Saturday, June 27, 2015

Travel and The Sharing Economy

I just made my first booking through Airbnb; it is for a fine looking apartment in London, and the process was, for a techno-phobe such as me, relatively painless.

I had problems “verifying” myself - don’t you just love the vocabulary of the internet - but much to my delight this proved to be an issue with the Airbnb “app” and not an intellectual failing on my part. The host, or at least the property’s manager Jan (in Belgium) was great, and the booking made. Next time I will be quicker.

And more importantly, we have a fabulous-lookingapartment in Central London confirmed for four nights at a most reasonable price (for London) and the pictures, which have been judged by impartial reviewers to be accurate, look wonderful. C$360 per night for a family of four (when we are travelling), in a fine apartment in a central location seems pretty good to me.

I shall report.

I am unlikely to use Uber to get to the apartment, and because London is my home town, I may not engage a local guide through Tours byLocals, but one never knows. Travel has become much more intimate with these astonishing services, and in many ways, considerably simpler.

But my goodness, how they have upset the status quo.

And this, I find both amusing and a touch bewildering. Amusing because for most of my life, and those of many others, we have been taught not to waste; “waste not, want not” I was told (repeatedly). Do not waste food, not time, not emotion nor anything else within our control. And now we have the ability to share our unused capacity in a variety of genres, we are facing a wide and vociferous throng telling us that to share is wrong, dangerous and very economically short-sighted.

Well, I am not sure about this. I see the regulatoryissues of Airbnb being quite important, but not beyond the capacity of people to rectify through new lease arrangements, insurance modifications and potentially the broadening or retargeting of tourist taxes. 

Uber face the wrath of a variety of established businesses, principally those who have paid significant amounts of money for taxi licences; these licences are expensive, and in some cases inflated by the fusion of the taxi-licence price and a concomitantly lucrative immigration business. In either case, purchasers of these licences should, perhaps, have been aware of what was happening in The Ether, after all, I am sure that many cab drivers have used Airbnb and other on-line sites themselves, and should have positioned themselves accordingly.

We live in a brutal era that has seen entire industries become obsolete and eliminated within very short time frames; we, wearing our “consumer” hats have driven the change that has negatively affected us when we don our “employee” hats.

It is a rough world trying to balance each side of the equation. However, the equation still exists, and new opportunities to “sell” surplus services are bursting onto the scene each week. They offer  guides, rooms, electricians, plumbers, photographers, guides and virtually every other field of endeavour that one might need.

The regulation of Citizen Professionals will be interesting and for some time, a work in progress. The fact that the regulators around the world deal with the very services that they themselves find so appealing, will surely have an impact on the final outcome of these rules.

Uber, Airbnb, Tours by Locals are here to stay, and are an integral part of a travel program. They are tools that travellers and travel-professional alike should be embracing, and incorporating into itineraries. The danger comes, of course, when some of the more intimate on-line companies become absorbed into the behemoths of the internet world.

I think that many would be surprised to know which brands belong to the Expedia and Trip Advisor “families”. Successful on-line companies get purchased; this is life, and as more become part of the three or four major global drivers, the independence that we now have will be rapidly eroded.


That is the price, and that will be the cost. However, for now, make hay while the sun is shining, and just don’t give them more personal information than you have to!

Sunday, June 21, 2015

The changing Geography of Aviation.

I remember being in Dubai in the mid-eighties, and being introduced to the new airline, Emirates, that was just being launched. I was there to seek some business with DNATA, the national travel company, and all the talk was of the development of this upstart.

It was difficult to believe, on the one hand, because we were sitting in a dusty, hot and very isolated emirate, and the Dubai of 2015 was still thirty years and several trillion dollars away, but enthusiasm was not in short supply.

“The key”, I was told, “is our location; in the middle of everything”. My conversationalists this day were Tim Clark and MauriceFlanagan, two of the most significant men in the global aviation industry; they were fun, interesting and most engaging, and probably still are; I thought of staying, and throwing my hand in with this idea, but as with most of us and the opportunities that come our way, I packed up and went home instead.

They were, of course, quite correct, and now we see the global travel industry in the throes of a major shift. Who will win, what victory will look like and when it may be proclaimed are all fuzzy, but we can say for certain that the industry in ten years will be a very, very different beast.

Airline geography is a function of population diffusion and migration, of the ability of aircraft to fly immense distances and of political and financial sway.

There is no doubt that modern aircraft with the ability to fly for sixteen to eighteen hours have made the most difference; they have placed the Gulf States in the global centre of the aviation world. Most centres on the planet can be connected with a single transfer; Europe to Australia, South America to Asia, Africa to anywhere.

And herein lies the rub; the major Middle East carriers, Qatar Airways, Emirates and Etihad have had the money to invest, and invest, they have. They offer brand new aircraft, superb in-flight service and regular and punctual service. They serve the world’s diasporas with ever-larger aircraft moving hundreds of thousands of families home to SE Asia, the sub-Continent and Africa, while offering the high-yield business travellers a level of service that is rarely equalled by their Western counterparts.

The US carriers, in particular, no strangers themselves to the benefits of duopolies and cartel-like behaviour, cry “foul”. Their route strategies, so dependent on trans-Atlantic flights connecting to “partners” for onward travel are being usurped by airlines overflying Europe for the final local disbursement to be made from their Gulf hubs; considerably more efficient for their passengers, but a commercial stake-in-the-heart for those promoting the transfer hubs of Europe.

So we see a storm brewing; Canada refuses additional traffic opportunities for Emirates so the government of the UAE closes a Canadian military camp in Dubai; The US Three (United, Delta and American) cry foul at the perceived advantages that the Middle East Three may have with subsidised fuel; the Middle Eastern trio respond with stories of the American governments’ own anti-competitive instincts (just ask Norwegian about their welcome to America). And so it goes on … but to what end?

American carriers have old aircraft (by and large), indifferent crews and poor ground services; they suffer from immense legacy costs from both union contracts, pension obligations and bloated management that are not a part of the Middle Eastern carriers’ obligations. This may or may not be fair, but most certainly adds significantly to the cost of their tickets. They are losing passengers, but instead of whining, perhaps they should seek to control costs rather than chip away and monetising every perceived benefit their passengers might enjoy. Perhaps they should offer better service, and perhaps they should simply stop being so damned adversarial to their customers.

And perhaps all six of these behemoth airlines should be watching Istanbul.

Under, perhaps, the cover of darkness, or perhaps because nobody ever took Turkey as seriously as they should, in a wide variety of arenas, both economic and political, Turkish Airlines has grown into one of the world’s most powerful airlines.

They already fly to more countries than any other carrier (105), and with their hub in Istanbul within range of so many second and third-tier cities of their smaller A319 fleet, their growth is only just beginning. Transiting in Istanbul is an extraordinary experience; so many aircraft, so many destinations and so many people; their expansion plans are ambitious and their government an integral part of this future.


When is governmental investment in infrastructure a “vital key to economic growth” and when is it a “subsidy”?

It all depends on who is asking.

Thursday, June 18, 2015

Why airlines dislike (most) of their clients.

Mark my words, airlines and their clients are rarely in the same boat.

The aviation industry has always been peculiar, and it is, indeed, a very difficult one to regularly make a profit. It is said that the cumulative financial results of the world’s international airlines from the end of the Second World War is a nett loss. Currently this may be changing as the US carriers finally make money, and serious piles of the stuff, but if history is any guide to the future this will change.

Change happens for many reasons, but today’s attitudes of airlines and their staff really takes the cake. Forge the sycophantic “Thanks for your business, we know you have a choice” message one hears upon landing, they know that in general, there is no choice. Depending on where you live, there is a single dominant carrier with pricing of a level of predation that would make a bald-eagle blush.

Most city pairs can be flown by one of the three major carriers; the determinant factor is, however, the number of flights available. Yes, one can travel from Minneapolis to New York with Delta, American or United, but only Delta offers a non-stop service, and prices it accordingly. The others will offer various levels of discount depending on the day of the week, how individual flights are selling at any given moment and a variety of other factors that feed the pricing algorithms that they all operate. 

This is, of course, fair enough, but not inclined to make the public believe that the airlines care about them one iota; and on non competitive routes (Winnipeg/Minneapolis), fares are simply disgraceful, and cynical in the extreme.

And then they get you; having found a reasonable fare, now there is the fight over baggage, flyer points, boarding sequence, refreshments and so on. The airlines spin doctors like to tell us that this is all a wonderful utopia designed solely for our “choice”, but the sad truth is rather different.

Airlines seem to be the only business whose heavily advertised product is deliberately made so dreadful that we will pay anything not to have to use it as described.

Unless one is one of a carriers’ most favoured clients, and here we are looking at only the top 20th percentile, one can be expected to face a cynical barrier of auto-responses and disinterest in response to any and every irregularity. Dealing with impossible call centres in distant lands solves no problems; hiding behind veils of inaccessibility allowing such gems as “The computer says no” to become the stock answer, and the pretence of the fusion of Alliances to help travellers mask a rapidly growing corporate contempt for their customers.

Airlines are behaving like governments; disinterested and too big to fail.

But why? I believe that they are simply too big. Senior executives, and even most middle managers, have never bought a plane ticket in their lives, and have absolutely no idea what the customer interface with an airline is all about. They have “Interline Desks” and travel free; other airline staff help them because they all know and participate in the same game.

I don’t begrudge them the pass benefits at all, but I do wonder how it is that an entire industry has evolved that is run by people with absolutely no practical knowledge of the customer/industry relationship. Senior folks in the grocery industry have often purchased milk themselves, or go to a Home Hardware store; they know what expectations of service are. Airline executives have simply no idea whatsoever.

They have no concept of the lunacy of the ticket restrictions when trying to piece together a complex vacation, or the difficulty in corralling three friends or family together to plan a trip. And when they do, suddenly they offer a “lock in the fare” option for (only) another $75! They simply don’t understand the vast range of motivations for purchasing their product.

And herein lies the glimmer of hope. Pride, as we know, goes before a fall; sadly, falls don’t always follow pride, but we can’t have everything.

Airline profits are slim on a percentage basis, and one that returns 3 - 4% is considered quite spectacular. This implies, of course, that 97% of their income is spent operating the business, and this leaves a dangerous group of passengers who are basically ignored. For many, travel is completely discretionary, and the choice of airlines is too. For those living at gateways, those with choice, market share of the local dominants is being slowly eroded by the newcomers. Witness the extraordinary vitriol being spouted by the normally diplomatic CEOs of Delta and United over the growth of the Middle Easter Three: Emirates, Qatar and Etihad.

They know that they are losing, and spitting blood over “subsidies” is a poor substitute for raising their service to a point that people will actually want to purchase their tickets.

And while we are on the subject of subsidies, US Government requirements for thousands of employees, contractors and others to travel on a US carrier, and pay vast fares for the privilege generate billions of dollars of revenue for the airlines in a hidden subsidy.

The contract for the US Mail is another major source of subsidy; original awarded to Pan Am to allow it to operate the first long-haul routes to South America and Africa, this tool has long been a well-used part of the government’s arsenal of support.


It is time that airlines realised that their passengers doubled as human beings, and would react positively to good service off the plane. Air Canada’s service on board is exemplary, but it does not mirror the off-line support offered by their baggage folks, airport staff, sales staff and most certainly the reservation desks. If carriers are to secure their now-found financial stability, ensuring clients’ loyalty by delivering an attractive service from beginning to end rather than by forcing loyalty through geography and nicely designed web tools would be a good move.

Monday, June 8, 2015

Here we go again! A new airline in Canada

As if the Canadian skies weren’t crazy enough, we now have a brand new airline (well, actually a small but established airline (Flair Airlines) with a new and marginally catchy name “NewLeaf Travel Company”) starting in Winnipeg.

The lessons of Greyhound, JetsGo and Canada 3000 are learned, says their new CEO, and they are ready to do for the travelling public what no other carrier has successfully done before. Challenge the might of Air Canada and WestJet, and the depth of their pockets.

And money is only the starting point; Air Canada is a public company with a soaring stock price; WestJet's shareholders include the Ontario Pension fund. Neither like competition; they don’t even like each other, although they do use each other to fly their crews around, and start-ups are a menace. They might take business, and this needs to be stopped at all costs.

We will see predatory pricing; we will see additional shots of the travellers’ cocaine, Frequent Flyer Points, and we will see some pretty demanding advertising. We will also, soon enough, hear the cry of the stranded passenger seeking somebody’s assistance to bring them home in the event that NewLeaf Travel fails to deliver.

I would love to see new, low cost carriers survive; however, they regularly do so only in highly populated environments with an average flight-length of about one hour. Charter flights are, of course, a different matter, firstly because the risk is shared with the tour operator, but stand-alone scheduled airs service is not for the faint of heart. It is a high-risk and basically low-yield business.

It is very difficult to wean regular flyers from their preferred carrier/alliance, and the passengers who are driven completely by cost are about as fickle as any market can be; they will be off to an alternative as soon as a piece of bait is tossed their way, and will only look to pay as little as possible. Adding car rentals and hotels is a nice idea, but it took EasyJet and Ryanair, the doyens of this genre of airline,  many years and much investment capital to do so.

And they didn’t start their business life in Winnipeg. We may be a singularly cheap city, but we still remain a long, long way from anywhere. The key to a successful low-cost operation, apart from the obvious lack of legacy costs, pensions, ultra-highly paid executives and so on, is the ability to fly often; with an average on a one-hour flight, one can offer twice as many rotations as one can with an average flight of two hours in the air. This makes a huge difference.

When WestJet first started, they operated on the Vancouver, Calgary, Edmonton, Kelowna routes; all short and all popular. They started a Calgary / Winnipeg route, but soon abandoned it, realising that it took five hours to get the aircraft from Calgary to Winnipeg and back, during which time they could have flown three or even four legs in their familiar environment.

We will, of course, happily allow ourselves to be seduced again; but remember Zoom, Astro (yes, who remember their four months of scheduled service to Winnipeg), Nationair, Roots Air and of course Royal, the reincarnation of JetsGo.


I do wish NewLeaf success; I just don’t want the travel community, and the community at large to have to pick up the pieces.