FlightCaster

Now writing at tnooz!

Thu, 13 Oct 2011 15:06:00 -0700

Hi Everyone:

In case you hadn't heard, I'm now officially a "Node" at tnooz. That means I now write regularly for tnooz, the go-to place for all travel industry news and debate.

It's a great honor, but it does mean this blog is now second fiddle to writing quality pieces for tnooz. I will still try to post here from time to time, but you should follow what I write there also.

Visit my profile page: http://www.tnooz.com/author/ekonwiser/

There you will find my latest articles, and make sure to also read what the other Nodes, guests, andstaff writers post.

And of course, if you don't already, follow me on twitter: twitter.com/evankonwiser

I'll keep you up to speed on all my writings, but general interest news, banter, and debate in the travel industry.

Thanks for reading and safe travels,

Evan

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tnooz guest post: Google entering travel could be nothing to worry about

Tue, 19 Jul 2011 07:25:07 -0700

I wrote a piece for tnooz about Google's acquisition and threatened domination of air search to be overhype.

You can check it out here: Google entering travel could be nothing to worry about after all

Agree? Disagree? Comment on the tnooz post to add to the discussion.

And make sure to follow me on twitter: twitter.com/evankonwiser

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Why Expedia had to deal with Groupon (and what made Groupon say yes)

Thu, 02 Jun 2011 07:20:00 -0700

Big news from the travel industry yesterday as Groupon and Expedia have announced a joint venture: Groupon Getaways

These will be typical Groupon deals ("up to half off") distributed through e-mail via the Groupon Getaways list. Groupon handles the user interface and deal distribution, Expedia will source the deals.

So here we go, a new frontier! Innovation like we've never seen before!

Or, is it more of the same? Groupon offered a Virgin America deal a few months ago and it appears the world is still turning. More so, it didn't even get abnormal buzz (anyone know how many they sold)?

In reality, I think Expedia was forced into making this deal by market conditions, strategic needs, and competitive threats. In short, they had no choice but to do this, and do it with the #1 player in the market. They were unable to succeed in this space on their own and they have a pricarious hold on the top spot in a market with iffy long-term fundamentals. To be fair, I do think this will be a good product and could do quite a bit of sales. But I don't think it's all that big news to the travel industry. I see it as a fancy new marketing channel for Expedia -- not necessarily changing how we purchase and get inspired for travel, but more just adding an element to how we interact with an OTA.

Here are the big questions and my stab at answers:

1) Why partner at all?

Expedia is the biggest travel brand in the US and Groupon already has a big salesforce that knows how to sell. Are you telling me Groupon sales reps can't sell to hotels? Or don't know how to put together packages? Living Social does it, so why can't they? Expedia, on the other hand, has already tried this with SniqueAway, which apparently isn't doing all that great. Expedia's failure to innovate is well documented. It took them years of their own mediocre mobile development before they bought Mobiata. I'm glad to see they figured out they couldn't do deals right alone, either. As for Groupon, they can go door to door to small hotels and certainly has the clout to call up Starwood and Marriott. What does Expedia really bring to the table? Maybe enhanced distribution and a marketing agreement to get members of both companies signed up for each other's lists. But to make this big deal just for marketing seems like a lot. My bet is it's the marketing dollars and existing booking engine that made this deal good for Groupon. With Expedia, they don't even need suppliers on board, Expedia simply can do it themselves by funding deals and providing a booking platform to execute. That is a deal that Groupon couldn't turn down.

2) What's the business model?

They didn't answer this publicly, but my guess is Groupon is getting a really sweet deal from Expedia. Part of it likely includes Expedia acting as the merchant itself early on and promising to fund many of the deals. Perhaps the deal breakage will help them re-coup losses, or perhaps they'll just use their really fat margins with some properties. The result makes this agreement free money for Groupon to leverage their mailing list and build a great user experience.

3) What are the competitors going to do?

By competitors, I mean Priceline. I have a hunch that Priceline was sniffing really hard on this one, and Expedia did something drastic to make the deal happen and keep them out. Priceline has quite a bit of money -- almost $2b cash on hand and a market cap of $25b! Expedia also has a bunch of cash (~$1.7b), but with a market cap of only $7.6b -- that's a lot less stock to give out in an acquisition or strategic investment. Am I saying Priceline was going to acquire Groupon? Probably not (although I wouldn't have been shocked to see something that big), but they could have made a major investment, or inked a big partnership. Or perhaps Priceline is about to buy someone else big in the space and Expedia needed to act first.

4) Will consumers like it?

If I knew what consumers would like, I'd be spending my evenings counting my money instead of writing a blog (see Jason's blog for our philosophy on that: Don't give bulls$^t advice). But I do think that the: "Pay $25 for $50" model might be more challenging for travel. You don't just buy credit to a hotel in Cancun in case you decide to go there in the next year, you plan a trip! The dollar values are higher and the trips take more time investment. This could be perfect for weekend getaways -- I see that as a major niche potential. Lots of sites have tried to inspire vacations in the past, but there is a reason Expedia and all the OTAs start with a destination box: It's what they're good at and why people use them. If I get e-mails from Groupon with cool destinations (as I do with Jetsetter et al now), it definitely piques my interest, but aside from a weekend getaway I'm not liable to purchase. Also remember the repeat business model is completely flawed here. In theory, people buy restaurant and local service Groupons many times over. Travel is a once or twice per year thing for most people. So even if you do successfully inspire someone to buy, they are only going to do it on occasion. Despite a higher average purchase, the scale here doesn't exist like it does in your local deals. Also, the entire merchant incentive to give 50% off is to get repeat customers. Do you think a Barbados resort thinks that by giving 50% to Groupon it will get repeat business? Likely not. That segues into my last question below:

5) Will suppliers like it?

Suppliers are already doing what they can to discount inventory. Like restaurants, travel inventory is perishable. Once the date passes, it's over. That is why revenue management became big in travel and is now ubiquitous for airlines, hotels, and car rental agencies. You might say that this will work just like restaurants, who currently give carte blanche Groupon deals all the time. Turns out, not so much. Despite also having perishable inventory, restaurants do not revenue manage! When you go in on a Friday, the menu is not more expensive than a Thursday. (Yes, they do very basic revenue management like early bird deals, and happy hour specials for sure, but not nearly as sophisticated as the travel industry). So my issue here is not that travel suppliers will not like the idea of Groupon promos, but that they'll want them to be revenue managed, which means a clash is coming. Andrew Mason in this video said explicitly there would be no restriction deals, but I'll believe it when I see it. Look for a mixed reaction from suppliers trying to figure out the long-term impact. In the meantime, expect Expedia to foot the bill. I bet they'll plow a significant marketing investment in funding early deals to show suppliers that it works. Then it will be up to them to make the pitch. For a while, I'd expect us to see great hotels and resorts in the marketing material, but really just Expedia credit that makes up the deal. Innovation? You be the judge.

I do not expect this deal to change any fundamental in the industry. It could be a great new marketing channel, but I'll eat my hat if in 12 months I'm expecting to use a Groupon to get 50% off coupons before buying my United Airlines tickets. To me, this is an opportunistic marketing arrangement for Expedia in an age when the long-term climate for OTAs is poor and Expedia wants to ride the daily-deal wave ahead of Priceline. Do I blame them? Nope. Kudos for making it happen. But just like local merchants will eventually rebel at consumers expecting 50% deals, I suspect the travel supplier is going to approach this like a lagoon full of alligators. Carefully. And with a shotgun.

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I'm Evan, the co-founder of FlightCaster and travel industry incendiary.

You should follow me on twitter at: twitter.com/evankonwiser

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Five Steps to Innovating Around a Big Slow Travel Company

Tue, 31 May 2011 08:46:00 -0700

I want to draw your attention to a great tnooz post by Alex Kremer today:

Travel industry gatekeepers should open their APIs to breed innovation

I whole-heartedly agree with everything Alex says, and it reminds me of some of the key points I tried to make in a post of my own last year.

In a talk I gave at The Beat Live biz travel conference in Chicago, I talked about how corporate travel companies had to open up their ecosystems, instead of being these walled gardens that are overprotective of their users and stifle innovation. See that post here: The future of corporate travel: How to change your approach to become truly traveler-centric

But I want to take it one step further. If Alex's post is for the big travel company who has an internal API and data cache that they are protecting, let this post be for the travel entrepreneur who wants to take them down. If they don't want to open up, then you'll just have to innovate around them until they either a) Have no choice but to play ball, or b) Become irrelevant to you (and inevitably, to the market at large).

Five Steps to Innovating Around a Big Slow Company

1) Use the few good APIs and extrapolate: When we were building FlightCaster and we wanted flight data, we called OAG, Innovata, FlightView, and the usual suspects. Some of them wanted a lot of money, others didn't have exactly what we needed. One company did: FlightStats (Conducive Tech). FlightStats had most of what we needed and were willing to work with us to create a package that was sustainable as a start-up and even had a self-service option (just as Alex suggests in his post). When OAG called back weeks later with some ridiculous pricing, we just said "no thank you". Similarly, we used the FAA's data feed for free.There are plenty of free APIs out there that can get you started, you just have to work with what you've got, not worry about what you can't get.

2) Scrape: When Kayak started, they scraped. Qunar.com in China scrapes. Mobissimo.com scrapes. This is the old-school meta-search tool. They didn't have fancy APIs with flight schedules and fares, nor did they have lucrative contracts with ITA. They just scraped. When Southwest Airlines said "no" to including them in search results, they scraped anyways (until they got a cease and desist, of course. But even that shouldn't stop a small start-up just getting off the ground). When we at FlightCaster found that the FAA API didn't have all the relevant info that was available on the web, we built a scraper. Suddenly our FAA "API" included several more fields that nobody else was using because they were too lazy to scrape it, including fields crucial to understanding flight delays. Similarly, when we wanted to do some analysis on fare trends, we scraped. We learned that some airline web-sites (e.g. Delta.com) allowed scraping quite easily with some basic workarounds that even beginner developers know well. Some made it more difficult, but you can either avoid those or invest in more complex workarounds. Nearly every web-site can be scraped reliably.

3) If your mouse can do it, your API can also: You can also build scripts which have your back-end infrastructure search and transact as if its a user. For example, you want to transact for one of your users on your site but the supplier doesn't have an API. Build a script which fills in all the fields on the supplier web-site and transacts as if its a user. On your site, it appears as if it all happens seamlessly. On the back-end, you're using the supplier web-site, not a fancy API. This can easily be good enough to get you off the ground and prove a concept.

4) Human-power: One of the most underrated tools for start-ups is what humans can do for you. Once at FlightCaster we were having trouble scraping fare data from a particular airline web-site. So we scaled down the data requirements and just took turns searching each hour and recording the data in an excel sheet. For our purposes, that was fine. Similarly, our earliest version of flight delay prediction was me opening up the 5 web tools I would use and manually predicting the delay (one of our early product names was "Virtual Evan". Sadly, FlightCaster was thought to be more marketable...). Even if the user enters the request online, the transaction can still be completed manually and the user never has to know. Even if this is not scalable (and you'd be surprised how far this can take you), it can get you to the point of investing in more permanent infrastructure or convincing a partner that you have the demand for their API. Amazon provides an awesome service for this called Mechanical Turk, where you pay people a few cents to complete a small task.

5) Go straight to users: Remember that at the end of the day, consumers rule. Case in point here is TripIt. They asked you, the traveler, to forward your itinerary to them and they were going to provide the value-added service of organizing your info. Now they have the data of who is traveling where on what airline, staying at what hotel, etc. And they know all the trips you've taken in the last year, and the ones you've already planned. They didn't start by asking an OTA or TMC for this info, they went and got it the old fashioned way, one user at a time. They got so much user data that TMCs were trying to protect that they were bought by Concur for $120mm.

If the travel community doesn't heed the advice to open their APIs, we will innovate around them. We're not going to wait and we don't need to. That being said, if everyone had easy to use APIs (even with a rev share pricing model), we'd probably just use them since they would make our products easier to build and more robust earlier on (always a good thing). If we do that, the API-owners can play in the upside and stay relevant in whatever new industry niches are created. Sounds like a win-win, right?

In the meantime, consider the five steps above. If you have more, be sure to let me know or add in comments.

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I'm Evan, the co-founder of FlightCaster, travel conference incendiary and industry blogger.

You should follow me on twitter: twitter.com/evankonwiser

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Why the mobile buzz is fizzing and how not to fall victim (for PhoCusWright)

Fri, 25 Mar 2011 13:54:09 -0700

A few weeks ago, I put together a presentation for the PhoCusWright Young Leaders Summit. The goal was to present something interesting to my fellow members of the Class of 35, something that reflected an industry trend. A tough task, for such a group of talented industry insiders.

On Friday, PhoCusWright announced that I was the recipient of their first ever Young Leadership Award as part of this program, so I thought I'd share it here on my blog. Now keep in mind this was done in January (things change fast!) and had a particular mandate, but nonetheless, I think the insights are worth sharing.

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Coming out of PhoCusWright 2010 in Scottsdale, I was nervous about a trend I was noticing. It was pretty clear that "mobile" and "social" were the buzz words of the year. Sure, "local" and a few others are increasingly sharing the spotlight, but 2010 was supposed to be "the year of mobile", wasn't it? And yet I felt like social was already dominating the discussion without mobile reaching anywhere close to its peak.

Let's assume for a moment that PhoCusWright's Innovation Summit and Class of 35 (young leaders) are good proxies for what's up and coming in the industry (not too far a stretch, I would think). I did some quick analysis and noticed that very little of the attention either on stage at the Summit, or in the dialogue among young leaders, was about Mobile. It was like mobile was sooo 2009. Going into 2011, everyone is focused on how to integrate with twitter, or facebook.

Hold on a minute folks, what happened to mobile? Is it done? Complete? Everyone has solved it? We heard on stage for 2 straight days that mobile is still a work in progress, not a proven business model, not a massive channel, just for marketing, etc. (so essentially, not solved at all!) and yet the forward-looking buzz is now all social.

I decided to take a look into the issue -- because I just don't believe this is reflective of smartphone growth and spending. Perhaps our industry was missing something, or too manic to stay the course!

Lo and behold, I found a few things interesting.

1) Business model for mobile still unclear, but investments finally being made anyways.

Perhaps 5 years too late, but Expedia finally admitted it couldn't build good mobile products, so it bought Mobiata (announced at PhoCusWright). Perhaps they were saying to the world that they *finally* get it: Mobile is important, so let's spend some money on someone who has proven they can build tools people want. Despite all the CEOs saying on stage that mobile is not a money-maker (albeit starting to drive meaningful search volume), there are some positive movements. Since I made this presentation, I'll also note Priceline launched their mobile web-site (well done!). Now, there is still A LOT of work to be done here folks, because these tools so far just move a good UI experience onto the smartphone, they don't actually take advantage of any of the features that come with it (e.g. interacting with the traveler while they're traveling). But, hey, it's a start, right?

2) Mobile, tablet, and desktop converging at a rapid rate

Two years ago, we all thought mobile apps were the key because it was soo hard to do anything on a smartphone without one. Today, it doesn't really matter that much, does it? Aside from a lack of flash, my iPhone does everything. My iPad does even more. The reason is two-fold: First of all, the iPhone and Android browsers are awesome (and RIM is finally catching-up). Second of all, network speeds are pretty fast now, and only getting faster. Together, this means your phone is like a mini-computer, not some specialized device. I admit, I didn't realize how important this was until February when I (finally!) traded in my ancient blackberry for a Verizon iPhone. It's like I was in the dark, and now can see light. The renaissance from the middle ages. The first buds of spring after a loong winter....okay, i digress. You get the point.

But the main takeaway here is that the industry is confused. We thought we had to just make our sites smaller and easier, now maybe we don't. Maybe now it's all about local and social applications on the smartphone. Or maybe it's about tablets. Or something else entirely. But the theme that unites all of this is: mobile! And the reminder of how disruptive this is comes care of Apple. Their recent Mac OS update includes an app store on the laptop/desktop. A peek into the future: Computer applications will be bought, installed, and used like mobile apps. So at the end of the day, which UI prevails? If you think it's the desktop UI because well, it's what we're used to and people will never use silly mobile apps on the desktops --- then I refer you to all those retailers who thought their web-sites would be at best complements to their brick & mortar stores circa 1998. You can find them in bankruptcy court.

3) Social is overwhelming us with awe and unknowns

The stats are hard to ignore, every person and their mother (and their dog and the neighborhood squirrel or hipmunk it chases) are on Facebook. It's ridiculous. Sometimes I think my parents are the only holdouts (fortunately I get to say that here because they won't know I posted anything). Perhaps when my 92 year old grandmother has an account before them, they'll start to rethink things.

Anyways, simply put: more facebook users than smartphone owners in the US. Period. Does that mean mobile isn't important? No. But it does mean that if you're a travel company with limited innovation resources, you have a lot of ground to cover, you don't know where to invest, and social is too hard to ignore, so at best you have to spread thin.

So what's the answer? Stop getting caught up in the buzz words, and get your mobile head on straight. It's too darn important not to. It's life or death. IPO or bankruptcy. Center Stage speaker at PhoCusWright or that attendee desperately looking for a job in traditional media sales.

How to get it right? Focus on two things:

1) Functionality that is just better in a mobile environment. It knows who you are. It knows where you are. It knows who your friends are. It might know your travel itinerary. Talk about power! Time to wow us, rather than just allow us to search hotels by shaking the phone to see what deals are nearby. (seriously, how many times are you buying a hotel nearby? And if you are, use Hotel Tonight. It's a sweet app. Click here to download it and I may or may not get referral credits)

2) Think of mobile as the future of your UI. Because it just might be. Pretend in 5 years your mobile apps/site gets 90% of your traffic (including tablets). What then? If that were the case, would you survive? If you can't confidently say yes, you've got some work cut out for you.

I'll give you until PhoCusWright 2011 in Florida to figure it out. Thanks to my $10k credit from from the Young Leadership Award, I promise you I'll be there, and ready to see who's allowed their mobile buzz to fizz for uncharted experiments in LocoSocioColor. I'll call you out on it, and maybe buy you a beer. You'll need it after the long year of watching your competitor's iPad apps eat your lunch.

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Like my blog? Don't like it? Either way, you should follow me on twitter.

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As oil prices go up, who you gonna fly?

Thu, 10 Mar 2011 16:14:35 -0800

Up up up go the oil prices, and it feels like 2008 redux. But this time around, airlines are at least a little prepared for the mayhem ahead. Two in particular have solutions to help you avoid the perils of rising fuel prices, or benefit from the false hype around the summer oil peak.

Late last year, I wrote about Continental's FareLock program. This allowed would-be travelers to pay an added fee to lock-in a fare without actually buying the ticket. My analysis was not so flattering, as I explained how airlines were abusing the revenue management advantage they already have over customers to add incremental revenue. The apt metaphor is betting against the house when they get to deal you the cards of their choice.

Today, I wanted to highlight an alternative approach, that of Allegiant Air.

In a letter to the DOT last month, Allegiant CEO Maurice Gallagher, Jr., asked them to reconsider the rule that says airlines may not change the airfare post purchase. While this sounds extremely consumer-unfriendly, Allegiant is proposing a specific use that passengers might actually not mind so much.

In a nutshell, Allegiant would like to explore offering two types of fares for any given flight: Fixed and Flexible. The fixed fares would be as any fare is today. Once you buy for $X, that's it (until you get nailed at the airport for lots of incremental fees, of course). The flexible fares would be dynamic, and would change relative to the price of oil. They would be conspicuously marked as such at the point of sale. Passengers would get a reduced fare, but take a gamble that oil prices will not rise. If they do, the passenger is promising to pay more money later on (up to a limit). On the other hand, Allegiant may also lower the fare if oil prices go down and offer a refund to the passenger.

This is brilliant as it offsets some of the risk to the passengers if they want it but doesn't change the business-as-usual fares. Allegiant already has rock-bottom fares and serves a leisure audience that buys their tickets months out, so the fluctuating fuel prices are particularly harmful to them. Additionally, their cost-conscious consumers might be willing to take this bet. If it doesn't work out, I bet they'll be happier paying that increase than they would the baggage fee at the airport. After all, it's not the airline's fault, it's the Middle East's.

This type of product might not work with some of the larger airlines. But let us differentiate this in two major ways from Continental's Fare Lock product:

1) Allegiant would give you a discount to take a risk, Continental is charging you to not take a risk. Additionally, Continental's is pre-purchase and Allegiant's is post. So the lifespan of the "risk" is only 3-7 days for Continental, but could be months for Allegiant.

2) Allegiant would peg the increase or decrease to oil prices, which are externally set. So now you are betting against a 3rd party, like sports, horse racing, the odds of the deck, or...the oil markets. This is an established, normal, rational bet to make. As opposed to Continental, who is asking you to bet against their own revenue managers who have all the data while you have almost none.

Kudos to Allegiant for once again bringing innovation to our industry. Let's hope the DOT considers an exemption for this kind of purpose (and it is implemented in a responsible way). If we're going to make it through this summer, we may need to see quite a bit more creativity from the airlines.

What other ways can airlines innovate to survive high oil prices? Comment if you have ideas. And no, raising prices 7 times in 2 months is not an adequate answer.

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tnooz: Why the industry should wake up and smell the new distribution coffee

Tue, 25 Jan 2011 06:30:58 -0800

My guest post on Direct Connect was published by tnooz this morning.

Please check it out: Why the industry should wake up and smell the new distribution coffee

Let me know what you think here or on tnooz. And if you haven't already, follow me on twitter.

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FlightCaster Acquired!

Mon, 10 Jan 2011 06:22:54 -0800

We're pleased to announce that FlightCaster has been acquired by Next Jump Inc. It's a good day here at FlightCaster HQ (freakin' phenomenal day!), and we're stoked about the new possibilities.

Before we go any further, let us address our users. FlightCaster.com will stay right where it is and continue to provide flight delay prediction for free. We're also making our mobile app free -- you can download it now. We'll continue to use our powerful algorithms to predict flight delays. We'll continue to push the envelope on getting the best travel intelligence to people when they need it.

Now, for a bit of context. While our flight delay prediction products are our most public-facing applications in production, we've actually been working on a lot of other stuff in the background. The biggest item in production over the past year has been an engine for travel discounts. We realized early in 2010 that helping travelers and businesses save on travel is as important as helping them get to their destination on-time. As we really dug into this space, we met the team at Next Jump and were blown away with their insights into discounts.

So who is Next Jump and why are we joining forces with them? For those of you who don't remember, Next Jump came out of stealth mode in late 2009. They are a leading source of discounts and loyalty programs and an increasingly powerful player in e-commerce. They power a number of web properties, such as the MasterCard Marketplace and Corporate Perks, which provide proprietary discounts and rewards to employees of member companies -- 90,000 companies in total. Think of it as a Groupon for brand names such as Best Buy, Sony, and Apple.

As proud experts in finding every possible travel deal, we were shocked to learn that we save so much money buying travel through Corporate Perks. The system works by giving you Next Jump WOWPoints when you purchase travel through your usual sites such as Priceline, Expedia, or Orbitz. You can then turn those points into cash or use them to get free stuff. We literally started booking all of our travel through Corporate Perks because we'd get the normal Priceline price plus rewards points equal to an additional 5% discount. Boo-yah, free money. After getting hooked on their product, we reached out to partner with them, and yada, yada, yada, here we are.

James, Jon, Evan, Jason, Jared, and Chase are full-time at Next Jump now, enjoying the ridiculous perks. We're in NYC for a couple of months and then we'll open up the SF office. Our bud Brad Cross is working with us part-time while he gets his newest brilliant creation off the ground.

So, what's next? Next Jump is a platform for discounts built on great data, and we love tackling data problems. We've set out to make Next Jump the best place to purchase travel and will be working on innovative travel products that best serve our consumers.

To those of you in the travel community, stay tuned for what's coming from Next Jump Travel. Evan will keep you informed on this blog, in addition to his usual ranting and raving about the travel industry.

Thank you everyone!

The FlightCaster Crew

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American Airlines is right! Time to move travel into 21st century only one decade late.

Wed, 05 Jan 2011 13:17:08 -0800

The travel industry is riveted by the chutzpah of American Airlines. By forcing Orbitz and Expedia to de-list AA flights, they are taking a hard stance on the future of distribution. The media storm suggests a stand-off of epic proportions -- one of the largest suppliers vs. two of the largest agencies in the world (and now Sabre is in the fray also).

But what is really going on here? Is this about fees? Is it about control? Is it about technology costs? A little of each, of course. But let me say what everyone is thinking deep down inside but few want to admit:

American Airlines is right. Expedia, Orbitz, Travelport, and Sabre are wrong.

For the OTA and GDS worlds, this is about protecting legacy, antiquated, unfortunate business models from technology that can cheaply and directly provide for us. This is like a tobacco company lobbying against anti-smoking because it'll hurt their profits, even if its good for the public (yes, I just went there, and no, I don't work for American, I don't even fly them much).

The industry is in an uproar that AA wants them to build new technological interfaces to work with Direct Connect. They are upset that TMCs won't get GDS fees if they go this route and the commissions that AA will pay them are uncertain. They claim that it is bad for the consumer, because it prevents apples to apples comparisons (really?) and other unsubstantiated complications.

Wow, could they have come up with anything else? How about those floods in Australia? Brought on by AA, no doubt. Quick, shut off Direct Connect before the floods reach Sydney!

The truth is American has been talking about this for years. They have established the API in conjunction with Farelogix, the Open Travel Alliance (and Open Axis Group), with many other carriers and industry players. They have been setting the stage that this is the future of distribution, that they want agencies to connect to them directly rather than through an intermediary. So it makes no sense to me that when they finally put their foot down and say that it's time to follow-through -- the travel technology community raises it voices in surprise, in confusion, in downright fury.

Let me quote Michael Strauss of PASS Consulting from a recent TNooz article:

"So here we are in a world where technology is ready to be implemented but progress and innovation are slowed down by political forces. It is as if we have this brand-new airplane that produces 50% less atmospheric pollution, but you are not allowed to use it as the revenue stream of the oil lobby would be cut in half as well."

Of course, he said that only after admitting that "it is challenging for us to promote direct connects" for at least the near term. So we all know the truth, right? We're just not collectively brave enough to act on it as an industry. That's a recipe for massive external disruption. If we can't do it, someone else will.

Agencies need to realize that they are distributors of travel inventory, and they are (whether they like it or not) at the behest of the supplier. Southwest doesn't want OTAs booking for them, so they don't allow it. If American wants OTAs to continue to distribute their tickets (which I'm quite sure they do), then they'll make the business model work for the agencies. Putting agency revenues at risk is not a sustainable strategy for a supplier who wants that distribution channel. And if they don't want the distribution channel, it's their prerogative and the onus is on the OTA to deliver more value.

The GDS needs to realize that their core business model is at risk (actually, if they haven't realized it yet, it's too late). Amadeus has been diversifying into more broad IT solutions for years. Sabre is a heavily diversified company, but the GDS is its gold mine. Travelport, well, they're getting there also, and their Universal API could be the "GDS 2.0", creating less cash, but playing a core role in travel distribution that will allow them to monetize other parts of the value chain. Of course the current GDS is a cash cow, but just like tobacco is watching their core model disappear, GDS also need to evolve. Simply saying "no" to the likes of AA won't do it. In the history of technology, it is invariably the companies that are first willing to put their core model at risk to innovate in the value chain that survive disruption, NOT the companies that put up walls.

If you don't believe me, let's examine Netflix vs. Blockbuster. Netflix put up streaming video as a free resource for subscribers, thereby making their core DVD business almost irrelevant. They put their core revenue stream at risk because they knew the future is in streaming, not DVDs. Now they have an opportunity to monetize the new model first, surviving the disruption. Blockbuster held onto its brick and mortar stores even though we knew the future wouldn't include them. Why? Because they made so much money and they thought it was a competitive advantage. Turns out, not so much. Now they're in big trouble (aka bankruptcy).

This is not an isolated phenomenon. Try Kodak. They invented the first digital camera in 1975. Yes, 1975. What did they do with it? Not much for decades, because it would completely destroy their underlying business of film and film processing. Even when they did have products, competitors had better ones. In fact, one of Kodak's first implementations of digital photography was to license it for a Nikon camera! (See Motorola, Nokia and digital phone technology for a similar story). By 2006, Kodak was the #3 player in digital cameras, with both Canon and Sony eating their lunch. They've also not managed to mitigate the impact of reduced film processing, having to cut employees.

When I look at Travelport's list of reasons why Direct Connect is bad, I think of a Blockbuster executive telling me that consumers want to always be able to go to their local store for a movie. That the infrastructure involved in delivering DVDs to their mailboxes or streaming would raise costs for consumers. That the business model of media companies will never support the digital revolution. In other words, that we're all destined to destroy the industry if we go along with this new, annoying, innovator. They'd be wrong. And Travelport et al, so are you.

Sooner or later, when this all settles, consumers, suppliers, and agencies will all win. Except for the GDS...they will lose. But the fact that they still wield so much power in 2011 is ridiculous. They should be happy their core model lasted this long and transition their businesses to lead this revolution, not respond to it.

So Orbitz, Expedia, Travelport, and Sabre -- Stop posturing for the benefit of GDS and hook up to Direct Connect already! We've heard from all your agency cronies but has anyone stopped to think what is really best for the consumer in the long-run? As a general rule, close connectivity with suppliers is GOOD for consumers. More customization, relevant merchandising, perks and rewards, etc. The notion that you need a GDS create discipline in shopping is technologically obsolete.

The delicious irony of this story is that American Airlines, the company that created the first GDS (and made billions off of it), is the company sticking out its neck to destroy them. Of course in other technology industries that would have happened in a matter of years, not the decades it took in travel. It's time to enter the 21st century --- I'll place my long-term bet with American.

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The secret truth about holiday travel, a letter to the traveling public

Mon, 20 Dec 2010 08:01:31 -0800

Dear fellow travelers,

If you read the newspapers and bloggers or watch the evening news, you might be worried about what you'll find at the airport this holiday season. The headlines read something like an obit for air travel:

For air travelers, holidays are the season for delays

Why Flying Sucks: Beyond the TSA

Is it still 'fly' to fly?

Is TSA going to far with air security measures?

At best, it will raise your anxiety. At worst, it will cause you to adjust your travel plans, or not travel at all.

Allow me to share a different perspective: Air travel is, quite simply, fine.

Actually, it's more than fine. December 2010, I can search online for itineraries that will take me from my home to any of thousands of destinations worldwide. In a matter of minutes, I can reserve my space on any plane and pay with a credit card that will allow me to avoid actually paying for months. When I do pay, the fare will be as low as it has ever been in the history of aviation. I can show up at the airport an hour before departure and be whisked away -- traveling 6 miles in the sky at ground speeds in excess of 500mph, often while watching Hollywood movies, enjoying a beverage or a meal, chatting with a friendly neighbor or reading the book I've been unable to get through during the busy months preceding my trip.

When I land, I'll be in a new city, state, country, perhaps even continent. I'll be re-united with friends, family, acquaintances, or perhaps even better -- the pure joy of discovering an uncharted land heretofore unknown to me, with nobody to see.

Travel is what brings the world together, it's what allows us to stay in the lives of family and friends spread across continents and time zones, it's what allows us to experience (and appreciate) foreign cultures, customs, and cuisines.

So I ask you: Is even 30 minutes in a security line really that bad? Is taking off your shoes and belts going to stop you from experiencing the majesty of Venice or your Aunt Stacey's Apple Pie?

Travel disruptions happen to us all -- but is the anxiety of a delay going to ruin your vacation? And how about those body scanners?

I'm not here to say whether they're good or bad, worth it or not. Frankly, I couldn't care less. We as a people have more important things to worry about than the TSA official that gets a look at our underwear. Don't let it get to you. The media would have you believe that it's an uproar, an outrageous violation. But it's at worst a mild infraction that enables the more supreme liberation -- that of mobility. Sure, there's the principle of the matter -- but make that argument in courtrooms and policy think tanks, not in the hearts and minds of the vacationing public.

My fellow travelers, I beseech you to focus your energy elsewhere. Like what variation of latte to get at the airport Starbucks, or if you'll choose the chicken or the pasta on board (and yes, you might ::gasp:: have to pay for your meal! As if meals are free everywhere else in the world. Give me a break!).

The secret truth: Flying isn't that bad. In fact, it's quite easy.

I know what you're going to say. That even if you get over security and lines, you've still got bad weather and lengthy, uncertain delays. This is true, as anyone flying through England this past weekend would attest. And you'd be right to a degree, there is no getting around that. But remember that weather can just as easily impact the 3 hour drive to your cousin's house on Long Island, or your ski trip to Vermont. Buy a book, or some magazines, and don't show up to the airport until you know the deal. Mother nature is nobody's fault. Yes, it can be stressful, I won't deny it, but it doesn't have to be a doomsday scenario for you and it's no different today than in the past.

In fact, travel in general is no worse than it was 10 years ago, and a rather painless experience in the scheme of life. With a little patience (no more than you need for holiday shopping, mind you), let one of our industry professionals take you away to a far off land.

And as you sit back and relax on your journey once airborne, take a moment to reflect -- on the incredible feat of aviation, on the excitement that awaits you at your destination, on the hard-working employees of your airline, airport, and TSA who work holidays to enable you to travel whenever you want, on the Boeing or Airbus engineers who designed that plane for your comfort and safety.

The rest of the world might want you to believe flying is awful, hardly worth it. They're lying to sell papers, exaggerating to get your attention. It IS worth it. Because it delivers the most meaningful, transcending, experiences of life. And frankly, a couple of hours extra in an airport or taking off your coat for screening is a rather small price to pay.

To quote a line I once read on an aviation employee message board -- "You're flying. It's a miracle. Shut the ::bleep:: up."

Amen.

Safe travels. See you in the skies this holiday season, and into 2011.

Evan

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You should follow me on twitter: http://twitter.com/evankonwiser

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When peace of mind is worth betting against the house: Continental FareLock

Tue, 14 Dec 2010 10:43:32 -0800

The latest fee-inspired innovation to hit the skies is Continental's new "FareLock" product (TNooz article on it here). It gives you the ability to pay a fee to lock in your fare without booking the ticket for up to 3 or 7 days depending on how much you pay. The fee is non-refundable, so if you go on to purchase the ticket or not, you're out the money -- generally $5 to $10 depending on certain factors such as advanced purchase and fare.

With some quick testing, a flight between Newark and SFO is eligible for FareLock if the outbound is 17 days or more in the future. At 17 days, only the 3-day FareLock is available for $29. At 24 days advanced purchase, you have the option between the 3-day at $9, and the 7-day at $19. For way in advance (e.g. 60+ days), it is $5 for the 3-day and $9 for the 7-day.

On the surface, this is a great option for consumers. If you're like me and you hate booking tickets early, this allows you a relatively cheap way to prevent fare creep if you're mostly sure you're going to take a flight but not quite wanting to commit to it yet. Sounds great, right? Sure beats the expensive change fee when you need to change your plans, and certainly is better than the fare going up on you!

But lets dig into this a bit more. As I saw in my testing, Continental says that the fee "will vary based on a number of factors such as the itinerary, number of days to departure and the length of the hold." Meaning they get to decide how much you need to "bet" on the fare going up. In essence, you are placing a bet. If you think the fare will stay the same or go down, you don't purchase FareLock. If you think the fare could go up by more than the fee (e.g. more than $10), then you do. Clearly Continental is going to adjust the fee based on similar factors as we saw. For example, if you're 6 months before a flight, the odds the fare is going to fluctuate in the next 7 days are much lower than if it were 2 weeks before the flight. As such, the FareLock fee wold be higher as we saw in our testing. Makes sense, right? So it's a bet.

In fact, Farecast (now Bing Travel) had an early business model doing this as a 3rd party (see here). They offered a fare insurance product called Fare Guard that allowed you to pay them for insurance against the fare going up if they said it wouldn't. They have all these proprietary algorithms that supposedly can predict fare movement (see it today at bing.com/travel when you do a fare search). Much in the same way, you would pay them a few bucks, and if the fare went up, they paid the difference. A very similar offering to FareLock.

But there's one difference, and pay attention folks, it's a big one: Continental also controls the fares.

That's right, you're betting against the house who gets to not only see the cards, but manipulate them at will. Even more so, by you placing a bet, you are effectively giving them advanced notice of demand, allowing them (dare I say asking, begging, pleading with them) to adjust availability accordingly. They can tell from search volumes if demand is high, and now by placing a bet, they get practically a weeks notice that you're going to buy. Of course they then can't change the fare on you because you've bought the insurance. But you also have to remember to go back to Continental.com and complete the purchase. If you don't do it within the time limit (3 or 7 days), you're out of luck.

And what if the fare goes down (gasp!)? Then you're out the $9, but you can of course cancel your reservation and make a new one. But as long as they've got your FareLock down, their incentives to lower the fare are nil. You've already professed you are going to buy, it's just a matter of time.

Okay, so I admit I'm spinning conspiracy theories that assume that the various arms of revenue management at Continental actually talk to each other. I'm also assuming here that enough people partake in FareLock to make an impact on the system (e.g. if you have a few people holding onto fares on one flight at a time, that would be a huge number given how many flights are available for booking at any given time). But that being said, I think the value is minimal here unless you can hold fares for longer -- like a month. I'd almost pay $20 or $30 to hold a fare for a month on a trip I wasn't ready to book for fear of a big fare increase.

But for a week? C'mon. Play the odds. Use your powers of reasoning (or e-mail me and I'll give you my "Better than FareCast" instinct). But whatever you do, don't bet against the house when they control the cards you're dealt. That's just silly.

Of course, look for other airlines to follow. Revenue is revenue. Just remember to add this to your total cost of trip. There are plenty of post-purchase fees, let the arms race for pre-purchase fees begin! If only I could get people to pay $5 to read my blog should I happen to decide to write a post in the next 7-days...

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You should follow me on twitter for travel industry insights and banter: http://twitter.com/evankonwiser

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Regional Airline Revolution: Should you be scared?

Wed, 03 Nov 2010 15:30:46 -0700

Regional airlines have received some attention recently, and generally not in a flattering way. They've crashed planes, sat on tarmacs overnight, been often very late, and generally brought significant scorn on their partner brand as well as the regional airline industry as a whole. Just this week, reports of business travelers fearing regionals appeared in the Chicago Tribune (see here). And more reports like this one on Bloomberg seem to confirm the flying public's not only fear, but general lack of knowledge about regionals.

So all this boils down to one big question: How do you know if you're flying a different operating carrier and should you avoid them?

The answer is simple: The operating carrier, if different from the marketing carrier, is listed below the flight info before and after you buy the ticket, by law. Just read it. And second, no, you shouldn't avoid them. But clearly you might opt to choose mainline carriers whenever possible due to general comfort and ease, if not the illusion of safety also. Because of their untenable relationship with the public and media in addition to their poor operating dynamics, regionals are shifting their own approach and we're likely to see significant changes in the coming year. But the bottom line remains that regional airlines are a safe means of transportation and while there are reasons to avoid them (safety just being one), I would never recommend being scared of or avoiding regional carriers for anything but a modest cost.

Now, an explanation --

The fundamentals of regional airlines (and the source of all their ills) are this: Small aircraft mean poor economics and pilot pay, but are a necessary evil to fill larger planes at hubs.

The large network carriers of the US have built a hub and spoke system around key airports. For them to succeed, they need to fill planes in and out of those airpots, especially those going overseas and on high yield routes. As in most businesses, larger quantity means higher margins, and the same is true for plane size. It is not an escalating curve, as planes have to get larger and there is a strong variable component of cost, but generally speaking larger planes have a lower unit cost, and international routes have a higher unit yield. But network carriers can't fill their planes with folks from the big cities that serve as hubs, so they built out their market by feeding in people from small cities.

In the past, these feeder flights might have been operated by different airlines altogether, but over time they forged relationships to deliver passengers seamlessly from point A to B, thus code-shares were born. In this arrangement, a passenger flies on Continental Airlines to Houston Intercontinental, and then transfers to an ExpressJet flight (regional carrier) from Houston to a smaller destination (e.g. Midland-Odessa, TX). The flight is branded Continental Express, and only knowledgable or unusually observant passengers know the name "ExpressJet".

Sounds like a great arrangement, right? So why has this system gotten so much flack in recent years? What happened to this seemingly symbiotic relationship? Many things:

1) Regionals fly mostly Canadair Regional Jets (CRJs) or Embraer Regional Jets (ERJs). (Before I get flamed, I do realize there are still props out there, as well as Embraer E-Jets. The financial performance of those other fleets are generally better, but other concerns remain the same). As fuel costs went up, these planes became unprofitable. Simple as that. CRJs generally don't make money on their own. In the scheme of things, the revenue they bring is is essential to the overall airline network, but this creates tension between the marketing (e.g. Continental, in this example) and operating (e.g. ExpressJet) carriers. In most relationships, the marketing carrier guarantees certain revenue and operating carrier foots the bill for costs.

2) Regionals crashed, five times in the US in the last 8 years (compared to 0 on-board crash fatalities for mainline passenger carriers in that time). The CRJ that crashed in Lexington, KY took off on the wrong runway. The Colgan Dash-8 that crashed in Buffalo, NY did so also due to blatant pilot error. I could go on. Suddenly, the spotlight is on regional airline safety. Almost every plane crash of recent times can be attributed to some degree of pilot error. Regional airlines safety regulations are often identical to their larger counterparts and all meet FAA standards, but the simple fact is regional pilots are less experienced. Less experience means greater chance for a mistake. Now you can argue that FAA regulations should be changed to make the minimum experience required higher, sure. But the same truth remains: Regional pilots are less experienced than mainline pilots. Universally, it's where pilots start on their commercial careers since mainline carriers can pick off experienced regional pilots for their entry level positions. It is what it is, you've got to start somewhere.

3) Mainline airlines control ops. Check out the analysis I did in on Continental vs. ExpressJet at Newark. Mainline ops control slots, they control ground handling and gates. That means the regional gets the shaft when things go awry because there are fewer and often lower yield passengers. It also means that when they get stuck overnight at airports, they don't concern mainline airline management (or at least, they didn't in the past).

So this sounds pretty bad for the regionals, doesn't it? Yes, it's true. But there's hope also. A few things are changing how this all works in the US and it gives us reason for optimism.

1) Merger mania of regionals: Most regional carriers are now owned by one of 4 holding companies of regionals, SkyWest, Pinnacale, Republic, and Trans States (and one is owned by AMR, AA's parent, although there is wide speculation it is for sale). This is recent consolidation in the past few years that has been stirred in part by the mainline carriers divesting their stake in regionals. You might think mainlines getting out of the biz is a bad sign for them, but it's a net good thing because it will mean larger pools of pilots, more uniform training and regulations, and more streamlined operations. Safety will improve, costs will go down, and regionals can find niche markets to exploit independently. Additionally, the legacy carriers have enough on their minds with merging, returning to profitability, and managing their own challenges -- the last thing they need is to have to run an entirely separate regional airline also.

2) Mainline merger mania means fewer regionals period. Now that the "big 6" is the "big 4", the airline don't need as many CRJs. They can combine CRJ flying into more mainline aircraft, avoiding some of the profitability and congestion issues. They will always have their place in the US aviation industry, but their impact will be reduced.

3) Media attention on regionals will force carriers to fix some of the problems. People are paying attention, and the marketing carriers are protecting their reputations better even when the flying is done by a regional. This means better regional performance overall. New regional aircraft in the works also promise increased safety and comfort for the passenger (furthering what the E-Jet has already done for Republic and JetBlue, among others). The DOT is also likely to increase regulations about disclosure, meaning passengers will be more aware of the operating carrier. That doesn't mean they'll pay attention, but all these rules do help force attention on the issue.

4) Slow growth means more senior pilots in general. Since growth has been stagnant the last few years and is just starting to pick-up, you have a generally more experienced pilot pool. While this might not impact every airline equally, it can have an impact overall. In general, more senior pilots mean more experience in the cockpit and a safer industry.

In closing, I think the problems with regional flying have reached their peak and we are likely to see big improvements. If you ask "are they safe?", the answer is unequivocally "yes". Sure, the safety record is slightly less than mainline carriers, there is no denying that. But they are still extremely safe by any measure. That being said, if you have the choice between a regional carrier and a mainline aircraft, why not choose the mainline? You get a larger, more comfortable aircraft, better on-time performance, easier connections (more likely to be the same terminal), and more senior pilots. But other than a preference for mainline (just like I prefer United to American, and LaGuardia to Newark), I wouldn't worry about it all that much. But do pay attention to who the operating carrier is when you fly -- if for nothing else, than just to be an informed consumer.

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The future of corporate travel: How to change your approach to become truly traveler-centric

Mon, 11 Oct 2010 10:47:00 -0700

Below is the transcript of a talk I gave at The Beat Live, a business travel conference attended by some of the top executives in the industry a few weeks ago in Chicago. I wanted to share it with my blog readers and the broader travel community. It's my perspective on how some of the existing major players in the industry need to re-think their capabilities and roles in order to adjust to the changing market.

I welcome your comments and thoughts.

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I’d like to begin with my definition of “traveler-centric.” And that is: A travel program build around traveler utility above all else.

I want to contrast that to the definition I’ve heard around the corporate travel community while speaking with travel managers and attending conferences over the last year: Adapting a travel program to meet traveler needs.

The reason this is important is that our industry is changing, and the companies that stay relevant to the traveler in a very real way will have the best chance of success in the new paradigm. I don’t believe the convention definition is good enough to withstand many of these changes.

I think this is likely to happen for two main reasons:

For one, consumer travel technology is vastly outpacing managed travel. This is not a surprise, nor should it necessarily be worrisome. Companies like TripIt, Kayak, Google, Apple, and the garage developers should produce the best traveler-friendly tools and technologies. A Travel Management Company (TMC) or Corporate Booking Tool (CBT) can never build the most beautiful user interface -- It’s not in their DNA, nor is it their mandate.

But as the baby boomer generation retires and the younger generations become the predominant corporate traveler, we are going to find they aren’t nearly as satisfied with the technology they’re getting from the managed travel companies for a high cost vs. what they get on their own in the consumer world for a low cost.

Secondly, this trend has a profound impact on the value chain as consumer-oriented tools carve themselves a space in the business model. Platforms like the iPhone have made it easier to monetize user experience and new technologies will continually put pressure on the value chain and extract revenue where they can. This means the business models are shifting, and the entrenched players aren’t necessarily in the right positions to adjust accordingly.

I won’t spell out the death of the TMC or GDS, but we all know the writing is on the wall. Twenty years ago, agencies were in between the leisure traveler and suppliers. Today, suppliers can market, sell, and up-sell their product directly to the consumer. How long before that becomes regular in managed travel also? Cost is a concern, but at some point there’s an inflection where you can’t hold back the tidal wave when low cost technologies can provide adequate cost controls and reporting.

Okay, so we’ve got some challenges.

But there are also some great solutions to tackle the issue of relevance and value-chain re-shuffling. Two important ones I’d like to mention for your consideration.

The first is data. Everyone in Silicon Valley is obsessed with personalization and recommendations. Those are the hot buzzwords right now, and it goes hand-in-hand with mobile and social media and many of the other trends we’ve seen. But the problem experienced by everyone from Google to some small start-up is access to data. Even Google doesn’t know everything about you, although maybe close to it!

It turns out that managed travel programs know a significant amount of information about their travelers: Itineraries, demographics, profile, transaction history, and potentially even more information if integrated with HR systems.

That’s an extremely powerful advantage. I’m not talking about using this information to do anything devious – but rather using it to make a better traveler experience. All the location-aware tools out there are already doing it. But location alone isn’t enough.

We should be harnessing all this information to create better travel tools and travel experiences. Even better, we should use it to make compliance the natural, easy course for travelers rather than relying on mandates. For example, when I get off a plane, I’d like my travel tool to give me one click access to request a taxi to my destination from a taxi provider sanctioned by my company and integrated with expense information so all I have to do is sign. That helps the traveler, it helps the travel program, and it helps the taxi driver. You’ve got the data, time to use it. This is still cutting edge even in Silicon Valley, so perhaps you’ve got to partner or reach outside your walls to make it happen. But I’d hazard the people to master this are going to be leading the way over the next decade.

The second solution is openness. Stop creating technologies with massive walls, legacy systems that are impossible to integrate, and this irrational need for proprietary branding and exclusivity. That is so 1999. It is not the way to create maximum value, especially when you’re doing things that you aren’t good at, such as creating world-class user interfaces.

This is how you view your suite of technologies

This is how your travelers view them.

Walled-gardens are the way of the past. One of the reasons Apple is killing it is they make it easy for every man, woman, and yes, child, to create an app and offer it through their store for their phones. Why haven’t Blackberry and Android been as successful with their application marketplaces to date? Because it’s not nearly as developer-friendly, and it’s not nearly as user-friendly in how you purchase apps. The killer app is the App Store itself, and the Developer SDK – the simple ease with which developers can create apps. Do you know how much it costs to make a world-class iPhone app? A few thousand dollars. Incredible, considering the power they have to transform the user experience of your brand.

And having been through the app approval process with FlightCaster, I can assure you that we can still keep this open system with some significant security and compliance. The notion that “open” means you can’t have the customization and security your clients demand is a myth.

It’s time to open up. If mandate is all you’ve got to get people to use your program, the future for you does not look bright. Let me give you an example: We all use Kayak.com to search for flights, right? Why not create a booking tool that uses Kayak’s front end? Why not make your booking tool cwt.kayak.com, or bcdtravel.kayak.com? Travelers can use the Kayak front end, and make it so that the prices are negotiated rates, the preferred suppliers are indicated, and when you hit “select”, it takes you to the corporate booking tool or TMC back-end to process the purchase?

You may cite lots of political, business, and technology reasons why you can’t do that. But my rejoinder to those excuses is simple: This is what your travelers already are doing. They are searching on Kayak, and then calling your agent or opening the CBT to process the booking. They do that because it is the most user-friendly way to find the flights they want, it’s the path with the highest utility for them. Kayak’s entire business is making it easy for travelers to use. As a CBT or TMC, your business is compliance, cost controls, expense management, back end connectivity, etc. You don’t even sell to the users.

Nowhere is this phenomenon more profound than with day-of-travel tools. Travelers are already forwarding their itinerary to various travel tools, they aren’t’ even waiting for you to integrate with them. There is real value in the itinerary, both to help the travel program and to reap the benefits from that marketing channel. If you can’t find a way to work WITH the innovators, you will be left out as someone else exploits the exploding market. This is all about being open, and working with those doing the best job of driving traveler happiness.

I started with my definition of traveler-centric, and I want to return to that. I mean it as the opposite of the mandate. You mandate an activity explicitly because someone would not otherwise do it. By definition, that means they prefer a different way. I urge the managed travel industry to understand that it doesn’t have to be that way – we, too, can provide tools that make it the preferred way, and in fact, that might be the only way we can maintain our relevance and business model sustainability as technology reaps disruptive havoc on our industry.

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I'm Evan Konwiser, co-founder of FlightCaster. You should follow me on twitter: @evankonwiser

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Southwest's acquisition of AirTran: Why they're doing it and why you should care

Wed, 29 Sep 2010 09:22:51 -0700

As the world now knows, Southwest is planning to buy AirTran for a mixture of cash and stock valued at $1.4b.

Most of the aviation community was caught off-guard by the suddenness of the move, if not exactly surprised. You see, Southwest has been saying for years that it was keeping options open for an acquisition despite always staying a little distant from the merger game. AirTran has sort of done the same, except for attempts to buy Midwest a few years ago before Republic bought it (and dismantled it).

The move by Southwest (and the apparently non-controversial acceptance by AirTran) has raised a lot of eyebrows in the industry. Yes, stock analysts are excited by the accretive value of the deal (especially for AirTran), but it seems at first glance that the deal doesn't make sense.

I'll give my view by answering three key questions:

Q1: Why is this acquisition silly?

Q2: Why is Southwest doing it anyways?

Q3: What does it mean for travelers?

Response 1: All that is wrong with this acquisition

1) Southwest is the most efficient airline operation in North America. Much of that is a product of its unified workforce, single fleet, and relatively benign airport mix. AirTran threatens all of that: New plane type, big workforce, major hub at ATL and expansion in the busy eastern corridor.

2) Any merger past a certain size brings along risk of cultural and productivity issues. Southwest's culture is legendary, but AirTran is big enough that it is a major threat to Southwest's culture and consistency of service (especially since Atlanta and some other stations will likely be entirely ex-AirTran teams). These types of major integrations can kill a companies much more stable than airlines are, so Southwest better stay vigilant.

3) 69% above market value? Woah. If they had made the offer 12 months ago, not only would the market value have been less, but the premium would have been less also. Good chance they're over-paying, simple as that (although every month they wait here on out will only drive up the price as long as the outlook continues to improve). Southwest stock has been relatively flat since the announcement, showing the market is still unsure.

Response 2: There must be some reasons why this is good, then, right?

1) Southwest must continue to grow, and it's running out of room with its current configuration. The best way to keep your unit cost down is to keep growth up. And since Southwest can't grow by adding capacity to current routes (we know the negative cycle that creates), they must find new markets. But any new market in the US is either too small or impossible to get into profitably. AirTran solves both problems by bringing a smaller plane and major entry into ATL (and growth at many other lucrative eastern airports).

2) AirTran is profitable. Always best to bring a winner into the fold rather than a loser. And they're profitable despite taking on Delta at ATL. They have a very impressive operation and leadership team with a great track record over the last decade.

3) The time is now. Southwest has enough stability that they can credibly spend equity and money on an acquisition without any liquidity concerns that come with a big recession (even though Southwest has always had a good cash position, shareholders are going to be wary about spending during a prolonged downturn. Ironically, that's the best time to buy price-wise, but that's the way our markets work). Despite that, still enough uncertainty remains that the price is reasonable (although as I said above, still looks high to me).

Response 3: What it means for Jo(e) Traveler

1) Bye bye AirTran. Southwest means to incorporate AirTran fully into their system -- they have the best culture and economics, no room for anything else. AirTran's perks? Gone. Assigned seating...gone. XM satellite radio...gone. Business class....gone. Wi-Fi....eh, that's likely to stay.

2) East coast, get ready for Southwest in a BIG way. ATL will never be the same. Expect major competition from Southwest with now a strong presence in key eastern markets. Southwest's position at BWI just got bolstered, and their slots/gates at LGA, EWR, BOS, etc. now make them a significant player. Delta and US Airways stand the most to lose here with major east coast networks. I foresee new-found price wars (good for the traveler) as the market share grab will be on as long as the recovery lasts.

3) Some airports are going to lose service. Actually, many will. AirTran services a lot of eastern airports with its 717s -- airports Southwest might not have any interest in serving anymore (e.g. My hometown White Plains is at risk, although probably less so than places like Knoxville and Asheville). You see, once Southwest gets its hands on that smaller aircraft, it will look at ALL airports nationwide where they can make the most money, not just those that make good connection points out of ATL. My guess is that will open up some great opportunities for Southwest all over the country at the expense of some of the smaller AirTran stations.

Overall, I find this merger a lot more palatable to the consumer than the legacy carrier combinations. Those mergers were far more about building scale (and yield superiority) for the major global alliances, not tapping into new markets and growth opportunities. For Southwest, this isn't about scale nearly as much as it is about growth and access to markets they can't get into otherwise. That means just serving more people on more routes, NOT growing market power on existing routes. Southwest just can't grow on its own into the places AirTran is big -- I don't think they'd have any aversion to competing with them (and the legacies) if they could. In fact, I bet they'd prefer it so they didn't have to risk their culture. But they're willing to put that aside for the growth imperative.

In closing, who's the biggest loser of the week? Sun Country, of course (bet you didn't see that one coming!). Sun Country recently had its bankruptcy plan approved and has been actively looking for a buyer. The price is cheap, also (~$20mm). Lots of people thought Southwest might swoop in to grab it -- giving it a growth platform in MSP and some 737-800s (Southwest recently got permission from some of its unions to add them to the fleet). It would have been a nice small acquisition for Southwest, and one that made lots of sense. Instead, they went much bigger in size of acquisition with AirTran, yet got smaller planes instead of larger ones. I'm guessing one purchase is enough for the time being, so Sun Country will have to find another suitor or hold off as a solo operation for a while.

Let the chess game continue, never a dull moment in the airline industry!

---------------------------------

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Part 2: The art of mastering airline loyalty programs -- Going for Elite

Thu, 23 Sep 2010 12:06:40 -0700

Part 2 of 2 on airline loyalty programs: How to master your own loyalty portfolio

Last week I talked about how airline loyalty programs are making a comeback. To piggy back on that, I wanted to offer my perspectives on which are the best programs and how you can master your own portfolio.

You may have seen lists out there for how best to maximize the value of your miles, but I wanted to focus how to maximize the value of the program, so that you can make the most of the overall experience in addition to the just using miles.

First off, here are my golden rules:

1) Never ever fly without earning miles. Even if you're on a new LCC you've never flown before, you may as well sign-up. You never know when those miles come in handy down the road if you fly them again (or not). It's just too easy not to.

2) Only belong to one program per major alliance. This way you can consolidate miles. Since you can earn and redeem on any carrier within an alliance, there's no need to have points across programs. However, it's always best to keep your points in the carrier you fly the most. Then you can use those points for upgrades and some other perks that might only be available to members of that program.

3) Pick a "dominant" program for you to focus on. Usually that will be the program of the airline you fly the most. If you're someone like me who moves around quite a bit, it might change based on where you live (I've migrated from Delta to US Airways to American to now United/Continental over the last 7 years). Ideally, you're not like me and you can focus on the same airline for several years running. Sign-up for all the alerts for this program so you know when there are mile specials and bonus point opportunities. Get a credit card of this program also so you can get the quick hit of 25k or 30k miles when you make your first purchase, and use it for purchasing tickets on that airline when you usually get 3-5x mies per dollar.

4) Go for Elite. That is the whole goal of airline loyalty. Yes, getting lots of miles is good also. But it's true they are hard to use, and while you can make good use of them to get magazines, upgrades, and travel -- loyalty programs can offer so much more. But they don't offer anything until you have status. Elite status gives you the ultimate travel experience. Even at the lowest tier, you generally get: Priority check-in, priority security, priority boarding, better seat selection, priority baggage, no baggage fees, special phone number for better service, need I go on? Talk about taking so many of the hassle points out of the travel experience!

My recommendation is to always go for elite. That means consolidating all your travel into one alliance, even if it costs a bit more from time to time. Ideally you've chosen the airline that offers you the most non-stop destinations that you frequent and competitive fares. But even if you have to pay a little more on occasion, think of the value of obtaining elite. Free baggage and perks like economy plus seats on United have actual real costs that you might pay for otherwise. You have to figure out how much elite is worth to you, but I'd hazard for lots of us out there (even only semi-frequent fliers), elite status is worth several hundred dollars over the course of a year. So why not put some of that benefit back into slightly more expensive airfare to get you on your favorite airline? It's a trade-off, but I think it's well worth it when you have to ante up an extra $20 or $50 here and there to make that happen.

Now, a lot of you out there might be thinking that you don't fly enough for elite status. That may be true, but when you consider all flights you take in a year, not just the ones on a specific carrier, you might be surprised how many miles you really fly. Base level elite status is 25k flown miles in one calendar year on nearly all airlines. Round trip LA or SF to NYC is 5k miles. So that's only 5 round trips coast to coast in a year. LA or SF to Europe is 10-12k miles r/t depending on routing. Do that twice and you're pretty much there. If you fly only up and down the west or east coasts -- yes, it might take A LOT of flights to make that happen. But if you happen to have a trip to Europe one year, it might push you over with your other domestic travel.

The other thing is you never know when you might have to fly. Trips tend to crop up, and if you're prepared by consolidating your miles, you won't miss out when a trip comes up late in the year and you haven't accrued enough miles in one place to make elite status a potential. Remember that elite status is based on a calendar year of miles -- Jan 1 to Dec 31 -- so it's best to keep that in mind and always start fresh at the beginning of the year. Finally, airlines now offer incentive to help you get to elite status faster. Some of them have credit cards where if you spend enough, you can earn EQM (elite qualifying miles). Additionally, if you're close to elite at the end of the year but don't quite make it, you are likely to get a marketing solicitation from the airline where for a cash payment or maybe one more flight on the airline anywhere (even a short hop), they'll give it to you. Additionally, there are programs like American AAdvantage's Challenge Program. It lowers the threshold for elite if you travel a lot on American in a short amount of time. If you call up an AAdvantage rep and tell them you want to sign-up for the challenge, it means you have 30 days to complete a certain amount of travel and they'll give you automatic elite (e.g. 5 or 10k miles in 30 days). Note they don't advertise this or promote it anywhere, you just have to call and ask!

Finally, Elite status isn't officially transferrable, but once you have elite on one airline, you can sometimes ask other airlines to match your status level. Call up and ask -- you usually have to fax or e-mail over a copy of your elite card from one airline before they comply with your request. It's well worth it to spread your benefits!

Finally -- my take on the best choice of program. Here are my criteria:

1) Points vs. Miles: Some programs use points, which are generally pegged to a monetary value or some set segment amount. These programs are often more flexible, but I find I can extract more value out of real mile programs. Additionally, when you fly long segments, you should prefer miles since you get more for your buck spent. So this means AirTran, Southwest, JetBlue, and Virgin America are out of the running (note Virgin and JetBlue also don't have elite status, so that's a definitely no-no anyways since clearly I view that as the best part of the program).

2) National network: This depends on where you fly, of course, but choose the airline that flies to your city the most and has easy connections for you. For example, don't choose US Airways if you live in Chicago. Similarly, don't choose Continental if you live in San Francisco. I'll leave this as a custom criteria.

3) Alliance: Especially if you travel abroad, find the best group of airlines for your international travel based on alliances. Personally, I choose Star because of Singapore to the far east and Lufthansa and Air Canada expanding options to Europe. SkyTeam is also compelling with KLM/Air France for Europe, and of course One World's newly merging British Airways and Iberia and anti-trust immunity with American mean great things for them also (plus Cathay to Asia and Qantas to Australia).

4) Airline specific perks: A lot of airlines offer a lot of the same service. But I've made no secret here than I'm a huge fan of the Economy Plus product on United. And an extra benefit is that it comes free with elite status. I also love Continental's overall product and service, so it's an added benefit that they're in Star even though I don't fly them that much living in San Francisco.

Verdict: Miles + SF hub + Star Alliance + Economy Plus = United Mileage Plus.

For you, it might be different. But follow the rules above, and whichever one you choose -- go for elite. I know a lot of people think they can't make it, but I'd hazard more people can do it than you think. And if you really don't fly anywhere near enough to make elite, than perhaps all the perks that come with it just aren't that important to you!

Feel free to offer your favorite program, tips, and tricks in the comments below. And if you won't make elite in 2010, gear up for Jan 1 2011 when all elite qualifying mileage balances reset to zero!

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Part 1: Why airline loyalty programs are poised to make a comeback

Fri, 17 Sep 2010 08:16:37 -0700

This is Part 1 of 2 in a series of posts airline loyalty programs.

It seems everyone has a loyalty program nowadays. Buy 6 cups of coffee at your local cafe, get the 7th free. Get points for transactions at your bank. Reap rewards for your gas purchases. And the newest one I learned about just this past weekend when I went to grab some lunch -- make sure to get your Panera Card.

But it's true that the airlines pioneered the loyalty program. American's AAdvantage Program launched in 1981 and while official membership is not published, rumors are that it exceeds 50mm people. Air Canada is famous for spinning off its Aeroplan loyalty program from the airline business to raise cash in 2005. The top airline loyalty programs are frequently cited as being worth more than the airline business itself. This has led to some interesting summations of the airline industry as simply flying planes in order to get people to join your rewards program, with the major revenue streams coming from the banks that buy miles for their credit card customers.

During the last decade it's true airline have clamped down on the value of miles as they've made it harder to redeem for flights. As such, lots of folks have shifted their attention to other programs (hotels, credit cards, etc.) and focused less on miles.

But I believe airline loyalty programs are about to begin a major renaissance that will once again return them to being the flag-bearers and trend-setters of loyalty building programs among travelers.

I say that for two main reasons:

1) Fees. The fee culture is rampant in airlines as they look for new sources of non-tariff revenue to boost the bottom line. But if you do a survey of the core revenue generated from folks who are members of a loyalty program vs. not, the results are startling: Loyalty program members generate significantly more revenue per passenger than non-members, even from the same cities with the same demographics. In short, loyalty is worth money to the airline operation, and lots of it. And that money out-weighs the revenue generated from baggage fees and exit-row seating.

Fees have generated a whole new area of "benefit" for loyalty members, namely the ability to not pay the fee. Get the Chase Continental One Pass credit card and you no longer have to pay baggage fees. Get the Barclays US Airways Visa Signature card and you get to board in Zone 1. Get Elite status on nearly any airline and you get most of your baggage, priority boarding, priority check-in, and priority seating fees waived. It turns out these perks might outweigh the actual miles accrued. I don't care at all whether I have 50k or 90k Mileage Plus miles, all I care about is whether I have the 25k in 2010 to earn Premier Associate elite status (good news, folks, I'll have it by November!). And the reason I care is that I want Economy Plus seating on all United flights. And I'll fly United exclusively to earn that status, and then enjoy the perks once I get it. That's loyalty at its best.

2) Consolidation. When there were 6 or 8 US carriers to choose from for domestic flying, loyalty was harder to maintain. If you're like me and you're willing to pay only a little bit more for your preferred carrier, that meant sometimes you could justify it and sometimes not. But that number has been reduced -- to only 5 major coast-to-coast carriers, and really just the 3 big alliances + Southwest. Yes, Frontier (and Midwest), AirTran, JetBlue, Virgin America, and Alaska all have market presence, but there are basically three alliances that can get you anywhere. This means it's easier to choose your preferred carrier. It also means there are fewer loyalty programs to join and maintain. I'm an active member of 5 airline loyalty programs, so technically I get benefit whenever I fly any of those airlines plus any other airline they share loyalty benefits with. But in one example of this phenomenon, I've never accrued a single Continental One Pass mile, ever, despite having flown Continental tens of thousands of miles in the last few years. Why? When they were in SkyTeam, I accrued Delta SkyMiles. Now in Star, I accrue United Mileage Plus miles. And while I have ~100k US Airways Dividend Miles and used to be a Dividend Gold member for several years, I now no longer accrue those either, I put it all in United since I've moved to San Francisco.

The point being that it's easier to consolidate your miles without consolidating your travel, and that makes the programs more useful for the traveler. It might dilute the loyalty benefit to the airline, but in the age of consolidation, it matters less (e.g. Continental and United will be merged soon, so it hardly matters to Continental that I earn United miles on them).

This resurgence of the programs is not lost on the airlines. United has been advertising their Mileage Plus program on billboards and TV spots in the San Francisco area for the last year, and given the upcoming combination with Continental's One Pass program, that is not likely to stop as that newly merged program stands to benefit from the combined membership and marketing power that goes along with it.

The trend of dumping airline rewards for credit card rewards and cash back is starting to come to a close. Credit card and other broad-based rewards programs will continue to be important and valuable, but airlines are once again regaining their mojo and their ability to assert their loyalty dominance. If airlines truly recognize this opportunity, we'll see them making their programs more beneficial and competitive in the coming year, rather than more restrictive. There's been a slight trend towards that lately, look for it to continue.

Nothing quite like making life more difficult for everyone else to make loyalty program members feel like kings and queens!

Up Next in Part 2: How to master airline loyalty rewards programs and which are the best.

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The Good Side of Fees: Paying for Convenience - Post on BNET

Wed, 08 Sep 2010 09:24:07 -0700

I was a guest writer for Brett Snyder (aka the Cranky Flier) this week.

Here's the post on BNET: http://www.bnet.com/blog/airline-business/the-good-side-of-fees-paying-for-convenience/2261

Enjoy!

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A case of strange bedfellows in NJ: United + Continental = Southwest Boon at Newark

Wed, 01 Sep 2010 10:40:32 -0700

The big news from last week was NOT that United and Continental passed DOJ scrutiny, it was that they did it by giving Southwest an incredible gift. In a behind-the-scenes deal, Southwest was granted 36 slots at Newark from Continental as part of a slot divestiture that cleared the merger of the DOJ's one area of concern. As a result, the DOJ dropped anti-trust proceedings and the merger has cleared a major hurdle on its way to approval.

You can read the Washington Post's coverage of the DOJ hearing here: Justice Department clears United, Continental merger for takeoff

But what is being written as the secondary story - Southwest's grant of slots at Newark - is actually the big news. The DOJ has stated in its report that the only area of concern regarding the proposed merger is the monopoly on routes between United and Continental's hubs. Namely, between Newark, Houston, Chicago, and Denver. Since Newark is the most slot constrained airport of the bunch (Chicago O'Hare is gate constrained, but not slot constrained), it boils down to whether there is any room to add competition on these routes. The clear answer to allay anti-trust concerns is to demand slot divestiture by the merging carriers, as they can ideally combine flights into larger equipment to serve this market (e.g. United's A320s between ORD and EWR can go, and the merged carrier can upgrade equipment to 753s on those routes to make up for it).

So far this sounds like a pretty straightforward story. But remember that in the past (for example, US Airways and Delta's slot swaps at LGA and DCA), airlines have viewed LCC entry as a prohibitive prerequisite for anything. Meaning any deal that required the divestiture of slots to an LCC would be a deal breaker. Obviously a merger is very different than a slot swap regarding the importance of the deal, but why did United and Continental bow down to the DOJ so easily, even before they publicly made their remarks? Also, why didn't they find a less threatening carrier to provide with the slots, rather than the feared Southwest?

There are two great answers to this, creating a delicious strategic move by United and Continental.

1) Southwest is the epitome of pro-competitive moves. It means the DOJ doesn't have an opportunity to think about approving the plan, it's an automatic "yes". It means Continental and United are serious about listening to DOJ concerns and doing what it takes to make the merger a success. In other words: It's a guarantee of positive outcome. Given all the moving parts, sensitive timelines, and wary legislature (who, by the way, can still block this merger), it was a shrewd move by United and Continental to try to put to rest any concerns of anti-competitive behavior. If they had tried to give the slots to Sun Country, AirTran, Spirit, and USA 3000, they would have been met with skeptical responses and ongoing legal hassle. Southwest is a cure-all. Brilliant.

2) Of course Southwest comes at a price. But let's review the three markets we're talking about here: Newark-Houston, Newark-Denver, and Newark-Chicago. For two of those markets, Southwest uses a secondary airport (Hobby for Houston, and Midway for Chicago). This means that even if Southwest opens the "directly competing" route to the merger carrier, it won't actually compete. How's that for strategy! At Denver, of course, there could be some strong competition. But remember that with Continental, United is no longer an O&D feeder into Newark. It's Denver-Newark travelers might be connecting all over the world. Additionally, the combined carrier has such a frequent flier business traveler base in the NY metro area, it's likely only going to cede leisure, low yield, travelers to Southwest. No big deal. The same goes for most other routes Southwest might choose to compete on at Newark. It's never a good idea to let Southwest into your hub, but the strategic risk for the new United is far less than for other carriers given their strong international route network out of that airport (e.g. Southwest at Denver is a much bigger risk for United, since it's primarily a domestic hub).

So win-win, for the DOJ, the public, Southwest, and United/Continental, right?

Well, there is one area that keeps bothering me. What will Southwest do with the slots? They have no obligation to use them to fly to Midway, Hobby, and Denver. If past moves by Southwest are any indication (a la entry into LaGuardia), they'll use some for Midway and Baltimore. The others? Hobby probably. Denver? Maybe, maybe not. But here's the real kicker: Are Houston Hobby and Bush Intercontinental airports considered the same market? What about Midway and O'Hare in Chicago? In the DOJ's analysis for prior mergers and potentially anti-competitive actions by airlines, the DOJ has determined pretty clearly that different airports within a metro area are NOT the same market. Previously this sniff test has been applied to the three main airports in NY (EWR, LGA, and JFK), and the three in the Washington DC area (DCA, IAD, BWI). The DOJ has confirmed that market share in one cannot be combined with another to test for market power, they have to be analyzed as separate markets. So why suddenly in this case are the Houston and Chicago airports being considered as unified markets?

Hard to say, and there is no public response to that question. But it rolls up into the issue that Southwest hasn't promised to use the routes specifically to counter United and Continental's route monopoly either. So if they don't fly to Hobby, well then, it hardly matters if it's the same market at Intercontinental or not, does it? It might just be that giving 36 slots to Southwest is a big enough give-away regardless of how they're used and how it impacts the specific potential monopoly routes outlined by the DOJ.

Shrewd move by United and Continental, for sure. Great move by Southwest to get into Newark in a meaningful way (significantly more than their presence at LaGuardia!). Unclear if the results will directly attack the merger monopoly concern, but Southwest's presence at Newark will clearly have a positive competitive impact on the market, so there's reason to be optimistic about that. Will the new United learn to rue the day they became bed-felllows with Southwest? Very likely. But either way, it will be fun to watch it play out in 2011.

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Can flight search be improved? Three innovative sites that say yes

Mon, 23 Aug 2010 11:31:20 -0700

I'm an avid user of consumer flight-search tools. I always have one or two trips I'm planning at any given time. I use a handful of flight search engines on a daily basis, always checking fares at least once or twice a day (You'd be surprised how quickly options and fares move around).

I'm also a general believer that flight search options out there are pretty good. Especially for domestic travel, it's not hard to quickly know what is available and for how much.

But that doesn't mean there isn't room for improvement or that some folks aren't doing some interesting things. I wanted to draw your attention to a few innovations in flight search that I think are poised to become mainstream. Now I realize some of these aren't brand new. I will highlight them still because while they are ahead of their time, I believe their features are poised to become mainstream.

First, the baseline. The best mass-market search tool today is Kayak.com. Yes, I've worked there, so I'm biased. But I'm not the only one who feels this way. In fact, if you audit innovation in flight search, I think you'll find that most of the features (e.g. filters, searching multiple sources, sliders for selecting times, etc.) started at Kayak and became ubiquitous. Kayak is my first stop for flight search and has pretty much everything I want.

That being said, here are three flight search sites and features that I also find quite useful:

1) Hipmunk and the Agony Meter

Launched just last week, Hipmunk is the latest to the game of flight search engines. For those of us long familiar with flight search tools, their search result page might look similar to ITA Software's QPX Matrix results. But QPX has never been able to book tickets, so was never more than a good search-only tool. Kudos to Hipmunk for recognizing the need and bringing it to the market as a fully functional purchasing tool via click-through to Orbitz.

But the best part of Hipmunk is not the display. It is the Agony sorting. Hipmunk's value add is that they filter out all the results that you'd never choose because they are simply more expensive versions of other results, or less attractive schedules for the same price and airline. For example, they show a United non-stop, but filter out the Continental and US Airways code-shared version which are both available at a higher price. Similarly, they show a flight with a stopover in Houston, but don't show 2 other flights that have the same route but earlier first legs requiring huge layovers. I'd never book one of those (who wants a 5 hour layover when a 2 hour one is available at the same price?), so best not show them to me. And in case you're worried about missing out, you can easily toggle them on and off, they just default to off.

Hipmunk has a ways to go to build out its parity feature set (e.g. flexible dates, more sources of fares, etc.) but it's definitely a welcome addition to my search site portfolio.

(Note: In full disclosure, Hipmunk and FlightCaster share an investor in Y Combinator)

2) InsideTrip's Flight Quality & Total Cost of Trip

I've written frequently about InsideTrip because I think it's a window into the imaginary world where we purchase tickets based on something other than schedule and price. Their Flight Quality dashboard with 12 inputs is a welcome relief to comparing flights and you see other sites have started to incorporate pieces of it, like red-eyes, turboprops, short layovers, and on-time stats. The additional features of fleet age, legroom, load factor, and gate location are neat things to use as points of comparison also. Look for the more salient data points to continue to be integrated across the web.

Their "Total Cost of Trip" calculator adds on baggage and drink fees. I think the drink fee portion is a bit of a gimmick, but the baggage fees do help since it's best to include them in the comparison. Note though that Kayak (and others) also do this.

I think there's a big risk when adding so much data into flight search -- namely that it becomes way too complicated (See Scott Adam's blog post on that here). But in general I feel that there are plenty of "simpler" sites to use if you don't care about getting the best option or lowest price. For savvy travelers (like us), more data in an elegant way is often an upgrade.

3) Yapta's Fare Tracker

Fare tracking and comparisons have been all the rage lately and many sites now have fare calendars to tell you when you should fly as well as fare trackers telling you if the fare is trending up or down (not to mention Bing/Farecast's prediction). While these data sets are interesting, I never find them super-helpful. Why? Because I don't care what the lowest fare is on the route I'm traveling. It is almost always a 6am departure or a red-eye and almost aways has a stop-over in an undesirable city. Tracking the trend of that "lowest fare" is useless to me. As is seeing how that fare varies whether I fly on Tue or Wed. What I want is to see if the 10am non-stop departure varies day-to-day, and there's no good way to do that yet.

Part of the problem is that most sites get their flight intelligence from actual fare searches that other people do. They cache the data and then use it to show me what other searched fares are. They're not actually instigating searches on their own just to populate the calendar or trend map for me (hence you sometimes see blank spots). They also don't have a good way to know which flight I want, so using that data is hard. Perhaps Google and ITA together can solve this problem since the cost of instigating searches would no longer be a barrier to having a complete and valuable dataset on fare history.

Yapta doesn't have a calendar, or a trend tracker -- But they will track the fare on specific flights you select and send you e-mails when the fares change. This is super-helpful because it enables me to find the right time to book my fare. So whenever I know I'm going somewhere, I always go to Yapta and track the specific flights I would like to take, as opposed to tracking the lowest fare on the route like all the other sites. Mind you I'm a pretty price sensitive traveler -- I'm not going to pay a ton more for a better flight, but I am willing to pay a few dollars more for a far more attractive time or routing, and that's almost always lost in the current fare trackers.

I often find that even if the "lowest fare" doesn't go down, I can get some of the more convenient flights to price match the lowest. To me, that's a big win. I'd just as rather get a much better flight for the lowest fare than save $50 on a crappy one.

There are plenty of tools out there, with new ones coming along all the time as the OTA's make it easier to access their fare search results through an API. This has caused speedy innovation which is always good to spur the industry forward. While I don't see flight search technology changing any fundamentals in the short term, it will continue to refine itself to provide for a better user experience. And with Google now potentially in the game, that innovation cycle sure isn't getting any longer, to our benefit no doubt.

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Did Southwest just throw us under the plane? Sneaky fine-print changes explained

Thu, 29 Jul 2010 08:57:23 -0700

A little bit of news out of Dallas -- Southwest has been playing chicken with its Contract of Carriage. That's the 30+ page document that each airline has and you, as the traveler, agree to when you purchase a ticket. It's the fine print -- the rules and regulations about what they have to do for you and when. While it's rarely read, it is the source document for policies such as when you get compensated for a cancelled flight, when they put you up in a hotel, and the rules around baggage, to cite a few examples.

On July 14th, Southwest decided to add "mechanical failure" to its list of "force majeure" events. That's the list of things that are explicitly outside the airline's control and therefore outside their responsibility to provide any compensation when a passengers is impacted by such event. This was first reported by the Arizona Daily Star, and you can read the article here.

Then just yesterday (July 28), they edited it again (view the latest here), presumably based on feedback from the first edit from places like the Cranky Flyer. In the latest version, they clarified what they really meant -- not all mechanical failures are out of their control, only "mechanical difficulties by entities other than Carrier". What does that mean? It means Southwest will take responsibility for their own equipment, but not the equipment of airports, the FAA, or perhaps contractors. Interestingly enough, they made an additional edit -- they added "inability to obtain...airport gates" as an additional thing beyond their control. This I think is higher impact than it sounds, since a lack of gates is an often cited reason for delayed or canceled flights at the more congested airports. That being said, other airlines (e.g. Delta and Continental) have the generic term "availability of facilities" as something out of their control, so this might just put Southwest at par with the industry.

This second change will quell some of the rage, but it still raises some interesting questions about what exactly is the Carrier's fault vs. not. And how can they just quietly change the fine print which then can have a major impact on the traveler -- whether or not you are entitled to a hotel and meals, or even alternate transportation, when there is a major delay or cancellation?

Southwest has an answer to this: They're making no such changes to policy, only the fine print. In fact, Southwest claims nothing is changing on the customer service front. That would leave the Contract of Carriage change to be purely a legal one. They're trying to limit liability, but have no intentions of changing the customer experience unless that includes a lawsuit.

That's fair -- in today's litigious world an airline, like any other company or person, should protect themselves from frivolous lawsuits. Having someone sue because they missed a meeting due to a mechanical failure is a needless legal expense by the airline and clearly without merit. So assuming Southwest truly doesn't plan to change the policy, this is harmless, right?

Let me offer 3 reasons why these sort of changes are much more consequential than Southwest might think:

1) No policy protection: The Contract of Carriage, while not a customer service bill of rights, represents the foundation of customer service policy. Even though Southwest or any airline can choose to enact any policy that is more customer-friendly than the Contract, they're legally not bound to do so. As such, this is a slippery slope. How long before the Contract seeps into customer service? Even if it's years, they're setting a dangerous tone by making this change.

2) Other airline are armed and dangerous lemmings: No other major carrier in the US has mechanical failure of any sort as a force majeure event right now. But whenever an airline issues a customer-unfriendly change to anything in it's network (e.g. fees galore), the other airlines watch closely and usually follow-suit. So Southwest might have unwittingly set a precedent and I would bet the general counsel offices in other airlines are looking at this to see if they should do the same. If they do, it can quickly spiral from the Contract to policy. It also begs the question: What other ways can the airline tweak the Contract to make it more customer unfriendly?

3) The Law of Unintended Consequences: Why is it that major airlines can't seem to understand that the law of public opinion is not based on fact, but perception of fact? A quiet (aka secretive, devious) change to the Contract of Carriage to make mechanical failure out of the airline's control sure sounds like a very unfriendly action. How long until Senator Schumer (D-NY) starts convening panels to talk about this? In today's climate of DOT micromanaging, is this really the sort of move that inspires confidence in the airline industry? They should be doing whatever they can do present an image of customer-friendly innovation. That just maybe, they have this whole passenger-experience thing under control. That they can treat people with respect when things go well AND when things go poorly. I think Southwest picked the wrong year to be making quiet changes to their Contract. Despite this being benign in intent and (in all likelihood) implementation, it sure smells like a rat to the untrained nose.

All this being said, I applaud Southwest for so quickly editing the document. They have thus admitted it was a mistake and have softened it. Is it enough to avoid the public wrath? Perhaps. But let this be a warning to all airlines -- At this critical time, when the economy is starting to recover, the DOT is thinking about making life WAY more difficult for you, and passengers are fed up in a serious way: Think carefully about how the world might perceive your actions. Spare yourself the embarrassment and maybe, just maybe, one day you'll make the evening news for something good, not bad.

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