Professor Sabena's Blog

The Professor's 2012 Wish List

2011-12-31T11:11:00.000-08:00

OK so you have had my predictions and my Grinch list. I have even done my top 10 secular holiday season songs.

Now what would I REALLY like to see happen in 2012? I have reached into my file of things that I really want to change. I want to solve world peace but don't have the time or the temerity to deal with this. But I do have a few ideas. So here is my list of changes I want to see implemented in 2012.

The Cookie Tax – the ultimate solution to equitable wealth redistribution. Facebook, Google and Apple (as well as just about everyone else) get hit with a Cookie tax. For every cookie loaded the cookie placer has to pay a tax of 5 cents per cookie. The Cookie tax can be avoided if the provider gets a cookie free certificate. This would certify that the company does not use Cookies.
Ending Abuse of Surveys. Survey Monkey (and all survey questions) comes with a university or college degree in how to ask questions. No one can use Survey Monkey without a degree in Applied Research or Statistics. Websites are allowed to ask one survey a year. If they want to do more they have to pay their users $10 per survey completed.
A “Do Not Abuse My Data” Registry. This enables you as a consumer to register the company that you do not want them to control or use your data in any way other than for the company itself you signed up with. IE no advertisers can share or use the data. Also the registry will tell you HOW you can see all the data that any company has on you. All breaches are punishable by death or $1 billion per instance whichever is less convenient for the company concerned.
A control spam application. This is a freely available app that lets me choose who sends things to my email. Anyone caught abusing this is liable for a life time of being hung upside down from the Space Needle in Seattle.
Fixed price mobile phone service. No advertising – a public utility service – that can be provided by any player with no long distance changes, no caps on data and no caps on text or call minutes. All for less than $50 per month. A surcharge of $20 per month for international roaming.
Guaranteed QoS service mark that can be appended to any online or offline service. If the QoS metrics are breeched then the provider has to refund any service fees attached to it. For example if you have to pay for a bag and it arrives damaged or late you pay a fine.
The Guaranteed Service bundle. Every provider of a service is required to offer a full bundled service offering (as well as the unbundled pricing). For example an airline would be required to offer a bundled fare not to exceed the lowest fare by 50% which allows me to select a seat (other than middle ones please) check a bag and get from A to B without paying anything else.
Revised Do Not Call Registry. A true “Do not call” registry that includes – “thanking me for my service”, political ads, robo calls of any time, charitable causes and annoying neighbours who are bored. As part of this service the true name and contact details for the person calling you will be displayed or available after the call to you.
The anti Bovine Law. Regulation that says any airline that exceeds 80% load factor must provide extra flights until the numbers reach 80% again. Same for hotels etc etc.
A new Bill of Rights. A new United Nations citizen charter of rights. This includes banning of all lies by politicians. A pain tax – however much pain is inflicted by the politicians on their electorate they have to pay out of their own pocket this includes banning all influence peddling. Enforcing existing anti-competitive regulations etc etc. … there are many more like this!

With that I wish you an excellent 2012. If you like this spread the word and share with your friends (and enemies alike). Send to your favourite politician. There are a few others I would like to see. Like breaking up of Google but that will keep for another day.

Peace, Love and Understanding

Cheers

The Professor.

The New Top 10 Secular Season Songs

2011-12-25T07:44:00.000-08:00

Since we are not allowed to use the "C" word in our new politically correct world, a whole new crop of seasonal songs have come out. Adapting classic favorites and launching Yuletide cheer for all Geeks and their families everywhere

White Facebook – Mark “Bing” Zuckerberg

The perrenial favorite from the movie of the same name

The Google Song – The Acolytes

The lovable rascal animated characters in their season stomping romp.

Rudolph, the Windows 8 Reindeer – Steve Gene Balmer

A newcomer to the chart, Steve's song delights children everywhere

I saw Mommy kissing Larry Ellison – Weird Al Yankovic

While the thought might be repugnant to many - Weird Al makes it feel oh so PC.

The Timeline Song – Time’s Awasting

Another newcomer to the chart, Nat Zuch Cole's old favorite replaces many useless songs.

Googleplex Rock – Sergey and Larry

Those real hipsters Sergey and Larry deck the halls

Snoopy’s iPod (soon to be re-released as Snoopy’s iPhone) - Steve Jobs

Sadly Steve did not live to see his own creation become a timeless season's classic

Here Come’s iPad Claws – Tim Cook and the SFGMC

This not terribly dynamic song just creeps up and grips you

Little Mapper Boy – Visteon vs Garmin

Two warring factions put aside their differences and tell a solid tale in song

Rockin’ Around The HP Tree – Meg “Brenda” Whitman

The base maybe a little shakey but Meg and the boys are putting on a revival.

And to all - a GOOD NIGHT

Happy Holidays!

Thanks to Jay Allbritton for his image.

The Professor's Top 3 Posts of 2011... and a Thank you

2011-12-24T09:15:00.000-08:00

2011 was a really interesting year.During the time we have had the Arab Spring. We have had a host of difficulties and triumphs personal and public.

But for the Professor's blog which were the top stories of 2011?

While I try to stick close to my roots on this one - I tend to comment on Travel in general, Airlines, Distribution matters and Customer service (or rather frequently lack thereof).

So for those of you who are interested here are the top 3 posts of 2011.

By far the most popular is the impact of IATA Resolution 302.

Number 2 was a rather esoteric piece on aircraft boarding.

Number 3 was my nostalgic piece on Dr Who, and the passing of the actress who played Sarah.

Thank you readers... you are a weird lot but I am really grateful that you do actually read my work. I commit to try and do better in 2012. My day job keeps getting in the way but well I will endeavor to do better. I would like to thank all those who have contributed ideas for the Blog. Those who have given me fodder for my writing - thanks to you too.

And in the best tradition may I wish all the ABSOLUTE BEST to each and everyone of you all this holiday season. I hope that you are close to your loved ones. If not then I hope that you will be reunited soon. May Peace and Love reign over all of us.

Cheers

Delta and Air France joint partners yes in form, integrated in service no.

2011-12-24T08:58:00.000-08:00

Not a pretty sight.

Many of the airline JVs are touting their seamless service. Sadly this is not the case. It is important to consider that as a user the expressions and impressions you use and leave behind permeate. By now we should be long past trying to hoodwink your customers. Airlines however have yet to learn this lesson. Some have – others keep stubbing their toes. Qantas and its various unsuccessful attempts at Social Media prowess would seem to be a case in point. Airlines need to step up their game across the board.

And this is where I want to pick on someone who should be my favorite airlines. I am elite on many airlines. With Delta for the first time I have reached Diamond status. Delta is currently running lots of ads extolling the virtues of people. Delta people.

Delta people are good. Sure not everyone can be perfect all the time. But they try pretty darn hard. But Delta people are the only ones servicing Delta customers.

Let me describe an issue which illustrates that this is more of a structural problem. While on a long distance international business trip. I received a phone call to say that my waitlist on a DL flight had cleared I was told to call my “local” DL res office. When I called DL Reservations in UK it was answered by a rather obnoxious Air France representative. (BTW this is the usual way AF deals with DL pax. They are generally arrogant and rude even when dealing with AF passengers. I really don’t know where they get them from but AF really does seem to go out of their way to hire people who can best Ryanair for customer service skills). She insisted that there was no upgrade authorized in the reservation, therefore I must be lying. However gritting her teeth she did divulge that I was still listed as waitlisted. I told her that my DL account showed that the WL had cleared.

The issue is three fold. Firstly DL should see that I am travelling and should use email as a way to communicate. Then there is no ambiguity. Secondly AF does not have access to the full system. As there are no longer any DL full service personnel answering the phones this represents a huge problem. Particularly for frequent travellers such as myself. Thirdly, the AF agent (a much nicer person!) at the airport was unable to get to Skymiles to confirm the information necessary (certificate number). If my flight had departed before say 0930 that would have meant the agent did not have access to the information nor could they obtain it. Recommendation is that there should be an automatic roll over back to Atlanta Skymiles desk when the local desk is not occupied.

A general observation. The so called seamless service of DL/AF/KL is flawed in many ways. A process team should be looking carefully at the whole manner of integration. As I noted above Delta's advertising talks about "Delta People". I am sure that Delta people would have handled it. However Air France people attempting to behave like Delta people are unsatisfactory. So much for the fiction of seamless. And just in case the other airlines want to have a quiet snigger about this. DL’s experience is not unique. The other global alliances and the inner JVs are just as bad. In some cases WAY worse.

C’mon guys. You need to put some meat behind that service. Otherwise then regulators should be looking hard at penalties for failure to deliver on your promises to them when these programs – mergers in all but name – were approved.

Cheers

The Professor’s Grinch List for Travel and Technology 2011

2011-12-22T18:54:00.000-08:00

While everyone is doing nice best of and worst of lists, I thought I would do my Grinch list. These are companies or classes of company who have managed to make Travel and Technology as bad as it is. Yes I know it’s a long list there were a lot of special mentions of players who should be on the list but aren’t – but have a read. Remember this is tongue in cheek! (well partially anyway).

(Joint) Travel Agents and Airlines for having no cojones to complain and fight back when presented with outrageous GDS contracts (see #8). Note this is not addressed to every single airline nor agency but the majority of these classes who have already either accepted or are guilty of the sin of rolling over their contracts and not reading the small print – true there is a lot of it. You know who you are, shame on you!
Airlines (and other product sellers) – for not openly compensating intermediaries for the work that they do. Oh yes and airlines for calling their alliances SEAMLESS service. Stop telling porky pies
Apple – For wasting my time and also for making products that only work their way. (They get a special dispensation for making very cool products). For allowing a whole raft of bad Apps to appear and not worry that they either don’t work or are actually bad for the consume
Facebook – for wasting time and creating an addictive product . OK but their real sin is in destroying several good words in the language. These include Friend, Like etc. Also for turning nouns into verbs. For destroying the ancient art of Biography, Teacher is not amused.
(Joint) Oracle and Microsoft - For screwing up the JAVA product, not fixing the bugs in the latest version that doesn’t work with Windows. And they don’t know why (I do – you are too lazy to fix it). I could go on about Larry Ellison but I am keeping this to companies.
DiscoveryMedia (and all the silly people who are in the sordid American Muslim affair) The whole issue is an insult to decency and common sense. There is guaranteed freedom of worship in the USA. This whole episode is an affront to everyone not least of which are Muslims. No need to sensationalize it. What next American Mormons? American Unitarians? American Nuwaubians?
Travelport (in particular) - For their Agility Program – Way to go boys for screwing the travel agents especially the little ones. Let’s see you dig yourself out of this hole! I really pity the spin meisters at Travelport who have to justify this.
GDSs (in general) – Oh boy where do I start. Let me just pick on a few items.

For subscriber contracts which tie agencies to inefficient and restrictive agreements that prevents competition
For Airline FCA contracts ditto reason as 8.1
For failing to create an open model that allows ALL airlines to participate fairly. Thus in putting out an incomplete product they have made it harder for the consumer to shop. On the other hand the meta search companies love GDSs for creating their niche.
Generally putting out bad products and telling the world how innovative they are. ‘Nuff said
For taking airlines money and putting it into the market and forgetting that this does create a skewed economic model.
And a special “Thank You” for making travel agents drug addicts who now can’t live without your incentive fee revenue.

Lawyers (my perennial favorite) – For causing so much trouble. This year special mention to the 100 lawyers involved in the Sabre side vs AA. For 2012 I am keeping an eye on the lawyer teams in patent trolls who are going to make innovation WAY harder. And yes this is Travel and Technology I am discussing.
And this year’s winner the 2011 Grinch of Travel - Google – For so many things. For perpetuating the myth that they do no evil. I love their latest charm offensive. For putting out products and calling them beta. For telling everyone that Google Flight Search is comprehensive. For wasting my time. For tracking my every move. For telling me that they have decided what I need to see (can you say censorship?). For Schemer (no comment but don’t be sucked in), for inaccuracy and failing to have a high enough quality standard and then expecting me and all the other consumers to fix their crap for them.

Bah Humbug! Ebenezer is really happy and thanks you.

The Professor's 2012 Predictions

2011-12-19T11:01:00.000-08:00

It's that most wonderful time of the year. The Professor has dusted off his crystal ball and peered into it.

This year, I am seeing a lot of change and disruption. 2011 was a bad year for the integrity of the travel world, and 2012 will be no better. So here are some of my key predictions; in fact this is my top 10. I am not going to rank them - they are all equally likely to happen. The impact will vary on where in the food chain you live. So here goes:

1. More Regulation - yes re-regulation by stealth and through the front door will occur. Much of this will be consumer focused. Much of it will also be revenue focused. States are struggling with their financial obligations and so taxes will increase.

2. Less Competition- this might seem strange but I see much less competition in key areas that matter. Less competition among airlines for example in the USA where the number of airlines has shrunk to the point where competition is almost non-existent. Prices are going to rise for travel. The golden age of competitive pricing for airlines and cheap airfares are over. One bright spot is that the long haul traffic in the Gulf State airlines will continue to create value for long haul traffic - in the back of the bus. Low cost carriers will continue to eat away at legacy airlines’ market share. Some of these legacy players are going to suffer badly that in turn leads to short term improvement but long term reduction. Travelport’s Agility program is another example of companies trying to extract more money out of … ultimately the consumer. The lack of true competition in distribution enables them to do that.

3. More fragmentation of the user experience. Think of the current Hipmunk type change as version 1.0 of lipstick on the front end of the pig. In 2012 we will see a lot more innovation coming in the UX. However many of the players will be pretenders to the throne. Many players will be attacking the user interface without understanding the complexity of product requirements and the sophistication of the users. Developers will continue to mistake UI for UX.

4. Availability state will become a top problem to be dealt with - specifically quality and speed of results. Finally the current generation of cache results will be exposed for the poor quality they provide. However this will not deter practically every travel vendor from demanding a source of cache availability. At the same time the suppliers will be demanding more and more discrete transactions; i.e., tell me who you are and what you want, and only then will I tell you what you can have. This battle is going to heat up in 2012.

5. Google Flight Search will be a mixed bag. It will launch internationally but won’t be very good and certain significant airlines will not participate. Google’s inability to display discounted fares internationally will condemn them to be just like Expedia’s UK product – only partial in its delivery. The boycotting by several airlines such as Lufthansa will be marked by slow adoption of the Google Flight Search product by consumers. Google itself will start to feel the heat from regulators and users alike. No more will it be the “do no evil Mr nice guy”.

6. More dynamic based pricing. This is a longer-term trend. The move away from fixed and predictable pricing will be an early trend. Tools that have made the pricing more transparent will be harder to use and the gaming of the systems by users, meta search and supply/sellers alike will make the task of knowing pricing harder and harder for the user. This is a double-edged sword. The lack of reference based consistent pricing results in Consumers searching (unnecessarily) harder than they do today costing more in real search assets and costs. If there was true dynamic pricing – then the search would be different. Today the searching of approx. 6 guaranteed but different pricing causes confusion. IE we might as well move away from fixed pricing. Unbundling will continue. (See #1 above).

7. We will see a wave of apps ported back onto PCs as search on tablets and smartphones becomes the biggest obstacle to app adoption. Already many sellers and providers of travel information are seeing low returns on their mobile efforts. Much of this can be laid at the door of the poor tools for search in the mobile environment. As such to get better search – SEO and SEM – all round many app providers will port back their apps into the Browser and PC/Mac worlds. Google must be rubbing its hands in glee at the thought.

8. Tablets get better and broader adoption but applications that are truly useful for basic travel – like search – don’t match the devices. Yes more and more of us will be using tablets. Windows 8 will have a big impact as it will be the first really unified fully functional service platform. Android is showing that it’s a pain to work with and unstable. Google will need to balance the need for openness with the requirement and expectation of stability. So many apps, so little time(!) will become an over-arching problem for app developers. The lack of quality of many apps out there will start to show how slipshod and lazy developers have been. However we will still see squillions of poor quality apps coming into the market, and more unhappy companies who commissioned such efforts and but are not realizing any returns.

9. Big Data will have a big impact with more people attacking core problems of infrastructure than ever before. Those who oppose them will be under tremendous pressure. Specifically the structure and economic models of Gatekeepers such as GDSs will start to show their difficulties. Think of a world of smart ITA wannabes who actually attack successfully tough data problems. Be afraid – very afraid if you have a large IT infrastructure.

10. The patent wars will hit travel. I wish I didn’t have to make this prediction, but I believe the current state of the Phone Patent Wars are but a precursor to the wars that are going to affect travel. Already we see Patent Trolls beginning to send snotgrams (aka legal letters) to the world of travel. Yes – this one is likely to have a chilling affect on the development of travel as a whole. Ignorance is not bliss and what you don’t know will hurt you.

And now some rather obvious non-predictions:

1. 2012 is not the year of mobile in travel (that happened a few years back in case you missed it)

2. Social fatigue will set in. People will get bored with messing around with Social apps. Too many, too wasteful.

3. The GDSs won’t die in 2012. However they will see even more share erosion. Amadeus will get really strong and Travelport will get weaker. Sabre will stay relatively quiet

4. Several high profile startups will run out of cash and will fade away or become zombies. There will significant culling in certain sectors such as trip management.

5. Apple’s first efforts will hit travel

6. Google will not be top of everybody’s fave list

7. Google and Facebook won’t merge

8. Facebook will IPO and it WILL be awesome

9. There will be a lot of startups coming into travel. More investors will eye travel and conclude it’s too expensive, too complex and full of a lot of Looney Tunes.

10. And there will be even more conferences than last year.

With that –may I wish you and yours a very Happy Holidays from the Professor and all of us (well OK it’s just me, the dog and the cat) deep in the heart of our secret lair somewhere in Washington State.

Feel free to comment. And catch you all in 2012. I will try and be better about posting. I suggest you follow me on Twitter where despite my dislike of the service - I am a reluctant participant.

Cheers!

And just one note of thanks to the literally thousands of you have have read, mused, commented, cursed, prasied and otherwise consumed the Professor's Wisdom in 2011.

And thanks to Sodahead for the image.

The True Intent of Google's new Schemer.

2011-12-17T10:33:00.000-08:00

Most new things that come from Google are well works in progress. Most usually have something of value that is immediately apparent in what it can do for you. IE it has some value to you in your daily life that makes it easier or better for you to do things.

As a result we have become expectant that any new Google tool will indeed do just that. Improve what we do.

There is one area where Google just takes us for being fools (and indeed others especially Facebook is also guilty of this sin).

They automatically believe that we have unlimited time to waste on their latest ideas and toys. The arrogance of Google is in believing that we will do their hard work for them... like testing and debugging. And of course donating the most scarce resource of all which costs the most and never get accounted for ... yes I am talking about time.

Schemer is an interesting idea. Based on the premise that because we are so busy doing Google's work for them that we now have to be inspired to think of real things to do.

And not so subtly somehow the number one thing that Google thinks the Professor should do is ....
Work for Google.

Well... if you think that this is the case Sergey and Larry - you have my email address and you have all my details and activity - you can find me any time.

And as for the offer to work for you for free? Well other than what I am doing without explicitly agreeing to it (which is a lot) - no thanks I will pass. if you want to pay me - somewhere in my emails is the rate. I am sure you can figure it out.

Cheers

PS - And in case you missed it - I made the entire text clickable so you dont have to work too hard to see the picture.

Ciao!

AA Lays Out Business As Usual... For Now

2011-12-03T10:29:00.001-08:00

As expected American Airlines has petitioned the court in its Chapter 11 pleadings to pay its obligations to the distribution channels.

For now that means its business as usual.

AA is quite far along in building an independent distribution infrastructure that supports direct and indirect distribution services. Rather than relying on a single channel for its revenue management - it is already one of the most diversified of the major network carriers.

It is unlikely that AA is going to change that strategy mid stream. Even with Tom Horton at the controls - the company would be ill advised to place most of its eggs back into the GDS only basket.

The company has invested much time and effort in building a multi-functional and advanced capability network of services. While it still depends 65% (from court filings) on the agency marketplace, the company has built a number of new bridges into the channel.

Many have mistakenly assumed that its drive to Direct Connect was to eliminate the Agency from the mix. Nothing could be farther from the truth. AA has embraced the agency community and is not going to walk away or do anything that will undermine that relationship. However it does not mean that the distribution channel systems can ride on the back of this relationship. AA has made it clear it believes that it needs to control the product offerings and the holistic nature of its pricing.

Many legacy airlines have yet to focus on the issue of consolidated pricing of the air fare products. AA has grasped that nettle and is moving to ensure that it will deploy the necessary technology to deliver that end. Its new Jetstream reservation system being developed on the HP Agilaire platform will incorporate several ITA Software innovations. Check out the case story of the Boombox implementation.

Anyone who thinks that AA is going to back off from its ultimate goal of controlling its distribution has not understood the animal. In my view the company will emerge stronger and more competitive from Chapter 11. And whatever it takes to ensure that it can deliver its products in a cost efficient manner - it is going to pursue.

After the make nice period is over, we are going to see AA implementing the necessary processes and structures to ensure that it remains competitive. If not why go through this Chapter 11 process.

Cheers

The Good Lord Giveth, And He Taketh Away. Travelport Introduces Fees For Agency Subscribers to Green Screens

2011-12-02T01:06:00.001-08:00

With declining revenues from airlines and a falling marketshare the legacy GDS model has been under threat from a number of sources of late.

In many markets around the world the agency community has benefited from increased user incentive fees driven higher by competition and by legacy GDSs who fear their model is under fundamental attack.

While some of the GDSs make reasonable amounts of money from the subscribers - in general the model has been to pass on significant cash from the airline segment fees to the agents in the form of these incentives. But this effort has angered the airlines who resent seeing a large part of their distribution fees used in this fashion.

Each of the 3 legacy GDS companies derives its revenue in increasingly different ways. Amadeus for example has offloaded its Hospitality and OTA businesses. Of the 4 lines of traditional revenue only Sabre now plays fully in each:

Airline IT
Distribution
Hospitality
OTA

Travelport divested itself of its GTA Hospitality business to Kuoni early this year leaving it with essentially only the distribution revenue stream.

Travelport now has the lowest yields of all the three companies and has struggled with a very high debt load. It also pays out the highest rates of agency incentives.

For some time Travelport has been hinting that it will be relying increasingly on technology as opposed to paying additional incentives. Read Gordon Wilson's interview here.

At the same time with two failed IPO attempts behind it - there has been a continued rumour that the company is gearing up again for another run at the public markets. Some have said as early as 18 months time if not sooner.

Now Travelport has introduced a new fee structure that includes charging the agents for the use of green screens. (Actually in the case of Travelport these are mostly blue!).

With such a large number of screens still in existance (even with the move to more API/XML based links), the company is clearly hoping to make up for the shortfall in revenues that it has suffered in recent months by slapping a tax on the long suffering agents.

The revenue shortfall that has to be made up comes from another part of the business. My analysis shows that this is to make up for the loss of their few remaining airline IT revenue streams. United Airlines will terminate its hosting agreement at the end of March 2012 and Delta is moving its online fares and pricing to another provider. (Being the only major North American carrier who is not using Google/ITA for online search/shopping, that choice would be rather obvious).

However there is considerable risk in this strategy. Taxing the screen using agents with an annual fee of $300/screen might not seem to be that much. Should agents choose to use this manoeuvre to exit the business (as many are already doing), reduce the number of screens or move to another GDS - in my estimation a loss of between 5-10% of screens would not be unrealistic. However losing that same amount of revenue generating capacity could easily come back and bite Travelport badly. Such a loss of revenue would more than wipe out the advantages of this new agent tax. Especially when considered that the larger agents have negotiation ability and will likely not be hit as hard as the smaller agents.

Travelport may have shot itself in the foot. Taxing the smaller agents in this manner will clearly not win them any favours in the vocal agency communities. As all three Travelport brands have a higher proportion of smaller agencies in their portfolios - this will affect the smaller agents disproportionally in my view.

While there is upside for Travelport in its quest for the IPO gold ring, this is not an automatic win and comes with a very high potential cost. This could end up being a pyrrhic victory for the company.

Time will tell.

Cheers

Aussies Face Economic Reality: Staycation - A New Word

2011-11-29T22:43:00.000-08:00

From our friends over at Crossman Communications there is a new survey out. They were interested to see how global and local economies are affecting the Great Aussie Summer Vacation which is about to start down under.

And its not a pretty sight. Things are not looking very positive. The mood in the country is not a happy one.

For a summary - read the PR release from the survey results. I was able to get an actual copy of the complete results and compared to other markets in the Asia Pacific region they make for sobering reading.

As a comparison - check out deal site Getflight. Their Australian site (based on Sydney) compared with their Singapore site illustrate just how far your travel dollars will take you. If this doesn't give you travel envy - I don't know what will.

There is a clear lesson here. Those selling travel products have priced themselves out of the market and the Crossman Newspoll provides a dose of reality about how competitive the pricing is in Australia vs the rest of the region.

Tiger and Qantas's woes - in fact the woes of all the airlines in Australia - illustrate the depth and breadth of the problem. With the Australian Dollar at near all time highs the ability of the local population to take advantage of the natural resource powered prosperity boom seems to be very muted. This survey should also give some credence to Alan Joyce's crusade to get lower costs for Qantas mainline brand. The costs have to come down. As the cost of the aircraft are in US dollars (IE relatively lower) - the local controllable costs are the issue for all airlines.

Check out the Aussie Dollar 5 year currency history compared to three other major currencies (Pegged to the US dollar - the Aussie Dollar vs The Euro and the British Pound.

With the Gillard government that is existing on a single vote seat majority in parliament - they should pay attention to keeping their constituents happy. Happiness is a state of mind.

And there is a lesson in this for all of us. (er hmmm US Congress are you paying attention!)

Cheers

Research in WSEAS and New Plenary Speakers. WSEAS do not give any extension in the conferences. The deadlines are the deadlines on our site and do not change for any reason

2011-11-29T05:14:00.000-08:00

Dear Colleagues,

You can upload your papers for the WSEAS/NAUN conferences
(Vouliagmeni Beach, Athens, Greece, March 7-9, 2012
(Sponsored and Supported by Universita degli Studi di Genova, Italy and Technical Univ. of Sofia, Bulgaria)) strictly until DECEMBER 7, 2011

www.wseas.org www.naun.org www.europment.org

So, after the great number of papers (that were uploaded for the WSEAS Conferences in Cambridge (UK) and Harvard until November 25, 2011), you can upload new papers strictly until DECEMBER 7, 2011 for the WSEAS/NAUN Conferences in Vouliagmeni Beach, Athens, Greece,March 7-9, 2012 (Sponsored and Supported by Universita degli Studi di Genova, Italy and Technical Univ. of Sofia, Bulgaria)

Delegates attending WSEAS and NAUN 2012 will be invited to submit an extended version of their paper for publication in the following journals indexed by SCOPUS, Elsevier, IET (IEE), Engineering Village, ACM, AMS, ACS, Zentrablatt, Crossref, PubMed, British Library, Ulrich's Periodicals Directory, Chemical Abstracts Service, EEVL, TUBITAK-ULAKBIM, Thomson-Gale, Cambridge Scientific Abstracts (CSA), EBSCO Database, INTUTE, DEST, DOAJ and DBLP

INTERNATIONAL JOURNAL OF MATHEMATICAL MODELS AND METHODS IN APPLIED SCIENCES

INTERNATIONAL JOURNAL OF MATHEMATICS AND COMPUTERS IN SIMULATION

INTERNATIONAL JOURNAL OF MECHANICS

INTERNATIONAL JOURNAL OF GEOLOGY

INTERNATIONAL JOURNAL OF CIRCUITS, SYSTEMS AND SIGNAL PROCESSING

INTERNATIONAL JOURNAL OF COMMUNICATIONS

INTERNATIONAL JOURNAL OF COMPUTERS

INTERNATIONAL JOURNAL OF EDUCATION AND INFORMATION TECHNOLOGIES

INTERNATIONAL JOURNAL OF ENERGY

INTERNATIONAL JOURNAL OF BIOLOGY AND BIOMEDICAL ENGINEERING

INTERNATIONAL JOURNAL OF ENERGY AND ENVIRONMENT

Sad News: Prof. D.H . Staelin at MIT www.mit.edu that was two times Plenary Speakers in WSEAS passed away in November 10. So after Caro Lucas and Ladislav Kohout, we lose one more great personality that helped WSEAS very much with his Plenary Lectures.

We will not give any extended deadline to any of these conferences and for any reason. For every WSEAS conference we have at least 2 university teams in collaboration.

Announcement of acceptance or rejection for any paper in less than 40 days for any WSEAS Conference and in less than 60 days for any WSEAS Journal and WSEAS Book is strictly prohibited. All papers are sent to 5 independent reviewers by the WSEAS Organizers, Editors etc, but even if the comments of them are available, the WSEAS entities will not announce the result of the reviews before the aforementioned time frames. This policy also applies to any Conference where WSEAS is the main sponsor-organizer or simply a co-sponsor. The submission forms are taken down on the exact date announced in the respective conference pages, at 23:59 Greenwich time, and no extensions is given.

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RECENT SPEAKERS in WSEAS meetings:
Lotfi Zadeh, Dimitri Bertsekas, Sunil Das, Bimal K. Bose, Janusz Kacprzyk, Leonid Kazovsky, Rao Kamissety, Ronald Yager, Narsingh Deo, Sidney Burrus, Biswa N. Datta, Mihai Putinar, Stamatios Kartalopoulos, David Staelin, A. Bers, Athanasios Manikas, Wlodzislaw Duch, George Giannakis, Nikos Markatos, Wasfy B Mikhael, Valeri Mladenov, Panos Pardalos, George Tsamasphyros, Tadeusz Kaczorek, Leon Chua, Irwin W. Sandberg, Constantin Udriste, Andris Buikis ,Metin Demiralp , Michael N. Katehakis, Imre J. Rudas, Brian A. Barsky, Dimitris Kazakos, Alexey L Sadovski, Amedeo Andreotti, Ion Carstea, Sudip Misra, Victor-Emil Neagoe, Panos M. Pardalos, Hamid Abachi, Ryszard S. Choras, Hamido Fujita, Miroslav Begovic, Josef Boercsoek, Dumitru Cazacu, Costas G. Helmis, Zhixin Wang, Sankar K. Pal, Ulrich Albrecht, Jim Cunningham, Dorian Cojocaru, Andrzej Ordys, Fumiaki Imado, Milan Stork, Remi Leandre, Kleanthis Psarris, Kinshuk, Moustapha Diaby, Brian McCartin, Patrick Wang, Costin Cepisca, Charles Long, Gabriela Bognar, Angel Kuri-Morales, Jiancheng Guan, and many others .... See: http://www.worldses.org/ feedback.htm and http://www.wseas.org/reports/

All submitted papers will have opportunities for consideration for the Special Issues or Regular Issues of several journals (some of them belong to ISI category). The selection will be carried out during the review process as well as at the conference presentation stage. Submitted papers must not be under consideration by any other journal or publication. The final decision will be made based on peer review reports by the guest editors and the Editor-in-Chief jointly.

Impact: See also the importance of these conferences can be proved by the impact of these conferences in previous years: See, please http://www.wseas.org/reports

Other Important Benefits:
1) A very strong and important feature is that the NAUN and WSEAS is going to give you a new username and password WITHOUT EXPIRY DATE for on-line access in the WSEAS Conference proceedings FOR EVER.

2) Rich cultural and social part as usual. The importance of these conferences can be also proved by the impact of these conferences in all the previous years, 1996 -- 2008: See, please http://www.wseas.org/reports/

What did the Previous Plenary and Other Invited Speakers say for the NAUN and WSEAS Conferences:

" I was in the Secretariat Desk of the WSEAS Conference (December 2009, in Tenerife) and
I saw the catalogue of the conference participants. It was amazing the high rejection rate of the papers. I estimate that for every 10 papers, 4 were accepted and 6 were rejected.
That means that the WSEAS Conferences are very prestigious"

Many Thanks
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Is This The Way Forward for P2P Accomodation?

2011-11-20T08:19:00.001-08:00

Regular readers and followers of the Professor's Wisdom knows that I am not a fan of the aggregated P2P accomodation business of Airbnb. In my view there is a lot of risk and lack of regulatory adherence hurts consumers. Their somewhat cavalier attitude to the consumer got them into a lot of hot water this past summer. And rightly so.

Part of the problem in P2P accomodation services is that there are a wide number of disconnects between the needs and wants of the people who own the property and those of the consumers. This is not new. However when someone steps into the middle to connect the two there has to be a clear set of roles. Either you have a marketplace where P2P can take place or you are an agent acting for one side or the other.

In the case of the former - this is just like Criag's List. So anyone doing this in an ad model can do so provided they understand their responsiblity to ensure that the ad is genuine. Classified Newspapers around the world have been doing this for years. Its fine. Caveat emptor applies.

In the case of the latter if you step into the middle of the relationship even if its just to collect the money they you become something called an AGENT. In this case they you take on a series of responsibilities. This is the flaw (fatal in my opinion) that companies such as Airbnb failed to comprehend in their pitch to investors.

At last week's PhocusWright in Fort Lauderdale Florida, Bob Sharples CEO of HomeAway was interviewed. Having put a significant ring fence around his business - he was able to demonstrate that the process of renting is not like that of fixed products such as an airline ticket or a car. He made the point that much of the value of HmeAway is not to facilitate automated booking but rather to enable a converesation between the owner/manager of the property and the consumer.

Indeed I have always felt that accomodation by definition drives more customer service questions than an airline ticket. If you are dealing with something that has more unknowns such as a private condo vs a fixed and predictable product such as a hotel room, then naturally you want to get some better sense of it. Having used HomeAway (successfully) and tried to use Airbnb (unsuccesfully so far) I can assure you that Bob's point about the conversational element of his business is spot on.

Last week, DepositGuard put forward a survey which highlights some of these issues. Clearly DepositGuard wants to promote its services, however they have a valid point and seem to be addressing the need. The survey demonstrates that there is a clear missing component in the P2P process that needs an honest broker to solve. Given Airbnb's troubles in this area, both renter and property owner need to ensure that they are dealing in a safe and secure fashion. Ideally there should be regulatory controls in place that address this - and their are - however compliance is almost non-existent.

P2P accomodation services are addressing a need that has long existed in the market. I recall when my team launched Expedia UK that we had Home Exchanges as a lead facility. Personally I hate the impersonal nature of hotels and prefer to stay with friends or take the extra space that condo type accomodation provides. The concept that Airbnb proposed is very attractive to me personally. But do I trust them. Nope I don't. Perhaps this this is the answer.

Think about it

Cheers

Are South African Travel Agents Ripping Off Clients?

2011-11-14T12:10:00.001-08:00

It seems that there has been a bit of a storm in a teacup going on in South Africa.

Travelstart the local OTA there commissioned a survey and had cold calls to agents asking them for prices. That the agents gave different results is not in of itself shocking. The disparity of the results however was a bit of an eye opener. The story hit the press this week and has upset the local Travel Agents Association. Here is the original article.

Clearly Travelstart had its own reasons for the survey and that would largely be to demonstrate that inconsistencies exist. And that Online Travel is transparent. However in nice cozy markets where there is not a huge amount of competition - the results tend to vary because the agents dont work as hard as they need to. I want to be clear that there are good agents and bad agents. Any one who claims that all agents are good and vice versa are clearly not giving the whole picture.

So why are there discrepancies?

There are lots of reasons. These range from lack of familiarity by some agents to laziness by others. Whether there is malicious intent is open to interpretation. IE do agents deliberately rip people off? In general I think that would be unlikely. However the ability of the agent to find the lowest fare and communicate that to the consumer remains difficult. The enormous complexity of finding the lowest fare when the request seems so simple can be attributed to the desire of the airlines to obfuscate the true market fare.

What should be a lesson for all concerned is that the lack of a true reference price that consumers can rely on is a problem that affects all outlets irrespective of geographies.

Consumers are forced to jump through a lot of hoops to get a best price. And this is not their fault and not really the fault of the travel agents. Having a deep skilled agent handle your travel has to be tempered with their performance and how it suits you. Most agents surviving today are skilled. But not all. That the airline price can vary based on so many factors should be a lesson to all. Sadly that means that the consumer generates massive amounts of unnecessary searches that are increasing at a time when actual purchases remain flat.

Will this get better? No... because the true players involved - the GDSs and the airlines are not tackling it. Some airlines have had enough and are doing something about it. But the current infrastructure and systems in place do not help.

Cheers

Are Hotels Being Stupid? Are Travel Agents?

2011-10-06T06:09:00.000-07:00

When will the ever learn? When will they ever learn.... lines from that old Pete Seeger song we all learned in school.

When it comes to hotels and indeed a large number of other location owners such as convention halls and meeting rooms - it seems never. The number of companies who STILL charge for WiFi is appalling.

I know many organizations who are now insisting on it as a condition of a convention space and meeting hotels. At the ABTA conference this week this message was delivered loud and clear. In a post in e-Tid, David Rowan, editor of Wired UK, told the ABTA Travel Convention that it was like charging for bath water to ask for basic wi-fi, then akin to charging more for hot water if the customer wanted to upgrade to a faster rate of wi-fi access.

‘It is foolish for a hotel to charge for basic wi-fi. It looks like a rip-off especially when you can get it for free in Starbucks or McDonalds,’ he told the event in Palma.

‘I have called for a boycott of hotels doing this. We expect to be online, we expect wi-fi.’We know that Gen Y people dont waste time complaining - they just move on elsewhere. In a post in US Travel Weekly - the Luddites seem to be seizing on a DECLINE in internet usage.

Richard Turen thought it was one of the most interesting trends. However I think he is missing something. That the pool of conventional users of brick and mortar agents is shrinking and those that are left are now those who are less and less likely to use the web for Travel Planning.

I divide those who dont use the web for Travel planning and/or buying into two camps. Those that refuse and those that are (still) scared or unable to. The deciding factor is whether the behaviour is wilful or not.

For those who are waiting and holding onto this notion - please get over it. Sure there will be a niche for these people. But they (and those who depend on them) will die out.

Then we will be asking - where have all the Travel Agents gone? I sincerely hope this doesnt happen. But every year the number of agents falls.

Sadly

Now Will You Believe Me Social Media AD Revenues to top $10 Billion by 2013

2011-10-05T06:41:00.000-07:00

Holy smokes Batman.

I was a late convert to Social Media. Mostly because in the early days I could not see the Media part of it. Now I do (OK - I am old so that's my excuse).

But now we are seeing dramatic rises in the total revenues from Advertising. With many of the Ad vehicles not yet fleshed out - this tells me we are going to have a hard time understanding how we interact with these tools and more importantly how we deal with them and integrate them.

eMarketer is reporting that global ad revenues for Social Media will top $10 Billion by 2013.

Today sadly it was reported that AC Nielsen JR has passed away. It is interesting to note that we see the world changed forever. A world where he presided as king - now we have a new world. Are we using the right metrics. Now that is a good question.

Cheers

iPad Browsers Killing Others Online

2011-10-05T06:29:00.000-07:00

So while Android is doing a great job in working through the pack and like other Google powered monsters - its like PacMan it destroys everything in its path.

Not so in Browser shares on mobile devices. As you can see from the latest Browser share trends, the iPad is clearly a better device for browsers. We know its a better device for Apps based on App numbers and usage.

Sadly Opera Mini the little browser that could is being replaced in people's hearts and is headed south after blazing a trail of browsers on small aperture devices. So much for being first! And having used it vs the Safari browser I much prefer the simplicity of the Opera Browser.

So iOS5 is coming. Let's see what happens next.

And you all thought it would be a new iPhone (me included) although I did speculate that it would be kind of a ho hum release. Seems I was right

Cheers

Farewell Andy Rooney: "Just Let Me Eat My Dinner".

2011-10-03T06:50:00.000-07:00

Andy Rooney has been a fixture on American TV for more than half a century. The last 33 years as a commentator on 60 Minutes. Last night he signed off for the last time with a memorable line.

So read about the old curmudgeon. He will however still be writing. And so we can still appreciate that from him

Go to the CBS website to learn more.

Farewell Andy - I will miss you.

cheers

Service Really Is A Differentiator - And Are You REALLY Surprised?

2011-10-02T18:29:00.000-07:00

A great post today by Gerry McGovern. I love his posts because they cause me to think about how thing work and what makes things tick.

The really obvious thing to me - and it should be to everyone - is that service matters. Too bad service is such a nebulous concept.

I know many people who hate Ryanair. I like the airline. They fly places I want to go or at least they can fly there. Then their service is consistent. I know just what to expect for my average 100 Euro fare. Yes that is the amount on average I spend with Ryanair. Southwest is also an airline that I like. It gives me a consistency that I appreciate. However they dont fly enough places that I want to fly and therefore I need to rationalize my flying to be on airlines that give me something. So I am a point hound!

I have a very low opinion of service. I dont it expect it and I am rarely disappointed. However every now and then I get surprised by individual personalized service where someone will go that extra mile. I am talking about someone making a difference. There are many hotels who try to force this thought process on their customers via the staff who have not the faintest notion of why they do something. I recall staying at a hotel where they rolled out a corporate credo using a particular word. The word was "surprising". It was AWFUL I challenged a member of staff who( the operator) as to why she had used it 9 times with me and she spilled the beans. Sadly it made everyone uncomfortable. Fortunately within 2 weeks it had been abandoned.

You cannot force service - you can enable it. And then it must be up to you and your fellow operativess to deliver against it. In online this is really important. Let me give you an example.

I am a member of the Global Entry system - I was an early adopter. This year it will roll out to high level frequent flyers in the elite classes of all US Carriers programs. The service structure is typical government. A system designed by a committee. However I was impressed that the agent at the border recommended - from her own volition what I could do to enhance my experience. That was someone who didnt need to do something going out of their way to help.

So humour me with my rant today. I do see that there are new customer service technologies that are improving the service proposition across the board. However sadly in my experience even in those organizations that adopt them - they are never used properly. What really kills me is that whoever is responsible for these implementations must never walk through their own process. This allows me to indulge in something where I take a perverse pleasure in breaking systems and processes. It is SO freekin' easy.So what are you doing about

SHAME ON YOU!

So here is a request. GO and think hard about your service. Then WALK through your website. Call your call centre. And then see what I mean. Be difficult. I would be happy to provide anyone who is interested with some use cases to enable you to do this.

YES I MEAN YOU! Your service sucks and it doesnt have to.Please go and fix it

Thank you for your attention - now you can go back to reading your email and updating Facebook... that was what you were doing wasn't it?

Cheers

Twitter Misses Ad Targets - But Outlook Bullish

2011-10-01T13:10:00.000-07:00

So Twitter is still struggling to get its revenue model off the ground but it is making headway. In the early days of Twitter I was highly critical of the value of the service. Now that it has matured and we have tools and processes to weed out the Twitterhea - I think the business is a useful tool.

eMarketer is reporting that their initial revenue projections for 2011 will be missed. However they remain upbeat on the future

Check out the article for a full analysis on where Twitter's revenue is going. Twitter has no where near the revenue potential of Facebook. And actually not getting spammed is one of the nice things about Twitter.

In my view - I believe that there is plenty of opportunity to MAKE money via the Twitter platform. Indeed way more than can be had through the restrictive practices of the big 3 F.A.G. gatekeepers.

That indeed counts for something

Cheers

Mobile Maturing - Are You really Ready?

2011-10-01T11:39:00.000-07:00

Is 2011 the year of Mobile? This is a question that so many people ask. I have to say I am not quite convinced on either side. In fact I think the question has become rather irrelevant.

Mobile and Social are already here. We are however still struggling to get good at both of them. And good we must get. There is a nice series in WIT drawn from a series of discussions between Siew Hoon and Gerry Samuels Doing it "Bloody Well" and understand who wins - Supplier or Intermediary - are great discussion pieces. If WIT is not on your regular reading list - you are missing a treat.

Getting good at Mobile is not a trivial exercise. There is a lot of infrastructure that is frankly not in place to make it easy. Therefore early providers are having to bootstrap solutions to get the end to end services running. Regulatory and service level functions are scant and frankly the performance of the networks and devices together SUCK. Publishers are complaining that they dont find it easy. For sure they are not adopting fast enough.

One key issue that is decidedly a constraint on Mobile Commerce are the payment systems. There is a plethora of options and the market is just beginning to pick up. The battle for the mobile wallet is a royal one.

There is the huge battle going on between the OS systems on the small aperture devices. You have Android split into Pure and Honeycomb. You have the Apple with its iOS. You have a bunch of also ran players - Microsoft, Nokia (now moving with MS), RIM (About to exit the tablet space by slashing the price of the Playbook), HP (not sure if they are in or out at the moment). Let's not forget the App vs Browser battle. An astonishing statistic is from HP who projects there will be 25 million apps by 2020.

Underneath it all there is a multi-billion dollar battle over patents. This is enough to make ones head spin.

But allow me to put a little perspective on things. While I think it is a bit premature to declare victory for mobile, there is a very interesting trend. The Gen Y/Millenials are not worrying about the problems of infrastructure. It either works or it doesn't. Unlike the Baby Boomers (like me!) who struggle with the small apperture of the devices concerned - they are quite comfortable in using their mobiles to do a wide number of things concurrently.

My conclusion on this? Mobile is darn hard. The traditional gatekeepers in travel commerce are nowhere near prepared for mobile. The suppliers need to break free and stop using traditional processes to address mobile solutions. AND most importantly you have to use every trick in the book to get the consumers to start pulling through adoption. Traditional ways of pushing products into the marketplace and hoping for the best frankly are useless. If I hear one more person scream that their investment in mobile has been wasted - I think I will eat my hat. It's the adoption not the features stupid!!!

Airlines to DoT - You Can't Count

2011-10-01T11:09:00.000-07:00

The US airlines in general think that the US Dept of Transportation's bean counters are not that good.

A cabal of them - representing the Big 4 Network Carriers - US, UA/CO, DL, AA have filed a complaint with the DoT over the issues of the reporting of the Ancillary Revenues.

As reported in the Wall Street Journal the airlines say that the $150,000 figure for the whole industry in extra admin costs are way off what the airlines calculate will cost the average airline $1,000,000 per regulation per average airline. That would be a whopping cost. I bet that some of that is going to be charged by the GDSs!!!

I have to say whether I agree with the DoT or the airlines on the actual numbers. I can assure you that the admin costs that will be spread across the industry in additional costs will be significant. it will hit all sectors of the supply and distribution chain.

Those who argued long and hard for this as a way to put a break on the Airlines revenue aspirations may be happy. But those who thought that this was a way for the GDSs to win a battle in their war with the airlines may rue the day. The legacy GDSs have now been handed a carte blanche ability to charge the airlines an extra set of fees for compliance. And poor travel agents will be picking up much of this tab in both extra costs (through lower incentives) and for sure extra work.

As I say frequently - be careful what you wish for... you just might get it.

Cheers

The Professor's 2300 Posts

2011-10-01T10:57:00.000-07:00

Dear Readers - Just a BIG thank you for keeping us going. We have just passed 2300 posts and counting.

I had a wander through some of the prognostications and predictions I have made over the past 5 years. There is a heck of a lot of content here. So I encourage you to read through some of my thoughts. There is a lot of entertainment. Laugh, cry and be entertained but mostly be better informed. I have a lot of opinions on a lot of subjects but I hope that you will see that I try to do this with honesty and thought. If I fail let me know.

Every week hundreds of you come and visit this little site. Thank you and thank you again for doing that.

I know that I am not the world's best writer and also have a strong propensity to typos and some really bad grammar.

However I get loads of emails from you and comments. It takes a lot to keep this site going (no I am not appealing for money) but I will continue to do this as long as you come and read it.

Please do spread the word. And again a very big...

Cheers

Don;t Be Blue At A Failed Relationship

2011-10-01T10:47:00.000-07:00

Most breakups are lets face it less than amicable. People don't just wake up one morning and say "Rationalizing our relationship is not working let's just be friends"

I understand that breakups can now be handled by a wide variety of media. Text (there is even a lame website called TextBreakup), Tweets, and of course the true sign you have been ditched is when your paramour changes her/his status on facebook back to SINGLE AND LOOKING.

In business some of the best laid plans of a business relationship can just fall afoul of the realities of the business environment.

Germany's biggest airline, Deutsche Lufthansa AG, in December 2007 paid $300 million for a 19 percent stake in JetBlue Airways Corp. There were big plans for feeding via JFK and the other points where the 2 airlines intersect. For the smaller airline it was a precursor to a number of deals that have seen them also tie up with some time rival American Airlines who also is in a rival Alliance.

But to be frank there has been little execution of the grand vision and Lufthansa seems to be pulling in its horns across the board. The German airline's plans for world domination included at the time expansion into the German speaking market and a bold run at different markets like USA (JetBlue), UK (British Midland) and the oft rumoured but never consummated take over of SAS. With a few bad quarters under their belts - and a general softening of traffic in the markets where its most heavily vested - LH seems to be pulling back. Its put the for sale sign out at Castle Donnington (the English Chateau that doubles as the HQ for BD), now the The Wall Street Journal is reporting that LH is looking to exit out of its relationship with JetBlue.

JetBlue and Alaska are the largest unaligned airlines (Southwest should be excluded from this list). Both of them have resisted combining with other larger airlines. AS has a slew of partnerships and has a strong feed as a result while shoring up a fortress on the North South Routes. Effectively AS has conquered the West Coast markets and solved that perennial problem of Mexico vs Hawaii by straddling both effectively. JutBlue has built a series of very nice hubs in Boston and JFK as well as a number of smaller ones across the country.

Perhaps what we are seeing is the precursor to a merger between these two feisty and mostly profitable strong regional airlines.

Now there's a thought.

Cheers

What Happens When Exclusivity Clauses Collide. The Impact of Exclusivity Clauses on Competition and Consumers

2011-10-01T03:35:00.000-07:00

This is a musing on the impact of the Air Asia and Malaysian Airlines agreement with an extension into the overall issue of exclusivity clauses and the impact on the consumer.

Air Asia and Malaysian Air System (MAS) have entered into a cross shareholding agreement. In this agreement - the two airlines will cooperate essentially to carve up the market for Malaysian based traffic. IE traffic INTO and OUT of Malaysia. Effectively the airlines will avoid direct competition where feasible. This will result in a certain reduction in competitive services for consumers. Thus prices will undoubtedly rise in certain thinner markets.

This is to be expected and will cause a number of people to complain and moan about it. Fair enough. But there is ANOTHER agreement that has some serious impact on the consumer. That is the exclusive agreement between Expedia and the Air Asia Group. In this agreement Expedia and the JVs between Air Asia and Expedia are the EXCLUSIVE distributors of content from these two parent organizations.For intermediaries who may have happily been distributing MAS product in some cases for many many years and in others exclusively, all of a sudden their product has been pulled out from under them when MAS abandons routes in favour of Air Asia. And they will lose their rights.

I raise this issue because JVs and exclusivity has become a new staple of the airline and GDS worlds. Thus creating restrictions on open commercial agreements. So let's dive into that a bit deeper.

Full Content (FCA) GDS agreements are very restrictive. As such FCA contracts will have an overriding pressure to raise prices and reduce consumer choice. An airline who signs the standard FCA agreements will find that it cannot distribute its own content when and where it pleases. This is a relatively new consideration and that has only just started to dawn on the airlines who have signed these agreements. While the original intent of the FCA agreements was to prevent competitors from entering the market for GDS type services - what we are now seeing is an unintended consequence - at least from the airlines sides. The ultimate loser in all of this is the consumer. Less choice = less competition = higher prices. As the legacy GDSs love to trumpet to the vendor community -the highest yielding channels are the GDS based ones. Now perhaps it should dawn on everyone concerned that this results in higher prices for the consumer.

That normally should be positive for the airlines and hotels. However as they have seen the real end result is that they have not only delegated their pricing capability but now also delegated channel management control to the GDSs. And in whose interest do the GDS operate?

Think about it, I wonder if the regulators have been thinking about this problem. What started out as an equal agreement to reduce cost of distribution and ensure wide distribution of airline content has in fact has an opposite effect.

Good or Bad? that depends. Today it means that scaling the fortress tower is going to be that much harder. Believe me when I tell you that this is not a happy realization for a whole host of parties.

Cheers

Travelport Gets A Get Out of Jail Free Card. Probation May Be Rather Costly

2011-09-30T02:15:00.000-07:00

Travelport at the 11th hour managed to avoid a pre-packaged Chapter 11 restructuring by getting the approval of all of its Lien Holders on its PIK to allow the $715 million PIK to be repaid by December 2016 instead of March 2012.

However the price is going to be very high. A quick flip through the issues now confronting Travelport Holdings (Parent company to Travelport Inc) are as follows:

1. There is a large group of unhappy bondholders. A group representing 25% of the bond holders filed on September 23rd a formal complaint to the company which was then submitted in regulatory filings to the SEC.
2. Travelport is now paying a 2011 record interest rate of approx 13% to the lien holders for the revised debt swap however this is a somewhat fictitious amount as the agreement allows the company to use debt rather than cash to pay the dividends.
3. Travelport's ability to raise funds for new activities will now be limited.
4. Travelport may have restructured its immediate debt but it is still creaking under a very heavy debt burden that would discourage any IPO offering.

The level of machinations required to complete the transaction is almost mind-boggling. I have waded through the SEC filings along with analysts briefing on the topic. In my view the long term financial health of the company will be in doubt irrespective of its actual performance. It still has to restructure the overall debt to remain in compliance with the obligations of the different forms of the debt. It has already sounded warning bells of the loss of the United Airlines (Apollo) Hosting contract that must end before April 2012. There are other issues that face the company.

It seems I am not alone in my concern about the [parent company's (Travelport Holdings) health.

The unhappy note holders representing 25% of the outstanding PIK hired Dewey & LeBoeuf to denounce the restructuring. In their September 22nd letter to the company they stated “The noteholders demand that Holdings (parent company) and its affiliates (presumably including Blackstone) cease and desist from taking any steps to document or consummate the restructuring,”Their efforts failed. So highly likely there was some smoky backroom deal was made but the resentment is still there. This letter found its way to filings to the SEC the following day.

The initial PIK loan, from the early days of March 2007, was used to finance a dividend to Blackstone and affiliated equity owners, according to the September 22nd letter. And this has been a pattern all along for Blackstone to cover its own position preferentially at the expense of the other debt holders. Remember that when the original deal to acquire Cendant was done in 2006 - Blackstone was a private company. Today following its IPO it falls under a much tighter regulatory environment.

Travelport Holdings bond values have been falling for some time. Since August the value of the bonds has plummeted over 40 %. Two of the debt rating agencies downgraded the debt first Moody's on 16th August then S&P earlier this month on 13th Sept. This came after the first warning was fired by S&P in February of this year with a caution. By September 23rd the yield on the bonds was 39%, The company’s $247.2 million of 11.875 percent senior unsecured bonds due September 2016 rose 3 cents to 42.5 cents on the dollar that morning and has been very volatile since then. When trading starts again this morning with the immediate debt crisis over - the bonds will likely settle down. That discount shows just how far the debt value has fallen since the notes were first issued in 2007. There is a large amount of this debt out there in the market. There has been a significant amount of trading going on in this debt especially during the last 9 months.

Long term - this is unhealthy.

Cheers

NOTE Thanks to Bloomberg and the Debt agencies for the information in this story. Thank goodness we have EDGAR to help us navigate the maze of SEC filings.