Since Mother’s Day is upon us this weekend, I thought this video by Michael Marantz and Barry Pousman was more than appropriate.
Thank you mom for raising three boys so well. Even with our flaws, you still did a good job.
Author: ssegraves
Fight Brewing Over O’Hare and Parallels with Intercontinental
There is a little bit of a fight brewing in Chicago over the future expansion of O’Hare.
Mr. Emanuel is at odds with airline boss Jeff Smisek over expansion of O’Hare International Airport. The CEO of United Continental Holdings Inc. jabbed at Mr. Emanuel recently, saying there’s no need to finish the multibillion-dollar project launched seven years ago.
Both men have the best interests of their businesses (Chicago is Mr. Emanuel’s “business”) in mind as they discuss the upgrades and expansion of Chicago’s O’Hare airport. Mr. Smisek is trying to control United’s costs by limiting their involvement in the expansion of the airport.
Mr. Emanuel can’t afford to let O’Hare fall behind rival airports. Mr. Smisek, on the other hand, has a different agenda. Unlike airline execs of the past, whose expansionist strategies dovetailed with the city’s desire for an ever-bigger O’Hare, he’s focused on the bottom line. He aims to boost profits by reducing capacity and competition in the airline industry, which has a long history of big spending, bloody fare wars and monumental losses. His merger of Houston-based Continental Airlines Inc. and Chicago’s UAL Corp. advanced those aims while creating an airline with unprecedented market power, the largest in the industry.
The interesting take away here is that apparently Mr. Smisek hates competition, yet none of this came up during the merger of United and Continental, which truly reduced competition. And why is no one bringing this up in the possible merger of US Airways and American Airlines? If competition is so important, then enforce it when carriers try to remove competition directly by merging.
All of this should be a warning sign to those looking at the airline industry from the outside. The airlines are struggling and they are trying to do all they can to survive. For some, that means merging, for others that means looking at operations and reducing capacity and for others it’s a combination of both. And this is not just a problem in the United States, just look at Lufthana’s announcements about reducing regional jets from the fleet, removing first class from some aircraft, etc.
Then there is this article I came across. What stuck out to me was this:
The terms of the debate are different in Chicago, but the bottom line is the same. What’s best for the city may not be best for United Airlines, and vice versa. There’s nothing particularly remarkable about a large company with near-monopoly control in a given market doing whatever it can to keep competition out. What is remarkable is that the argument to allow such competition would somehow be damaging to consumers is given any credibility.
We sure are getting lax with our throwing around of the “m”-word. United and American Airlines both have major hubs at Chicago O’Hare but that has not kept carriers from starting service to the airport. Virgin America has a number of new flights to and from Chicago. And neither airline has tried to limit Southwest’s operations at Chicago Midway. During the city council meeting in Houston the word “monopoly” was thrown around a lot as well. United does not control the Terminal D/E FIS facility. Other airlines are free to come and go as they please. Southwest used to even have gates at IAH. They gave those up to move to Hobby and in doing so, gave up their option to fly international flights. TACA, Aeromexico, and VivaAerobus all fly to Latin America from IAH, clearly, United does not have a monopoly. The other airlines’ operations are not huge but that isn’t because of a monopoly, it’s because IAH is not their hub. By this monopoly logic, American Airlines has a monopoly in DFW even though plenty of other airlines have flights there. Or, heaven forbid, Southwest has a monopoly at Hobby and Love Field.
Let me refer you back to the two posts in which my wife Tiffany Tyler analyzed Southwest’s proposal and the claims United was making at the time, which seem to have evolved somewhat. I understand United’s fear of this proposal. I understand their threats regarding Terminal B at IAH, though given the growth projections for IAH and the fact that they want to close down the former Continental hub in Cleveland it’s hard for me to take those threats too seriously – where else are they going to go? Unlike Southwest, which says it will go to San Antonio for their Latin American and Caribbean business if Hobby is not available to them, they’re pretty much locked in. What I don’t understand is how having more competition, even if it’s just for a handful of Latin American routes, can be bad for travelers. It makes no sense to me, and according to his press release it makes no sense to CM Andrew Burks, either. I hope in the end it makes no sense to the rest of Council.
The problem is not necessarily that there is competition, it’s the fact that the competition is based on false figures ($133 Houston-Bogota fares). Where will United go if Hobby is allowed to have international flights? Denver. They have plenty of gates there and can serve the connecting traffic just as well from there as from IAH. In fact, I’m sure the city of Denver would be happy to have more people flying through their airport. During the city council meeting Southwest offered to build the necessary gates and pay for the FIS facilities at Hobby. I say let them do that. If the city does not have to pick up the cost then there is no reason not to let them try to compete in the Latin-American markets.
Loosening the Perimeter at Reagan Washington National Airport
Breaching the Perimeter (The Economist) →
Reagan Washington National Airport will soon see new flights to San Francisco and San Diego and a few more flights to Los Angeles and Salt Lake City, with four new round trips set to be picked this month. Good news all around. I love DCA, both for its architecture and design as well as for how easy it is to reach from the center of Washington D.C.
Happily for busy Washingtonians, the Federal Aviation Administration’s recent reauthorisation includes a loosening of DCA’s perimeter rule. The number of services to destinations outside the perimeter will increase by two-thirds. The airport’s four big incumbents, Delta Air Lines, US Airways, American Airlines and United Airlines, will each exchange an inside-perimeter flight for a longer one. San Francisco (United) and San Diego (US Airways) will be added to the destination board, and Los Angeles (American) and Salt Lake City (Delta) will each get a new round trip. Four new round trips will go to airlines with limited or no presence at DCA. Seven carriers have submitted proposals; federal regulators will pick the winners this month.
When “Unlimited” Does Not Mean “Unlimited”
American Airlines offers different forms of an unlimited first class flying pass. When originally conceived its usage potential was not completely understood by American and it came back to get them.
Mike Joyce of Chicago bought his in 1994 after winning a $4.25-million settlement after a car accident.
In one 25-day span this year, Joyce flew round trip to London 16 times, flights that would retail for more than $125,000. He didn’t pay a dime.
There are people always willing to find the different ways of making programs, deals, etc. work for them. The users of the AAirpass were no exception:
Creative uses seemed limitless. When bond broker Willard May of Round Rock, Texas, was forced into retirement after a run-in with federal securities regulators in the early 1990s, he turned to his trusty AAirpass to generate income. Using his companion ticket, he began shuttling a Dallas couple back and forth to Europe for $2,000 a month.
“For years, that was all the flying I did,” said May, 81. “It’s how I got the bills paid.”
The problem is, some of these uses were against the terms of the passes. American had let their enforcement of such terms and conditions slip and now had to react swiftly to stop any further loss.
Cade was assigned to find out whether any AAirpass holders were violating the rules, starting with those who flew the most.
She pulled years of flight records for Rothstein and Vroom and calculated that each was costing American more than $1 million a year.
[…]
On Dec. 13, 2008, Rothstein and a companion checked in at Chicago O’Hare International Airport for a transatlantic flight. An American employee handed him a letter, which said his AAirpass had been terminated for “fraudulent behavior.”
The whole story is a fascinating read and I highly recommend reading it. It is further proof that travel is a bit addictive and being able to pack up and go somewhere exotic is very alluring. And such an attractive hobby means that there always people looking for ways to maximize their value, bend the rules, and skirt attention.
Debunking United’s anti-Hobby Arguments
What they are pretending will happen is that the fares and number of passengers on any given route are static, and that by splitting them with SWA, they will have to cancel IAH flights (because there aren’t as many passengers to fill their planes – SWA is “siphoning them off”). What happens in reality is the famous “Southwest effect”: SWA reduces fares, UA matches, and demand increases because the price dropped (simple supply-demand curve economics). SWA does not have to actually have lower costs than UA to reduce fares (although they do), they simply have to be willing to give up some of the fat monopoly profit margins UA currently enjoys on those routes. Even if their costs are exactly the same as UA, fares will come down and demand will be stimulated. This terrifies UA, of course, because not only do they lose the fat monopoly profit margins, but they have to offer more flights to meet the demand surge, pulling planes from elsewhere (either that or just cede market share to SWA). Of course, Houston wins all the way around: lower fares and more service.
What Mr. Gattis fails to mention is that Southwest has, in recent years, been less likely to lower their fares significantly over a long term when entering new markets. This was brought up by the city council when reviewing the Houston Airport System study, which, oddly enough, heavily favored Southwest. City council questioned the mentioned fare numbers due to their extremely low prices, something like $150 for Houston to Cancun. When the Houston Airport System and Southwest folks were put on the spot, they could only offer a rebuttal along the lines of “that is what we forecast in five years”. Unless Southwest expects fuel prices to plunge in the next five years, those numbers are unattainable. I cannot seem to find a mention of this anywhere on Mr. Gattis’ blog.
I do think that United’s arguments are a bit of posturing, but what do you expect? I do not think that demand will necessarily increase out of Houston if Southwest gets its way, simply because prices probably will not go down that much. Southwest will start flights at some rock bottom rate and two weeks later they’ll be close to matching what United has. Where Southwest will win out is one-way fares and last minute and walk up tickets.
The difference with “siphoning off” passengers in Houston versus say, New Orleans, is that Southwest is not sure they could fill the planes out of New Orleans, but they feel they could out of Houston. What Southwest is effectively doing is moving closer and closer to the legacy airlines by creating more and more of a hub-and-spoke system. If they wanted, Southwest could easily start international flights from any airport in the U.S. and in fact other airlines have done that; United offers seasonal service from Austin to Cancun, Raleigh-Durham to Cancun, etc. Instead, Southwest does not want to incur the costs of paying for immigration and customs officers at all of these airports, instead they want the city to split those costs with them.
I’ll end this by saying I do think international flights from Houston’s Hobby Airport are inevitable. The push for them is just too persistent for it not to happen. What I don’t understand is this anti-United sentiment. I read and hear comments about “losing the hometown airline” and if that is what is fueling this rage against United then it is in poor form. United still has one heck of a presence in Houston and it will continue to stay that way for a long time. Just as Mr. Gattis said, it’s about free markets, and that’s why United moved to Chicago, they have a better office/building agreement up there.
Why Everyone Should Learn to Program
Why Everyone Should Learn to Program (Reviews in Depth) →
Dan Haggard on why everyone could benefit from learning to program:
We passively receive ALL the various interfaces that we deploy to manipulate our environment: the stove top you use to cook your food, the knife you use to cut your meat, the piano on which you play your music, the steering wheel you use to drive your car.
Just think about that for a moment and let it sink in. EVERY interface you employ on a day to day basis is likely created by someone else. And since our own creativity is necessarily constrained by the various interfaces we employ then an absolutely crucial dimension of creativity is denied to us. […]
If you use a computer in your day to day work – it’s very likely that your processes have developed to a point where they could benefit from some degree of automation. And the only person really qualified to provide that automation ultimately will be you and YOU alone – because you may well be the only person who knows the process. […]
I now feel cured of an affliction I never realised I had. If I had to name this affliction, I’d call it – defaultism. Always did I just default to the way of things as it was handed to me. Now I look at every aspect of my life with a hacker’s eye.
It is awesome to see someone jump into programming and love it. The complexity with programming does not usually lie in the code itself but in the setting up of the environment and getting the language to run consistently across multiple machines. Platform specifics and quirks across environments used to have books written about them but now, with such great internet search tools, it is easy to find a fix to just about any problem you may have.
Football, Dogfighting, and Brain Damage
The whole article is gut wrenching but I think this quote sums up the reason football, in its current form, may be ended.
McKee got up and walked across the corridor, back to her office. “There’s one last thing,” she said. She pulled out a large photographic blowup of a brain-tissue sample. “This is a kid. I’m not allowed to talk about how he died. He was a good student. This is his brain. He’s eighteen years old. He played football. He’d been playing football for a couple of years.” She pointed to a series of dark spots on the image, where the stain had marked the presence of something abnormal. “He’s got all this tau. This is frontal and this is insular. Very close to insular. Those same vulnerable regions.” This was a teen-ager, and already his brain showed the kind of decay that is usually associated with old age. “This is completely inappropriate,” she said. “You don’t see tau like this in an eighteen-year-old. You don’t see tau like this in a fifty-year-old.”
With technology now able to see the effects of concussions and other brain related injuries football, and the wear and tear it causes on the body, are being examined even more closely. Will the sport go away entirely? No, there is too much money being made from it. Instead we will see more and more regulation put on the sport, especially at the high school and college levels, until eventually, it becomes unplayable.
Turkish Airlines Tentatively Starting Flights to Houston
In February the City of Houston and a group of Turkish representatives announced new service between Houston and Istanbul on Turkish Airlines.
If you follow airline announcements you know how quickly such rumors turn into pipe dreams or disappear completely. In the cast of the Istanbul-Houston route, I have been very skeptical, especially with fuel prices being what they are, but, this investor announcement from Turkish makes me a little more confident the service will actually launch. The page is in Turkish but here’s a poorly translated version:
Incorporation; aircraft availability and depending on the permissions in 2012, Istanbul-Houston-Istanbul and the Istanbul-Constanta-Istanbul route open, Mogadishu-Istanbul-Khartoum-Khartoum-Istanbul flights and Istanbul in Istanbul, Turkey-Djibouti-Djibouti-Mogadishu; Istanbul-Nakhchivan-Istanbul flights to Istanbul, the Istanbul-Ganja, Nakhchivan, it was decided to perform.
So, based on aircraft availability and the ability to obtain government permission, the Istanbul-Houston flights will start this year, possibly as early as this summer. I am really looking forward to this service starting! Turkish Airlines offers a great connection point to the Middle East, Europe, and Asia from their Istanbul hub and as a plus, Istanbul looks like a city I would have no problem having a stopover in. This announcement does not mean that flights are guaranteed to start between the two cities, but it adds a little credibility to the rumors and speculation.
FlyRights App – TSA and DHS Complaints From Phone
FlyRights is a new iPhone and Android application that allows you to file TSA and DHS complaints directly from your device. I see a lot of potential here.
Delta Wants to Buy a Refinery
Delta Bid for Trainer Refinery Gaining Momentum (philly.com) →
When I first saw the news that Delta Airlines was looking at the former ConocoPhillips refinery in Philadelphia I had to do a double-take. An airline running a refinery is just that strange. At first I thought it was a move by Delta to stir up the market a bit but this most recent news makes me think the Atlanta based airline is very serious about buying the facility.
The Trainer refinery is configured to produce a higher yield of jet fuel – about 13 percent of its output, or 23,000 barrels a day (966,000 gallons). Delta could ship the fuel by pipeline or barge to New York, where it has a large presence at LaGuardia and JFK airports.
Delta would ostensibly receive all of the jet fuel from the facility, but would probably swap much of the gasoline and diesel for jet fuel in other locations near Delta hubs.
I am still trying to understand where Delta thinks they will save the money. They will still be buying oil at the market price, the difference now is that they will be a refiner of said fuel. Refining crude oil is not a “value-add” process, it is a necessity. You can’t fly a plane on crude oil.
“The objective would be to achieve a 10 percent price reduction on a large portion of its fuel needs – which, if were achieved, would represent significant savings,” reported Linenberg, the Deutsche Bank analyst.
How? How are they planning to achieve that much of a reduction? Are they simply offsetting their fuel costs by selling the jet fuel on the wholesale market? If so, then how are they financing the operation of the refinery? Refineries are not cheap to operate and certainly not cheap to maintain. As stated earlier, oil companies do not view them as moneymaking facilities but rather, as necessities to compete in the market. The margins in refining are so small that it is hard to make money from fuel alone. Now, maybe if Delta is going to sell chemicals from the facility they can make the revenue that the article hints at.
I would love to have a sneak peek at Delta’s game plan. They must have some kind of strategy up their sleeve to make this work, but they’re going to wait to make it obvious to the rest of us.