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A SPECIAL STUCK-IN-THE-SNOW BRIEFING
By Joe Brancatelli
· This Is Why We Pay Attention to London Flights
· Southwest Pays Delta to Take AirTran's Planes
· Lufthansa Hopes You Want Discounted First Class
· A Few Flyers Generate the Most Transcon Dollars
· Marriott Instantly Doubles Its Presence in Africa
· Just 5.9 Percent of Flyers Use Gogo In-Flight WiFi
· We're Not as Stupid as Airline Executives Think
A message to members: Many of you are stuck in the snow waiting out cancelled flights and I'm thinking you need something to read. So rather than our normal weekly news briefing, here are some crucial items from the last year or so that you may have missed. Catch up on these important trends while the airlines try to catch up with their schedules after this week's snow and ice storms East of the Mississippi.
This Is Why We Pay So Much Attention to London Flights
Airlines and hotel chains were in New York this week pressing the flesh and promoting their brilliance to credulous crowds at an investment conference sponsored by JP Morgan. The most eye-popping presentation came from Delta Air Lines, eager to make the case for its acquisition of 49 percent of and code-share arrangement with Virgin Atlantic. Although the information wasn't exactly new, Delta shed fresh light on why airlines and business travelers obsess over London flights--and New York-London flights in particular. Eight of the top ten routes between the United States and Europe are tied to London, Delta explained. With the exception of New York-Paris/CDG (number three at 1.2 million flyers annually) and New York-Frankfurt (number 10 at 700,000 a year), the other routes are all about London. New York/Kennedy-London, the busiest route at 2.7 million passengers a year, is nearly twice as large as Los Angeles-London (number two with 1.4 million flyers). Taken together, Kennedy and Newark routes to London handle 3.9 million flyers, nearly as much as four other top-ten routes to London (Chicago, Boston, Washington and Miami) combined. British Airways (39 percent) and its Oneworld Alliance joint-venture partner American Airlines (23 percent) dominate London routes. Taken together, Delta (14 percent) and Virgin (22 percent) would still trail the BA/AA share of the U.S.-London market.(This item originally appeared on March 7, 2013.)
Isn't That Special: Southwest Pays Delta to Take AirTran Planes
I don't know if Dana Carvey still does his Church Lady schtick, but this is certainly one of those "Isn't That Special!" moments: Delta and Southwest cut a deal this week that conveniently solves each other's fleet problems. Wanting to dump the Boeing 717s it picked up when it purchased AirTran Airways, Southwest has struck what it calls "a very complex transaction that requires time and close coordination with multiple parties" to transfer the planes to Delta. Delta is desperate for the 717s because it is trying to retire the aging DC-9s it inherited in the Northwest Airlines merger and shed its unpopular, fuel-guzzling fleet of 50-seat regional jets. Over a two-year period, beginning in the middle of next year, Southwest will send as many as 88 of the 717s to Delta. Boeing will be involved in the transaction, too. Southwest will replace the 717s with Boeing 737s, the only plane it likes to fly and an aircraft that can seat between 143 and 175 passengers. But the ultimate irony: Southwest will pay Delta to take the planes. Southwest is eating the $100 million it'll take to remake the B717s in Delta's image and paint the aircraft in Delta's colors and livery. (This item originally appeared on May 24, 2012.)
Ready for Discounted International First? Lufthansa Hopes So
It is no secret that airlines are dumping international first-class cabins due to weak demand. Even Lufthansa, the German carrier that operates more planes with international first class than any other airline, is bowing to the marketplace reality. It has already reduced the number of seats up front to eight per cabin from as many as 16. And a new aircraft overhaul will reduce the number of planes with first-class cabins to about 75 percent. (Currently, 94 of 100 long-haul aircraft have first cabins.) Lufthansa won't say what routes will lose first class when the dust settles, but it wants you to know that it is discounting lustily on the first-class seats it flies from its U.S. gateways. (Well, as lustily as Germans, who have a cultural aversion to discounting, can discount.) The airline now offers four seasonal first-class sales: Thanksgiving, Easter, Christmas and the summer season. It also offers unpublished first-class discounts to deluxe cruise lines and luxury tour operators. Moreover, says Carsten Woldt, manager of pricing coordination at Lufthansa Group, it has introduced three advance-purchase first-class categories. On Los Angeles-Frankfurt, for example, the walk-up roundtrip is currently $19,461. But buy 28 days out and stay over on Sunday and the roundtrip fare is $8,933 roundtrip. There are also 14-day ($12,879) and 7-day ($14,379) advance-purchase roundtrips. The summer-sale price on LAX-Frankfurt in first is $8,069 if you purchase 60 days before departure. "We have too many empty seats and there is a market out there" for discounted first, says Woldt. "But it is limited." (This item originally appeared on March 28, 2013.)
Just a Few Flyers Generate Most of the Dough on the Transcons
The fabled Transcontinental Triangle--the flights between New York, Los Angeles and San Francisco--has long been the star of the U.S. route map and the nation's most ferociously competitive runs. The otherwise dull stories about the transcons in The Wall Street Journal this week nevertheless did have some statistics worth noting. According to Transportation Department numbers massaged by the Planestats Web site, just 9 percent of American Airlines' transcon customers pay $1,000 or more roundtrip on the JFK-LAX route. Yet those flyers contributed an eye-opening 45 percent of the $202 million in revenue American racked up on the route. Over at United Airlines, 14 percent of its JFK-LAX flyers paid more than $1,000 roundtrip and they accounted for 58 percent of United's $101 million in revenue on the route. (This item originally appeared on July 25, 2013.)
Marriott Buys Protea, Instantly Doubles Its Presence in Africa
Marriott made a big play for dominance in the growing Africa hotel market this week by agreeing to buy Protea Hotels, which operates 116 hotels on the continent. Protea operates under three brand names and about 100 of Protea's properties are located in its home country of South Africa. That means Marriott will double its Africa presence and will soon franchise or manage more than 23,000 rooms on the continent. Terms of the deal were not disclosed. (This item originally appeared on November 9, 2013.)
You Might Want to Google Why Gogo Is Failing at In-Flight WiFi
Airlines that don't have it now rush to install it. Airlines that already have it promise to make it available on even more flights. Some business flyers can't do without it. "It," of course, is in-flight WiFi. The problem? No one's making money providing it. Case in point: Gogo, the largest and best-known merchant. Since it launched in 2008, Gogo has equipped nearly 2,000 aircraft operated by nine U.S. and Canadian carriers. Yet five years in, Gogo only has a 5.9 percent "take rate," nerd slang for the percentage of travelers who use WiFi when it's available on a flight. That is even lower than the early days, when Gogo claimed its take rate was north of 7 percent. Worse, the now-public Gogo continues to hemorrhage cash. Although it boasted of a 37 percent rise in revenue when it reported second-quarter earnings yesterday (August 7), it was quieter about its operating expenses, which jumped by 30 percent, and its quarterly loss, which nearly doubled. "In-flight WiFi looks a lot like in-flight phones a generation ago," one skeptical airline executive told me this week. "Business travelers loved that, too, but not enough wanted to pay enough to make it a rational financial proposition." (This item originally appeared on August 8, 2013.)
Memo To Airline Executives: We're Not as Stupid as You Think
When he announced WestJet would add a premium-economy service and reduce coach legroom by as much as three inches, chief executive Gregg Saretsky suggested we were so stupid that we wouldn't notice. It turns out that we're not as stupid as Saretsky thought. The rollout of premium economy this spring "wasn't pretty," Saretsky admitted to securities analysts this week. As they boarded the newly configured jets, WestJet customers saw empty seats in the more spacious premium-economy section and grabbed them rather than go to the suddenly skimpy coach seats. "They just thought they'd sit themselves down and take advantage of some of the extra legroom," he said. "That put our flight attendants in a very awkward position of having to try to move them." (This item originally appeared on August 1, 2013.)
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ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.
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