INFocus Newsletter1

APRIL 2015 NEWSLETTER

Top 5 airports with the best cell service

Airport food goes gourmet

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CUSTOMS' WAIT TIMES LONG DESPITE NEW TECH

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CUSTOMS' WAIT TIMES LONG DESPITE NEW TECH

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INFocus Newsletter2

By Scott Moritz, Bloomberg

Tennessee’s Memphis International topped the list released Monday by mobile phone researcher RootMetrics, followed by Pittsburgh International, Chicago’s O’Hare International, Southwest Florida International in Fort Myers, and Dallas Love Field. Of those, only O’Hare ranks among the busiest in passenger traffi c, coming in at No. 3, federal statistics show.

The nation’s most-traffi cked airport, Hartsfi eld-Jackson Atlanta International, ranked seventh in cell service according to RootMetrics. San Diego International came in last for the second year in the 50-airport study conducted in the last six months of 2014.

Airports are way stations in bigger journeys where passengers are stuck waiting longer than ever before with heightened security and extended waits during connections. While some facilities

have promoted new gourmet food options, the real measure of what makes an airport experience the least frustrating is often determined by tech amenities like cell service, Wi-Fi access and power outlets.

A strong cell connection can mean fast movie downloads, uninterrupted video calls to the family and a burst of speed to catch up with work e-mail and project updates.

Higher NumbersThe ever-increasing number of travelers

glued to their mobile devices while waiting for fl ights makes it trickier for companies providing cell service at airports, according to Robert Mann, president of R.W. Mann & Co. aviation consultancy in Port Washington, New York.

“It’s not only more people but the services that they’re using are more intensive,” Mann said in a phone interview Thursday. “It’s everything from getting

weather at destinations to there’s people who probably still trade stocks while they’re waiting for the fl ight to take off. It’s anything you can do on a smartphone but that just becomes very data-intensive.”

Relatively few passengers get to take advantage of the opportunities at the top-ranked airports. Memphis is the 59th busiest airport in the U.S., according to the Federal Aviation Administration, with 2.3 million departing passengers in 2013. Pittsburgh is No. 46.

That contrasts with 45 million enplanements at Hartsfi eld Jackson.

Verizon Communications Inc. had the best cellular service, ranking fastest in 31 out of 50 airports, followed by T-Mobile US Inc. the smallest of the top four U.S. wireless carriers. AT&T Inc. and Sprint Corp. took third and fourth place, according to RootMetrics.

The 5 U.S. airports with the bestcell phone service

April 2015 3

Automated passport kiosks haven’t solved all the U.S.’s Arrivals Delays

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By Dan Peltier, Skift

Automated passport control kiosks can recognize faces, measure height and take fingerprints but apparently they can only dramatically reduce average wait times at some of the U.S. airports using them.

Automated passport control first rolled out for international travelers at Chicago’s O’Hare Airport in July 2013 and since then 23 other U.S. airports implemented the kiosks in their U.S. Customs and Border Protection international arrivals areas. When the kiosks debuted in Chicago and a few months later at New York’s JFK Airport, U.S. officials asserted they would slash average wait times by as much as 40%. They’ve appeared to deliver on that promise at some airports while most have seen mediocre success.

At JFK airport the average wait time for international travelers to complete the two-step arrivals process, using the kiosks and then showing the receipt travelers receive to a Customs Officer, is about 18.5 minutes so far this month

based on Customs data. That’s a 65.9% decrease from the 30.7-minute average wait time in March 2013 before the kiosks launched at JFK and this puts JFK at the top of the leaderboard in terms of which airport can claim the most success from the kiosks.

However, the improved overall monthly average wait time doesn’t mean JFK completely overcame its notoriously long Customs wait times.

For example, Delta Air Lines boasted that Customs wait times in its Terminal 4 arrivals facility at JFK were reduced by 90% shortly after the kiosks became available in October 2013 but last week there were still several instances of maximum wait times exceeding two hours in Terminal 4 and average wait times hovered around one hour.

Only four of the 24 airports using the kiosks managed to reduce their average wait time this month by 40% or more compared with March 2013 or 2014 (whichever date came before kiosks were implemented). After JFK,

Dallas/Forth Worth International Airport, Houston George Bush Intercontinental Airport and Miami International Airport reduced their average wait times by 51.6%, 45.9% and 40.4%, respectively, for this month compared to either March 2013 or 2014.

In March 2015, Miami International Airport’s North Terminal had the highest average wait time (22.1 minutes) among 24 airports and also had the highest average wait time in March 2013 before its kiosks arrived (37.1 minutes). Phoenix Sky Harbor International Airport’s Terminal 4 had the shortest average wait time so far this month (7.9 minutes).

The average wait times at some airports weren’t terrible to begin with before kiosks arrived which could explain why some terminals saw small percentage decreases, but still included excessive wait times of an hour or more in most cases. Some of the airports, such as JFK, Orlando International

INFocus Newsletter4

To date, major U.S. airlines have presented a consistent response to the question of whether lower fuel prices would mean lower fares: To put it bluntly, fat chance.

What about corporate air discounts, however? Even if airfares remain unchanged, might airlines be a little more willing to share their windfalls with some of their best corporate partners in the form of deeper discounts? While the answer remains about the same, travel buyers might have some opportunities for savings in the current fuel economy—

particularly for those buyers who are looking for the more lucrative seats in premium cabins.

"No airline is going to voluntarily give you a better deal, but there will be situations where carriers may offer improved discount terms," said Bob Brindley, vice president and principal of BCD Travel's Advito consultancy. "If you get a competitive situation, where they're trying to win additional high-yield business, it gives you more ammunition to try to get discounts to win that business."

On the other hand, it's feasible that lower fuel prices could result in even higher airfares.

Much of the outcome will hinge on carriers' capacity discipline. In recent fourth-quarter earnings conference calls, airline executives all said they had no plans to adjust capacity in response to lower fuel costs.

"We will only grow the airline as demand dictates," United Airlines president and CEO Jeff Smisek said during the company's earnings call. "The U.S. airline industry has transformed

itself over the last several years through consolidation and matching capacity with demand, and United will continue its discipline regardless of the price of oil."

Airline executives also have set plans for the savings they stand to reap from lower fuel prices this year, namely paying down debt and investing in fleet improvements.

"All airlines had underinvested through very difficult times, and we are using the profits we're producing to invest in a product that matters for our customers, like lie-flat seats, international Wi-Fi and improving the airport check-in experience," American Airlines CEO Doug Parker said in his company's earnings call. "Because we're profitable, we can do it now."

In an interview with Travel Procurement in January, Gail Grimmett, Delta Air Lines senior vice president in New York, struck a similar tone.

"There's more than one cost that goes into running an airline, so one cost

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Nearly 850 Million Passengers Boarded U.S. Flights in 2014

By Dan Peltier, Skift

April 2015 5

On a recent Wednesday evening in suburban Washington, folks sat at a cozy wine bar, clicking glasses, gesticulating with silverware and grazing on small plates of appetizers and charcuterie. Diners and drinkers wearing everything from jeans and sneakers to smart dresses and heels arrived and departed lazily on this particular pre-election Hump Day not far from the national levers of power.

The mise-en-scène was notable because of the venue: at the top of a bank of escalators in Concourse B at Washington's Dulles Airport, just steps from two banks of departure gates buzzing with travelers queuing for flights to New York, Dallas, Frankfurt and London. Everyone grazing at Vino Volo, a chain of boites created specifically to operate inside airports, was waiting on a flight and counting down the minutes to departure.

The tableau demonstrates how much airport dining has changed, especially since the terrorist attacks of September 11, 2011. Like it or not, we spend more time in airports because we can never be sure how long it takes to clear security and how reliably flights are running. With the chance of an in-flight meal slim — and usually unpalatable when it is on offer — we transform our airport "dwell time" into meal time.

The concessionaires that dominate airport retail have responded with gusto. They've populated airport concourses with national burger chains and outposts of local BBQ joint, and cut franchising deals with star chefs and local coffee houses. If it's being eaten on Main Street, chances are you'll find some version of it on the main concourse of the airport, too. That's led to a huge uptick in airport food revenue.

The median gross food and beverage sale per passenger jumped 14 percent between 2009 and 2012, according to the Airport Councils North America. The

Federal Aviation Administration says licensing fees and rent from food and beverage outlets contribute more than 7 percent of an airport's non-aeronautic revenue. And dining outlets ring huge sales from tiny airport spaces. One example: a McDonald's at Dulles Airport racked up $2.3 million in sales in 2013 from just 875 square feet of space. That's startling since the average standalone McDonald's restaurant is about 4,000 square feet and grosses just $2.5 million annually.

If you somehow missed the transformation of airport dining as you hustled between flights, consider the latest ploy from HMS Host, the $2.7 billion giant of travel food service. Consciously mimicking a promotion mounted in major cities across the nation, it's christened October "airport restaurant month" and created special menus for 26 dining outlets in 20 U.S. and Canadian airports.

"It's a great time to be in the restaurant business," says Frank Sickelsmith, a vice president of HMS Host. "And we're restaurateurs who just happen to do business in an airport."

The remarkable scope of today's on-

the-fly dining is reflected in the HMS Host roster of 300 brands and 2,000 restaurants at more than 110 North American airports. Grabbing a latte at an airport Starbucks? That's HMS Host. A pretzel from Auntie Anne's? That's HMS. A quick pizza and salad at California Pizza Kitchen? That's HMS, as are airport outlets of Chick-fil-A, Outback Steakhouse and Gordon Biersch. It has also brought celebrity chefs such as Rick Bayless, Todd English and Lorena Garcia to the airport and opened airport outlets of dozens of popular local microbreweries.

Maryland-based HMS Host is hardly alone in feeding us at the airport, of course. Atlanta-based Concessions International offers food service in more than half a dozen airports. Delaware North, of Buffalo, N.Y., operates from more than three dozen airports, works with the Food Network, and opens bars branded with the Heineken name. The SSP Group is represented at airports in 29 countries. Its U.S. division fronts airport branches of Einstein's Bagels,

By Joe Brancatelli, The Business Journals

Celebrity chefs, fine wine: The surprising new world of airport dining

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INFocus Newsletter6

Buffalo Wild Wings, Peet's Coffee, Panda Express and the Palm steakhouses.

There's also a place at the airport for the mavericks. San Francisco-based Vino Volo is an independent and doesn't franchise, yet it now pours fine wine and slices artisan salami at more than two dozen airports. Rick Blatstein's OTG Management came out of Philadelphia and transformed the entire concept of airport dining. OTG's nearly seamless integration of dining and at-the-gate touchscreen ordering at JetBlue's Terminal 5 in New York's Kennedy Airport in 2008 was such a hit that Delta Air Lines promptly hired Blatstein to remake food service at its terminals in Minneapolis and New York'[s LaGuardia Airport. And United Airlines hired OTG last month to "re-imagine" dining options at its hub at

Terminal C in Newark Airport.What's odd about all the action at the

airport table, however, is how closely it now mirrors the dining landscape of the rest of our lives. For all the upmarket options populating concourses and terminals —enotecas, salad bars, fancy steakhouses and specialty dining fronted by beloved local chefs — more than 40 percent of the food and beverage outlets at the airport are national brands. Fast food/quick service places such as Burger King and Sbarro command more than 44 percent of the spending, according to the Airports Council.

And what we eat at airports hasn't changed all that much, either.

"The No. 1 food items are still burgers, pizza and a turkey sandwich if it's ready-made," says Sickelsmith of HMS Host. "Portable works. Even at [airport] steakhouses, burgers are the most ordered menu item."

But that shouldn't surprise us, Sickelsmith explains. "If burgers and

pizzas are No. 1 streetside, it is logical that they'd be No. 1 at the airport, too."

And what we're likely to see and eat at airports in the years ahead won't look a lot different that what we eat near our office or at a leisurely dinner. Sushi will be better represented, for example. HMS Host even developed its own sushi concept, called Wicker Park at Chicago O'Hare Airport and Umazuchi at Honolulu International. "Shockingly good sushi," raved one recent Yelp reviewer about Wicker Park.

Major airport food service companies are developing additional Mexican food options, too. Noodle shops, already a staple at Asian airports, are a coming category, say some U.S. airport executives. Additional higher-end, artisanal burger, pizza and sandwich concepts are inevitable. Regional craft breweries, already an airport staple, will be even more omnipresent because travelers like the opportunity to sample a local brew before catching a flight.

AIRPORT FOOD CONTINUED

April 2015 7

isn't going to drive decisions across the board," she said. "You never know what's going to come up in contract negotiations, but there's a lot that drives the pricing of an airline, whether it's fuel or pick another element. If you drive pricing off of one element of your cost structure, somewhere along the line things aren't going to work out for you."

Carriers with fuel surcharges are facing mounting pressure to reduce them, but that won't guarantee lower air travel costs. The Qantas Group, for example, recently announced that it was gradually restructuring its international tariffs to phase out fuel charges, but those charges would be absorbed into base fares, keeping the overall cost the same.

Fueling DemandMeanwhile, it's possible lower fuel

costs will boost overall travel demand, Advito's Brindley said. For families planning leisure travel, fuel savings could equate to a sudden $2,000 tax cut, he said, and a stimulated economy would increase both leisure and corporate travel

demand. Of course, lower oil prices also are likely to slow corporate travel from the energy sector—something United, with a hub in energy industry stronghold Houston, already has noticed on a small scale—but such a drop likely would not be enough to offset the broader demand increase, Brindley said.

Should airlines maintain capacity discipline in the face of higher demand, basic economics put them in the position to increase fares. What's more, corporate travel buyers appear poised to accept it. A UBS research note from December, tallying a survey of 60 U.S. corporate travel managers, showed most would not significantly cut back on travel if faced with a fare increase of less than 10 percent.

Even so, airlines maintaining capacity discipline is not a guarantee. As airlines see temptation to grow capacity, the major carriers will be able to do so fairly easily by delaying retirement of older aircraft as they bring newer planes in, Brindley said.

"That would open up some lower fare buckets that might be closed now," he said. "Even without adjusting price levels, that could cause the average price to come down."

Airlines also will continue to face

consumer pressure to lower fares to account for lower fuel costs. Seeking Alpha analyst Andrew Hecht in a January research note predicted an airfare price war ahead as that pressure becomes insurmountable.

"At the current juncture, each airline has to be looking over its shoulder, wondering who will be the first to blink," Hecht wrote. "It is a sort of a prisoner's dilemma: If they all keep fares at current levels, they all benefit, but once one lowers them, the others will be compelled to follow."

Brindley added that airline pricing so far this year "looks to be a little softer than we originally thought. If anything, prices are relatively flat." Whichever way things fall, for the present, Brindley advised buyers to concentrate on markets in which airlines are aggressively trying to win market share, particularly those with new competition. Even in those cases, the carriers "are not going to come to the client and volunteer this," he said.

"If we see any kind of improved discounting, it's not going to be in the dominant markets, the monopoly market, and not in the low-fare inventory buckets," Brindley continued. "It's going to be high-yield, business-class markets that also are highly competitive."

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Airport and Chicago O’Hare Airport, allow travelers from the 38 visa waiver countries to use the kiosks while many,

including Phoenix Sky Harbor and Seattle-Tacoma airports., only grant access to U.S. and Canadian citizens.

It’s a given that all of the these airports have varying amounts of international arrivals each year and it’s unfair to expect average wait times at airports

with 20 million annual international arrivals to mirror those at airports with only a few million, for example. Still, airports are aware of their needs and realize that they’ll need more kiosks and personnel on hand if they want to make serious dents in their wait times.

KIOSKS CONTINUED

The number of international air passengers traveling in premium classes worldwide in January increased by a "weak" 2.6 percent year over year, according to the International Air Transport Association. IATA noted the "growth trend in premium international travel has flattened over the past several months," citing a "gradual slowdown in improvements in business confidence" in the second half of 2014, "with economic conditions in the eurozone and China deteriorating." Yet, IATA indicated the latest data suggested "signs of a pickup in business confidence in the eurozone and U.S., which could help ease some of the downward pressure on business-related international air travel." The largest percentage growth in January premium traffic occurred on Middle East-Far East (12.3 percent), Mid Atlantic (11 percent) and Europe-Middle East (10.2 percent) routes. Premium traffic on the heavily traveled North Atlantic, which connects North America and Europe, rose 3.7 percent year over year in January. International economy traffic, meanwhile, was up 3.8 percent year over year in January, according to IATA data.

Swiss is adding 22 new destinations from its Zurich hub at the start of the summer season.

From March 29, the national airline will fly from Zurich to Bari, Bilbao, Brindisi, Dresden, Gothenburg, Graz, Helsinki, Izmir, Krakow, Leipzig, Ljubljana, Malta, Naples, Porto, Riga, Santiago de Compostela, Sarajevo, Sofia, Thessaloniki, Toulouse and Zagreb. Its seasonal service to Palermo will become a year-round route.

The carrier will increase its frequencies on existing routes from Zurich to San Francisco, Copenhagen, Hamburg, Malaga, Palma de Mallorca, Stockholm and Valencia during the summer.

Swiss will also launch six year-round services from Geneva to Algiers, Dublin, Florence, Sarajevo, Skopje and Valencia; and summer services from Geneva to Biarritz, Calvi, Palermo, Thessaloniki and Zakynthos.

The airline said the new routes will bring its network to 106 destinations, including 80 in Europe, in 49 countries.

Last month, Swiss announced the "substantial" enhancement of its business class product

Emirates has opened a lounge at Los Angeles International airport.

The $6.2 million facility, which is the Gulf airline's 37th lounge worldwide, is available to first and business class passengers and to Platinum and Gold members of Emirates Skywards.

Located in the Tom Bradley International Terminal, the new Emirates Lounge at Los Angeles International Airport is 840 sqm in size and seats up to 157 people.

Features include free wifi, a terrace view, leather armchairs, a "choice of formal and relaxed seating", a dining area, showers, a prayer room and a fully-equipped business centre.

A private chauffeur-drive service is also available for first and business class passengers within 60 miles of the airport.

Emirates first flew to LAX in 2008 with a B777-200LR aircraft, before introducing a 490-seat A380 onto the Dubai-Los Angeles route in December 2013.

The carrier's 36 other lounges are located in Auckland, Bangkok, Beijing, Birmingham, Brisbane, five in Dubai, Colombo, Delhi, Dusseldorf, Frankfurt, Glasgow (see news, July 2014), Hamburg, Hong Kong, Istanbul, Johannesburg, Kuala Lumpur, London Gatwick, London Heathrow, Manchester, Milan, Munich, Melbourne, Mumbai, New York JFK, Paris Charles de Gaulle, Perth, Rome, San Francisco, Singapore, Sydney, Shanghai and Zurich.

International air passengers in premium classes increase slightly worldwide

Swiss announces an addition of 22 destinations from Zurich at start of summer

Emirates opens37th loungeworldwide atLos Angeles International Airport