3 November 2008
Singapore Airlines customers making Economy Class bookings on singaporeair.com now have the additional choice of guaranteeing themselves a Preferred Seat, with the introduction of Preferred Seat Selection. Currently, Preferred Seats available for allocation are located in exit rows.
Customers will be offered an option to purchase a specific Preferred Seat, when they make their seat selection for applicable Economy Class bookings – including KrisFlyer redemption bookings – on singaporeair.com.
Customers can also purchase a Preferred Seat anytime before check-in (which begins 48 hours before flight departure), simply by retrieving their bookings on singaporeair.com.
Preferred Seats offer customers more legroom, and are now available for advance and guaranteed customer selection, for a fee of USD 50 per sector, for all Singapore Airlines flights, except short-haul routes within Southeast Asia, and flights served by Boeing B777-200ER aircraft (this aircraft does not have seats located in exit rows). Preferred Seat Selection is subject to official approval in some markets, and some local variations may apply where regulatory approvals dictate.
Other categories of Preferred Seats, that similarly offer customers more legroom, may also be made available for selection in future.
Previously, Preferred Seats were only available on a request basis, without confirmation. The new option now offers a guarantee of assignment, subject to terms and conditions, on a first come, first serve basis.
Thursday, November 6, 2008
Monday, November 3, 2008
Study finds videoconferences distort decisions
31/10/2008 6:44:00 AM
THE ASSOCIATED PRESS NEW YORK -
Videoconferencing is often heralded as the next best thing to being somewhere - a cheaper, simpler alternative to travelling in person to attend a meeting. Yet a small study raises questions about whether videoconferencing distorts interactions in a subtle but important way.
The study found that doctors and nurses who attended seminars via videoconference were more likely to be influenced by the charisma of the presenter. In contrast, people who were face-to-face with the presenter were more likely to base their judgment of the presentation on the arguments that were used, the researchers said.
Carlos Ferran at Pennsylvania State University and Stephanie Watts at Boston University quizzed 44 medical professionals who took part in early morning medical seminars via business-quality video links, and 99 peers who were in the room with the presenters. The subjects were asked about how likely they would be to refer a patient to the speaker at the seminar, and how likable they felt he or she was, among other things.
In their study published in the September issue of the journal Management Science, the researchers hypothesize that a videoconference is mentally more challenging than a face-to-face meeting. That leaves less brainpower left over to process the content of the presentation. Cues we use in conversation, such as looking at people's gazes to figure out to whom they are talking, are harder to follow in a videoconference.
The videoconference participants were more likely to report that it was hard to follow what the speaker was saying, and reported higher levels of stress during the seminars.
The researchers noted that previous studies in the field have shown mixed results for videoconferencing compared to face-to-face meetings.
Peter Svensson, AP Technology Writer.
THE ASSOCIATED PRESS NEW YORK -
Videoconferencing is often heralded as the next best thing to being somewhere - a cheaper, simpler alternative to travelling in person to attend a meeting. Yet a small study raises questions about whether videoconferencing distorts interactions in a subtle but important way.
The study found that doctors and nurses who attended seminars via videoconference were more likely to be influenced by the charisma of the presenter. In contrast, people who were face-to-face with the presenter were more likely to base their judgment of the presentation on the arguments that were used, the researchers said.
Carlos Ferran at Pennsylvania State University and Stephanie Watts at Boston University quizzed 44 medical professionals who took part in early morning medical seminars via business-quality video links, and 99 peers who were in the room with the presenters. The subjects were asked about how likely they would be to refer a patient to the speaker at the seminar, and how likable they felt he or she was, among other things.
In their study published in the September issue of the journal Management Science, the researchers hypothesize that a videoconference is mentally more challenging than a face-to-face meeting. That leaves less brainpower left over to process the content of the presentation. Cues we use in conversation, such as looking at people's gazes to figure out to whom they are talking, are harder to follow in a videoconference.
The videoconference participants were more likely to report that it was hard to follow what the speaker was saying, and reported higher levels of stress during the seminars.
The researchers noted that previous studies in the field have shown mixed results for videoconferencing compared to face-to-face meetings.
Peter Svensson, AP Technology Writer.
Monday, October 6, 2008
American Airlines considers a la carte pricing
Sunday October 5, 3:43 pm ET
By David Koenig, AP Business Writer
Facing opposition to fees, American Airlines considers a la carte pricing for services
FORT WORTH, Texas (AP) -- The idea of paying a single, simple fare to fly on an airliner is becoming as quaint as stewardesses in short skirts.
American Airlines is about to accelerate the trend of breaking the cost of a trip into an airfare plus many smaller fees.
Starting next year, American, which led a stampede by U.S. carriers to charge customers for checking even a single suitcase, plans to imitate the a la carte pricing structure pioneered by Air Canada, airline officials say. There are likely to be a few basic fare plans, and travelers can pick additional services -- for a fee.
Fans of "unbundling," as it's called, say it gives travelers lower base fares with the option of paying for extras that they really want, from beverages to blankets.
Some travelers are wary, however, and suspect the airlines are just trying to chisel them a few bucks at a time.
Phone and cable companies have been using this pricing approach for years to offer extras like premium channels and pay-per-view events. Now airlines see unbundling as a way to boost revenue and defray sky-high prices for jet fuel. In recent months they have added and enlarged charges for fuel, checked baggage, changing flights, upgrading from coach and other services.
There may be no going back to all-inclusive fares, even with the recent decline in fuel prices.
"We as an industry have opted to not just raise (ticket) prices but to raise prices and change the fee structure," said Daniel Garton, American Airlines' executive vice president of marketing. Without fees to offset rising costs, "you're not going to be talking about fees -- you're going to be talking about lost service ... being able to have a flight to San Diego," he said.
UAL Corp.'s United Airlines expects to raise $700 million a year from fees. Northwest Airlines Corp. estimates baggage charges will bring in $150 million to $200 million a year. Continental Airlines Inc. predicts it will generate more than $100 million just from a new $15 fee for checking a single bag -- that doesn't include levies on additional bags.
Airlines have grown more sophisticated at wringing every last dollar out of a flight, partly by lowering and raising fares based on supply and demand. Much of this magic, called "yield management," is invisible to passengers, but it results in people in the same cabin paying wildly different amounts for the same flight.
Executives at Air Canada, which revamped its fare structure and began unbundling five years ago, look down their noses a bit at the actions of their U.S. counterparts, saying a la carte pricing should be about transparency and customer choice, not simply revenue.
Air Canada went through bankruptcy earlier this decade, and when it emerged in 2004 it was losing customers to low-cost rival WestJet Airlines Ltd. Air Canada fought back by creating a bare-bones service to compete with WestJet fares, with extra amenities for picking a fancier plan.
"We did this in the environment of Air Canada losing market share," said Ben Smith, executive vice president at Air Canada. "It was about gaining the confidence back from our customers and offering products we thought they wanted."
On Air Canada's Web site, travelers pick from four fare levels. The top tickets, called Latitude and Executive Class, are fully refundable and come with priority check-in, food and other goodies included.
The cheapest fare, called Tango, requires extra fees for upgrades such as a food voucher, advance seat selection, flight changes and airport lounge access. Tango passengers can save another $3 by declining frequent-flier miles or not checking a bag.
"Consumers don't understand airline pricing, and they certainly don't understand yield management," said Peter Belobaba, an expert on airline pricing at MIT. "Air Canada is saying, 'We're practicing all those pricing strategies, but at least we're laying it out for you.'"
Smith said simplified fares have helped Air Canada stabilize its domestic market share -- which it needs to feed its profitable international routes -- and increase revenue. Half of Air Canada's passengers pick an option higher than the basic Tango plan, he said.
Air Canada passengers give the airline credit for making fares understandable -- "It's nice to know where I could save money," said Amanda Kruzich, a cosmetics company marketing rep who recently flew on Air Canada from Toronto to Dallas.
Still, Kruzich said she would rather have an all-inclusive fare.
"I feel nickel-and-dimed when I have to pay extra for everything," she said. "Just throw it all in and tell me what the fare is."
Matt Kokidko, who works for a car-rental company in Orlando, Fla., and recently flew to Dallas on American, agreed.
"We're not saving enough on the fares to justify that," Kokidko said of the extra fees charged by American. He had not flown in a while and was stunned that American charged for use of a headset.
Scott Cowley of Dallas, a frequent flier in his job as sales representative for an aerospace parts manufacturer, said he does not want to take time to go through a menu of optional, for-a-fee services.
"It's hard enough to find the flight I want at the time I want," he said.
But experts say travelers should expect fees to become permanent.
George Hobica, founder of airfarewatchdog.com, a discount-travel Web site, expects airlines to start charging extra for carry-on bags, booking a flight online, and picking a seat assignment.
"The fees are here to stay, and there will be more of them," he said. "Honestly, I think it's better for consumers. If I pack light, why should I pay for the guy who packs heavy?"
According to a recent survey of airline executives by consultant IdeaWorks, fees that will spread the fastest will be for Internet, e-mail and mobile phone service during flights and for special seating, such as in exit rows.
Southwest Airlines Co. avoids most of the fees charged by rivals, and brags about that in television ads. Senior vice president of marketing Dave Ridley said the money other carriers make from fees might be offset by passengers booking their next flight on Southwest.
But Southwest will soon survey consumers about charges, and Ridley wouldn't rule out fees in the future.
There are still a few technology speed bumps in the way of true a la carte pricing.
Airlines still sell a large chunk of their tickets through global distribution systems, or GDSs, which were built to display simpler fare structures to travel agents and "have been very slow" to change how they display fares, said Smith of Air Canada.
The largest GDS, Sabre, says it has solved those problems.
Where will airlines draw the line on new fees?
Hobica thinks charging passengers by weight makes perfect sense because they cause the plane to burn more fuel. But he admits a poundage penalty might be hard to sell, and so would charging for oxygen masks.
"I can't see them announcing, 'Put in another quarter for the next three minutes,'" he said.
By David Koenig, AP Business Writer
Facing opposition to fees, American Airlines considers a la carte pricing for services
FORT WORTH, Texas (AP) -- The idea of paying a single, simple fare to fly on an airliner is becoming as quaint as stewardesses in short skirts.
American Airlines is about to accelerate the trend of breaking the cost of a trip into an airfare plus many smaller fees.
Starting next year, American, which led a stampede by U.S. carriers to charge customers for checking even a single suitcase, plans to imitate the a la carte pricing structure pioneered by Air Canada, airline officials say. There are likely to be a few basic fare plans, and travelers can pick additional services -- for a fee.
Fans of "unbundling," as it's called, say it gives travelers lower base fares with the option of paying for extras that they really want, from beverages to blankets.
Some travelers are wary, however, and suspect the airlines are just trying to chisel them a few bucks at a time.
Phone and cable companies have been using this pricing approach for years to offer extras like premium channels and pay-per-view events. Now airlines see unbundling as a way to boost revenue and defray sky-high prices for jet fuel. In recent months they have added and enlarged charges for fuel, checked baggage, changing flights, upgrading from coach and other services.
There may be no going back to all-inclusive fares, even with the recent decline in fuel prices.
"We as an industry have opted to not just raise (ticket) prices but to raise prices and change the fee structure," said Daniel Garton, American Airlines' executive vice president of marketing. Without fees to offset rising costs, "you're not going to be talking about fees -- you're going to be talking about lost service ... being able to have a flight to San Diego," he said.
UAL Corp.'s United Airlines expects to raise $700 million a year from fees. Northwest Airlines Corp. estimates baggage charges will bring in $150 million to $200 million a year. Continental Airlines Inc. predicts it will generate more than $100 million just from a new $15 fee for checking a single bag -- that doesn't include levies on additional bags.
Airlines have grown more sophisticated at wringing every last dollar out of a flight, partly by lowering and raising fares based on supply and demand. Much of this magic, called "yield management," is invisible to passengers, but it results in people in the same cabin paying wildly different amounts for the same flight.
Executives at Air Canada, which revamped its fare structure and began unbundling five years ago, look down their noses a bit at the actions of their U.S. counterparts, saying a la carte pricing should be about transparency and customer choice, not simply revenue.
Air Canada went through bankruptcy earlier this decade, and when it emerged in 2004 it was losing customers to low-cost rival WestJet Airlines Ltd. Air Canada fought back by creating a bare-bones service to compete with WestJet fares, with extra amenities for picking a fancier plan.
"We did this in the environment of Air Canada losing market share," said Ben Smith, executive vice president at Air Canada. "It was about gaining the confidence back from our customers and offering products we thought they wanted."
On Air Canada's Web site, travelers pick from four fare levels. The top tickets, called Latitude and Executive Class, are fully refundable and come with priority check-in, food and other goodies included.
The cheapest fare, called Tango, requires extra fees for upgrades such as a food voucher, advance seat selection, flight changes and airport lounge access. Tango passengers can save another $3 by declining frequent-flier miles or not checking a bag.
"Consumers don't understand airline pricing, and they certainly don't understand yield management," said Peter Belobaba, an expert on airline pricing at MIT. "Air Canada is saying, 'We're practicing all those pricing strategies, but at least we're laying it out for you.'"
Smith said simplified fares have helped Air Canada stabilize its domestic market share -- which it needs to feed its profitable international routes -- and increase revenue. Half of Air Canada's passengers pick an option higher than the basic Tango plan, he said.
Air Canada passengers give the airline credit for making fares understandable -- "It's nice to know where I could save money," said Amanda Kruzich, a cosmetics company marketing rep who recently flew on Air Canada from Toronto to Dallas.
Still, Kruzich said she would rather have an all-inclusive fare.
"I feel nickel-and-dimed when I have to pay extra for everything," she said. "Just throw it all in and tell me what the fare is."
Matt Kokidko, who works for a car-rental company in Orlando, Fla., and recently flew to Dallas on American, agreed.
"We're not saving enough on the fares to justify that," Kokidko said of the extra fees charged by American. He had not flown in a while and was stunned that American charged for use of a headset.
Scott Cowley of Dallas, a frequent flier in his job as sales representative for an aerospace parts manufacturer, said he does not want to take time to go through a menu of optional, for-a-fee services.
"It's hard enough to find the flight I want at the time I want," he said.
But experts say travelers should expect fees to become permanent.
George Hobica, founder of airfarewatchdog.com, a discount-travel Web site, expects airlines to start charging extra for carry-on bags, booking a flight online, and picking a seat assignment.
"The fees are here to stay, and there will be more of them," he said. "Honestly, I think it's better for consumers. If I pack light, why should I pay for the guy who packs heavy?"
According to a recent survey of airline executives by consultant IdeaWorks, fees that will spread the fastest will be for Internet, e-mail and mobile phone service during flights and for special seating, such as in exit rows.
Southwest Airlines Co. avoids most of the fees charged by rivals, and brags about that in television ads. Senior vice president of marketing Dave Ridley said the money other carriers make from fees might be offset by passengers booking their next flight on Southwest.
But Southwest will soon survey consumers about charges, and Ridley wouldn't rule out fees in the future.
There are still a few technology speed bumps in the way of true a la carte pricing.
Airlines still sell a large chunk of their tickets through global distribution systems, or GDSs, which were built to display simpler fare structures to travel agents and "have been very slow" to change how they display fares, said Smith of Air Canada.
The largest GDS, Sabre, says it has solved those problems.
Where will airlines draw the line on new fees?
Hobica thinks charging passengers by weight makes perfect sense because they cause the plane to burn more fuel. But he admits a poundage penalty might be hard to sell, and so would charging for oxygen masks.
"I can't see them announcing, 'Put in another quarter for the next three minutes,'" he said.
Wednesday, October 1, 2008
JetBlue's eBay auction scores a big hit with buyers
Tuesday September 30, 2008
News from Travel Technology Update: Getting people to put "awesome" and "airline" into the same sentence these days is no easy feat. But JetBlue Airways managed it with its recent auction of flights and vacation packages on eBay.
The idea came about when the carrier was thinking of ways to stimulate travel during the fall lull. "We were looking for something unique to get people thinking about travel," Don Uselmann, manager of business development, said. "We wanted a 'water cooler' story, something that people would talk about."
JetBlue decided to auction off 218 flight packages--roundtrips for one or two people to specific destinations on specific dates--and six vacation products for weekend trips in September and early October.
A couple of the vacation packages were billed as "mystery trips." "We didn't disclose the final destination, but we did provide flight days and times, so there were ways to figure it out," Uselmann said.
JetBlue had no idea what to expect from the experiment. "We didn't really have any way to benchmark it," Uselmann said. "A lot of effort went into getting everything set up, like the look and feel of the store page and the legal loose ends," he said. But once everything was up and running, the auctions proceeded very smoothly.
The minimum bids were set at 5 cents for a flight package and 10 cents for a vacation package. "We figured that since people are getting nickel-and-dimed so much these days, we decided to nickel-and-dime them in a good way," Uselmann said.
Each auction lasted for three, five or seven days, with no reserve. The winning bids varied greatly, depending on the destination. On average, "the flights sold at a 40% discount, so it was a good deal," Uselmann said.
A small burst of effort was required at the end of the auctions as well, he said. JetBlue's systems are not linked to eBay, so "fulfillment was a bit manual," he said. Each set of flights and packages had to be booked and issued by JetBlue staff.
The results of the auction could not have been more gratifying. Feedback was provided by 16 winning bidders, and the most frequently repeated word was "great."
"I was very excited to win this JetBlue ticket at such a great price," wrote a buyer who paid $192.50 for a Chicago-New York roundtrip. "Fantastic flight," posted the buyer of a Boston-Charlotte roundtrip for $129.50. "Couldn't be happier--great experience! Highly recommend!" crowed the purchaser of a Chicago-New York roundtrip for $242.50. "Awesome experience!! Keep these oppt's coming!! Thank you!" added the buyer of two Boston-Long Beach tickets for $511.03.
In some cases, it was hard to tell whether the praise was being lavished on the prize or on the auction itself. "There's something about trying to win something," Uselmann said. "It's fun."
JetBlue isn't sure it will do another eBay auction. "We saw it as a one-time thing and were happy to give it a short tryout," Uselmann said.
Whether it was the flights or the fun of the auction, JetBlue earned a 100% positive rating as an eBay seller. And the experience was positive for the airline as well.
"The news has just been so negative lately, and airlines' hands are tied--they're at the mercy of a lot of external factors," Uselmann said. "But we got people talking about JetBlue in the off season."
In a good way.
ATW Daily News
News from Travel Technology Update: Getting people to put "awesome" and "airline" into the same sentence these days is no easy feat. But JetBlue Airways managed it with its recent auction of flights and vacation packages on eBay.
The idea came about when the carrier was thinking of ways to stimulate travel during the fall lull. "We were looking for something unique to get people thinking about travel," Don Uselmann, manager of business development, said. "We wanted a 'water cooler' story, something that people would talk about."
JetBlue decided to auction off 218 flight packages--roundtrips for one or two people to specific destinations on specific dates--and six vacation products for weekend trips in September and early October.
A couple of the vacation packages were billed as "mystery trips." "We didn't disclose the final destination, but we did provide flight days and times, so there were ways to figure it out," Uselmann said.
JetBlue had no idea what to expect from the experiment. "We didn't really have any way to benchmark it," Uselmann said. "A lot of effort went into getting everything set up, like the look and feel of the store page and the legal loose ends," he said. But once everything was up and running, the auctions proceeded very smoothly.
The minimum bids were set at 5 cents for a flight package and 10 cents for a vacation package. "We figured that since people are getting nickel-and-dimed so much these days, we decided to nickel-and-dime them in a good way," Uselmann said.
Each auction lasted for three, five or seven days, with no reserve. The winning bids varied greatly, depending on the destination. On average, "the flights sold at a 40% discount, so it was a good deal," Uselmann said.
A small burst of effort was required at the end of the auctions as well, he said. JetBlue's systems are not linked to eBay, so "fulfillment was a bit manual," he said. Each set of flights and packages had to be booked and issued by JetBlue staff.
The results of the auction could not have been more gratifying. Feedback was provided by 16 winning bidders, and the most frequently repeated word was "great."
"I was very excited to win this JetBlue ticket at such a great price," wrote a buyer who paid $192.50 for a Chicago-New York roundtrip. "Fantastic flight," posted the buyer of a Boston-Charlotte roundtrip for $129.50. "Couldn't be happier--great experience! Highly recommend!" crowed the purchaser of a Chicago-New York roundtrip for $242.50. "Awesome experience!! Keep these oppt's coming!! Thank you!" added the buyer of two Boston-Long Beach tickets for $511.03.
In some cases, it was hard to tell whether the praise was being lavished on the prize or on the auction itself. "There's something about trying to win something," Uselmann said. "It's fun."
JetBlue isn't sure it will do another eBay auction. "We saw it as a one-time thing and were happy to give it a short tryout," Uselmann said.
Whether it was the flights or the fun of the auction, JetBlue earned a 100% positive rating as an eBay seller. And the experience was positive for the airline as well.
"The news has just been so negative lately, and airlines' hands are tied--they're at the mercy of a lot of external factors," Uselmann said. "But we got people talking about JetBlue in the off season."
In a good way.
ATW Daily News
Wednesday, July 16, 2008
Airline -- High Speed Train Cooperation
Source: Reuters
Air France KLM is in preliminary talks with state rail company SNCF about high-speed train cooperation even before the liberalization of rail travel by 2010. Air France last week confirmed its interest in high-speed train travel and said it was in talks with Veolia Transport, which does not currently have a high-speed train service. High-speed rail links have already taken traffic from short distance air links. With existing or upcoming high-speed rail links between Paris, Amsterdam or Frankfurt, airlines could transport long-distance air travellers to their hubs -- boosting the load factor and cutting costs.
Air France KLM is in preliminary talks with state rail company SNCF about high-speed train cooperation even before the liberalization of rail travel by 2010. Air France last week confirmed its interest in high-speed train travel and said it was in talks with Veolia Transport, which does not currently have a high-speed train service. High-speed rail links have already taken traffic from short distance air links. With existing or upcoming high-speed rail links between Paris, Amsterdam or Frankfurt, airlines could transport long-distance air travellers to their hubs -- boosting the load factor and cutting costs.
Thursday, July 3, 2008
Monday, June 23, 2008
US: High fuel costs are squeezing low air fares
Source : NY Times, June 20, 2008
The low-fare airlines aren't so low anymore. Jet fuel costs -- up more than 80% over last year -- are forcing the airlines to sharply raise some fares, and reinvent themselves to appeal to not just bargain hunters, but also the briefcase crowd that generally pays more for last-minute tickets.
"The arithmetic doesn't work if we transport five people across the country at US$99 each way," says a Southwest executive. Budget carriers still offer deals for passengers who book trips well in advance, travel off-season and at less popular times. But in general, bargains are getting harder to find, as low-fare carriers join the bigger airlines in raising fares, which are up about 18% industrywide this year. About half a dozen smaller carriers, including Frontier, have also gone out of business or entered bankruptcy this year, in part because of high fuel costs.
The low-fare airlines aren't so low anymore. Jet fuel costs -- up more than 80% over last year -- are forcing the airlines to sharply raise some fares, and reinvent themselves to appeal to not just bargain hunters, but also the briefcase crowd that generally pays more for last-minute tickets.
"The arithmetic doesn't work if we transport five people across the country at US$99 each way," says a Southwest executive. Budget carriers still offer deals for passengers who book trips well in advance, travel off-season and at less popular times. But in general, bargains are getting harder to find, as low-fare carriers join the bigger airlines in raising fares, which are up about 18% industrywide this year. About half a dozen smaller carriers, including Frontier, have also gone out of business or entered bankruptcy this year, in part because of high fuel costs.
Friday, June 13, 2008
Friday, May 30, 2008
In Tough Times – Price Transparency is Key
Commentary by Mark Burton
From "Fuel costs will lessen demand, Air Canada says," The Globe and Mail, May 22, 2008
While American Airlines was making headlines through its “creative” means for dealing with higher fuel costs, Air Canada and its local competitors WestJet and Porter Airlines were trying something truly revolutionary: telling their customers the truth. All three Canadian airlines are dealing with the same escalating fuel prices that American is, but they have chosen a very different path. Rather than taking away basic services that have always been offered for free, they are adding a separate fuel surcharge onto their tickets.
The smart money is that Air Canada and the gang will have a much easier time of it than American for a couple of reasons. First is the issue of fairness. The skyrocketing cost of oil is in the news every day. Consumers are aware of it and are more likely to be accepting of a price increase that is driven by the costs of a key input that they understand. In addition, by calling out the fuel surcharge separately, the Canadian airlines are making the oil industry the bad guys in their approach–a perception that is already widely held. In contrast, American is giving customers the impression that service will suffer (now I’ve always had to carry my bag on–and those already crowded overhead bins just became more valuable than beachfront real estate on Maui) and thus damaging their own brand, rather than fobbing the problem off onto already unpopular suppliers.
The second reason is that the competitors in Canada are more disciplined. When Air Canada first rolled out their surcharge, they hid it in the fine print–and subsequently got whacked by full-page newspaper ads from WestJet, pointing how they don’t hide anything from their customers. This public shaming of Air Canada reminded all players of their common cause and has led to a consistent pricing approach. If only American Airlines were as smart as our friends north of the border.
From "Fuel costs will lessen demand, Air Canada says," The Globe and Mail, May 22, 2008
While American Airlines was making headlines through its “creative” means for dealing with higher fuel costs, Air Canada and its local competitors WestJet and Porter Airlines were trying something truly revolutionary: telling their customers the truth. All three Canadian airlines are dealing with the same escalating fuel prices that American is, but they have chosen a very different path. Rather than taking away basic services that have always been offered for free, they are adding a separate fuel surcharge onto their tickets.
The smart money is that Air Canada and the gang will have a much easier time of it than American for a couple of reasons. First is the issue of fairness. The skyrocketing cost of oil is in the news every day. Consumers are aware of it and are more likely to be accepting of a price increase that is driven by the costs of a key input that they understand. In addition, by calling out the fuel surcharge separately, the Canadian airlines are making the oil industry the bad guys in their approach–a perception that is already widely held. In contrast, American is giving customers the impression that service will suffer (now I’ve always had to carry my bag on–and those already crowded overhead bins just became more valuable than beachfront real estate on Maui) and thus damaging their own brand, rather than fobbing the problem off onto already unpopular suppliers.
The second reason is that the competitors in Canada are more disciplined. When Air Canada first rolled out their surcharge, they hid it in the fine print–and subsequently got whacked by full-page newspaper ads from WestJet, pointing how they don’t hide anything from their customers. This public shaming of Air Canada reminded all players of their common cause and has led to a consistent pricing approach. If only American Airlines were as smart as our friends north of the border.
Profits are More Important Than Revenue in a Downturn
By Dr. Reed Holden
Yikes, another discussion of pricing in a downturn. Sorry, but I just finished an interview with Fast Company magazine,and the discussion point was how to get more for less. The writer’s initial thought was to figure out how to get more lean in a downturn by cutting costs and driving more efficiency at the same time. The problem is that cost cutting and efficiency can only go so far–you run out of fat to cut and you can only get so efficient.
We ended up talking about how most managers use price to solve revenue problems in a downturn. That's the real problem–when business slows, managers offer more discounts to hit revenue targets when they should be lowering the revenue targets first, since that move saves profits. It's unfortunate that we couldn't have spent more on that subject–how to get more profits using fewer discounts.
One of the keys to success in a downturn is to stop chasing unrealistic revenue goals with price discounts. The revenue you thought you were going to get just isn't there any more. As we've discussed probably too many times before, chasing declining revenue with price discounts just makes the problem worse–you end up with less revenue and no profit. Smart pricers look for ways to eliminate discounts, especially on high value products and services--even in a downturn!
Let's look at two examples from our local paper, The Boston Globe. On April 25, they reported that Ford "Surprises with 1st-quarter profit of $100M." Remember, we talked about Ford in December? About how they had cut sales expectations and shut down capacity. Now we see that they're one of the few auto makers that made a profit. Also, the Globe reported that "Demand (is) down at Thermo Fisher." The real news of that header is that first quarter profits "rose sharply." That should have been the headline! Unfortunately, the press hasn't figured this out yet.
Yikes, another discussion of pricing in a downturn. Sorry, but I just finished an interview with Fast Company magazine,and the discussion point was how to get more for less. The writer’s initial thought was to figure out how to get more lean in a downturn by cutting costs and driving more efficiency at the same time. The problem is that cost cutting and efficiency can only go so far–you run out of fat to cut and you can only get so efficient.
We ended up talking about how most managers use price to solve revenue problems in a downturn. That's the real problem–when business slows, managers offer more discounts to hit revenue targets when they should be lowering the revenue targets first, since that move saves profits. It's unfortunate that we couldn't have spent more on that subject–how to get more profits using fewer discounts.
One of the keys to success in a downturn is to stop chasing unrealistic revenue goals with price discounts. The revenue you thought you were going to get just isn't there any more. As we've discussed probably too many times before, chasing declining revenue with price discounts just makes the problem worse–you end up with less revenue and no profit. Smart pricers look for ways to eliminate discounts, especially on high value products and services--even in a downturn!
Let's look at two examples from our local paper, The Boston Globe. On April 25, they reported that Ford "Surprises with 1st-quarter profit of $100M." Remember, we talked about Ford in December? About how they had cut sales expectations and shut down capacity. Now we see that they're one of the few auto makers that made a profit. Also, the Globe reported that "Demand (is) down at Thermo Fisher." The real news of that header is that first quarter profits "rose sharply." That should have been the headline! Unfortunately, the press hasn't figured this out yet.
Tuesday, May 27, 2008
Experts say airlines close to failure due to fuel costs
By Thomas Olson
TRIBUNE-REVIEW
Monday, May 26, 2008
The airline industry is reaching a precarious tipping point, experts say. Airlines are losing mountains of money because jet fuel costs have soared so high.
"Fares are going up. Families are not going to be able to go to Disney World or Vail on a whim anymore," said Kevin Mitchell, chairman of the Business Travel Coalition, a business advocacy group in Radnor. "The cheap tickets are just not going to be there."
Airlines and their passengers won't have new flights to China, either.
After months of clamoring for government approval, US Airways and United and Northwest airlines got the green light in September for nonstop flights to Beijing in 2009, months after the Summer Olympics there in August.
But in recent days, they got cold feet. Why? The fuel cost for a flight to China is so high that airlines don't think enough passengers would be willing to pay the fares to cover it.
"Every one of those airlines has postponed those launches until 2010," said Robert Mann Jr., an airline consultant based on Long Island, N.Y.
The increase in jet fuel prices is outrunning what the airlines are getting from higher fares, said Philip Baggaley, airline analyst for Standard & Poor's, New York.
Baggaley warned that if fuel prices don't abate, more major airlines could file for bankruptcy next year. On his watch list are US Airways and Airtran, which have the weakest credit ratings.
"I've followed this through the 1990s and through 9/11, and I've never seen the industry this bleak," Mitchell said. "With fuel costs like this, major carriers will be out of cash next year."
Soaring crude oil costs have sent jet fuel prices up 54 percent this year over 2007, the U.S. Department of Energy estimated. The largest 10 airlines are expected to pay nearly $17 billion more for fuel than last year, when their tab was $30 billion.
US Airways said the $4-a-barrel increase in crude oil May 21 translates into $150 million more a year in its jet fuel costs.
"The dilemma is they'd have to increase prices dramatically to get to where they'd be sufficiently profitable," Mann said. "That same customer will be stuck heating their home with $5-a-gallon heating oil and filling their car with $4- or $5-a-gallon gasoline. So they won't have any discretionary income to spend on air travel."
Fares have been increasing for months and won't stop rising any time soon, experts said.
Tickets for departures during the next 90 days cost an average of 20 percent more than a year ago, said John Rauser, who analyzes fare data for Farecast.live.com, Seattle.
From Pittsburgh, the cheapest US Airways flight to Los Angeles for July departure is $358 round-trip. That compares with $198 a year ago, said Tom Parsons, chief executive of Bestfares.com, a bargain fare clearinghouse in Arlington, Texas.
Carriers have imposed a host of new or higher fees. For instance, American Airlines on June 15 will start charging $15 for checking a bag, and other carriers might follow suit.
"If you check a bag, it costs you money. If you pack an extra bag, it costs you money. If you check it at the curb, it costs you money," said Parsons. "They are nickel-and-diming you to death."
US Airways announced Thursday that it's dropping complimentary snacks from coach class on domestic flights to save cash.
Carriers are removing weight from aircraft to conserve fuel, Mann said. For example, those in-flight telephones that have been nice customer perks are viewed as paper-weights to be jettisoned.
Some airlines have cut the amount of potable water they carry for drinking or coffee to 60 gallons from the usual 120 gallons. "You save 500 pounds right there," the analyst said.
"The days of popularly priced air travel may be coming to an end," Mann said. "It's going to go back to air travel of the 1960s and 1970s, when it was more for the well-to-do."
TRIBUNE-REVIEW
Monday, May 26, 2008
The airline industry is reaching a precarious tipping point, experts say. Airlines are losing mountains of money because jet fuel costs have soared so high.
"Fares are going up. Families are not going to be able to go to Disney World or Vail on a whim anymore," said Kevin Mitchell, chairman of the Business Travel Coalition, a business advocacy group in Radnor. "The cheap tickets are just not going to be there."
Airlines and their passengers won't have new flights to China, either.
After months of clamoring for government approval, US Airways and United and Northwest airlines got the green light in September for nonstop flights to Beijing in 2009, months after the Summer Olympics there in August.
But in recent days, they got cold feet. Why? The fuel cost for a flight to China is so high that airlines don't think enough passengers would be willing to pay the fares to cover it.
"Every one of those airlines has postponed those launches until 2010," said Robert Mann Jr., an airline consultant based on Long Island, N.Y.
The increase in jet fuel prices is outrunning what the airlines are getting from higher fares, said Philip Baggaley, airline analyst for Standard & Poor's, New York.
Baggaley warned that if fuel prices don't abate, more major airlines could file for bankruptcy next year. On his watch list are US Airways and Airtran, which have the weakest credit ratings.
"I've followed this through the 1990s and through 9/11, and I've never seen the industry this bleak," Mitchell said. "With fuel costs like this, major carriers will be out of cash next year."
Soaring crude oil costs have sent jet fuel prices up 54 percent this year over 2007, the U.S. Department of Energy estimated. The largest 10 airlines are expected to pay nearly $17 billion more for fuel than last year, when their tab was $30 billion.
US Airways said the $4-a-barrel increase in crude oil May 21 translates into $150 million more a year in its jet fuel costs.
"The dilemma is they'd have to increase prices dramatically to get to where they'd be sufficiently profitable," Mann said. "That same customer will be stuck heating their home with $5-a-gallon heating oil and filling their car with $4- or $5-a-gallon gasoline. So they won't have any discretionary income to spend on air travel."
Fares have been increasing for months and won't stop rising any time soon, experts said.
Tickets for departures during the next 90 days cost an average of 20 percent more than a year ago, said John Rauser, who analyzes fare data for Farecast.live.com, Seattle.
From Pittsburgh, the cheapest US Airways flight to Los Angeles for July departure is $358 round-trip. That compares with $198 a year ago, said Tom Parsons, chief executive of Bestfares.com, a bargain fare clearinghouse in Arlington, Texas.
Carriers have imposed a host of new or higher fees. For instance, American Airlines on June 15 will start charging $15 for checking a bag, and other carriers might follow suit.
"If you check a bag, it costs you money. If you pack an extra bag, it costs you money. If you check it at the curb, it costs you money," said Parsons. "They are nickel-and-diming you to death."
US Airways announced Thursday that it's dropping complimentary snacks from coach class on domestic flights to save cash.
Carriers are removing weight from aircraft to conserve fuel, Mann said. For example, those in-flight telephones that have been nice customer perks are viewed as paper-weights to be jettisoned.
Some airlines have cut the amount of potable water they carry for drinking or coffee to 60 gallons from the usual 120 gallons. "You save 500 pounds right there," the analyst said.
"The days of popularly priced air travel may be coming to an end," Mann said. "It's going to go back to air travel of the 1960s and 1970s, when it was more for the well-to-do."
Friday, April 18, 2008
Skybus, Ya Think?
Commentary by Steve Haggett
From "Skybus Ends Service, Third Airline to Fold This Week," By Nancy Kercheval, Bloomberg, April 5, 2008
Skybus Airlines shut down its engines this week, the third US air carrier to bail out in a week.
Skybus, a discount airline, was famous for offering $10 fares on flights to California, New York, Florida, and other destinations. “Nobody has a long-term viable business plan that can be sustained at these jet-fuel prices,” said Darryl Jenkins, an airline consultant. “What do you do in a situation like that?”
Charge more than $10 for a trip from New England to Florida?
The Skybus reservation page now states: Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier.
But what is being mourned as a cost problem is wrapped up in a pricing problem. Who decided to set prices in competition with highway tolls, or the cost of a single movie ticket, or even the cost of sending an envelope to the same destination? When we read that US Airways has found problems on Boeing 757’s because “a wing part on one of its planes fell off during a flight” recently, those $10 fares start to sound like discount seafood. There is a discount price level below which a customer is forced to question basic safety. Would you respond to a new clinic at the strip mall offering $10 laser eye surgery or $10 brake replacements? There’s no way you’re getting me on the land bus from Boston to New York at $10, let alone the sky bus.
Customers understand rising fuel costs and have no expectation that an airline ticket across the country should cost significantly less than filling a gas tank. Fuel prices may have quickened its demise, but by choosing unrealistic reference prices, Skybus drove itself to the breakdown lane.
From "Skybus Ends Service, Third Airline to Fold This Week," By Nancy Kercheval, Bloomberg, April 5, 2008
Skybus Airlines shut down its engines this week, the third US air carrier to bail out in a week.
Skybus, a discount airline, was famous for offering $10 fares on flights to California, New York, Florida, and other destinations. “Nobody has a long-term viable business plan that can be sustained at these jet-fuel prices,” said Darryl Jenkins, an airline consultant. “What do you do in a situation like that?”
Charge more than $10 for a trip from New England to Florida?
The Skybus reservation page now states: Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier.
But what is being mourned as a cost problem is wrapped up in a pricing problem. Who decided to set prices in competition with highway tolls, or the cost of a single movie ticket, or even the cost of sending an envelope to the same destination? When we read that US Airways has found problems on Boeing 757’s because “a wing part on one of its planes fell off during a flight” recently, those $10 fares start to sound like discount seafood. There is a discount price level below which a customer is forced to question basic safety. Would you respond to a new clinic at the strip mall offering $10 laser eye surgery or $10 brake replacements? There’s no way you’re getting me on the land bus from Boston to New York at $10, let alone the sky bus.
Customers understand rising fuel costs and have no expectation that an airline ticket across the country should cost significantly less than filling a gas tank. Fuel prices may have quickened its demise, but by choosing unrealistic reference prices, Skybus drove itself to the breakdown lane.
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