Posts Tagged ‘money’
The Data Will Set You Free
25% of Airline Delays Due to Volume
Have you wondered recently why air travel seems to have gotten worse but you can’t exactly understand why? Are more people traveling? Is the economy going gangbusters? Is Social Media bringing the world together?
A quick stroll through the transportation department bureau of statistics is truly revealing. The airline industry is methodologically reducing capacity AND increasing profits. This does not make sense – how can any product sell less and make more?
The number of domestic flights has reduced from just over 10 million in 2005 to only 7 million in 2011. This is the same number of flights as 2000
- Domestic Airline Profits
Revenue passenger miles have fallen from 570,854,623 to 473,968,295 over the same time period. That is roughly 100,000,000 less seat miles flown.
That makes sense because available capacity has dropped – seat miles have diminished from 739,841,385 to 571,129,091
Meanwhile load factors (passenger-miles as a proportion of available seat-miles) have jumped from 77% to 83%. Yup, that means that airplanes are a lot more crowded.
- Revenue from Cancellation / Change Fees
So then it should not be surprising that 25% of all delays are from overloading as airlines pull away from smaller airports and work the hubs harder.
Well, we know that aviation is a difficult business and that the industry racked up major losses but things are better now right? The industry profits are well over 5 billion dollars.
But where is this money coming from? Well, first the reservation change/cancellation fees collected are 2.3 billion dollars in 2010 – this is the money that we pay the airlines for delivering ZERO service, seriously. The baggage fees collected are also over 3 billion dollars. So there are $5B in fees and $5B profit…do the math.
Does anyone see what’s happening? Can anyone see what direction these trends are headed in? Does anyone see the alternative? We do – the future opportunity is to build an alternate system of non-stop service using public charter certification on private jets. If you are a traveler, set yourself free. If you are an investor, Social Flights is a magnificent opportunity getting better every day…
Why Google Is Chasing Travel
At Social Flights, we have said many times that nothing economic truly can happen until people get together to build something. Economics is the science of incentives and no incentive is stronger in the human species than family and community. It does not take much of a chasm of reason to see why Google is so interested in travel and travel related properties.
Travel is the keystone for change; change of ideas, change of relationship, change of intentions, and change of markets. A banker is not interested in money – they are interested in the rate of change of money; it’s called “interest rate”. People are not interested in the same old story, they want the story to change – this is what keeps their “interest”
Again, we find Google at the center of the social “Interest Rate” in travel. Don’t think for a minute that Facebook “timeline” is not also a move to capture how people change and react and adapt to the conditions around them. This almost makes it pointless for people to try to react to these changes because such a reaction is, in fact, registered by the platform driving the reaction. Is this a problem?
From http://www.tnooz.com/2011/12/12/news/google-quietly-introduces-social-travel-service-schemer/
What makes you want to go to a place to begin with? When you have chosen a place – what makes you want to explore further? The inspiration phase of leisure trip planning research has been by far the hardest for tech-based services to master.
Google has announced (and started sending out Beta invites to) a new service, known as Schemer, which attempts to compete in this gap. Effectively it is local destination ideas based on tips from your (Google+) friends, celebrities (oh yes!) and professional destination content producers (ie. travel writers).
If destination research moves to starting at Google Schemer rather than Google Search, then Google will be able to pitch flights, hotels and other travel services, without having to necessarily work within the confines of their existing web properties.
Everyone else who makes it their business to build P2P platforms such as tour guides and recommendation platforms will be cut out of the loop. If Google can now branch away from their core search and into the social connectivity business, they can compete with their own customers. Is this a problem?
What Google does not do, and cannot do, is actually operate a jet aircraft. They cannot clean a hotel room or manufacture a rental car. They cannot cook a holiday dinner or wax a snowboard. Real people need to do this. Why is Google chasing Travel? Google is chasing people. At the end of the day, people drive Google. Is that a problem?
Is There An Alternative To Commercial Airlines?
In Japan and Europe, high speed rail often competes with air travel for short distance routes. While it may take 3-4 hours door-to-door to travel 300 miles in an aircraft, the high-speed train can cover the same door-to-door distance in more comfort, the same time, and for less money. An automobile may need 6 hours to complete the same journey at a similar cost of ownership.
What many peoples fail to realize is the possibility that a community can operate their own airline. This alternative is being pioneered by Social Flights. The regionalization of air service is a new concept that allows communities to own and operate one or more aircraft maintaining control over the schedules and locations where the aircraft flies.
In the United States, a rift continues to grow between available air service and reasonable alternatives to air service. This creates a substantial burden on families; but it also creates a compound burden on the economy upon which those families depend for their livelihood. If corporate travel is constrained, the economy as a whole is constrained.
From this article in the NY Times:
Consider the new realities of air travel. Competition is decreasing, fares are rising and airlines are adjusting routes (and charging extra fees) in ruthless calculations to extract the greatest possible revenue per mile flown.
Many airlines will continue shrinking overall capacity and trimming domestic routes in 2012, and the Chapter 11 bankruptcy filing of AMR, the parent company of American Airlines, will merely exacerbate the situation. In 2012, American will “ground some planes and resize our network,” the company’s chief executive, Thomas W. Horton, recently told employees.
In addition, John P. Heimlich, the chief economist of the trade group Airlines for America, said, “Capacity reduction is one of the steps the industry is taking to preserve profitability.”
Several articles are now popping up comparing the alternatives that are available. An overnight Amtrak in a cozy sleeper car can cost the same for some routes as the aircraft - unfortunately, Amtrak is not universally connected to very many routes. High speed rail is still on the drawing boards but still many years away with fewer stops and likely connecting major hubs anyway. The other alternative is to simply drive; with the ground travel and delays incurred t hub airports, a commercial flight less than 750 miles can have an door-to-door average speed of around 70 miles per hour.
Michael Boyd, the president of the consulting company Boyd Group International, sums up the phenomenon succinctly. “The cost of flying airplanes across the sky has eclipsed the ability to support it at many communities,” he said in a recent forecast. In 2012, he predicts, airlines will accelerate the mothballing of smaller 50-seat jets, the workhorses for connecting service between many midsize airports, and even some big ones.
Social Flights can provide the knowledge, expertise, personnel, certification, and equipment to maintain and operate an aircraft fleet, as well as the social media backbone that allows people to self-organize around the aircraft asset.
As such, the community can create direct flights bypassing hubs, they can schedule flights for their corporations and shuttle their executives to new business markets for a price that is hugely favorable to any existing alternative; which is often nothing.
Business Aviation is waiting on the rebound; Do we have to?
An October 14 article in the Wichita Eagle by Molly McMillin says the aviation manufacturing industry in Wichita is waiting on the rebound of the economy and the business aviation market.
If you are leading you don’t sit around and wait on anything or anybody. You blaze a trail and create your own economic recovery.
The true innovators in the history of modern economies did not wait on rebound, they created it.
In business aviation will we allow our fates to be tied to decisions made by the government, by economic down turns and up turns, by someone else’s innovation and prosperity? If so we are in trouble.
A recent post by Dan Robles of the Ingenesist Project stated the following:
The invention of the wheel, wedge, and pulley came long before the invention of credit scores, CDO’s, and International Trade Agreements.
Technological Change must always precede economic growth – economic growth cannot sustainably precede technological change. If you throw money at a problem, you are not guaranteed technological change. If you throw technological change at a problem, you are guaranteed money.
We are going about the process of globalization as if economic growth can precede technological change. This is the tiny flaw of market capitalism and it is unsustainable. In short, we’ve gotten it backwards and continuing on this course prevents us from seeing the future.
Sadly to me it seems that our industry is stuck in a mindset that we will be in a “no growth mode” to “slow growth mode” for the next few years. That means no new jobs, maybe even a few more layoffs, and those of us who are here today will be fighting for a piece of the pie that is not going to get any bigger anytime soon.
A good example of innovation driving a market is the personal computing industry. The market has grown because price went down at the same time computing power went up. The growth has been exponential, not in small increments. And because of that growth, billions of people have the power in their hands to communicate and connect that we could not have imagined 20 years ago.
What about the growth of social media as a way for people to connect? Facebook surpassed 500 million users this summer. Who could have predicted the adoption rate of social media 5 years ago? Did any of us have social media in our marketing plans in 2005?
So if we want our industry to grow, and the manufacturers of business aircraft can’t innovate fast enough to deliver a faster less expensive machine like the personal computing industry, then what do the rest of us to do?
Can we innovate, through the use of social technology, to offer travelers a new solution?
Who Wants Greener Skies?
Starting in 2004, UPS began systematically saving money on fuel and reducing emissions, in part, by planning their routes and reducing the number of left turns in them. About 15 minutes after the policy was first reported, the first skeptical “Bah!” issued forth. The report was taken to mean that drivers were instructed to make only right turns, which is inaccurate. Routes are planned to reduce the number of left turns (in countries that drive on the right-hand side of the road), thereby reducing the amount of time spent idling in the turning lane. Other interesting measures were put in place, as well; so, the exact dollar amount of savings attributed just to right turns is hard to quantify. Still, the increased efficiency and lower fuel costs are easy to see. And, none of the measures were rocket science, really, just simple, common sense practices used to save money.
NextGen ATC has the potential to act like the route planning software that UPS uses, allowing aircraft to fly more direct routes, thus saving time and fuel while reducing emissions. However, as we’ve previously discussed, that program is stalled while most of the parties who will benefit from it bicker over who will pay for it. In the interim, Alaska Airlines is testing some other programs in their Greener Skies project at the Seattle-Tacoma International Airport, one reason the Wall Street Journal named the carrier the most fuel efficient in the country.
Using satellite-based guidance technology (Required Navigation Performance or RNP) that they pioneered , the carrier has tested its use in landings. Using the technology with a continuous descent or optimized profile descent (OPD), the aircraft can descend from cruise altitude to runway using a shorter flight path and lower power. What they found by using these principles is that they reduced their landing fuel-burn by about 35%, which translates to about 400 pounds or 60 gallons per event. The carrier estimates that they could save 2.1 million gallons each year by using this system. On 13 August 2010, Jet-A prices ranged from $4.72 per gallon in Smyrna, Tennessee, to $6.98 in Boston. While carriers don’t buy their fuel at those prices, you can still imagine the huge amounts of money that could be saved.
The more direct flight path and lower power do more than result in just lower fuel-burns. Those lower burns translate into lower carbon emissions and lower noise levels. According to the Seattle Post-Intelligencer, Alaska Airlines estimates an emissions reduction of “22,000 metric tons each year, the equivalent of taking 4,100 cars off the road.” And, of course, a more direct route sends aircraft over fewer homes and lower power means less noise for those homes still in the approach path. That’s great news for busy airports’ neighboring communities that are concerned with noise and air pollution levels.
A great many of the aircraft currently flying already have the technology to use these same procedures. ATC has to catch up and redesign the approaches to make the best use of the technology, equipment and procedures. The potential good the aviation industry can realize by the more efficient process is enormous. With decreased costs, the industry can produce a healthier bottom line. And with decreased air and noise pollution, we can all breathe a little deeper and sleep a little more peacefully.
Is there really going to be a pilot shortage?
I was at an advisory board meeting for the Middle Tennessee State University’s Aerospace Department this past week and one of the other members of the board who runs a training facility in South Florida was sitting at my table during the dinner. He made a comment that in just a few years we will see a shortage of pilots based on the fact that he is seeing less new pilot trainees, with the exception of foreign students. He also commented that other major training schools in the country are seeing the same thing.
Throughout the last two decades US trained pilots were in high demand in foreign countries because these countries did not have a developed system of growing their own pilots. Will we wake up one day in an opposite scenario and find ourselves recruiting pilots from other countries to fly our airliners because we don’t have enough candidates to fill the seats?
It is hard to imagine a pilot shortage when so many pilots were put out of work in the last two years.
Later in the week I read an associated press article published in the Chicago Tribune (www.chicagotribune.com/travel/sns-ap-us-ntsb-professionalism,0,3783173.story) about the same subject.
Quoting from the article by Jan Lowy:
There are signs that future airline pilots will be less experienced, less ethical and in short supply, a panel of experts told an aviation safety forum on Tuesday.
While there are more pilots than there are airline jobs today, the reverse is likely to be true as airlines recover from the economic recession and begin hiring again, experts on pilot hiring and screening told the National Transportation Safety Board. The coming shortage may likely fall heaviest on regional airlines, who generally employ less-experienced pilots at lower salaries, they said.
There are about 54,000 pilots working for major airlines, nearly 19,000 regional airline pilots and about 2,500 qualified pilots available for hire in the U.S. today, said aviation consultant Judy Tarver, a former pilot recruiter for American Airlines. She estimated that airlines will need to hire about 42,090 pilots over the next decade, due to retirements and anticipated industry growth.
Panel members said there are far fewer military pilots leaving for jobs with airlines. Fewer college students say they want careers in aviation because they see it as an economic dead end, and airlines are increasingly having to compete with corporations for pilots.
The basic problem is this: Starting pay for entry level jobs in the airline industry is dismally low. You can make more money doing just about anything else with a college degree that doesn’t require you to spend an additional $70,000 – $100,000 in costs to get your pilot ratings on top of the degree.
The reason most of us got into aviation was for the passion of flying and not the money. Most of us who still get into this industry are doing it for the passion. The problem is that there are less young people today passionate about the opportunity to fly an aircraft. Maybe the new has worn off and flying doesn’t have that same magnetism it had in generations past. .
So if it all becomes about the money then the airlines are in trouble.
The consumer wants cheap airfares and convenient flights and they also want safe aircraft and great service. So to give them what they want the airlines beat down the costs and that includes the pay scales of all who keep the airline going – not just the pilots but everyone. So you get a pilot making starting pay of $16,000 per year! If you translate that into a 40 hour work week it comes up to $7.69 per hour. About what you make starting in fast food. It is hard to get anyone excited about a career in aviation with that kind of money.
You would like to say the airlines are raking in the big bucks at the expense of labor but the earnings of the airlines don’t reflect it.
I am not sure what the solution is, but things continuing as they are will not result in any solution, so it will be interesting to see what happens. Maybe we just outsource flying jobs like we have done with other jobs in this country. I hope not!
What The Heck Is An Asset?
When you go into a store to buy anything, the rational person will always compare the quality of the object against the price of the object versus any alternative products or markets.
When you buy a home, the property is characterized by descriptions for “quality” (construction, neighborhood, schools) and a series of ”quantities” (number of bedrooms, square footage, price)
When you cross the road, you look both directions in order to assess the quantity and the quality of the traffic that may or may not kill you. Are the traffic slow moving pedestrians or are they fast moving trucks?
When a bank makes a loan, they “quantify” all of your valuable things like your home, cars, 401K, and personal income and they use the credit score to measure the quality of your finances (debts, credit pulls, past history, bankruptcies, etc).
Supply and demand cannot, absolutely cannot, be determined by any other means other than by measurements of quantity and quality.
In fact, economics is the science of incentives where the fundamental graph is the supply and demand curve. Both supply and demand behave according to inputs of quality and quantity, specifically price and availability. Supply and demand for anything absolutely cannot be determined by any other means than by coordinates of quantity and quality.
Investors manage risk.
Risk is an asset, if it weren’t, insurance companies would not exist. There are three things that an investor must know in order to manage risk. 1. They MUST be able to identify their exposure to peril. 2. They MUST be able to estimate the probability that the peril will or will not impact them. 3. They MUST be able to determine the cost of the consequences in the event that the peril happens.
Again, within the definition of risk – to which ALL INVESTMENT RESPOND, are the characteristics of an asset; what is the quantity (1) and (3) and what is the quality (2) of the peril. If the investor does not CLEARLY SEE these three positions, they will not invest. Period.
This is what drives successful markets and what kills unsuccessful markets.
To ignore the fact that all rational human behavior, intentions, decisions, reactions, conversations, relationships, education, ideology and every other state of human consciousness in a market, corporation, community, family, or social network ARE NOT characterized in the form of a quantity and a quality, is frankly, ignorant to ones market, irresponsible to one’s community, and incompetent to one’s profession.
Yet so many people do not see themselves as an asset. Maybe someone should give people permission.