Well here we are with part two of my conversation with LAN (see part one here) and you’ll see at the end that we talk about the importance of Japan Air Lines to the South American airline. That’s particularly appropriate since JAL announced today that it would be sticking with oneworld. (see my piece on BNET) I’m sure there are a lot of sighs of relief down in Santiago today since, as you’ll see, JAL is an important partner for the airline.

Cranky: Will the San Francisco flight go beyond Lima?
Pablo: Yes. The plane is going to continue to Sao Paulo. We have a lot of demand there from companies and leisure traffic going to Brazil. But also it will connect with Santiago and Buenos Aires and most of the rest of South America; we fly to more than 50 cities.

Cranky: It’s an interesting hub in the middle of the night in Lima.
Pablo: We’re making some changes actually. We are working right now on what we’re calling internally, the double hub. The one that you flew was in the middle of the night, but we want to have another connection bank in the middle of the day, around noon, so we will have more alternatives for US passengers.

Cranky: Will Los Angeles have a flight that gets in during the day?
Pablo: Yes, we will have both.

Cranky: When it that starting?
Pablo: We are still working on that because there is a lot of work to be done. It should be probably by June or something like that. The same will happen from New York. The feedback is the same, they don’t want to stop in Lima in the middle of the night.

Cranky: I assume there’s not much you can say about the rumors about TAM and LAN potentially working together?
Pablo: Of course. That’s some very confidential information that I don’t even have. What I can tell you is what our CEO has already stated for the last couple years is that for LAN it’s strategic to be in Brazil. We have been working on different alternatives to have something similar to what we have in Peru, Argentina, and now Ecuador. About this rumor with TAM, no we don’t have any concrete information.

Cranky: I was wondering about that with Brazil. Is there a reason you haven’t started LAN Brazil? Are there too many regulatory reasons?
Pablo: Yes, there are a couple of reasons but one of the main ones is the legal structure. In Argentina or Peru, for example, the government helped us to create these companies with local investors. In Brazil it’s much more complicated, because you can’t do that. You can’t have external investors having most of the equity. So in this case, that’s the main reason. Of course, we’ve been evaluating alternatives. Brazil is almost the size of the rest of South America altogether, so for LAN it would almost double the size of the company when we go to Brazil, so we have to be very careful.

Cranky: I’m always interested to watch LAN in South America because you’re obviously the broadest airline down there in terms of covering the continent well. I’m very interested to see what TACA and Avianca are going to do together. I assume you pay attention to them closely?
Pablo: Yeah, definitely. They are an important player now more than before but actually it’s not very threatening to us. We have been dealing with a lot of competition down there. They are not exactly where we are in South America. We believe that we still have important strategic differentiations, and our business model is, I believe, very strong. Of course, we are always looking at the competition. We are realistic.

Cranky: Can we expect further expansion in the US? Are you looking at additional cities?
Pablo: This year we are expecting a lot of growth. For example, out of New York, we are growing our seats 25%. We are growing a lot but more in terms of consolidating our routes and more frequencies, especially for the corporate travelers. Plus this new gateway to San Francisco. Then we might look at expansion like we did a couple years ago to Toronto, the last gateway we opened before SFO. We might evaluate something like Montreal or Vancouver or Chicago but there is no specific project with a concrete date. We know the next cities in terms of traffic that are important are Washington, Chicago, Vancouver, and we’re always evaluating them.

Cranky: I know I’ve heard some people wondering about Washington.
Pablo: Yeah, last year we were almost there. We had everything ready to fly to Washington from Lima a year ago, more or less, but the crisis was much worse than what we expected, especially on the cargo side of the business and then we had to withdraw the project. We expect to fly to Washington in the middle term.

We never start an important route and then drop it. We always start and then we stay there. We work with the community to increase tourism and traffic. That’s probably why we take a little longer on starting projects like this, but I’m pretty sure we’ll go to daily flights out of San Francisco before we reduce capacity.

Cranky: One more question and then I’ll let you go. Oneworld has been in the news a lot lately. Are you guys involved in the package that American, British Airways, and Qantas have put together? Are you happy with oneworld?
Pablo: In general I would say that we are very happy. We are still, even though we’ve been growing double digits over the last 10 years, we are still one of the small brothers. Being part of the AAdvantage program has been very important because we can go with American or with Iberia in Europe. Oneworld has been working well for us. We don’t see any good reason to look for alternatives.

Now, if you see things happen with JAL and Delta and everything is going to be restructured in the next 1 to 2 years, of course we’ll be willing to evaluate things. In markets like the US, it’s a point we use a lot, to promote LAN as part of oneworld because it gives us more awareness as an important world class airline.

Cranky: Do you get much traffic from JAL?
Pablo: I hope they don’t leave. They bring quite an amount of clients to our routes from LA and now we expect to have them in San Francisco, so that’s something we are working on with them.

Cranky: Thanks again for taking the time to speak with me.
Pablo: It was very nice to talk to you.

It’s been awhile since I last put together an Across the Aisle interview. Sure, I’ve spoken with plenty of people, but I haven’t done the straight interview format lately. So, when I was contacted to see if I would be interested in talking to LAN’s VP of North America and Caribbean, Pablo Yunis, I was certainly interested to kick start this series again.

See, LAN just announced it would begin flying to San Francisco from Lima four times a week beginning July 1. LAN is also looking at growing elsewhere in the US and in Peru and Brazil. Beyond that, with oneworld having its share of issues in Asia, I thought it would be great to get a South American perspective on things.

Cranky: Thanks for taking the time to speak with me today. I’m really curious about the San Francisco route because Los Angeles has been on the network for years but San Francisco never has been, right?
Pablo: No, it’s the first time and we are very excited because we’ve been planning this for a very, very long time. We needed to grow in the US and flying directly to a very important gateway like SFO was a huge step for us.

Cranky: How did you determine this was the right time to fly to San Francisco?
Pablo: That’s a good question, because we’ve been planning this for a couple of years and we were seriously thinking about starting it up last year. With the crisis and especially the decreased demand in the cargo business, we put it on standby. In the end, we realized that it’s going to be good timing now because the demand has improved.

It’s a very important gateway because we are not only bringing clients to South America from the US but also from Canada and Asia on the same route. When you combine all those demands, and of course, there are no other carriers flying nonstop to South America, you see the opportunity.

Cranky: Are you taking new 767 deliveries or is this just taking the place of some other flying?
Pablo: We are receiving some 767s this year and also at the same time we are making some changes so we have some more availability in the US. There will be some growth this year that we didn’t expect a year ago.

Cranky: Is this a route, maybe Los Angeles too, that would see 787s? You’re taking delivery of them sooner now, right?
Pablo: The original plan was for 2013. Some rumors are on the news, because of what is happening with some Japanese carriers, we might have something sooner, but it’s not confirmed. I don’t have any dates or anything.

Cranky: Oh, so these are just rumors?
Pablo: I read it myself online like you. We would like to have those 787s as soon as possible. We have a very important growth plan for the next 5 years, so it’s strategic for us to have those planes or alternatives. And we are open to alternatives with either Boeing or Airbus.

Cranky: How did you decide to fly this with LAN Peru aircraft? I know that from LAX, you have one from LAN Peru and one from LAN Chile.
Pablo: This is kind of the way we’ve been growing in South America. In this case, LAN Peru is very well established in Peru, having very good relations with the authorities. Peru looks like the most important in terms of demand from Asia and from the US. That’s why we decided that this project should be under the LAN Peru umbrella. In the end, all this is very internal. In terms of the commercial part, we have only one brand, which is LAN and that’s it. That’s what we want to communicate to our clients. We are one airline, one brand, one service, flying and connecting all of South America to the world.

Cranky: I’m curious about Peru right now especially with all the floods around Machu Picchu and the railroad tracks being washed away. Some people anticipate this will hurt tourism. Is that going to hurt you?
Pablo: It’s important but it’s not as big as you might think. Peru is important to us as a destination and as a way to connect people to other parts of the world. We have been talking to the Peruvian government and the authorities there. The impacts of this could be very large, but for us and for passengers going and coming from Peru it shouldn’t be that that big. They expect to have the railroad fixed within the next 6 to 7 weeks.

On the other hand, Cusco is fully operating and has a lot of attractions different from Machu Picchu. You can go to Cusco today and there is no problem there. Of course, we know that Machu Picchu is an important attraction, so we are doing different things. We are working together with the government tourism group in Peru. We are launching a contingency plan campaign where we lowered our fares aggressively to Peru. We are actually promoting to go to Peru now, because people are very focused on Machu Picchu, but you can go to the rest of Peru. So we have these very low fares already on the web and through travel agencies. We pretty much expect that by March we should have traffic back to normal.

Cranky: My wife and I went to Peru two years ago and flew LAX to Lima on LAN and we went to Cusco and loved it, but in the US people think of Macchu Picchu first.
Pablo: You mention that, it’s very important. The campaign we just talked about, the focus is to say that Peru is much more than Macchu Picchu. Something like “discover the rest of Peru.”

Tomorrow we’ll finish up here with talk about a growing Lima hub, TAM and Brazil, as well as oneworld.

I had the pleasure of speaking with Air New Zealand CEO Rob Fyfe this week on a wide variety of topics. Though his latest claim to fame might be that he’s the hottest businessman in New Zealand (no need to bother Googling, that’s him at left), he should also get the award for being one of the most successful businessmen in New Zealand. Air New Zealand has a very strong product and it continues to profit despite the downturn. We talked about this, the success of the airline’s new airport concept (which allows customers to arrive as little as 15 minutes before departure), and more in the interview.

The first half of our discussion centered around the airline’s latest, highly successful ad campaign where Rob and other employees took their clothes off. You can read that piece of the interview over on BNET. Here’s the second half of our conversation.

Cranky: So how is the new airport check-in concept working out domestically?

Rob: It’s going really, really well. There are a couple of challenges and we knew those challenges would be there because we’re asking people to change their behavior quite significantly. The big pluses, the kind of hero-aspect of the new proposition, is for our regular travelers [aka frequent fliers] getting the RFID tag on the back of their phone. It’s a little tag that’s an inch by a half an inch. You see people walking around displaying this almost as a badge of honor, like a membership in an exclusive club.

The benefit of that particular device sitting on their phone is what it means for the regular travelers domestically. We have far less complex security frameworks here in New Zealand than you have in the US, so that customer can now arrive at the airport and go directly through security. As long as they’re at the gate 10 minutes before the flight, all they do at the gate is they put this tag on the scanner, the device prints out a seat number, and they need no boarding pass, no e-ticket receipt. It typically means getting to the airport 15 to 20 minutes before flight departure.

Cranky: Wow, that’s unheard of in the US.

Rob: Yeah. And if you’re traveling with bags, that same passenger just puts the device on the kiosk, it automatically checks them in and prints out the bag tag. They take it over and put it on the conveyor belt. There’s no requirement to have any human interface, albeit we have plenty of help and assist staff to assist our passengers that are unfamiliar with the system. That same tag also gets you into the lounge. You swipe the tag and it says that you belong to the lounge. It also alerts our system that you’re at the airport and will be on time for your flight.

For regular travelers, it works really, really well. The challenge we’ve got is that it’s a re-education process for people – those people who now have to put their bag on the conveyor themselves, for example. It’s getting that kind of familiarity. You used to take that bag to the counter. Now the counter doesn’t exist anymore, so you just take that bag an extra couple of steps. It saves time.

The other challenge we find is connecting long haul passengers connecting into domestic flights. They have a lot of bags, but they come in relatively small numbers. We just make sure that they get the help they need.

Cranky: So there aren’t any changes you want to make to the system. It’s just an education issue?

Rob: Yeah. The system is working really well. It’s just an education process. At first we took the ticket counters away and we kept all the staff. In time, we would expect that through attrition, we would reduce the number of people there as passengers become more familiar with the process.

Cranky: Let’s talk long haul a little. How is long haul demand holding up lately?

Rob: Demand is down everywhere for us. Long haul demand is down 15% but capacity is down as well so our load factors are comparable year-on-year. The airline is still operating profitably. We reported a profit for our first half which was to the end of December 2008. Our second half we’d expect to be much more strongly profitable than the first half was. Part of the reason for that is although demand is down, Air New Zealand is predominantly a tourist airline so we don’t have the strength of business demand that other carriers have. The loss of the high-yielding business traffic is certainly causing a number of airlines to experience much stronger revenue reductions. The key for us is you just have to move quickly to adjust capacity.

Cranky: I have to ask you specifically about one of my favorite routes – LAX to London. I’ve flown your airline on that route before, and it’s been great, but it’s a funny route since you aren’t a British or American carrier. How is it doing? Is that something that you would consider cutting in a down economy? How important is London?

Rob: It’s a very important piece of the network for us. We’re predominantly an inbound carrier. About 70% of our traffic is inbound to New Zealand. After Australia, the UK is our second largest source of inbound tourists to New Zealand, so it’s very important for us to have it. We fly to London from both Hong Kong and LA. The LA route is the stronger of the two – probably because we get good support out of LA. Loads are quite good, albeit the yields are down. But like we say, we don’t have quite the same dependency on premium traffic that other carriers have.

Cranky: It’s anecdotal, but I know several people with smaller companies who don’t have corporate contracts who prefer to fly Air New Zealand to London every time.

Rob: We get great support from those who aren’t aligned with corporate agreements. We also get great support from the Hollywood movie industry.

Cranky: Thanks for taking the time to talk.

Rob: Absolutely.

Can you imagine getting to the airport 15 minutes before departure and walking right on to the plane? If anyone has experience with the new airport concept in New Zealand, leave your thoughts in the comments down below.

Last week, I had the chance to chat with Patrick Brannelly, Emirates VP Passenger Communications and Visual Services. The topic? Onboard mobile phone use. This should spark some pretty interesting debate.

Patrick was very encouraged by what he’s seeing on Emirates so far, and he thinks much of the anti-phone hype is just that . . . hype. Does that mean that the rest of the world should adopt it? It’s obviously quite a complicated subject, but I must admit that seeing how it’s being used in real life makes me less averse to the idea in general.

You can decide for yourself.

Cranky: Hi Patrick, thanks for taking the time to talk with me about mobile phone usage onboard today. I understand that you’re seeing some very good response to the program.

Patrick: Yes, we are. We now have it on 37 or 38 aircraft and we launched it over a year ago. We’re seeing about 35% of people switch their phones on – sometimes as high as 65% of known passengers. These are people who switch their phones on. Some who switch it on can’t roam or don’t have roaming agreements, so not all can use it. In the last year since we launched, over a quarter of a million people switched a phone on on an Emirates flight. We’ve never had a single complaint. People like to message. There’s been a lot of use of SMS.

Cranky: What aircraft types are those 37 or 38 aircraft?

Patrick: The Aeromobile system is on a number of aircraft types – the A330, A340-300, and also the 777s. I believe it’s on 5 aircraft types and we’re installing about one a week.

Cranky: Will it be on the entire fleet?

Patrick: That’s the plan. We have seen some complaints of people not being able to use their mobile phone on the plane, so we want to make sure they have the service.

Cranky: But you say you haven’t seen any complaints from passengers about people using their phones?

Patrick: No. I think it’s a little bit of journalistic hysteria. Nobody likes to be sitting next to someone who is jabbering away, but there are a lot of natural self limiters to prevent that.

1. It is roaming. People speak less when the price is a little bit higher. These calls are still via satellite so it does cost more.




2. At any time on a long haul aircraft, roughly about one third of the people you’re trying to call are asleep. We are seeing almost zero calls on night flights.




3. It is only allowed five calls on an aircraft at a time. I heard a US Senator or someone say he didn’t want to hear 100 calls on a plane at the same time. That wouldn’t happen; it’s impossible right now.




4. We have TVs on every seat, so passengers are watching programs with their headphones on and not listening to phone conversations.

Cranky: Are you seeing certain geographic areas getting more usage than others?

Patrick: Asia is turning out to have a lot more text messages as a percentage. If you go to Asia, a place like Japan, the use of a phone in a public place is very persona non grata. They like to text.

Cranky: But are there certain flights where you’re seeing more usage than others?

Patrick: Oddly enough, we’re seeing a lot of voice traffic before you get into countries that are more expensive to roam into. People are trying to make the call before they land. But one thing to note, even on the most heavy use flight, we’ve only seen three concurrent calls at one time. We rarely see two concurrent calls, but we do.

Cranky: Really? So you’ve never even hit the limit. Interesting. What about specifically on flights to the US? What has usage looked like?

Patrick: I don’t believe we have actually flown the system to the US. The reason for that is that the US is served with very specific aircraft types. None of the 777LR or A380s have that yet.

Cranky: But you could use it on US flights if you wanted to, right?

Patrick: It would be switched off on US flights. Even if we wanted to use it over the US, it would have to be disabled because the US uses a different system. It can’t be used without additional equipment and we haven’t installed that.

Cranky: But you could use it for the rest of the flight that isn’t over US airspace?

Patrick: Well, we could for part of it, but it doesn’t work above 82 degrees latitude, over the poles where some of our US flights go. We would like to be able to use it to and from flights from America but there has been talk that it may be prohibited, but we’ll resist that.

Patrick: One thing that’s being missed here is why has Emirates done this. We’ve had phones on the seatbacks and they have been used over the years. We see sometimes 40 to 50 phone calls on a flight to New York and never a single complaint. What this is about is more convenience. Passengers know the numbers, they can get billed to their phone and it might be cheaper than using the seatback phone. It’s about freedom. They have the freedom to choose more things. Some people will speak on the phone and speak loudly, but they’ll do that today on a seatback phone.

Cranky: Do you think this will work on flights anywhere on any airline or do you think it’s success is specific to Emirates which flies longer haul flights to countries that may have more expensive calling agreements?

Patrick: I think over time it’s bound to come down in price. Even if it stays at the same price, it’s deflationary. That’s given us tremendous freedom. I think this will work on any flight. People don’t just speak on their phones; they text, they email, they download applications on their iPhone, etc. This is all about allowing people to live normally when they’re traveling anywhere.

One of the most important things is if you’re traveling in an emergency – maybe you’re traveling with someone who is not very well – you’re on a 7 hour flight and you’re stressing about that. Having the freedom to diffuse the situation and calm you down is very important. It’s almost a human right. You should be able to communicate.

Cranky: Wait, did you say you can download applications? Do you have internet access via phones now or is it just voice and text?

Patrick: At the moment, it’s SMS and voice. We need to upgrade some of the other avionics on the aircraft, and very soon we’ll be offering GPRS data. I have GPRS data on my BlackBerry, and I can surf the internet. I can’t watch YouTube, but it keeps me in touch. I know what’s going on in the world. We’ll have that working on some planes within a year. Whether or not you can download an app, I’m not really sure.

You should be connected at the airport, you should be getting wi-fi for free, like airlines like JetBlue give. This is what it’s all about. In the future, people will be 100% connected 20 years from now. This is just about what happens in between.

Cranky: So what about onboard internet. Are you looking at putting a system onboard?

Patrick: There are a number of solutions out there. In terrestrial America, you have the GoGo product which has been well received. But you need to have a lot on the ground and that’s not possible over water or probably in Europe. We want them to have free, or very cheap, we want them to have free internet. It has to be easy to use. You don’t have to swipe credit cards and all that stuff. I don’t think travelers are prepared to pay $24 for a two hour session. We’ve done things like free wi-fi in lounges worldwide. People say, “you could make money, you could charge with this,” but that rubs us the wrong way. This is a service.

Cranky: Back to onboard mobile, let’s talk details of how this works. Do you or does Aeromobile (the mobile provider onboard) charge a fee for use or is it just what the networks charge?

Patrick: The way it works – it’s just like another country. Aeromobile has roaming agreements with about 150 operators worldwide – there are 900 total – and that determines how much the phone company is charged. The phone company can charge the customer whatever they want. We know one phone company that’s charging less than they’re paying and another that’s charging a 300% markup. Check with your operator. If you get ripped off, you’re likely to change service providers. Emirates are not in this. We will not make profit out of this. This is a service and we are not interested in making a profit out of it.

Cranky: So then you get one bill from your mobile phone provider at the end. But do you know if Aeromobile has agreements with US carriers?

Patrick: I don’t believe they have agreements with the major US carriers. [Further research found that no US carriers currently have an agreement with Aeromobile. I understand that Aeromobile simply isn't prioritizing US carriers because this doesn't operate on US flights, but they will get there eventually. Apparently, there is some demand. More than 400 US carrier subscribers tried to turn on their phone last month.]

Cranky: Great, thanks for taking the time to chat, Patrick.

Welcome back to Part 2 of my interview with Dave Barger, CEO of JetBlue. If you missed Part 1 which discusses the problems in Long Beach along with the general product direction, then you might want to go check it out.

In Part 2, Dave and I talk about inflight wi-fi, big changes coming to the TrueBlue program, and some future international partnerships, including Lufthansa. Let’s get on with it.

Cranky: What about wi-fi? I know you have one plane, BetaBlue, with email and instant messaging, but what about a full broadband solution now that many other airlines are doing it?

Dave: We believe that narrow band [the BetaBlue product] is the model. We’re going to start a fleetwide campaign for narrow band by year end. But, if it makes sense for full wi-fi capability, we want to be able to respond. That being said, we believe narrow band included in the price of the ticket for the whole airplane is best.

Cranky: Do you like the narrow band product itself or is it just technically better for you?

Dave: We’re pleased with the product. For us, the product is TV, radio, and connectivity, not just wi-fi. It can also be a great tool for our crewmembers as well as the customer. It could be used for irregular ops. If we need a flight attendant to go to Rochester and overnight there, we will be able to email them on the plane. Then when they land, they can make a call to tell who they need to tell.

Cranky: Or they could just email them on the plane.

Dave: Yeah, exactly. As a quality of life application, it’s good.

Cranky: Let’s talk about TrueBlue. My wife and I were doing a fair number of flights to the Bay Area last year to prepare for our wedding. We flew JetBlue, but there was no way that I was going to ever reach an award with short haul travel, so I didn’t even want to sign up. The only reason I eventually did was because I wanted to use a credit from a changed flight online and I had to sign up for that purpose. Are you going to make changes to the program?

Dave: I totally agree that it’s not relevant right now. It’s interesting to hear your opinion, and I agree. It worked for its early life cycle, but it needs to change. We are going to roll out a new program in Q2/Q3. You can think of it as TrueBlue 2.0.

Cranky: Glad to hear it. Though I suppose it’s bad news for you that we flew you anyway and didn’t need the frequent flier credits.

Dave: No, these programs are important. They’re very powerful and we need to do better. Partners are an important piece of that. Can you accrue on Lufthansa? What about Hertz? These are important.

Cranky: What can we expect to see with the new program?

Dave: One of the biggest complaints we hear is that people say they can’t get seats. We do have a lot of availability, but people say they want last seat availability.

Cranky: Will you have last seat availability as a standard or will you be looking at tiered rewards like other airlines?

Dave: We believe we will have a best-in-class frequent flier program. It’s going to be very customer relevant.

Cranky: I know we’re running short on time, but really quickly I’d like to talk about partnerships. You mentioned on the panel today that you were seeing 100 passengers a day connecting into your network from Aer Lingus. That’s really surprising to me. What else might we see?

Dave: Partnerships with Lufthansa and Swiss are next. They’re strategic investors in JetBlue, and we will have partnerships with them. After that, well, I was serious with Ali [Al Rais of Qatar Airways] about doing something with Qatar [as mentioned on the panel today].

Cranky: Could we see some partnerships on the west coast, maybe with Asian carriers? I imagine that would have to go to LAX though.

Dave: Sure. The potential could be there for partnerships at LAX. We can’t do that in Long Beach, but there’s no reason two operations in the LA Basin can’t work for us.

Cranky: Thanks, Dave. Let me know next time you guys are out in Long Beach.

Dave: Will do. And congratulations on your wedding.

So there you have it. A Lufthansa partnership is on its way, and Dave really doesn’t see a need for full broadband right now. I’m not sure that I agree that the narrow band solution will be enough, but as long as they’re watching this closely and willing to change quickly, then they should be ok. I’m also glad to hear that TrueBlue is going to be fixed, because it really isn’t a compelling program as it stands today.

Again, if you missed Part 1, click here.