Year: 2016

Delta’s Mixed Message for Seattle

ssegraves

Delta has been growing their Seattle hub operation over the last couple of years, trying to cultivate a west coast hub that can serve Asia as well as some domestic U.S. destinations and parts of Europe. They released a new commercial recently, that you can watch below, that is directly targeting their Seattle market.

The general consensus is that the commercial doesn’t really get Seattle or the Pacific Northwest. I can see that. The ad doesn’t say much except to give a nod to Seattle’s proximity to both Tokyo and London and how the city has momentum (whatever that means).

More concerning than the commercial is a recent article in the Minneapolis Star Tribune where Delta’s new CEO had some interesting thoughts on the airline’s future plans in China.

In September 2014, then-CEO Richard Anderson told a group in Minnesota that Delta hoped to explore a new nonstop route from MSP to China “in the next three to five years.”

Bastian, who has served as president since 2007, succeeded Anderson, who formally retired Monday. Bastian said he also believes an MSP-to-China route “would be an ideal opportunity” once Delta receives its new Airbus 350 planes — which will replace the retiring Boeing 747 aircraft — next year, and if U.S. carriers are granted more traffic rights in China. Foreign governments negotiate how many flights from each country it will allow to operate within its borders.

So why is Delta focused on building their Minneapolis hub’s reach in China when they have a rather large presence in Seattle, where they can use aircraft that don’t require ultra-long ranges? I am not sure. It seems like the complete opposite of what they were originally trying to do when they opened the hub in Seattle. United has started flying to non-top tier airports in China out of San Francisco, capturing a part of the market that Delta will quickly lose unless they make a move soon. By spreading their transpacific flights over multiple hubs I am a little worried that they are diluting themselves and not really building up the Seattle base. There has already been a slight withdrawal with the reduction of Seattle-Hong Kong and threats to stop flying to Tokyo from a number of U.S. airports if they are not granted certain slots at Tokyo-Haneda. One has to wonder how much more Delta’s presence at Seattle will retract all while they release commercials touting its awesomeness as a hub.

Airline Service Returning to Klamath Falls?

ssegraves

According to U.S. Representative Walden’s website, the House has unanimously approved the Treating Small Airports with Fairness Act. The act name is kind of cheesy but essentially it would bring back TSA screening to small airports that lost service at the beginning of 2013 and has a commitment from an airline for service.

The TSA Fairness Act would require the TSA to restore screening services to any airport that lost service after January 1, 2013 and that has a guarantee from a commercial airline to resume service within one year. There are currently at least six airports nationwide that have commercial airlines seeking to resume flights after undergoing a temporary gap in service, but are being denied TSA security screening and personnel. Instead, the agency directed the airports to allow passengers to fly unscreened to their next destination, and undergo screening there.

Klamath Falls is one of the closest airports to Crater Lake so this change will make it easier for tourists to make it to that lovely attraction, not to mention the rest of southern Oregon. If the act passes in the Senate the airline that has already been tapped to operate the Portland-Klamath Falls service would be PenAir, who has already started a number of routes out of Portland and is partners with Alaska Airlines.

There is no date for when the Senate would vote on the legislation, but I will definitely be on the look out for its passing.

The Dreaded Middle Seat

ssegraves

The New York Times posted an article titled, “Avoiding the Dreaded Middle Seat May Now Cost You” and it is a pretty accurate depiction of the landscape of commercial air travel. Most major U.S. airlines will soon have a “basic” economy fare that is essentially only the price for a seat on a plane between origin and destination. No other benefits. Want to check a bag? That’s $50. Want to select a seat? That’s $15-30 depending on the route. Want that seat to be an aisle? That’s another $10.

Recaro Slimline Seat 1
Some would argue that the unbundling of airfare into different components is good for the consumer because they can purchase just the items they want for the trip and save money. But that would imply that the different services airlines provide, seat selection, baggage handling, etc. are things that are completely unrelated, which is far from the truth. When you travel you need a seat and you might need to check a bag. Neither of these is a cost that is unaccounted for by the airlines. They are going to have to handle cargo/bags/mail whether you fly or not. A seat selection, in simple terms, does not cost the airline money. This is the illusion of unbundling. Yeah, if you and your family do not mind sitting in random middle seats around the plane, you will probably save a few dollars. But, if you don’t want your mother seated at the rear of the plane while you’re ten rows up, that’s going to cost you. This is the illusion of cost savings. Sure you might save $100 in airfare but as soon as you check a bag or select seats that cost savings dwindles and it is hard to tell where the equilibrium is between that “basic” economy fare and the regular fare that would have included the items you paid for. If you do not check bags, travel with family, or care where you sit, then unbundled fares are probably for you.

There is also the illusion that unbundling items from airfare will keep the airfare low. Well, that would go against the basic argument of unbundling, which is that the airfare and the ancillary items can act independently of each other. So, if the airlines decide that $60B in ancillary fees is not enough, they can adjust those prices, leaving airfare untouched. Or, they can manipulate airfare to fit a market and leave the ancillary fees alone. I am not against the airlines making money but it is disingenuous to paint the unbundled fares as “saving customers money” when the basic facts point to the scheme as being solely about revenue generation. And that’s fine, airlines are businesses, they are supposed to make money. Just don’t promote a revenue generation tool as mystical cost savings awesomeness, because for a lot of people, it means they will be sitting in a middle seat, delayed at LaGuardia.

Alaska/Horizon Airline’s fleet announcement is huge growth

ssegraves

As Jon Ostrower from the Wall Street Journal reports:

That means Alaska will have 349 aircraft at their disposal after all deliveries are made and the merger is completed. That is a huge increase for them and even with the retirement of 15 Bombardier Q400s by 2018, they will still have a very big fleet for the size of the operation they are running now.

Route growth has to be on the horizon then (no pun intended). With the Virgin America merger it is clear that Alaska will increase their presence in San Francisco. I would not be surprised to see them keep Virgin America’s transcontinental routes to JFK and Boston but I could also see them flying a number of west coast routes that are underserved by United, Delta, and American.

The big unknown is what happens to Alaska’s presence at Seattle. They have the planes for growth but Seattle is already overcrowded and I don’t know that Alaska has the gates to start a whole of new flights. I guess theortically they could park the E175s at the regional gates and have passengers walk outside to the planes, but even that area is a mess during the morning and evening rush hours.

This could also mean the end of the contract that Alaska has with SkyWest for operation of CRJ-700 and E175 regional jets to a number of destinations. SkyWest currently flies routes like Seattle-Milwaukee and Portland-Austin on E175 and Portland-Tuscon with CRJ-700s. To responsibly grow, Alaska may start operating those routes with their own planes and pilots via the Horizon Air subsidiary.

All of this to say, it is going to be interesting to see a rather niche carrier like Alaska navigate the waters of huge growth without overextending themselves in terms of passenger capacity and the physical limitations they will face at Seattle and Portland.

This food is making me anxious

ssegraves

In late 2014 I was commuting from Portland to New York every week for work. A friend of mine was getting married on one of the weekends and I planned to fly from New York to San Antonio for the wedding and then home to Portland. About halfway through my work week I became very ill with intestinal issues to the point that I could not leave the hotel room. I eventually recovered slightly and made it to San Antonio for the wedding but still experienced the illness until I was home. I was happy to enjoy the wedding but was in a lot of pain during the weekend.

To this day I still do not know what caused me to get sick. I had a slight cold the week before all of this took place and took Mucinex to help with the congestion. Was it the Mucinex? Was it food poisoning? Who knows. But ever since then, I have noticed myself becoming more and more obsessed with food preparation, cleanliness, and a concern of becoming ill. I will admit that it is completely illogical. In fact, I even remind myself that it is when I am thinking about it, but there is still a part of me that obsesses over it.

Satay Stand

Three or four years ago without hestitation, I would describe myself as an adventurous eater. Put something new, different, funky, whatever, in front of me and I would gladly try it. What has happened since the illness is that I have found myself questioning whether or not I should eat something. Go to a new restaurant and I am wondering about cleanliness and less about what to order. If I notice that something has not been cleaned, I immediately become hesitant to order and have to fight a mini-war in my brain that I have eaten in some crazy and less clean places around the world and that I will be fine.

It is hard to even write this post because it sounds crazy to think about food preparation and health so much. It sounds obsessive to believe that a little dirt would make someone sick. And I do not disagree with you. The one illness event did not all of the sudden cause me to feel this way, I think it simply started my mind racing down a path that it struggles to deviate away from. Getting sick while criss-crossing the country made me feel completely out of control. I was taking medicine but still at the mercy of my body and I hated that feeling.

Deep down I know this is all mental with very little rooting in reality. Deep down I know that eating at a food truck is not going to make me sick. Deep down I know that I am going stay healthy on the road. But my thought process immediately goes the opposite direction and it takes quite a bit of self-convincing to get back on track. I know there is a bit of anxiety involved and I am working to control that and not overthink the small things that I cannot control. It is an uphill battle. Here’s to fighting that fight and adventurous eating.

International Airlines – Price versus Service

ssegraves

The Economist has an interesting short piece and infographic on international airlines and the price you pay versus the service you receive. They used customer satisfaction data from Skytrax and lined that up against flight-volume data from FlightStats.com.

At the bottom of the satisfaction list? United and American Airlines.

Another interesting tidbit was the “worst airports to sleep in” category. Port Harcourt International Airport in Nigeria topped that list… And that isn’t a good thing.

Alaska Airlines purchases Virgin America

ssegraves

The Wall Street Journal reports that Alaska Airlines has reached a deal to purchase Virgin America. The big news is the price paid.

Alaska Air Group Inc. said Monday morning that it had reached a deal to buy Virgin America Inc., winning a frenzied bidding war with rival JetBlue Airways Corp. The parent company of Alaska Airlines said it would pay $57 a share for Virgin, a 47% premium to Friday’s closing price, representing a total equity value of $2.6 billion. The Wall Street Journal had reported Sunday that Alaska won the bidding contest for Virgin, whose shares have risen lately on takeover speculation.

And investors are responding with a little bit of disapproval as well, with Alaska Airlines stock down around 5.5% at 10am Pacific.
Alaska Stock Price After Purchase Announcement of Virgin America

I am a little concerned that Alaska is paying a significant premium simply to gain gate space and landing slots at a few different airports, namely San Francisco. They are making the purchase at a time when Delta is still trying to grow their new Seattle operation and encroach further into Alaska’s dominant hub, yet they seem unfazed. The Alaska premium product is definitely not cut out to go head to head with some of the other premium transcontinental products and Virgin’s product is showing its age. How does Alaska plan to compete with better products on some of the more lucrative transcon markets (SFO/LAX-NYC, SFO-BOS)?

And all of this without taking into account two very different customer loyalty groups. Virgin is considered sleek and hip, while Alaska Airlines has a loyal following in the Pacific Northwest and Alaska. Merging those two cultures together while not losing customers will be key for Alaska to succeed. I wonder if the Alaska Airlines management team has a plan in place for doing just that or if they are going to call in the consultants to try and sort it out.

Lastly is the two very different airplane fleets. Virgin America operates an all Airbus A320 and A319 fleet while Alaska Airlines is Boeing 737s for their mainline operations. During the analyst call this morning it was mentioned that the Virgin America Airbus leases start expiring in 2020, so for the next few years, there will be a mixed fleet. The one possibility is that Alaska will use the Airbus fleet up and down the west coast since their capacity is a little less than what the 737s can hold and Alaska could run more frequencies to make up for that.

My general sentiment is that I had thought JetBlue would win the bidding war and build a larger west coast presence. This seems like a generally risky move for Alaska who up until this point has not needed financing to operate and they have grown very organically through the years. I worry that biting off more than they can chew could come back to haunt them in the next few years. I hope I am wrong, but the true test will be whether or not they are able to stay entrenched at Seattle-Tacoma International.

Quick Thoughts on the Starbucks Rewards Changes

ssegraves

I am probably not the customer Starbucks wants using their rewards program. When I am in a city where there are not a lot of local coffee options, Starbucks is my backup. The blonde roast is drinkable and if it is not being brewed they are happy to make a pour-over of it. All of this to say, a lot of my recent work travel has not been close to local coffee shops, but Starbucks were readily available.

The recently announced changes to Starbuck’s rewards program are not going over well.

Under the new plan, the “stars” that are stockpiled to earn free drinks and other rewards are awarded at a rate of two stars for every $1 spent. Currently, customers earn one star per visit. But it will take 300 stars to get to the company’s Gold status, up from 30 stars, and it will take 125 stars for a reward, instead of 12.

Stars will now be earned based on spend instead of number of transactions, meaning people who buy the expensive Frappuccinos will earn more stars than someone like me who orders a grande coffee. I am sure this is specifically targeted at a customer like me who earns 12 stars by ordering coffees and then redeems (or has someone else redeem) an expensive drink. Or worse, the person who orders a coffee and a pastry but in separate transactions to earn two stars and then redeems for something expensive.

Are the Starbucks changes aggressive? Yes, but just like in the airline mileage earning and redemption world you have to remember: Pigs get fat and hogs get slaughtered. Starbucks could have probably made some rules changes that simply limited the number of transactions per day to something reasonable (2 per day maybe?) but they decided to go fully revenue based. The revenue based rewards are quickly becoming commonplace across tons of different industries as a way to “reward” someone for their spend rather than their loyalty. The thing to remember is that spending more to earn a reward usually is not beneficial to you mathematically. Well, unless you’re buying the office coffee on a corporate card; Then you’re making out like a bandit.

In the end, this probably will not change my habits when it comes to Starbucks. If there is no local option when I travel, I will visit Starbucks. And that’s probably exactly what Starbucks wants. Spending habits stay the same but the number of rewards will decrease.

Plane or Train?

ssegraves

I have been wrestling with this decision for a few days now and figured maybe someone reading this has a logical point to make in one direction or the other.

My wife and I are headed to Prague in March but our final destination is Berlin. Basically, the cheap fares were to places outside of Germany, so I looked for one that had a decent train schedule to where we were headed. Anyway, the train to Berlin takes about four hours. It’s relatively inexpensive and we would leave the Prague airport, after a 2pm arrival, and head straight for the central train station, eventually arriving in Berlin around 8pm.

Unbeknownst to me, Air Berlin started a regional service with Etihad between Prague and Berlin. The price is nearly the same as the train if I buy a roundtrip, which is fine, because we have to come back to Prague for the return home, and it’s a 1 hour flight. The only catch is, the connection means four hours of sitting in the Prague airport. Seth brought up a good point that he would rather keep moving than potentially fall asleep and I am taking that into consideration.

But what would you do? The arrival time into Berlin is about the same with both options. I guess one upside of going by train is being able to take public transit on arrival to the hotel instead of a cab from the airport.

Alaska’s New Brand

ssegraves

Alaska Airlines, arguably the hometown airline of Seattle, Portland, and Anchorage, unveiled a their new brand and livery at an event yesterday in Seattle.

new_alaska_livery
In a blog post, they give details on why they are refreshing the brand and a few insights into why they went the direction they did.

“We’ve added 90 new markets in the past five years. As we continue to grow, we are updating the outward expression of our brand so it shows up bolder wherever we fly.”

Essentially, we now fly Boston to San Diego non-stop and want to make our logo simpler for that market. I get it, it is not like they were going to change the name of the airline or anything. The first thing that stands out to me though is how close the new tail livery looks to some of the low cost carriers and how the entire livery looks a little Southwest-ish. The second thing is what I pointed out to Seth yesterday, the multicolored cheat lines look like the engines are spewing out the Northern Lights.

southwestlivery

Maybe that’s what Alaska was going for. The colors also match up pretty well to the Seattle Seahawks, the Mariners, and Sound Transit System. Coincidence?

I am no branding or livery expert but I just find the new look to be less Alaska and more Spirit/Southwest/Frontier. Maybe that is what they were going for. There is even a hint of Eurowings in there. There is a pretty great breakdown of the entire brand, livery, and other customer facing materials at Under Consideration. Their impression? Underwhelmed.

Overall, it’s not a highly inspiring redesign and rather than double-down on the quirkiness and ruggedness of the brand equity established they have moved away to safer territory.

Maybe Alaska should have gone to an all retro livery… (to be fair, some of the colors do match up)

old_alaska

— Updated at 12:30pm PST

I should add, if employees like the new look and it motivates them to better serve customers, then I am all for it. From the video of the unveiling of the new brand it does seem like the employees are excited about it and that’s a good thing.