Airline alliance realities: airlines win, consumers lose
by Charlie Leocha
The big boys in the airline industry are in full huff-and-puff mode in response to federal legislation HR 831 by Rep. James Oberstar, D-Minn. that will force a restudy of the airline alliances’ benefits to the public.
The Air Transport Association, representing the airlines, noted,
International alliances are a vital element of a global economy and produce enormous benefits for travelers, businesses, shippers and others. The U.S. Department of Transportation (DOT) has historically approved international airline alliances because of the substantial benefits that they provide both to passengers, and to European and U.S. airlines. H.R. 831 could destroy important service and public benefits such as competitive fares and new routes by withdrawing previously granted rights for carriers to participate in alliances.
The basic question remains, are these alliances good for the industry or good for the consumers? Almost all of the evidence shows that these alliances work strongly in favor of the airlines and their bottom lines. Unfortunately, the same can’t be said of the benefits for consumers, the traveling public.
Even though the ATA release claims benefits of competitive fares, alliances have never created competition and many experts feel they lead to higher fares. And as for the second benefit noted in the ATA release of new routes, these are illusory — simply slapping an AA flight number on a BA route that already exists doesn’t create anything new. It only renames it.
Slowly but surely over the past two decades, the airline world has been de facto carved into three major alliance players — Oneworld, SkyTeam and the Star Alliance. In some ways they function as though they were three mega-companies. Alliances can be seen as de facto mergers.
The alliances compete with each other like a giant oligopoly, in the interest of the industry, not the consumer. Their relationships can be seen as more of a peaceful coexistence rather than real competition — an airline bonhomie.
Oberstar’s legislation, introduced in early February, directs the General Accounting Office to study the impact of these super-alliances on the end users. He wants studies completed focused on competition, air fares, airline service, etc. He claims there’s evidence that the alliances are having bad effects.
These “bad effects” spill over not only into consumer protection, but reduced competition for business travel, suppliers, GDS providers and travel agencies.
Insiders who worked with the initial alliances, inaugurated in the late 1980s between Northwest Airlines and KLM, admit to me that they have not seen any benefits (with the possible exception of accumulating frequent flier miles) for passengers, businesses, suppliers or travel agencies from the steady move towards more and more alliances.
At the same time these insiders freely acknowledge that both KLM and Northwest realized surprisingly good economic benefits from integrating schedules and coordinating marketing. Eventually both airlines blended their transatlantic marketing departments in one. Northwest took over KLM’s marketing and PR efforts in the U.S. and KLM assumed the same work for Northwest in Europe.
I haven’t even delved into the effects of these alliances on other parts of the airline world food chain. Surely there are unexplored effects on suppliers such as caterers, cleaning crews, airports and so forth. There are ramifications on travel agencies and corporate travel managers when alliances have the ability to shape schedules and flight availabilities.
I’ll bet these ramifications are not supplier- or agency-friendly.
In a recent series of communications between the Oneworld Alliance and the Department of Transportation concerning the extension of alliance arrangements, the airlines submitted statements that were more than 70 percent redacted. To we non-lawyers, that translates to secret. Plus, they added a requirement that only lawyers would be able to see these statements.
What are they hiding? Why were they trying to sneak (fast track) the alliance approvals into the final actions of the last administration?
Rep. Oberstar has hit the nail on the head with this bill and its sunset provision that requires all airlines reapply for their antitrust exemption after the government has three years to reformulate the rules and regulations for these super-alliances.
Thursday, March 26, 2009
In the Saturday, March 21 edition of My Nassau Sun under the Community Page, came the announcement of my new column. Thanks to Editor Heather Lovejoy for the nice "lead in". In future columns I will keep careful watch over content so as to help fulfill our promise of bringing greater clarity about things economic to our local community.
Tuesday, March 24, 2009
Spam note
Google is doing the spam control thing and apparently something triggered their atention. Thus the warning on this new site. I have taken the requested steps to unblock, and we should be good to go soon.
Monday, March 23, 2009
The Ugly Tourist
The Ugly Tourist
“Now obviously I'm not a tourist because I live here, but it got me thinking how much I hate it when everyone assumes that you are. Even when I am a tourist.....I never think of myself as such. However, there I was in town today and there was such a happy group of Japanese tourists. Really happy, giggling away at some purchase, and they had great big plastic signs around their necks identifying them as part of an organized group. How can they stand to appear in public like that?”
Posting on an Internet travel blog for Brits.
“What used to be the gigantic Armijo hacienda is now just a bunch of shops that sell touristy memorabilia--much of it having nothing to do with Albuquerque--at rip-off prices. A lot of the stores carry mostly stuff with their own logos most prominent, as if you'd be so proud of having visited Store X that you'll pay extra money to have it on your pocket knife.”
Public comment postings on the travel promotion web site of Albuquerque, New Mexico.
“A bold customer even asked the hotel at the Amelia Island Plantation to drop the word “Island” from its moniker. (Oddly enough, the word plantation didn't sound any alarms.)” Tampa, Florida newspaper report on the increasing customer sensitivity about “expensive” sounding vacation spots
These small samples of public comments by and about tourists, and their appearance and behavior, are widely echoed everywhere in the world by those who live and work in destinations that attracts visitors from other places. The common themes of such comments include everything from disdain to wry amusement at the nuttiness and sometimes downright nastiness of their visitors. Sometimes the comments also include a plea for tourists to go away and let the locals enjoy their homes in peace, and thus do away with the problems that tourist almost always bring with them; noise, overcrowding, higher prices, crime, gambling, and so on.
Such unhappy local attitudes and responses are not so rare, and often feel very appropriate when we hear some tourist trampling over the sensibilities of the local population. One story relates that of a foreign tourist who was in a local shop holding out his hand filled with many bills of the local currency, when he loudly asked the shopkeeper, and anyone in hearing distance, “How much is this in real money?” I can personally attest to the report of an acquaintance who upon returning from his first trip to France, noted that he was amazed by the “...smarts of even the little kids there—they all spoke French!” However, he also noted that one major problem with the trip was that, “You couldn’t get a decent hamburger anywhere” In our own community, and in many other destinations in the south there have been stories of the often loud, and insensitive probing by tourists of local attitudes about what has been euphemistically referred to as, “The late unpleasantness between the states”
Perhaps the most egregious example of insensitive ignorance was that of the fellow who told me he was truly ticked off during his visit to Amelia Island when he discovered that, “All the service staff at my hotel spoke only Spanish, and couldn’t talk to me in English. What the h- - - is going on here? Isn’t this the United Sates?”
What causes this often uncharacteristically obtuse behavior by visitors? Why do otherwise nice people seem to become insensitive, socially clumsy louts when faced with human interaction with strangers outside the place where they live? Is it curiosity? Is it the desire to lord it over the locals? Is it intentional, or just unintentionally stupid behavior. Whatever the cause, and there is much academic and psychological research on the subject, it can be a serious and ongoing problem that often results in greater rigidity of approach by local residents who remember and resent the frequent pin pricks of nastiness by past visitors, and who then seek to visit their angst on the next round of new visitors.
Such negative human response formations also give rise to the reflexive negative reactions relative to all tourists, and thus, by demonizing the bad behavior of some, all of them can be held responsible for the sins of the few. This makes more and more publicly acceptable, the usual next phase of local behavioral responses, in which tourists can be seen only as sheep to be sheered of as much of their money as possible in the shortest period of time.
Indeed, at the height of this phase, we can stop seeing the tourist as individuals, and we can acceptably begin to treat them simply as larger bodies of statistical hordes whose major purpose is to provide economic input to our community. Thus the sentiments such as, “Hey! Let’s tax them-they don’t live or vote here” and/or “They owe us for all the trouble they cause” and/or “They’ve got the money so they won’t miss a few bucks” become the prevailing under current of our local attitudes.
In the academic literature of tourism there is a well established and observable phenomenon that describes the life cycle of tourist destinations. The cycle typically begins with the arrival at the destination of the few and the wealthy. Over time the demand cycle proceeds to pass through a stepped predictable cycle that inexorably leads to the development of more local supply, (i.e. more hotels and restaurants etc.), and in response to an increasing degree of egalitarian demand, the destination is then anecdotally described as characteristically moving from, “Class to mass.” While the literature is careful not to try to forecast the velocity and vector of this inevitable change in the demand markets, and the resulting response of the local supply side, it is well documented that the process does happen in this manner.
Among the many variable conditions that have been observed as making a significant contribution to the velocity of the destination life cycle, is that of local conditions and attitudes, particularly as they affect the reputation of the destination. In recent years, as the internet has produced so many social network sites where visitors talk about their destination experiences, the reputations of many places have risen and fallen in direct response to this form of personal experience and observation.
So what to do?
Well for one thing, we could all stop trying to paint all tourists with the same brush. We can make sure that we too, who from time to time, visit other places, must beware of stereotyping those who we meet along the way whether we are on the receiving or delivery end of the tourism business.
Second, we need to be careful that out of our occasional unpleasant experiences with a visitor, who makes stupid comment, or an insensitive remark about local folks or conditions, that we do not act as though they are the norm. They are not.
Third, we need to see our visitors not just as raw material for our jobs and livelihood, but as folks mostly very much like us, who are using precious financial resources to bring themselves and their families to see a new place, meet new people, and for a brief period of time, find a rest from their everyday routines.
To coin an applicable self awareness phrase from the old Pogo comic strip, “We have met the enemy, he is us”
On a higher plane perhaps we should be more aware and responsive to others.
"Freedom is not doing what one pleases for the sake of it, but the ability to make good, moral choices to fulfill our social duties to our fellow human beings". Gandhi
“Now obviously I'm not a tourist because I live here, but it got me thinking how much I hate it when everyone assumes that you are. Even when I am a tourist.....I never think of myself as such. However, there I was in town today and there was such a happy group of Japanese tourists. Really happy, giggling away at some purchase, and they had great big plastic signs around their necks identifying them as part of an organized group. How can they stand to appear in public like that?”
Posting on an Internet travel blog for Brits.
“What used to be the gigantic Armijo hacienda is now just a bunch of shops that sell touristy memorabilia--much of it having nothing to do with Albuquerque--at rip-off prices. A lot of the stores carry mostly stuff with their own logos most prominent, as if you'd be so proud of having visited Store X that you'll pay extra money to have it on your pocket knife.”
Public comment postings on the travel promotion web site of Albuquerque, New Mexico.
“A bold customer even asked the hotel at the Amelia Island Plantation to drop the word “Island” from its moniker. (Oddly enough, the word plantation didn't sound any alarms.)” Tampa, Florida newspaper report on the increasing customer sensitivity about “expensive” sounding vacation spots
These small samples of public comments by and about tourists, and their appearance and behavior, are widely echoed everywhere in the world by those who live and work in destinations that attracts visitors from other places. The common themes of such comments include everything from disdain to wry amusement at the nuttiness and sometimes downright nastiness of their visitors. Sometimes the comments also include a plea for tourists to go away and let the locals enjoy their homes in peace, and thus do away with the problems that tourist almost always bring with them; noise, overcrowding, higher prices, crime, gambling, and so on.
Such unhappy local attitudes and responses are not so rare, and often feel very appropriate when we hear some tourist trampling over the sensibilities of the local population. One story relates that of a foreign tourist who was in a local shop holding out his hand filled with many bills of the local currency, when he loudly asked the shopkeeper, and anyone in hearing distance, “How much is this in real money?” I can personally attest to the report of an acquaintance who upon returning from his first trip to France, noted that he was amazed by the “...smarts of even the little kids there—they all spoke French!” However, he also noted that one major problem with the trip was that, “You couldn’t get a decent hamburger anywhere” In our own community, and in many other destinations in the south there have been stories of the often loud, and insensitive probing by tourists of local attitudes about what has been euphemistically referred to as, “The late unpleasantness between the states”
Perhaps the most egregious example of insensitive ignorance was that of the fellow who told me he was truly ticked off during his visit to Amelia Island when he discovered that, “All the service staff at my hotel spoke only Spanish, and couldn’t talk to me in English. What the h- - - is going on here? Isn’t this the United Sates?”
What causes this often uncharacteristically obtuse behavior by visitors? Why do otherwise nice people seem to become insensitive, socially clumsy louts when faced with human interaction with strangers outside the place where they live? Is it curiosity? Is it the desire to lord it over the locals? Is it intentional, or just unintentionally stupid behavior. Whatever the cause, and there is much academic and psychological research on the subject, it can be a serious and ongoing problem that often results in greater rigidity of approach by local residents who remember and resent the frequent pin pricks of nastiness by past visitors, and who then seek to visit their angst on the next round of new visitors.
Such negative human response formations also give rise to the reflexive negative reactions relative to all tourists, and thus, by demonizing the bad behavior of some, all of them can be held responsible for the sins of the few. This makes more and more publicly acceptable, the usual next phase of local behavioral responses, in which tourists can be seen only as sheep to be sheered of as much of their money as possible in the shortest period of time.
Indeed, at the height of this phase, we can stop seeing the tourist as individuals, and we can acceptably begin to treat them simply as larger bodies of statistical hordes whose major purpose is to provide economic input to our community. Thus the sentiments such as, “Hey! Let’s tax them-they don’t live or vote here” and/or “They owe us for all the trouble they cause” and/or “They’ve got the money so they won’t miss a few bucks” become the prevailing under current of our local attitudes.
In the academic literature of tourism there is a well established and observable phenomenon that describes the life cycle of tourist destinations. The cycle typically begins with the arrival at the destination of the few and the wealthy. Over time the demand cycle proceeds to pass through a stepped predictable cycle that inexorably leads to the development of more local supply, (i.e. more hotels and restaurants etc.), and in response to an increasing degree of egalitarian demand, the destination is then anecdotally described as characteristically moving from, “Class to mass.” While the literature is careful not to try to forecast the velocity and vector of this inevitable change in the demand markets, and the resulting response of the local supply side, it is well documented that the process does happen in this manner.
Among the many variable conditions that have been observed as making a significant contribution to the velocity of the destination life cycle, is that of local conditions and attitudes, particularly as they affect the reputation of the destination. In recent years, as the internet has produced so many social network sites where visitors talk about their destination experiences, the reputations of many places have risen and fallen in direct response to this form of personal experience and observation.
So what to do?
Well for one thing, we could all stop trying to paint all tourists with the same brush. We can make sure that we too, who from time to time, visit other places, must beware of stereotyping those who we meet along the way whether we are on the receiving or delivery end of the tourism business.
Second, we need to be careful that out of our occasional unpleasant experiences with a visitor, who makes stupid comment, or an insensitive remark about local folks or conditions, that we do not act as though they are the norm. They are not.
Third, we need to see our visitors not just as raw material for our jobs and livelihood, but as folks mostly very much like us, who are using precious financial resources to bring themselves and their families to see a new place, meet new people, and for a brief period of time, find a rest from their everyday routines.
To coin an applicable self awareness phrase from the old Pogo comic strip, “We have met the enemy, he is us”
On a higher plane perhaps we should be more aware and responsive to others.
"Freedom is not doing what one pleases for the sake of it, but the ability to make good, moral choices to fulfill our social duties to our fellow human beings". Gandhi
Cayuga Hospitality Advisors
As Managing Director of Cayuga Hospitality Advisors, the world's largest hospitality and tourism consultancy, I am privileged to lead the tourism portion of the practice. My colleagues are all experts in their separate fields and we have a long record of service to clients in both the the public and private sector. More information is available at www.cayugahospitality.com
Tourismtalk
The social, economic and structural impacts of modern mass tourism are nothing short of world shaping. The size of the phenomenon is ever increasing as more and more of the world's population wants to see what is on the other side-in their own country and elswhere in the world.
This blog will be devoted to a wide ranging discussion of tourism in all its many iterations and the forces which shape its future.
This blog will be devoted to a wide ranging discussion of tourism in all its many iterations and the forces which shape its future.
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