Monthly Archives: January 2012

Time to Share Airline Secrets

By Tom Smith
During the ACI-NA Air Service Data and Planning Seminar, which wrapped up earlier today in Long Beach, the nearly 100 participants learned some of the secrets of airline route planning from six current and former airline planners.

Monday morning began with three former airline planners who now work as air service development consultants — Jamie Kogutek, Sixel, formerly of AirTran Airways; Mike Lopez, Seabury APG, formerly of Continental Airlines; and Zach Mensen, Intervistas , formerly of Delta Air Lines.  Each of the three had left a carrier in the last 18 months.

As ex-airline employees each shared information that they could not before. Their secrets:

  • Keep up with what airlines are doing in terms of strategy
  • Know if decisions are made top-down or bottom-up.  At some airlines new routes are ultimately a CEO decision. The new United is using old Continental methods.
  • While building relationships is important, you need to follow an airline’s prescribed channels when trying to win a route.
  • Deal with the planning team, but do maintain your relationships.
  • Airports that survived Southwest’s cuts did so because they had good relationships. It becomes a lot harder to cancel routes or cut capacity when you have good relationships. It is the tie breaker.
  • Some carriers appreciate JumpStart meetings with currently-served airports just to check-in, especially in this environment. But others cautioned to know your carrier’s attitude because don’t want to use JumpStart meetings as a relationship building session.
  • Don’t bring the mayor.  Do get community decision-makers involved, but not necessarily at those first meetings. Keep the group small.
  • Different carriers have different goals for different conferences. Delta tries to meet with each airport at least once a year. A conference meeting could take the place of a headquarters meeting.
  • There are competitive reasons for adding routes. Stomp out the competition. Sometime a lot of those decisions come from higher up.
  • Market share plays are to make sure your brand is standing at the end of the day. We are now nearing the end of the game with this game ship.
  • There will still be a market for 50-seat regional jets. There are certain roles that they will be viable.
  • Airport operating costs. It a part in the decision, but it is not a deal breaker.
  • Airlines don’t care about total annual passengers. Airlines talk about emplacements, not passengers.
  • How does you community relate to places in my network is a key variable. Or, to which Florida markets your community travels. What business in you town has an office in Atlanta or needs to connect in Atlanta?
  • Use corporate sales data only if they would be traveling on my airline.
  • An airport trying to forecasts my costs is a waste as I know my costs. If you do them, they need to be believable for your credibility.
  • More important to use the data before the presentation not during the presentation.
  • Find the things sticks out. Tell me something I don’t know.
  • If costs are not right, it can have a negative impact on the meeting.
  • How forgiving are you for data mistakes — as long as carrier’s name was correct.

 

This morning, currently-employed airline planners shared their advice on making JumpStart presentations. Presenting we’re Adam Green, Virgin America; Nicholas Haan, Southwest Airlines; and Mark Kopczak; Spirit Airlines.

  • Worst JumpStart mistake:
  • Green: One airport failed to provide requested, additional information — that airport was under serious consideration. The airline passed them over.
  • Haan:  One airport promised an exciting opportunity but first it wanted us to lobby Congress to get them included into the service to D.C. zone.
  • Kopczak: You need to tailor presentation. One airport copied data from one city pair pitch made to a different carrier — they changed the city but not the data. Be confident with your information. We do check them.
  • What to include:
  • Tells us what we don’t know about your community and how it would fit into our network.
  • Spirit likes to see recent retail sales numbers because it’s tickets are impulse buys.
  • Does your business community “jive” with the typical profile of a Virgin America passenger.
  • Southwest does not read the presentations it takes back from JumpStart but instead adds the information to the files it has on each potential service community.
  • All agree don’t give paper presentations to take back but rather give them a flash drive or e-mail it later.
  • Know the airline’s strategy and business plan. Make sure the pitch is in line with the airline’s plans.
  • Make sure the pitch matches the aircraft the carrier would likely fly on the route. Don’t do a forecast that is barely defensible for a small plane when the carrier usually doesn’t fly that aircraft.
  • Don’t pitch a route on the basis if the new route is there then the community will naturally fly it.
  • Layout costs upfront. Spirit will ask for it right away. We want to know the rates and charges.
  • Be up front.  The airlines don’t like to be surprised with major projects that could impact their costs or their operations.
  • Beyond the runway capacity the airlines don’t care about the airport terminal facilities, its concessions and  awards during the initial presentation. At this stage the economics of the community is more important.
  • Route selection is not a competition or reality game show in that cities are competing against each other for the next aircraft. Airlines are looking for the best revenue opportunity.
  • Incentives:
  • Green: They are important to us.  Some airports get it and some do not. Long-term not important to strategy. But in the short-term they are. In a “bake-off” they have made a difference. Stress the partnership with the airport. You cannot make a market out of incentives, but it can make a launch.
  • on our five year plan
  • Work in part ships with community groups. The airport role, I understand needs to be neutral. Then the community group can take the lead to build relationships. The community are really invested because they want to be on the Southwest network.
  • If your presentations mentions a community group, give examples of how it has worked with other carriers. These really good stories of earlier successes push it over the top when decisions are made.

Obama’s Travel and Tourism Initiatives Follow ACI-NA’s Requests

By Channon Hanna
On Thursday, President Obama travelled to Walt Disney World in Orlando to announce new initiatives to increase travel and tourism to the United States.  Among the initiatives announced were visa reform, Global Entry expansion and promotion, and the expansion of the visa waiver program— all of which are key reforms that ACI-NA has advocated for years and has worked to advance through the ACI-NA Facilitation Committee, the U.S. International Air Service Program and the U.S Government Affairs Committee.  ACI-NA President Greg Principato also sent a letter to President Obamacommending these initiatives.

In front of Cinderella’s Castle in Walt Disney World, President Obama on Thursday announced his new initiatives to increase travel and tourism.

During his address, President Obama reminded the audience that the U.S. tourism and travel industry is a substantial component of U.S. gross domestic product and employment, representing 2.7 percent of GDP and 7.5 million jobs in 2010.  The President emphasized that these initiatives are a part of the administration’s comprehensive effort to help spur job creation.

Highlights of the initiatives include:

  • Increasing non-immigrant visa processing capacity in China and Brazil by 40 percent in 2012.
    • As a part of this initiative, the Departments of State and Homeland Security announced a pilot program to simplify and speed up the non-immigrant visa process for certain applicants, including the ability to waive interviews for some very low-risk applicants, such as persons applying for visa renewals.
  • Ensuring that 80 percent of non-immigrant visa applications are interviewed within three weeks of receipt of application.
  • Increasing the efforts to expand the Visa Waiver Program and travel by nationals eligible to participate in program.
    • The Secretary of State has formally requested that the Secretary of Homeland Security consider Taiwan for participation in the program.
  • Final Rule on the Global Entry program which will make it permanent and expand the program to four additional airports — Minneapolis, Charlotte, Denver and Phoenix.  This expansion would mean expedited clearance would be available to approximately 97 percent of international travelers. ACI-NA submitted comments to the administration in support of making the Global Entry program permanent.

These initiatives by the President are a great start to increasing international visitors to the United States. ACI-NA will continue to work with the administration and Congress to develop strategies which will enhance the security and the efficiency of the international arrivals process and attract international visitors to the United States.

Redistricting and Retirements a Plenty on the Hill

By Annie Russo
In the past 13 days that mark 2012, it seems like there has been an uptick in the number of Senate and House retirements.  With some time at home with the family and reevaluations of the downside of traveling, raising money and running for your job every two or six years is enough to make anyone reconsider serving in the legislative branch.  I would even venture to add that for many veteran politicians the gridlock on the Hill is enough to push anyone out as well.  This year, however, there is another huge factor that we’re seeing coming into play for names and faces that have been a part of the legislative process for decades: redistricting.

When I received the breaking news last week that former Appropriations Chairman Jerry Lewis (R-Calif.) had announced his retirement, the two sentence update reminded readers that Lewis had been redistricted into a more liberal leaning seat. Lewis isn’t alone by any means.  For many people who are avid watchers of the House floor, it is going to be hard to imagine a heated debate without Rep. Barney Frank (D-Mass.), who probably knows the House rules as well as the House parliamentarians.  Frank announced late last year that he was retiring after a major change in Massachusetts to his congressional district.

The list is long of those who will end their congressional careers this December. Many will definitely fall casualty to redistricting while others have just decided that it’s time to do something else.  Either way, I think it’s only the beginning of what could be a much longer list as primary and general election filing deadlines in most states draw near.

Insurance Outlook Mixed for 2012

By Liying Gu
The ACI-NA Risk Management Committee kicked off the New Year with its 13th annual Risk Management Conference held in the warm and sunny New Orleans with close to 140 attendees, up more than 30 percent over last year’s attendance.

The first session Thursday highlights the current airport insurance market and its emerging trends of domestic liability, property, and professional coverage/employment practices liability.

John Geisen, Senior Vice President, AON Risk Services Central Inc., provided a review of the aerospace insurance market with a focus on airport market capacity and the outlook for 2012. The airport and air traffic control sectors ended 2011 with a 7 percent premium reduction much as they did in the past three years. This continued softening is driven by surplus capacity. Geisen is predicting that 2011 could be the bottom and prices in the sector might start to rise if passenger numbers recover but all evidence suggests a flat 2012.

On the property market, Richard Terlecki, Area Senior Vice President, Arthur J. Gallagher Risk Management Services, delivered some bad news. There were 12 losses that exceeded $1 billion in 2011 with a total of $70 billion catastrophe losses in just the first half which was the second worst in history. On top of the losses, interest rates are at historic low which translates to low investment returns. All this means that insurers are being forced to reassess exposures which would lead to reduced capacity on the property side.

In contrast to the liability market, there is relatively limited underwriting capacity for public officials’ liability, according to Simon P. R. Hodge, Managing Director of Wells Fargo. Finite number of insurance carriers restricts competition with pricing and terms driven by broader Directors & Officers and Errors & Omissions insurance markets. There remain significant opportunities, however, to enhance coverage quality.

Continuing Your Business After All The Aftermath

By Nelson Lam
Rob Swift, Mike Gardner, and Forrest Artz presented Thursday at the 13th Risk Management Conference presented about business interruption coverage.  With natural disaster occurring spontaneously and without notice, does your airport have a continuity plan and will your business interruption income be covered?

Granted that your airport does purchase business interruption coverage, the first thing all three speakers mentioned was read your policy.  As a number one rule of risk managers, never assume; read the fine prints – know the definitions as they may be defined differently in your policy.  Swift mentioned, know your return time objective – understand when you need to have your business back up and running, and build your strategy in accordance to it.  Additionally, know the return point objective – how much data can you afford to lose before the point of no return.

Do you have property insurance that goes with your business interruption coverage?  Well even so, there are many points to consider.  If you have water damage coverage for your property, does that coverage cover mold damages as well – know the exclusions of the coverage and once again read your policy.  For your equipment, are they all covered or just the high value dollar items?  As a risk manager purchasing such coverage, do consider that every small dollar value item not on the balance sheet can add up exponentially.

As mentioned by Gardner, for a business interruption claims, talk to your insurers, your assessors, and peers right away.  Understand the situation that you are in.  Document, document, document as there will be large discussions amongst the risk managers and the Insurers of what the income loss is as a result of business interruption; the documentations will come in handy.  Lastly, if you need help, hire or ask for help.  Include additional professional fee in your business interruption coverage to ensure you can hire help when you need it.  Nothing is worse than to be in a troubled situation where you lack the knowledge or experience, and you have no resources to go to.  The risk managers and all the risk professionals here at the Risk Management Conference are here to help.