Schulze Soundbites

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FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

 

June 25 2013

 

Schulze Soundbites

Excerpt from recent item in People-in-Travel.

 

Horst Schulze, now running Capella hotels and resorts, is best known for his time running Ritz-Carlton. Some soundbites on the upmarket hotel business:

 

-The luxury hotel business started to change about 20 years ago. Traditional luxury hotels will be called affordable luxury, and the others will be ultra luxury.

 

-The industry is becoming much more global.

 

-Over next 10 years mergers will increase 4-times. That means more business travel. At the same time, emerging markets are travelling more outside. 1% of Chinese would mean 15mn roomnights. (That is a giant under-estimate. At present, domestic roomnights are probably already 1.5bn roomnights.)

 

-You want to have loyal customers. They need to trust your brand. You have to understand what they want. Many in the business know what they want to give customers, but not what the customer wants.

 

We disagree almost 100% with Schulze; hotel groups spend enormous amounts of energy on trying to learn what the customer wants. Indeed, we might accuse Schulze of knowing what he wants to give customers.

 

-They want timeliness. At Ritz-Carlton when I started the customer would wait four minutes and that would be ok. We gave him a drink and he waited another two minutes. Now, people do not want to wait longer than one minute. And they want no defect, and they want it from a caring staffer.

 

-Now, people need service after 3-maximum-4 rings. Service starts the moment they start to contact you. The first step is a welcome. An employee who is trained just to fulfil a function, cannot do this.

 

-We have created a commodity for a place to sleep in. But the customer does not want that. He wants a meaningful experience. That wasn’t the case 30 years ago.

 

-Are we creating ‘meaningful moments’ or just ‘moments’? We don’t produce beds. We don’t produce the floors or the walls. We produce one thing – service. They need to look you in eyes and know they are getting service.

 

-From emerging markets it is more important because they are more nervous travellers.

 

-30 years ago they checked in wearing a business suit, with chandeliers, art, and service at arm’s length. Now they arrive in jeans with holes in them, and they are screaming “I want it my way; I want it for me”.

 

-And they will get more demanding in the next 10 years. They will want more tomorrow than today.

 

 

The Fox

 

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PAGPFT: Air Asia Japan, Fastjet.

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FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

 

June 14 2013

 

PAGPFT: Air Asia Japan, Fastjet.

 

Recent reports on Air Asia Japan (AAJ) and Fastjet (FJ) in Africa talk of surprise following two developments. You can guess who is not surprised – and I have the contemporary published reports to prove it.

 

These are two more examples of what I call PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.

 

 

 

Air Asia Japan

 

Air Asia made a public statement last week that AAJ “has been facing some challenges attributed to a difference of opinion in management, most critically on the points of how to operate a low cost business* and operating from Narita”.

 

AA clearly blames its partner, All Nippon Airways, noting that the AAJ management team “is predominantly comprised of ANA staff, starting with but not limited to the CEO and CFO”. Obviously, though, AA accepted this arrangement from the start.

 

When AAJ was launched, it seemed everyone loved the idea – because it seems everyone loves Air Asia (and is thus incapable of analysing the company coldly, which is my specialty), AA is a success (although because of the fawning, few spot setbacks), All Nippon Airways is a solid reliable airline, Japan is a solid reliable country, and travellers love low fares. What could possibly go wrong?

 

From the start, I said there were a few things wrong with the businessplan as announced. The launch was slow (more than 12 months). The Tokyo airport was wrong. It should not be Narita, but Haneda at least, but better Ibaraki. A320 landing fees for Ibaraki – 80km north of Tokyo – are US$1000 compared with US$2000 at Tokyo Haneda and US$1500 at Narita.

 

Then there is ANA.

 

I presume ANA insisted on Narita because it did not want to lose domestic traffic out of Haneda to a ‘competitor’ airline. Also, at the same time as the creation of AAJ was announced, ANA announced that it was creating a NFA* based in Osaka.

 

Eh? Of course if ANA wanted an NFA in Osaka, then AAJ should have had added a hub there. Not create another airline. To me, this showed that either ANA management was incompetent, or it did not want AAJ to succeed.

 

(Why start something you do not want to succeed? Answer: this is Japan.)

 

This prompted my contemporary quote – “Will AAJ succeed despite ANA?”.

 

But I do admit to one surprise concerning this matter. That AA published its disaccord with ANA. Surely AA management is aware that this is the most serious of affronts in Japan. That said, times change, and there is a possibility that ANA will be so ashamed following the AA announcement that it will do something positive. That said, again, I do not believe that ANA management is capable of understanding how an NFA needs to work.

 

PAGPFT.

 

 

 

 

Fastjet

 

Fastjet is based in Africa, which is far from my area of observation and thus knowledge. However, I made comments earlier because the airline was partly backed/owned by the founder of Europe’s Easyjet (EJ), and my general observation of the airline business.

 

As with Air Asia (see above), Stelios Haji-Ioannou (SHI) gets a good press. We have noted only that for Easyjet, SHI copied a businessplan (from Southwest in the US, which copied it from California’s PSA in the late-1960s).

 

SHI, head of the Easy Group, appears to think that because EJ is a success, that everything he touches will be a success. He has been proven wrong – with Easycar, Easycruise, Easycafe, and more!

 

Briefly, FJ planned routes (no precision, but intraAfrica international routes from bases in Angola, Ghana, Kenya, Tanzania). It was billed as an NFA*, later changed to a LCA* – different airline types to me, but possibly the same to others, including FJ management.

 

I said FJ’s start-up timetable (about six months from the announcement with operating plans detailed) was “optimistic, given the likely hurdles with traffic rights”.

 

I added that I could not see any of the aviation authorities in the four markets “readily giving traffic rights to a foreign-owned scheduled airline, even more so in that some would be in competition with existing airlines, many of which still have the state as a major shareholder”.

 

Further, I noted that most of Africa has no current need for NFAs, just LCAs. And NFA essential practices – such as internet booking, boarding-pass printing, no cancellations, no travel agencies, etc – are likely to be too complex for immature travel markets.

 

At present FJ is operating only domestic routes in Tanzania.

 

Now, an independent report says that FJ cannot get the traffic rights it was hoping for, and that in at least one market, Kenya, the state airline plans a NFA, Jambo Jet. That does not mean Jambo Jet will be a success, but it does threaten any support that FJ might have been hoping for.

 

In addition, says FJ management, costs in Africa are high, so operating a LCA is hard.

 

Eh? Wasn’t any of this foreseen? Also, FJ comment about high costs is a red herring – if that is possible in aviation. Generally, ‘low-cost’ means relevant costs. FJ should be aiming for lower costs than at present in certain parts of Africa – not in comparison with the US or wherever.

 

If FJ managers cannot cut costs below those of FSAs*, then they should be fired.

 

PAGPFT.

 

 

*Definitions at Travel Business Analyst are specific:

-FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

 

-LCA = low-cost-airline. (Not a low-fare-airline; see next.) An FSA but with lower operating costs (cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for instance), fewer fare types, which may have first and business cabins, and which allows bookings through travel agencies etc. Usually similar to the parent airline, but a different name, and competition against parent airline allowed.)

 

NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: market freedom in terms of routes and aircraft choice; single aircraft type; where relevant, competition against parent airline allowed; fares that are extremely low when booked at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no service frills; single economy-class cabin; no seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

 

The Fox

 

Trottings: Bangkok, Dubai airports.

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TROTTINGS = Trip Jottings

The Fox Trots: Travel Stories from The Fox.

 

June 5 2013

 

Trottings: Bangkok, Dubai airports.

 

COMMENTS on recent trips through two airports – Bangkok and Dubai.

 

 

 

[] Bangkok, Suvarnabhumi:

 

-Despite being a relatively-new airport, Suvarnabhumi has no working or charging electricity points for portable devices. This should be simple to resolve; management should take a quick day trip down to Singapore Changi to learn how to look after the customer.

 

-Because of the silly design for trash cans (presumably aesthetics came before practicalities) at the airport, rubbish is picked out from the bins by tongs – almost piece by piece. As a result, not all the rubbish is emptied each time; it would take too long.

 

-One set of cleaning staff at the airport use dusters on a stick. Management has not yet realised that although this might clean the particular item, it also throws dust in the air – which then falls somewhere else.

 

-Saving announcement time (even if few think of it, this is also an efficiency matter). Flights are announced as “Flight [say, AB 123] for [] is boarding at [say, Gate D2]. Passengers for [repeated, AB 123] should board at [repeated, Gate D2] immediately.” They should simply drop the second names/numbers.

 

 

 

[] Dubai.

 

Tim Clark, head of Emirates, who has met me, was interviewed on one of the airline’s inflight programs about the new Concourse A at Dubai airport. “It will not have the problems that some airports have had with new terminals”.

 

I might demur. Some comments:

 

-Authorities are proud of the terminal, built for 20 A380s. Apparently, though, designers and Emirates (because the airline proudly announced that it had an important influence on the design) did not realise that if there are 400 seats on the aircraft, then they need about that number of seats in the departure lounge – to which they encourage passengers to go well before departure.

 

They miss by about 100! So passengers sit on the floor, lean against walls, and wait – there is nothing there, except complimentary newspapers; not even TV. And no way back. Because a lot of people choose to sit on the floor or stand near the boarding point, passengers called to board must negotiate their way through the waiting passengers. Shambles.

 

-There is little difference with the main terminal (in fact, you might not realise what is different). That means long corridors with shops in the centre and gates at either side. Not traveller-friendly; shop-friendly.

 

-The airport authorities did not add portable device-charging electricity points. So many people sit on the floor next to plugs in the walls to recharge their devices. The authorities should take a trip to Singapore’s airport; the authorities there realise that many people use working stations while waiting in transit.

 

-The airport has free wifi available for passengers, but you have to ask. At the enquiry points, no information. The name is ‘Maxspot’, not an obvious one (how about ‘Dubai Airport Transit’?). I was unable to connect with either of my two devices; signal strength variable.

 

 

 

The Fox

Air France: Hop-less case?

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FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.

June 1 2013

Air France: Hop-less case?

HOW soon before Air France needs to announce some type of drastic restructure?

Recently, I showed traffic figures to indicate that reworking its subsidiary airlines into Hop (sic) is not working.

This is not just because Hop’s CEO wears a tie (no male CEO of a low-cost-airline should be seen wearing a tie, and his is red – even worse). It is as I outlined earlier – Hop’s business model is flawed – although I did think its low fares would attract more customers.

I now see AF’s Cityjet subsidiary (operationally based in the UK, legally in Ireland; shhh!) is in an even worse state – seat sales down 28% in the latest-available data for this year!

AF’s 25% share in Alitalia is also a weight, I believe. It is not possible to know because Alitalia manages to publish many traffic figures (load factor, baggage handling, on-time counts, etc) while avoiding any that show how the airline is doing (seat sales, ASKs, RPKs, etc).

Its load factor – which management presents as a good improvement – is poor, growing from a bad 68.8% to a barely-acceptable 70.7%. Perhaps its new CEO, ex Ducati, will make Alitalia fly faster?

(Whatever, Alitalia’s financial loss increased about 30% in Q1 – a charge which AF must bear also.)

As for the main Air France airline (whose traffic figures are now always combined with KLM’s – which is generally assumed to be growing), latest results show a fractional fall.

Air France cannot support all these losses. Watch for admission of that, in some form or another.

The Fox