Lufthansa & the airlines should learn lessons from this crisis and get a clue on pricing --- hint: Stop Screwing Us

Lufthansa sent me an email today offering lot's of good discount's to fly to Europe with them.

What was most interesting was that they included a link to the latest news, including - Lufthansa: Crisis in the industry burdens economic result

Lufthansa wants to explain that its financial results are a product of the worsening economy.

Which is somewhat true with a couple of minor exceptions.

Lufthansa's profit centers are focused around cargo and premium air travel. Keep in mind, Business Class travel is taken by "business-people" whose byproduct often is the shipping of goods or services on that airline.

For years Lufthansa has offered a sub-standard product in their profit focused business class. Their seat keeps you at an angle thus creating the "great slide" while you sleep. Whoever thought that idea was good should be smacked a couple of times.

I could cut them slack for having a crappy seat if they priced it correctly - they don't. Lufthansa, like other airlines, offers their seat for an insanely high price (~$7,500 R/T FRA-DEN). This means that on a 9 hour flight you are essentially paying $13.88/minute. This number is crazy when compared to a coach ticket (~$900 R/T FRA-DEN) which pulls in a $1.66/minute (both numbers are based on a 9 hour flight time).

They could get away with crazy and outrageous business class ticket prices when there was a supply side scarcity because there were only so many seats across the Atlantic ocean and companies (such as my former employer) needed the seats.

Lufthansa (and the other airlines) would then "discount" their Business Class to a more reasonable rate (for reference: AA gave us a 25-30% discount off published fare) and we promised to send anyone at an executive level in business class and push all other company travellers onto that flight.

This of course was great for my employer because we thought we got a deal. It was great for the airline because they got steady customers and it was awful for those people who would have paid a reasonable price to the airline but were priced out of the market.

When the economy hit the skids - customers & companies stopped buying business class tickets and in many cases stopped travel altogether. This meant that keeping prices high and discounting them wasn't going to work - in fact discounting them altogether wouldn't work either. When money got scarce - people got smart. Was paying the extra $12.22 worth the business class seat. Clearly the market said NO and thus the horrible business conditions Lufthansa experienced came true.

So Lufthansa here is some free business advice for you:

Stop whining about the economy. Get some cost controls in place, fix your corporate discounting model and start acting like a business. If you want loyalty, earn it the old fashioned way by treating your customers (all of them, not just the Fortune 500) with respect. Nobody want's to trust the guy whose screwing you at ~$12 a minute.

If you want to charge a price thats based on supply/demand do it evenly and make it reasonable or at least "sort-of" reasonable. You could pack every business class seat if you priced it at $3,500 a seat and offered a $500 discount for 2 weeks and then 4 weeks. That model would give you reliable results and steady profit. If you prefer boom-and-bust...then don't whine when the bust happens - tell your shareholders this is the bust and they will get busted until things get better. Don't be surprised when they bail for a stable and solid investment.

I am skipping the part of this blog where I talk about why we want an airline to be stable and solid.

Take some lessons from Nissan and Infiniti. Nissan took their Altima/Maxima (think coach/economy seat) and added some serious upgrades in the engine, the comfort and the features. They then priced this new offering at a maximum of 2.5x the Altima/Maxima price. This gave us the Infiniti, a premium car that was just premium enough to get them profit but without being too premium that nobody bought it.

You fly 3/4 of a certain x86 chip company back and forth between Austin/Sunnyvale and Dresden. Send your execs on one of those flights and have that company explain the concept of commodity, volume, pricing and capacity. You might be shocked what you can learn from a customer.

For now, I'll pay for coach and either grin and bear it or upgrade. I have no loyalty during a recession, especially to companies that wanted to screw me over when we weren't in one.

Just know every international flight I take --- could have earned you an extra $1,000-$1,500 and I wouldn't have complained about the German granny flight attendants you have barking at me during seating.

This is a simple commodity/volume issue.

AT&T in the NetBook / Mini-PC Game

This weekend I was surfing around the AT&T website trying to decide what my next BlackBerry will be (it's a toss-up between an old-school Pearl and a new-school Bold).

I discovered the following placeholders - NetBook and Mini-PC. These were well hidden and there wasn't any products included within the placeholders but it started me thinking. What if AT&T was also my computing provider (at the client side).

I have an iPhone and they suck at getting it 3G service (everyone I know has issues with this). The call dropping and quality is just dismal. They are behind the times on implementing tethering, MMS and upgrading their data network to keep pace with the demand. It also sucks that they can't figure out how to package WiFi + Data Card + iPhone in some usable/economically happy way.

Now they clearly must be planning a marketing spin toward non-AT&T customers because anyone who has already depended on AT&T knows better.

So the logic of cloud computing and thin clients end up converging here at the NetBook from AT&T. They create am incentive for you to buy their NetBook+Wireless data plan and thus build a business model based on transport/connectivity (to and from) the cloud. It's just interesting to see that in the consumer world, they are counting on transport to be their leverage point (as far as I can see).

The model of discounting equipment in order to lock-in to a service seems somewhat wrong to me. There are lawyers far smarter than me that can determine if there is an anti-trust issue somewhere in the "tying" market, what is certain is that it doesn't feel right.

If AT&T jumps into this market using the same dodgy service they have had already and they combine it with a contractual tie-in to a NetBook, it could easily ruin any customer base it has.

I want to go backwards with my phone technology

I am an accidental smart-phone user.

I got hooked on using a BlackBerry when I joined Topspin in 2003. My boss required me to use one and made it an MBO (one of my objectives was to carry it, not carrying meant no bonus $).

When I joined at AMD I was already hooked. It took a considerable amount of paperwork and the CIO's signature to add me to the BlackBerry server. AMD considered it an "senior executive-only" function. I started a trend and soon my boss and his boss and our team was ordering BlackBerry's and it became the norm.

Having a fully integrated collaboration experience was awesome (Exchange+Windows). Once you were setup, it just worked. You logged into your machine and were automatically logged into the exchange server (same credentials). That integration also extended to your device (assuming you were using a BlackBerry).

I once walked out of the office with a replacement (brand new) BlackBerry, hopped a commuter flight to LAX and from the LAX gate waiting area called AMD IT to get my BlackBerry setup and provisioned prior to my international flight and 3 week trip. It took 5 minutes on the phone and magically (via Enterprise Activation) my BlackBerry was syncing with the server at AMD and my mail/contacts/calendar all just worked. This trip was in early 2005.

Fast-forward to 2008 when I joined Sun. We of course don't use MS Exchange and instead relied on an "interesting" hybrid system that includes "standards-based" servers offering us access to our accounts via IMAP. The Calendar system was seperate and you could connect to it via Lightning (if you wanted) or just run your own calendar locally (iCal) and connect back.

I settled on using an iPhone to handle my email/calendar/contacts with synchronization to my Mac. This was a clumsy setup and gave me the ability to blame anything on the crazy list of software I used. If I spoke to someone within Sun they would understand and usually cut me slack.

Now while the iPhone does the job, it also required me to start consolidating on to one device. My work and personal life ended up sharing a device and anything that messed up my iPhone (sluggishness, AT&T screwups etc..) ended up screwing me up both at home and at work.

I have been carefully screening potential employers with one of my criteria being that they have to use some form of properly integrated collaboration system. I really want to be able to use my iPhone for the lightweight personal life I have and have a reliable and integrated tool for my mail/calendar & contacts.

I don't need an App Store, a Compass, Maps, YouTube, Photos, Stocks, Weather, etc.. on my device.

I do need EMAIL + CONTACTS + CALENDAR in a way that works without bloat or suckiness. The toys are fine for my personal life but it seems odd that the most reliable and best cloud client I ever owned was 4 years ago.

If anyone out there has a BlackBerry Pearl (brand new) -- send it my way ;-)

WiFi Fix (MacBook Air)

My MacBook Air goes everywhere with me. Now just because I have it, doesn't mean that I get to.

There has been an ongoing problem with the MacBook Air (and various other models of MacBook's - based on reports from friends) implementation of Wi-Fi.

The problem showed up when I was on campus at Sun and when I was at hotels that had multiple base stations. Apparently a WiFi network made up of multiple base stations all communicating with the same SSID confused the Mac and it ended up freaking out and not establishing a connection or being able to maintain such a connection.

There were multiple workarounds being used by folks such as pinging the default gateway/router, or bringing their own router and plugging it into the hardline networks. These both seemed silly to me ;-)

Eventually I found a post HERE that has been working fine for the last couple of hours. If it should fail I can go back to using the MacBook Air ethernet adapter. It looks like the issue is based on having a "location" named in your pref's.

Before this fix I would get dropped constantly (think like every 15 seconds or so) and the only way to recover the connection was by selecting the Airport Icon in the toolbar (upper right hand corner). When I hit the icon, the connection would magically fix itself .... bizarre

weird... this should be something that Apple fixes ;-) At least now I can be online in Maui without too much interruption.

kyle

IBM vs. Dell SVP of Strategy... Corporate vs. Personal Ethics

I really try to be ethical in doing business. If someone tells you they are always ethical, ask a ton of questions and then run as fast you can. As much as we'd like to pretend to all be ethical, it's almost impossible to never make a screw-up. My policy is to fix what I screw up and be on-the-table with everything else.

I've been reading the press on this monkey business with IBM and Dell over Dell's new SVP of Strategy who was formerly IBM's Corp Dev guy. Google the title below if you want the WSJ take.

Here's what I find disturbing - David L. Johnson, the guy this all centers around, played around with his agreement because he didn't want to agree to it and IBM was withholding equity awards until they got a signature.

So instead of forcing the issue, not taking the equity and being above board with his issue - he turns it around and signs in the wrong place to make the agreement invalid. Then he collects his quity and is happy until IBM comes after him to stop him working at their competitor.

Now I think non-compete agreements are bogus in general but I leave a few loopholes:
(1) I don't think you should purposely move from your current job to a competitor if you can't be trusted to keep the secrets of your former employer.

(2) I think non-compete's should be eliminated and only done on the basis of severance. If a company thinks you're valuable, they should pay you severance and make not competing with them a condition.

Having never met David L. Johnson in real life, I hope it turns out that there are facts at work here beyond what's reported in the papers. If it's true that he pulled monkey business around this agreement, took a job at a competitor and basically gave IBM the finger - Dell should fire him right away. It shows that he will blatently screw over his employer to get the best deal for himself. What happens when he pulls the same shenanigans at Dell and moves to HP to help them get ahead.

I just wonder how some of these executives look themselves in the mirror in the morning. Aren't they embarassed that they tried to pull a fast one on the company that helped feed their families, pay for their childrens college and made sure they had health insurance.

IBM Is Denied In Bid to Stop Hire at Dell

Google Finance vs. Yahoo Finance

So I was expecting Google Finance to be totally awesome when it finally came out of beta this year.

I wanted to believe that Google's comand of real time information + a good UI would end up creating an awesome product.

Turns out they do a great job with their portfolio offering within Google Finance... but a really AWFUL job with news. To me news is far more important than my portfolio (which E-Trade already tracks).

I'll document one example (there have been many):

My former employer (SUN - NASDAQ:JAVA) was set to be acquired by Oracle at $9.50/share in cash. I of course think this acquisition is likely to happen and figured it would be good to buy some stock before the acquisition while the market price was around $9.30. It represented a solid, short term return in my book and since there is no insider knowledge of the transaction... a pretty easy deal.

I kept track of the price and suddenly saw a dip on Friday to $9.01 (from a prior $9.30). The regulatory review by the DOJ was now being extended (to allow a deeper review) and thus the market had adjusted the price to $9.01.

Now check out the news reported by Google Finance (Earnings Preview: Oracle to report fiscal 4Q MSN Money - Jun 22, 2009) is their top story.

Compare it with what you see from Yahoo where the top 4 stories are about the fast track deal approval.

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I think information matters more than fancy UI's for seeing the trend of your stock. Since you can't buy your stock from Google - they should be focusing on providing information with which to make a current decision (buy, sell, hold)... which means timely news matters

I seriously hope they see this post and get their act together - the more I use Yahoo lately, the more I start (barely) moving away from Google