Monthly Archives: September 2008

We’re Getting on a Plane and the Economy is Going Down the Tubes

Black Monday Recalled

Good morning from the Louis Armstrong International Airport. Yes, for you without GPS capability, that means I’m in New Orleans. I’m leaving this morning for Dallas, where I will attend the Southwest Airlines’ Media event Tuesday and Wednesday.

I’m sitting here looking out the window at the US Airways Piedmont retro livery. What a cool airplane. Then again I’m a sucker for most any retro paint job.

Actually, I’m looking at the Piedmont livery in-between reading about the meltdown in the financial markets, both here and overseas.

All jokes aside (re: the Origami Bank folded overnight) it’s not good out there folks. As the ex-CEO of Salomon Brothers, John Gutfreund, said this morning on CNBC, the problem is — nobody knows what the hell is going on or how bad things really are. Either here or in Europe. Much less Asia.

My personal take is that John is exactly right.

The FDIC announced a deal this morning between Citi and Wachovia. I was not able to hear just what Citi is taking over and what it is not. But it sounds very similar to the WaMu deal last week.

While they are both being cloaked as having been “absorbed” or “taken over” by other banks — the truth is that both banks failed. Period.

And I doubt they are going to be the last.

Meanwhile on the other side of the pond, Belgian-Dutch banking and insurance group Fortis was propped up as the governments of Belgium, the Netherlands and Luxembourg took a 49% interest in the financial, banking and insurance group, in return for an injection of $16.4 billion.

But that’s not all.

The U.K. Treasury said Monday it took control of Bradford and Bingley and will transfer the midsized mortgage lender’s retail deposits business and branch network to Abbey National. B&B is a major provider of mortgages in the U.K.

Meanwhile back on this side of the pond, the Federal Reserve announced a massive injection of liquidity — a deal that involves the central banks of a number of European countries

I’m not sure I want to see what’s going on when I get off the plane at Love Field.

Hang in there folks. It’s going to be a very rough day on Wall Street.

PlaneBusiness Banter Now Posted

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Shame on me.

I forgot to post the note here about PBB being posted earlier this evening. Okay, make me eat bad fish. Or something. I was distracted watching the Dallas Cowboys lose to the Redskins.

Subscribers to PlaneBusiness Banter can access this week’s issue here.

Financial Crisis Hits Japanese Banks; Origami Bank Folds


A reader just sent me this news update. It seems that the credit crunch is now hitting Japan fairly hard.

“The Origami Bank has folded and the Sumo Bank has gone belly up.

The Ninja Bank has taken a hit, but is still in the black.

The Kamikaze Bank shares have nose-dived, and 500 staff at the Karate Bank have got the chop. The Karaoke Bank has been put up for sale and is going for a song!

The Bonsai Bank has to trim some branches, while there is something fishy going on at the Sushi Bank. Staff there are expected to get a raw deal.”

Hey, if we don’t keep our sense of humor, what are we going to have left? Right?

Farewell to Butch Cassidy

Obit Paul Newman

Today we learn that Paul Newman — the man with the sexiest, most unnerving blue eyes in the world — not to mention one of the handsomest sidekicks on horseback, is dead.

Newman apparently died Friday at this Connecticut home surrounded by family and friends. He had reportedly battled cancer for some time.

I think I may have to hit NetFlix today and order up a copy of “Butch Cassidy and the Sundance Kid.” “The Sting” too. Maybe even “The Verdict.”

A PBB tip of the wing to Paul — one of the kindest, most generous, irreverent, intelligent, down-to-earth, and talented humans to have ever graced us with his presence.

Update on the Potential Benefit of $2 Cokes on US Airways


Back at the WHQ today. More from me later today. But first — as they say in TV land — an update on something I wrote earlier this week in regard to US Airways. In my post the other day about how quiet the flights were — sans the usual drink service — I alluded to the fact that perhaps the airline was also saving some money in terms of not having to provision as many soft drinks, etc. on board.

The airline continues to stock just as much, in terms of provisions, as it did before. I heard this first from one of the flight attendants on my flight yesterday and a quick check with the folks in Tempe today confirmed that yes, this was the case.

So the airline is not really saving any money, in terms of any weight issues onboard. And no — there is no danger of passengers being without ample refreshment should a long delay occur.

Where the airline is saving money is in the fact that fewer people are drinking soft drinks, which, obviously, means that in the big scheme of things the bill from Coca-Cola or whomever is lower than it would be normally.

Then there is the actual revenue the airline is making from charging for drinks.

Another point — several readers wrote me the last two days and asked more or less the same question. “Does this mean I think all airlines should do this? Have I lost my mind?” Or words to that effect.


As I said in my speech at TheBeat Live Conference on Tuesday, we are in the middle of an extremely creative time for the airlines right now. The question is — given an airline’s brand and the level of service it wants to provide — against its current revenue and cost structure — what is an airline going to do in terms of ancillary revenues?

In the case of US Airways — the airline has continued to push to be more of a low cost carrier since America West merged with US Airways. In effect the airline really has no definable “brand” right now. So for them, I don’t think it is that big of a problem.

But — would I recommend that Continental Airlines do it? No. Never. It would be a total 180 degree turn to the airline’s continued attempt to stress a particular level of passenger service.

And I doubt Continental Airlines will do it. They may do some other things. But they are not going to charge for Cokes.

Just how to tweak an existing airline brand right now is a huge question — given the revenue and cost scenarios. But I don’t see this as a negative. I see it as a very opportunistic time for the industry. Or at least for those who are willing to break the old mold of “well if airline A is doing it, we must all have to do it.”

I just don’t think that holds anymore. Some things are going to work well for some airlines. But they are not going to work for all airlines in the same manner. Yes — those “marketing” people at airlines may just have to start earning their stripes. Instead of simply thinking about what routes to add next week.

The ATA Should Find Out The Facts Before Screaming Foul


Getting ready to make my way back to the WHQ today so just a quick note.

I see that late on Monday the Air Transport Association issued a press release in which President James May exclaimed, “The market’s extreme volatility suggests that speculators, who withdrew tens of billions of dollars from the commodities markets when Congress threatened to tighten oversight of excessive and harmful speculation, breathed a sigh of relief last week when action in the Senate seemed unlikely and returned to the energy markets in full force. Well, speculators are back and prices are up.”

Not hardly Jim.

Oil futures contracts for October expired on Monday. The price climbed on Monday because those who had taken short positions had to cover their rears. This was made clear yesterday when the price went back down — ending at $107 and change.

Putting out press releases in which it is clear you don’t know what you are talking about doesn’t help build confidence in your credibility. I’d suggest the ATA consult with a professional next time before spouting out nonsense.

We Are Also All Witnesses To The Biggest One-Day Jump Ever Recorded in Crude Oil Prices


One last datapoint before yours truly hits the sack.

For you history buffs out there, you need to mark down this date in history. Because today the price of oil gained more than $16 a barrel. This was the biggest one-day gain in dollar terms since 1984 — when crude futures began trading on the New York Mercantile Exchange.

Crude for October delivery rose $16.37, or 15.7%, to close at $120.92 a barrel on the New York Mercantile Exchange.

MarketWatch reports that the gain surpassed the previous price-gain record of $10.75, registered on June 6 of this year. The highest percentage rise in a single day was seen on Jan.3, 1994, at 20.9%, according to FactSet.

So how did jet fuel fare today? NY Harbor Jet was up 17 cents to 3.34/gallon while Gulf Coast was up 7 cents to 3.35 gallon.

Shock and Awe as Holly Discovers An Unexpected Benefit to Traveling on US Airways

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I will be the first one to tell you that when US Airways announced it was going to start charging for soft drinks I was not a big fan.

No, it was worse than that. I thought they had lost their minds.

What self-respecting marketing-blooded human being (like myself) would agree that this was a smart move for the airline? Much less — for their passengers?

Then last week US Airways President Scott Kirby made headlines (which we noted in PlaneBusiness Banter this week) for telling the folks at the Calyon Securities Airline Investor Conference that hey — the change was proving to be a good deal for US Airways. And its passengers. The cabins were quieter, there was less trash to worry about, and the lines were shorter for the lavs. And yes, the airline was, net/net, improving the numbers on the bottom line, which is what we had suspected was going to be the case.

Some folks had thought the airline would need to sell a lot of drinks to make the move a smart one. No, not necessarily. If the airline sells fewer cans of Coke, they will save money in terms of weight and in terms of the number of soft drinks they have to pay for and stock onboard.

When I read Scott’s comments from last week, I laughed. Knowing Scott — I had to give him a gold star for what I thought was an attempt to make a positive statement about what was obviously a “deterioration” in passenger service.

Okay, I eat my bad thoughts. And I also admit that I am as shocked as anyone.

I flew two segments today on US Airways as I traveled from New Orleans to Cleveland. Tomorrow I will present the luncheon keynote speech for The Beat Live Conference.

And you know what?

The flights were more enjoyable. They are quieter, less stressful (where’s the cart, when is the drink coming, put down the tray, put up the tray, can I get past the cart to get to the bathroom) and yep, the lines are not as long outside the lavs.

Now — one caveat.

The flight out of MSY was held for an hour by ATC because of delays in Philly. That meant that folks in coach were sitting an awfully long time and were going to be sitting even longer without anything to drink — unless they purchased it.

So about 3/4s of the way through the hold, as we sat on the taxiway at MSY, the flight attendants began to distribute water to those passengers who wanted some in coach. Nice touch, and it was done well.

And that is where — going forward — I could see some potential problems. If, say, an aircraft was forced to sit for a long time somewhere with no food and a limited supply of beverages onboard.

But other than that — yeah, I was as shocked as anyone. But I’m telling you — it was different. And good different.

Oddly enough I wrote this week in PBB about the big revenue gamble that Southwest Airlines has taken by advertising the hell out of their “full service, no fee” strategy. They really have dug a huge hole for themselves now — both in terms of putting themselves out there as the only major airline not charging fees — which could backfire if they have to reverse course — and in terms of lost potential revenues.

Today, after the two flights I had — I’m convinced that paying $2 for a Coke on an airplane is not a bad thing. Either in terms of the passenger experience — which, shockingly, is actually improved — or the airline’s bottom line.