Friday, May 12, 2017

Aeroplan and Air Canada

Aeroplan’s slow demise started months ago, and Air Canada’s announcement yesterday that they were going to intervene in their headline program was simply an inevitable conclusion to a slow motion drama. That Air Canada did not own their primary trade-brand has come of a bit of a shock to a lot of people.

First, some background. American Airlines, back in 1981, had a brilliant idea; reward your best customers with free flights. Their program, American AAdvantage continues to this day, but the simplicity of the original concept has been lost in an ever-growing, and completely unregulated, jungle of scrip. Air Canada’s program started in 1984, and has been a powerful marketing tool ever since.

The real benefit of airline points
However, “points” are simply a currency; their value lies in people’s belief that by accumulating them, a benefit will arise. There is no central bank, the closest is an organisation called points.com that for a massive fee will exchange one kind of point for another, and there are no exchange rates. Issuers simply print more and more, and the inevitable inflationary pressure this creates causes the redemption rates to rise rapidly. As more people have accumulated these points by the millions, the liability that airlines carry for their redemption has got completely out of hand, and something needs to be done.

That the system is out of control is indisputable; how a managed deflation will occur without annoying millions of customers is a tricky path to determine. Air Canada have struck the first blow, and are, if fact, to be commended.

The devil, however and as always, is in the detail.

There are two types of points in circulation. The first are those offered by airlines and hotels, and are backed by the promise of access to their (and their partners’) products. One gets sufficient airline/hotel points and one can claim a seat/room. To expand their attractiveness, they join alliances, and thus Aeroplan points were usable on the seats of all of their Star Alliance partners.

The second type of points are the loyalty points that are offered by Air Miles, the TD Bank "Infinity" and RBC “Avion”  programs. These represent money, and are simply individual accounts that a portion of the money gained through merchant fees is assigned for future use by the cardholder. Thus when one has reached a certain spend threshold, say 60,000 points with RBC, one can get a ticket to Europe, but with the caveat that there is a maximum value of $1,300 that is applied to the fare only, and not the taxes/surcharges. In this case, one can see that the value per point is 2.1% - spend $60,000 and get a (maximum) $1,300 value. Other programs are less valuable, some only offering a value of 0.5%.

If you wonder why the value is applied only to the ticket bear in mind that the actual “fare” can now comprise less than 50% of the total cost, and the “fare” often carries a substantial commission from the airline that again lowers the actual cost to the bank.

The difference is significant. Aeroplan is not owned by an airline, it was sold to a private company Aimia to raise money in 2002-5, and now, while the carrier has a management relationship with Aimia, they are not the operator. This is a very significant difference, and one of the factors behind the change, I believe.

While partner airlines can trade seats between each other, Aimia can not do so; and recently, Air China, COPA, Avianca and now Swiss have been blocking their seats from Aeroplan redemption. Will more carriers follow suit, thus further devaluing Aeroplan’s attractiveness? The points’ utility is decreasing, Aeroplan staff have been told to say that “it is an IT problem”, which it is not, and the service is faltering. The currency is devaluing and Air Canada are faced with the problem of how to rescue their loyalty program. Their decision was powerful, and a strong enough signal to cause Aimia’s stick price to drop by over 60% on the day.

The future:

We know little. We have been told that after June 2020, Aeroplan will no longer be the Air Canada (and thus local Star Alliance) program and any accrued points will be the responsibility of Aimia. There will be a new program, but one cannot accrue points in it now, and Aeroplan points will not be transferred into it; difficult if one is saving for a Star Alliance redemption beyond June 2020.

For those many, many people who already have sufficient Aeroplan points to last them for a couple of years, given today’s information, I would suggest the following. Enroll in another Star Alliance program, Aegean Airlines if one wants to travel to the Mediterranean, United Airlines' program for those looking to visit the US, Lufthansa/Swiss for a more global reach and accrue the Air Canada miles on those programs. Switch credit cards to one that offers miles in a known program (MBNA has an Alaska Airlines card that I use, the miles being good for a wide variety of carriers), there is British Airways card available, and the American Express cards offer a few redemption options. There is also, of course, a WestJet card, but this is really only good for travel on their network, and is again, revenue-based.

And wait and see. Having successfully knocked $1 billion off the market price for Aimia by a slight flex of muscle, perhaps Air Canada will simply buy Aeroplan back, recalibrate the program and continue as usual – this would be a fine outcome for everyone. And perhaps they will decide that they can comfortably rid themselves of the massive liability of accrued points by letting Aimia die and move on to a brave new world.

One thing is for certain; one can be pro-active or reactive, and given all of the signals that are currently in the air, I will wait for a week or so and then make my move.


And, at the same time, use up the points that have been stored away for a rainy day.

Sunday, April 30, 2017

Passports, Visas and the Paperwork of Travel

Here, in a different spin on the blog, is a conversation that I had with CBC Radio's Nadia Kidwai about the ever-changing rules and regulations about travel.

Not only passport validity needs to be checked, and the requirements vary from country to country, but visas, childrens' documentation and other entry requirements.

Canada's introduction of an Electronic Travel Authorisation a short while caught a lot of travellers by surprise, as did the South African government's introduction of birth certificate requirements for all minors visiting the country.

I nearly got caught as well; I am travelling to Uzbekistan in June and had read in an English newspaper about the relaxation of visa restrictions that were announced in December. I had not read that in January they were reintroduced, and so I need now to get a permit from their embassy in Washington.

Things change, and it is always the traveller who is ultimately responsible for their own paperwork!

You are warned.

I would love to hear from you - do you like the radio links? I do a weekly broadcast on CBC Radio, and am happy to put the links up on the blog ... let me know!

Thursday, April 20, 2017

United Airlines; have they reintroduced the 72-hour reconfirmation rule?

United Airlines – tell us it ain’t so ……

A friend checking in to Lisbon airport this morning for a United flight to Newark was advised that his reservation had been cancelled three days previously. Curiously, he had been invited that morning by United to check-in on-line for the same flight.

So one of two things has apparently happened.

The first is that Air Portugal, United’s handling agents in Lisbon, had “adjusted” the reservation for some operational reason, and the second is that United’s computer had, indeed, cancelled his booking 72 hours prior to the flight.

The first is sadly possible; airline agents at airports are well known for manipulating reservations and blaming travel agents and other intermediaries; passing the buck is an age-old tradition in the industry, and cannot be ignored.

The second is more sinister. There used to be a requirement for all international flights to be reconfirmed 72 hours prior to the return journey. This was slowly eliminated, and most travellers today would have no memory of this requirement. However, simply because the requirement has been ignored does not mean that it is no longer detailed in United Airline’s 500-page thigh-slapper of Terms and Conditions.

So, in order to avoid “overbooking”, are they simply reverting to an obscure clause requiring reconfirmation, and then “unbooking” sufficient passengers to ensure no overbooked passengers?


There is, of course, nobody at United to talk to and we will leave this to professional investigators. In these days it is easy to jump to conclusions, but if it looks, smells and walks like a duck, you know what it probably is.

Tuesday, April 11, 2017

UA 3411: Overbooking airlines is a very dangerous process

The United Airlines incident is a most instructive situation, and one that has drawn a number of issues to the public's attention. I worked in the airline business for many years, and am quite aware that any transaction between an individual and an airline is the single most one-sided agreement that is ever voluntarily entered.

First, we should ask ourselves why that is. Airlines are commercial behemoths that grew from state-owned or state-controlled entities into private businesses; they brought with them a common view of their own unquestionable authority and have been allowed to develop this deportment unchecked.

Consumer protection in North America is weak to non-existent. Partially as a result in the separation of responsibilities between federal governments and state/provincial bodies in an industry that was not foreseen by our respective founding fathers. Simply, there is no consumer protection in this industry at all.
Overbooking is a scourge for carriers that do operate on extremely thin margins. It is, however, a problem that has diminished considerably since the 1990s, and the introduction of e-tickets, which at their core are the marrying of a reservation with money, have reduced the majority of travellers’ attempts to hold several simultaneous bookings.

All airlines have specific flights that were subject to wild overbooking; Northwest Airline’s Friday evening Minneapolis/Winnipeg flight offered 120 seats; regularly they would book over 200 passengers and still leave with one or two empty ones. A function of business travellers booking four or five seats to come home for the weekend, and then picking the right one when their schedules clarified. E-Tickets have reduced this sort of behaviour considerably.

However, airlines do overbook, and it is in the resolution of the problem that we are finding ourselves today. United appeared to try a little bit, and then quickly resorted to the contemporary tactic of dealing with commercial issues, and brought in the heavies. This was completely wrong. While the passenger’s blood curdling scream may have been a touch theatrical, but I have no idea what was going through his mind at the time, this was not a satisfactory way to resolve what was a simple commercial issue.

United overbooked simply to maximise their revenues; fair enough. When presented with an over booking situation, they should have continued the “bidding” process, offering increasing inducements to passengers until one or two were persuaded to accept. The story indicates that they tired of this process at $800 and called “The Boys”, but has they risen to the heady heights of $1,200 - 1,500 they would have found somebody willing to change.

It was, after all, their gamble that failed to pay, and adding a few dollars to encourage a change of plan would have worked; I have seen this before.

It is the quickness with which airline employees will hide behind the excuses of “security”, “our terms of passage” and “operational requirement”. “We have the right to ….”, they intone, and indeed they do. But having the right to disembark and client and bringing in a horde of unthinking thugs to haul them off an aircraft are poles apart.

It is also interesting and no less concerning that Air Canada in the past month have defended passengers finding themselves on “Stand-by” when a confirmed seat has been purchased by glibly intoning “a reservation isn’t a guaranteed seat”. Oh no? When did this change, and how many clients know that buying the most economical confirmed seat that an airline sells is only a “stand by” seat? Now defending overbooking may be hard yet justifiable, but turning the problem back to the passenger, and indicating that simply because they had paid the lowest fare (a price offered in exchange for a service), they deserved to be bumped is simply outrageous.

And this is worrying.

If this answer, of robust and haought dismissal of any complaint, becomes acceptable, then logically airlines will and can sell increasing numbers of seats by simply waving the (massive) rule book at clients duped into thinking that a cheap seat was a great way to get home and see the family for a weekend. “Sorry folks, but the regulations allow this, and I have you rerouted via Plonksville and Tarabang. You will get home in a week.”

This is a serious matter.

Airlines need to overbook to protect their margins and maintain profitability in a very difficult industry. However, when they lose the gamble and are faced with denying passage to their clients, they should stand up to the plate, pay whatever it takes and face the consequences of their actions. Resorting to the use of law enforcement officers to enforce the results of a commercial decision is a very disturbing pattern, and one that government agencies charged with protecting the interests of their constituents (and not simply their financiers) need to address.



Saturday, March 25, 2017

Tourism at the Tipping Point; what is too much of a good thing?

Tourism is a wonderful industry, but as with many endeavours, it comes with its own perils. It embodies the ideal of people moving around the world to meet other people, understand other cultures and become more globally aware, an important asset in today’s globalised society. It brings wealth to countries with few natural resources, and in many regions, tourism is a major employer.

What is not to like?

Lisbon is a very desirable place to visit.
Success is a very, very hard key to measure, and for each tourism destination there is a “tipping point” at which the problems start to outweigh the benefits. It is difficult to see that spot, and harder still for societies to protect themselves against Rampant Tourism.

This is only March, and mid-March, at that, yet Lisbon is full, Funchal was full and I could only shudder to think of these cities in the height of the season. Prices rise, and rise for locals as well as visitors, for everything from restaurant meals to property; crowds are relentless, rush hour lasts all day, there seems to be nowhere to escape People, and the destination loses its rhythm. While I have often scoffed at the made-for-tourism resorts like Cancun and much of the Spanish shoreline, I am now seeing these developments as necessary buffers for those folks who actually live there.

The Ice Park in Dubai. Really?
Visiting these man-made destinations makes no pretense at visiting a "real" destination; there are none of the same pressures that come with a gradual transformation of a local town or community into a theme park. Global brands are there, prices are high and everyone knows the score. It is the gradual layering of visitors on top of functioning destinations that leads to problems.

There are places that have, in my humble opinion, passed through the barrier and are now distinctly top-heavy with visitors. Barcelona leads the pack, Dubai, Florence and Edinburgh are not far behind, and for the world’s smaller destinations, there is nary a Caribbean capital nor a Mediterranean town of any size that has not fallen foul of the tourism bug.

Even cities like London have become oppressive. It is difficult to manoeuver even in the “off season”, and come the heat of the summer and the hordes of visitors trying to press their way in every direction, the city will become overwhelming and stressful.

Costa Nova waiting for the tourists to arrive, and Agadir, wishing that they would return

There is, however, a fine balance, and it has been interesting to contrast and compare Funchal and Lisbon. Funchal, with a population of about 110,000 is unquestionably a tourist city; its geography leads toward a concentrated centre, and although one realises that there is a great deal of commercial and administrative activity that have nothing to do with the visitor economy, the life of Funchal has been subsumed by tourism. Lisbon is a considerably larger city, of course, but its population of 520,000 is rather differently spread. There are densely populated, high-rise developments that circle the city, and a central, historical core that is where the tourism activity is concentrated.

Load of tourists! 
Lisbon is one of Europe’s top short-break destinations; the advent of the three-day vacation has been propelled by Europe’s low-cost carriers, and these seem to have become the staple break for millions of people. Walking through the city one can hear dozens of languages spoken; hotel occupancy has grown from 63% to 76% in only five years and this 20% increase in tourists has been hugely positive to the local economy. Restaurants are booming and the local tourism providers are making a good living.

What is not to like?

Nothing at the moment, but it is only March. July and August will be hot, very crowded and the prices for all of the goods and services that tourists use will rise. Pressure on the city’s infrastructure will grow, and at some point in the future a positive, balanced growth will give way to a something more dangerous. Prices will rise fast, for tourists only; pick pockets and petty crime will rise; the tolerance and good humour of the locals whose city has been overrun and transformed will become increasingly distant.

Lot's of things to sell to the visitors!
We start by visiting a city to see how interesting life is in that destination; we engage the local people in this exposition; and finally we turn the destination into a parody of itself. Locals in Barcelona do not like the vast numbers of tourists who now visit; Londoners are fed up with throngs that make their city unlivable in certain months; and most certainly Mexicans, Moroccans and Dominicans resent the fact that their homes have been turned into expensive and unaffordable theme parks.

It is a fact of life that visitors change the places they visit. It always starts well, but as travellers want and demand more and more services, and local residents are priced out of markets for property, food and entertainment, tension will grow. We can help, of course, by being less demanding, by seeking local interaction and not simply observation, by exploring and getting even a mile away from The Hoards. And by visiting countries and parts of countries that are less explored we help spread the wealth and allow a greater interaction with the folks who live in our destination all year round.

We will also be very welcome, and not simply seen as another visiting ATM.

Aveiro, Portugal; off the beaten path, and very welcoming

Monday, March 20, 2017

Terrorism and tourism; when these currents meet.

It is true to say that in general, tourist resorts hold little fascination for me but tourism does. I am intrigued by the ebb and flow of people seeking a brief sojourn in another country or place, and have spent most of my life working in this industry.

My voyage of tourism discovery
Tourism flows are determined by many issues, and the major one is simply the destinations that the major tour companies choose to fly their aircraft; this, in turn, is determined by where there are sufficient hotel rooms. Following these practical considerations, consumer interest, local political circumstance, currency exchange and a host of other issues are contemplated and decisions are made.

It is important, however, to remember that aircraft seats and their matching hotel beds are the primary driver of tourism numbers; for every traveller who books a seat on a plane and their own hotels, there are ten who are purchasing packages. Further, with the increasing power of the on-line sellers to direct one’s search and eventual purchase, the independence of independent travellers is considerably less than one might wish to think.

And when tides turn, they turn fast; following the Tsunami in SE Asia, the tourism momentum immediately went elsewhere leaving the Thai and Malaysian authorities, among others, scrambling to regain their lost market share. It is relatively straightforward with physical disasters; tour operators simply wait until it has all been cleaned up; with terrorist attacks it is considerably harder to regain confidence in a destination.

And so, with this in mind, I set off on a short trip to visit a series of connected but very different destinations in the eastern Mediterranean and Atlantic to gauge the local confidence and perspective of the changing tourism industry, the economic lifeblood of these countries.

 Central Tunis - the Medina

Tunis, the charming capital of Tunisia was my first stop, and it was readily apparent that the numbers of visitors had dropped appreciably. Hotels were offering deeply discounted rates, the souk was empty of tourists and full of merchandise; prices were keen and the street vendors’ tone took on a sharper note. They were concerned and even more, they were worried. “Where have you all gone”, one trader asked me, “and when will you all come back?” The second question was considerably harder to answer than the first.

Following two dreadful attacks in Tunisia, one in the National Museum, the other at a beach resort near the ancient city of Sousse the tourism industry has been halved. The tour operators, ever mindful of clients’ interests, and of the powerful and guiding hand of their insurance companies, took their planes elsewhere, and abandoned Tunisia. The country, economically difficult before the assault, is in financial chaos. There is little work, sales of everything from food to carpets, from ice-creams to guides have tumbled and with this decline the governments’ tax revenues have fallen and employment levels are weak.

I found a similar situation in Agadir, a tourist town on the Moroccan Atlantic coast, and another city bereft of tourists. Even allowing for the fact that this was a low season, the tumbleweed, shuttered shops and insistent attentions of the hawkers was a reminder of the difficulties they were facing. The Moroccan statistics tell a different story, but the drop of only 1 or 2% that is being reported is met with laughter by the bus and hotel operators with whom I spoke, who know exactly how many groups are cancelling, and the airport knows that the shiny charter jets from northern Europe will be pointed in another direction this summer.

And this direction may well be the Canary Islands, and to the south, Cabo Verde. As I flew from Africa the 100kms to Gran Canaria, I could immediately sense the difference in attitude and see the sheer volume of tourists passing through the airport at Las Palmas, a strong indication of where the elusive travellers have gone.

Madeira
Las Palmas

And the Atlantic Islands are really wonderful destinations. The Canary Islands offer a vast inventory off accommodation and sights on several quite different islands. Madeira, some five hundred kilometres north of Gran Canaria is a delightful spot, and once again full of visitors. They are very different destinations, of course, and best described by one man thus: “The Canary Islands are all discos and pubs”, he said, “here in Madeira we are all about gardens and libraries.” Different strokes but two very interesting and, at least for the moment, safe destinations.

Travellers will travel and resorts will fill; the last great downturns in the European markets, in Egypt and Turkey, filled their rooms with Russians until those relationships soured. Perhaps the Tunisian resorts will look east to the Chinese markets who are desperately seeking new destinations for their massive market to visit. We will see.

Tourist seek heat and security; destinations that can offer this, or at least a good pretense at doing so will thrive; there is no shortage of tourists and is no dearth of lovely beaches, blues water and drinks with umbrellas in them. Scratch under the surface a little, and one might disturbed at the realities of the global tourism industry, but for the most part it is about sun, sea and happy faces.


However, the haunting question of “When will you come back” reverberates; asked to me quietly in the early evening at the ancient and beguiling souk in Tunis, I could think of no good answer. “I am here,” I said, but this was of little consequence. They have lost hundreds of thousands of visitors to terror; the terrorists win when we become too terrified to go and enjoy the hospitality and culture of a distant land; and it appears that in North Africa at least, right now, the terrorists have won.