travelers will find a new and fresh look which has vastly improved offerings compared to its predecessor.

First and foremost, for business travelers, AA has finally installed wireless internet access from BT that actually works.   We measured throughput at 5.5 mps, which beats the speed in almost any other lounge we’ve encountered.  For business travelers hoping to catch up on email and send off messages before being out of touch for 8 hours or more, it’s nice to know AA has recognized the need.

Turning to food and beverage, a new wine bar in the center of the refreshment area offered 6 different vintages (3 white, 3 red) which were of excellent quality.   The self-serve beverage section contained a well-stocked collection of soft drinks, juices, and beer, as well as an open bar.   Replacing the non-existent food offerings at the old club was a typically British selection of fresh sandwiches, hot soup, cookies, and bar snacks.  The offerings at the new Admiral’s Club, while not quite up to the BA Galleries food bar, are better than the old First Class snack service, and you’ll find no complaints from me about the quality.

Three just-installed flat screen TVs were not yet fully operational, but were well placed for viewing throughout the room.  Nearly 200 new arm chairs, with ample power connections (both 220 and 110!) will make it easy for all travelers to plug in and power up anywhere in the lounge.  Work areas, complimentary computer work stations, and the aforementioned wireless access make this lounge a very comfortable and functional entry into the lounge wars.

American’s First Class Flagship Suite is scheduled to open later this Spring and we’ll be sure to let you know when it opens.

Our last connection through Terminal One was during the Summer of 2010.   All connections to Ireland depart through T1, as well as operations for all Star Alliance carriers.    We didn’t find anything that compares to the T3 and T5 offerings on our trip, although we understand a new Star Alliance lounge has since opened.    We’ll check it out on our next trip and shall report back.   It’s our understanding the new lounge is comfortable, with a limited selection of food and drink – but Internet Access is not complimentary.  There are more than 10 shower rooms, though, to help customers on long-haul flights recover and refresh for onward travel.

Finally, over in T4 – the Sky Team’s new home at Heathrow, the Alliance has taken over the old BA lounges, providing similar facilities for food and drink, showers and adequate seating areas.  While new carpeting and internet access have been added, the furniture is still a bit dated.

Our Summit Management clients and blog readers are encouraged to submit updates as your travels take them through Heathrow.  We’ll be happy to pass on your impressions and experiences to other readers, as the world’s second busiest airport continues to reinvent itself.