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The Amazing Race 13, Episode 1 (airline routes)



 
 
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Old October 1st, 2008, 04:49 PM posted to alt.tv.amazing-race,rec.travel.air
Edward Hasbrouck
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Posts: 23
Default The Amazing Race 13, Episode 1 (airline routes)

This column with links:

http://hasbrouck.org/blog/archives/001537.html

=====

The Amazing Race 13, Episode 1:

Los Angeles, CA (USA) - Salvador, Bahia (Brazil)

The first leg of "The Amazing Race 13" took the reality-TV
racers from the Los Angeles Coliseum to the city of
Salvador, in northeastern Brazil.

As usual, the flight choices for the first leg (on American
Airlines and United Airlines, we were told) were prescribed
by the TV producers, and the actual route and connections
were omitted or obfuscated. So viewers aren't likely to have
realized that even given a free choice of flights, the
racers would have needed to change planes at least twice.
And they couldn't have arrived in Salvador on American or
United, since neither flies any closer than Rio de Janiero,
800 miles away: at one of their connection points, they must
have had to transfer to some other airline.

In fact, northeastern Brazil is by far the largest and most
populous region so close to the USA without direct flights
to and from the USA. The reasons why are a case study in
airline and government decision-making:

International airline routes are determined by airlines, as
business decisions of how to maximize expected profits.
Profitability and passenger numbers are not the same: A
flight that is typically emptier, but serves a city pair
between which a wealthier clientele are willing to pay
higher average fares, may be more profitable (with a higher
average revenue per seat, even counting the empty seats into
the equation) than a flight between more popular but lower-
revenue destinations.

Profits, load factors (percentages of seats typically
filled, which may be different in coach/economy than in
business or first class), average fares (ditto), and other
costs (such as differential landing fees) aren't the whole
story, however: Airlines must work within (although their
lobbyists work hard to influence) the rules of bilateral and
multilateral aviation treaties, the terms of which are
negotiated by governments on the basis of their perceived
national political, economic, and other interests.

The USA is party to some so-called "open skies" agreements,
but they are far from free trade agreements, since they
don't override a variety of other protectionist laws and
subsidies that favor USA-based airlines over foreign
competitors. More often, aviation agreements set limits on
how many airlines based in each country can operate flights
between them (each country wanting to protect the profits of
its "own" airlines by protecting its share of the total
market), which gateways in each country they can fly between
(people who travel from country A to country B may come
from, and want to go to, different places in both countries
than those travelling from B to A) and sometimes what fares
they can charge. Nominally balanced bilateral agreements may
have very different effects on the two countries, their
airlines, and their travellers.

Those rules aren't necessarily bad: Market forces would
produce airline route maps even more skewed toward the
travel patterns of the world's richest people, and even less
oriented towards the interests of the largest numbers of
potential air travellers, than they are today under many of
these agreements. Air travel is very heavily subsidized by
taxes -- including taxes paid by people who can rarely
afford to fly -- and it's only fair for governments to make
sure the airlines that receive those subsidies operate, at
least to some degree, in the public interest.

The problem is that airline lobbyists, and other economic
interests (especially business travellers), have much more
influence on the negotiating process than ordinary
travellers.

When I was in Brazil last year, I talked about this issue
over lunch with the U.S. Consul in Recife, Brazil, in the
context of the bilateral USA-Brazil aviation agreement which
was then being renegotiated.

For historical reasons the U.S. Consulate General serving
the entire northeast of Brazil has long been located in
Recife, despite the fact that Salvador is now marginally
larger, wealthier, better known, and more popular with
tourists. My great-uncle Nathaniel P. Davis -- no relation
to the other better-known Nathaniel Davis with whom his
career in the State Department partially overlapped --
served as head of the U.S. mission in Recife in the 1920's.
Since I was passing through (the TAP Air Portugal flights
between Recife, other cities in northeastern Brazil, and
Lisbon are some of the shortest and most affordable
connections between South America and Europe), I was curious
to see what had become of the places where my great-uncle
and aunt had lived and worked.

The current U.S. Consul in Recife is a diplomatic history
buff, fluent in Portuguese, who started her career in
government service as a Peace Corps volunteer near Salvador,
many years before fulfilling her wish to return to the
region as head of the U.S. diplomatic mission. (She says the
transition from the Peace Corps to the U.S. Foreign Service
is less uncommon than one might think, perhaps because of
the paucity of U.S. citizens with any sort of international
experience.) She was unable to find out anything for me
about the former locations of the U.S. Consulate or the
Consul's residence. And the Consulate is woefully
understaffed (typical of the neglect of northeastern Brazil
by the central governments of both the USA and Brazil), with
only three other American officers, in addition to the
Consul herself, to conduct the required in-person interviews
and make decisions on all visa applications from a catchment
area with a population of more than 50 million people.

But the consul herself graciously made time to share her
perspective on the relationship between Brazil's Northeast,
the centers of Brazilian economic and political power in Sao
Paulo and Brasilia, and her own superiors at the U.S.
Embassy in Brasilia and in Washington.

I don't always agree with the official views expressed by
U.S. diplomats. Then again, they don't always agree with the
governmental views they are required (unless they want to
quit their jobs) to represent. Regardless of those
disagreements, I've always found it worth going out of my
way, and worth taking advantage of any opportunity, to hear
what they have to say about the places they are stationed.
In general, I think U.S. foreign policy would be greatly
improved by giving more weight to the opinions of diplomats
"in the field". (A point on which I suspect my Uncle Pen
might have agreed, at least most of the time, despite his
role in bringing greater administration standardization and
centralization to the operations of U.S. missions overseas)
Within the limits imposed by diplomacy, I've found
individual diplomats to be surprisingly forthright about
most things, even on the record.

You aren't likely to snag an invitation to meet the head of
a large and busy diplomatic mission. And the U.S. Embassy is
such a lightning rod for anger in some places (Sana'a,
Yemen, for example) that it's best to stay away unless it's
unavoidable. But in a place like Recife -- as much a
backwater today as it was in my Uncle Pen's day, in the eyes
of most Americans as well as those of most wealthy, white,
and southern Brazilians -- diplomatic courtesies are often
extended even to casual tourist visitors from the diplomats'
home country, if you ask nicely.

So what were the issues, and why, in the USA-Brazil aviation
talks?

The majority of the wealth in Brazil is in greater Sao
Paulo. The continent's largest and overwhelmingly wealthiest
city, it's the destination of most of the high-revenue
business travel from the USA to Brazil, and the source of
most high-revenue business and leisure travellers from
Brazil to the USA. Most tourists from the USA, on the other
hand want to go to Rio de Janiero, mainly at Carnaval and
relatively few the rest of the year.

Since the bankruptcy of Varig and a succession of short-
lived competitors, there is only one long-haul Brazilian
airline flying to the USA, TAM, and only one other Brazilian
airline (discount domestic and regional airline GOL)
potentially interested and able to do so. Allowing more
airlines from the USA to share the USA-Brazil market would
only dilute the Brazilian market share.

The USA doesn't allow Brazilian or any other foreign
airlines to fly within the USA. So Brazilian airlines want
to fly directly to as many places as possible in the USA,
and places that are destinations for Brazilians, while
airlines based in the USA can feed people through pretty
much any hub (even one that's neither an origin nor a
destination for many travellers) to and from places
throughout the USA.

This means that the Brazilian government is mainly
interested in limiting the number of airlines from each
country allowed to serve Sao Paulo, Rio, while getting
rights for them to serve as many places as possible in the
USA. If airlines from the USA add more flights, Brazil would
rather they be required to serve other provincial Brazilian
cities, preferably those chosen by the Brazilian government,
where they would promote targeted regional economic
development and reward the provincial and Northeastern
support base of the governing Workers' Party without
undercutting TAM's profits to and from the big-money centers
of Sao Paulo and Rio.

In arguing that USA-Brazil relations would benefit from
direct flights between the USA and the northeast of Brazil,
the U.S. Consul in Recife may have had more in common with
Brazilians from the Northeast than either she or they had
with either country's officials in Brasilia or Washington.
But as Consul, she had no direct role in the negotiations,
and could only forward her advice (privately) to her
superiors, for them to consider, or not, as they saw fit.

The government of the USA, on the other handed, wants as
many airlines as possible (most of which will be from the
USA) to operate as many or as few flights as they wish (to
maximize profits from large seasonal fluctuations in demand)
from a few hub cities in the USA of their choosing (to suit
their hub-and-spoke domestic route systems) to Sao Paulo and
Rio.

JetBlue was and is a wild card for both the USA and Brazil:
JetBlue's chairman, David Neeleman, was born and lived as a
child in Brazil, and returned there for a time as a young
adult Mormon missionary. JetBlue has made a success of
serving secondary international destinations in other
countries, such as Santiago in the Dominican Republic. If
any airline in the USA would have noticed the potential
profits and lack of competition for flights between the USA
and northeastern Brazil, most people -- including me --
assumed that it would be JetBlue. But as a dual citizen of
the USA and Brazil, Neeleman is eligible to own airlines in
both countries, under their parallel protectionist laws.
After resigning as president of JetBlue, he announced
earlier this year that he is starting a new airline (yet to
be named) that will focus on domestic routes within Brazil.
There's no clear indication yet that either JetBlue or
Neeleman's new Brazilian airline wants to fly between the
two countries. Neeleman's choice makes sense: average
airfares per passenger-mile within Brazil are substantially
higher than on most USA-Brazil routes, in either direction.
Most middle-class Brazilians travel by bus, even for
thousand-mile journeys. GOL has yet to saturate the
potential market for lower-fare, but still profitable for
the airlines, domestic air service.

The new bilateral agreement concluded in June 2008 reflects
a typical set of diplomatic compromises. The limit on the
number of airlines from the USA allowed to fly to Brazil was
lifted -- a key goal of the USA. The limits on the numbers
of cities in Brazil and flights per week to and from Brazil
by airlines from the USA -- key Brazilian desires -- were
retained, although increased. Of five new permitted
Brazilian destinations for USA-based airlines, Brazil was
allowed to designate two (Curitiba and Fortaleza, an
interior and a Northeastern city neither of which would
likely have been the first choice of the USA or any of its
airlines), while the USA is allowed to pick the other three.

Most of the new flights will be additional frequencies, and
flights on more USA-based airlines, between their hubs in
the USA, Sao Paulo, and Rio de Janiero. But a few of the new
flights will be to other cities in Brazil, including the
first direct flights to the Northeast. In November, American
Airlines will start direct fights between Miami and Salvador
(the flights that didn't exist when "The Amazing Race 13"
was filmed), Fortaleza (stay tuned!), and Belo Horizonte.

But while AA is adding a fourth daily flight between Sao
Paulo and Miami (in addition to its flights between Sao
Paulo, Dallas/Ft. Worth, and New York), they will have only
one flight a day to Salvador, and only four flights a week
to Belo Horizonte. That doesn't necessarily mean they expect
more traffic to and from Salvador than Belo Horizonte: More
likely, it's because most travel to and from Salvador will
be by wealthy tourists from the USA, while business to and
from Belo Horizonte will come mainly from the large number
of Brazilian-Americans from Minas Gerais state, their
families, and their friends. (I went to Belo, and found it
interesting and worthwhile. Among other things, it's the
center of the Brazilian clothing manufacturing industry,
with garment-district prices on distinctive Brazilian
fashions. But it's definitely not on the typical tourist's
radar.) Those different passenger demographics will mean
higher yields (average fares) to Salvador and profits even
with some empty seats in the back of the plane, while the
large year-round volume of lower-yield "visiting friends and
relatives" (VFR) traffic to Belo Horizonte will only allow
them to make a profit if they keep the number of flights
small enough that they can count on filling almost every
seat. That's the kind of calculus that airline route
planners go through in prioritizing the use of expensive
aircraft.

As for the Brazilian airlines, TAM's first new route to the
USA under the new agreement will be between Sao Paulo and
the most desirable destination for Brazilian tourists that
isn't an international hub for any major USA-based airline:
Orlando.

Back in 2000, American Airlines had nonstop Sao Paulo-
Orlando service, but dropped it after 11 September 2001,
when it became too difficult for even upper-class white
Paulistas to get tourist visas to take their families to
Disney World. Today, people in Sao Paulo have to wait an
average of more than 2 months just to get an appointment for
the in-person interview required for all tourist or transit
visa applications.

The U.S. Embassy in Brasilia, along with the U.S. consulates
in Sao Paulo, Rio, and Recife, has been working hard --
within the limits of the visa rules set in Washington -- to
speed up visa processing and mitigate its hassles. The
consul in Recife, for example, was rightfully proud of
having added an air-conditioned waiting area and an ATM
inside the consular grounds, so visa applicants are no
longer at the mercy of thieves who used to know that
everyone standing in line on the street outside the
consulate had at least US$131 on their person in cash to pay
their visa fees.

It remains to be seen if things have changed enough, or if
there is simply enough pent-up demand, for TAM to make money
on a Sao Paulo-Orlando route that depends on enough
Brazilian tourists getting visas to the USA.

--

Edward Hasbrouck

http://hasbrouck.org
+1-415-824-0214

"The Practical Nomad: How to Travel Around the World"
(4th edition 2007)
"The Practical Nomad Guide to the Online Travel Marketplace"
http://www.practicalnomad.com

Around-the-World and multi-stop international air tickets:
http://hasbrouck.org/tickets/
 




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