INFocus Newsletter1

FEBRUARY 2014 NEWSLETTER

TSI France to add business units

Southwest offers new Dallas routes

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SURPRISING AIRPORTSPENDING HABITS

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SURPRISING AIRPORTSPENDING HABITS

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INFocus Newsletter2

By Joe Brancatelli, The Busines Journals

I know where you've been lately. Same place as me and every other business traveler. At the airport. Stuck. Waiting out a collection of astonishing delays thanks to the record-breaking nasty weather.

After running nearly 80 percent on-time during the first 11 months of 2013,the nation's airlines plunged to about 70 percent in December. Then it really got bad. During the first ten days of January, Flightstats.com says the system ran an average of just 58 percent on-time. On January 5 and 6, as many major hub airports battled snow, ice and the Polar Vortex, more than half of all the nation's scheduled flights ran late. And for the 30 days ended last Sunday, FlightStats recorded an astonishing 222,399 delays, an average of about 7,400 daily.

So what did you do while you waited? Many of us undoubtedly spent far too much time in airport clubs. Some of us surely despaired of our flight's departure and scurried to the comfort of nearby hotels. We certainly spent far too many hours slumped at a gate ripping through the

music and videos on our tablets, laptops and phones.

Inevitably, however, we will have spent some time interacting with airport shops, restaurants and kiosks. And that sent me scurrying for information about what we do and what we spend while we go to or from (or wait for) our aircraft.

According to the Airport Council International (ACI) of North America, we spent a median of $5.15 on food and beverages each time we visited an airport. That number struck me as extraordinarily low considering the massive upgrade of dining options at most U.S. airports. It's true that $5.15, recorded in 2012, was higher than the $5 spent in 2011, the $4.69 in 2010 and $4.43 in 2009. But $5.15? Hell, a Starbucks grande latte at an airport kiosk will run around that much.

But if airport executives I've talked to lately can be believed, our dining patterns haven't changed much even though they've outfitted their concourses and terminals with fancy restaurants fronted by celebrity chefs, local brewpubs and cocktail bars

and even imitation Italian enotecas that sell pricey plates of cured meats and big-dollar bottles of wine.

"Burger and a beer still rules the roost around here," the director of a mid-sized Midwestern airport told me when I asked about how his relatively gentrified chef-fronted bistro was faring.

"Our steakhouse is always empty," said a West Coast airport executive, who then complained that $35 slabs of beef aren't what travelers want or expect from an airport repast.

"You hate yourself later, but you end up ducking into McDonald's for fries because you think the delay won't last long," explained a third.

This isn't to say the fancier places aren't doing well enough or that the charming bakeries and sandwich shops that have opened at Los Angeles International or the bespoke pizza and burger joints at New York's LaGuardia Airport are suffering. It's just that the numbers prove fairly

The surprising spending habits of people stuck in airports

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February 2014 3

TSI France makes changes to business units

TSI France's 3Mundi agency is changing its business mix by creating two new units: a consulting division as well as a research and development division. Led by Jordy Staelen, the travel

management company (TMC) wants to move more completely towards a "travel solution company."

The consulting division is now led by Guillaume Debomy, associate director of the agency. This service should refer clients to 3Mundi based on their technical maturity, and to tools and solutions that fit them best.

The goal is to assist clients by recommending the best combination of tools all the way through to expense

management, offering clients "end to end" service. To expand the team, four technical consultants are being recruited. As for the Research and Development department, it is directed by Simon Renaud, co-founder and CEO of the agency.

Aimed to service a broad range of clients, 3Mundi plans to create products for future business travel and improve existing solutions.

TSI Global Staff

Independently researched, ranked and published by SME & Entrepreneurship Magazine (small & medium enterprises) – SME100 ranks the top 100 fast moving companies in the country based on both quantitative and qualitative criteria. After intricate compilation and analysis, the final 100 are determined by the highest

weighted average score with heavy weightage on 'fast moving'. Recognized as one of the top 100 companies in Malaysia, Tradewinds Travel General Manager Mr. Mohd Khairy A. Rahim was present to receive the award accompanied by staff members and colleagues. The 2-hour prestigious award show which saw

other local SMEs from various industries receiving their due recognition, provides the perfect platform for entrepreneurs to network and share their success stories.

For more information on SME100, log on to: http://www.smemagazine.asia/index.php/events

Full-year 2013 global airline passenger traffic rose 5.2 percent from 2012 levels, with worldwide capacity levels up 4.8 percent, according to the International Air Transport Association. Combined domestic and international air traffic rose most among carriers based in the Middle

East (11.4 percent) followed by those in Asia-Pacific (7.1 percent), Latin America (6.3 percent) and Africa (5.2 percent). "The slowest growth was in the developed markets of North America (2.3 percent) and Europe (3.8 percent)," according to IATA. "We saw healthy demand growth in

2013 despite the very difficult economic environment," according to IATA director general and CEO Tony Tyler. "There was a clear improvement trend over the course of the year which bodes well for 2014."

TSI Global Staff

Busines Travel News

TSI Malaysia recognized as top 100 Fast Moving Companies

2013 Global airline passenger traffic increases from previous year

INFocus Newsletter4

Hub No More: United Plans Big Cuts In Cleveland

United Airlines by June will significantly reduce operations at its Cleveland Hopkins International Airport hub, cutting 60 percent of daily departures and eliminating roughly 470 employee positions, according to the carrier. The bulk of the service cuts, set to begin in April, comprises regional airline services operated by partners, with mainline flights, hub services and top-tier nonstop business city pairs largely intact.

"Our hub in Cleveland hasn't been profitable for over a decade, and has generated tens of millions of dollars of annual losses in recent years," according to a Feb. 1 memo to employees from United CEO Jeff Smisek. "We simply cannot continue to bear these losses."

Smisek noted that United would cut just "one of our 26 peak-day mainline departures." Yet, regional departures from Cleveland would be slashed by more than 70 percent. In total, available seat miles would decline 36 percent.

"When the schedule reductions are fully implemented in June, we plan to offer 72 peak-day flights from Cleveland and serve 20 destinations from Cleveland on a non-

stop basis, including to all our hubs and to key business markets," which would include New York LaGuardia, Washington National and Boston, according to Smisek.

To advance its merger with Continental Airlines, United in 2010 cut a deal with Ohio officials to maintain at least 90 percent of Cleveland flights for at least two years.

"No city has been more supportive of its hub carrier, and no group of employees has been more dedicated to providing great service," according to Smisek, "but the demand for hub-level connecting flying through Cleveland simply isn't there."

Smisek said the decision to cut Cleveland flying was driven in part by a pilot shortage, which he said has been exacerbated by new Federal Aviation Administration work rules.

"Those new regulations have caused mainline airlines to hire regional pilots, while simultaneously significantly reducing the pool of new pilots from which regional carriers themselves can hire," he noted. "Although this is an industry issue, it directly affects us and requires

us to reduce our regional partner flying, as several of our regional partners are beginning to have difficulty flying their schedules due to reduced new pilot availability."

Indeed, Cowen and Company airline analyst Helane Becker on Monday noted that "mainline carriers continue to shift their operations to mainline flying from regional flying as a result of the industry pilot crunch." That trend, illustrated in Cleveland, is especially troubling for regional airlines that fly on behalf of major airlines, Becker noted.

While United expects to keep operational bases in Cleveland for mainline pilots and flight attendants, employee cuts would include "up to 430 airport operations positions and approximately 40 catering personnel in Cleveland," set to begin in June.

Smisek in the memo struck a contrite tone, calling the decision to effectively de-hub Cleveland "difficult" and "painful" while apologizing to employees for likely hearing about the cuts via news reports.

By Jay Boehmer, Business Travel News

February 2014 5

Southwest Airlines announced on Monday it will offer nonstop flights from its base at Dallas Love Field, Texas to 15 cities later this year, after the expiry of federal restrictions from that airport.

The carrier plans to fly nonstop to Baltimore, Denver, Las Vegas, Orlando, Florida, and Chicago Midway from October 13. Service to Atlanta, Washington, D.C., Los Angeles, New York LaGuardia, Phoenix and other U.S. cities will begin November 2.

The Wright Amendment, a federal law introduced in the late 1970s, expires in October 13, which allows for direct flights from Love Field to 41 more states and the District of Columbia.

"The official repeal of Wright Amendment

federal flight restrictions signifies a turning point for the Southwest brand not just in Dallas, but from coast-to-coast," said Gary Kelly, Southwest Airlines CEO said in a release. "We are pleased to offer this new service to the Customers of our home airport, who have waited 34 long years, and we thank the many, many folks who made this opportunity a reality. Goodbye, Wright Amendment. Hello, America!"

Dallas Mayor Mike Rawlings and former U.S. Senator Kay Bailey Hutchison where there with Kelly and other Southwest staff at a news conference to make the announcement.

Last month, Southwest announced it plans to offer its first international flights, with destinations that include Aruba,

Jamaica, and the Bahamas. The carrier is also building a new international terminal at Houston’s Hobby Airport to allow it to fly to Mexico, the Caribbean, and Latin America.

In addition, the carrier is a beneficiary of the American Airlines-US Airways merger, which forced American to give up some of its operating rights at Washington’s Reagan National Airport. Southwest Airlines Co. bid and won the right to some of those slots, which would allow for 27 daily departures, adding to 17 daily flights that it already operates from the airport.

The airline is no longer “a small fish in a big pond,” Edward Jones analyst Logan Purk told Bloomberg News.

When Hal Biagas travels cross-country on business, you won’t find him wedged in a middle seat back in row 28. It’s not fancy meals or free bags that make premium-class travel a must for Biagas, general counsel at Excel Sports Management, which represents A-listers such as Tiger Woods and the Yankees’ Derek Jeter. “What I do tends to draw interest,” Biagas says, “and I can’t have someone looking over my shoulder and seeing a name on a presentation or contract.”

Just as Asian and Middle Eastern airlines

have built lucrative businesses serving executives and the wealthy, U.S. carriers have intensified competition for full-fare passengers who frequently travel between New York and Los Angeles. The contest for first- and business-class fliers on the heavily traveled route is pitting American Airlines (with 32 percent of the market), Virgin America (21 percent), Delta Air Lines (DAL) (19 percent), United Airlines (UAL) (16 percent), and JetBlue Airways (JBLU) (11 percent) against each other in a battle for investment bankers,

celebrities, and others who can afford tickets topping $6,500. Although coach fliers are a majority on almost all trips, Michael Boyd, chairman of consultant Boyd Group International, estimates premium-class passengers account for 75 percent of the revenue on cross-country flights. “Pandering to business traffic is a lot more important than getting volume,” Boyd says.

New York-Los Angeles is both the busiest

FoxNews.com

By Mary Jane Credeur and Mary Schlangenstein, Business Week

BiG News for Big D: Southwest Airlines offers new nonstop routes from Dallas

Airlines Fight for First- and Business-Class Passengers

CONTINUED ON PAGE 7

INFocus Newsletter6

convincingly that we talk a better food and beverage game than we live when we're stuck at the airport.

We apparently don't spend as much as we think at airport gift shops, retail outlets and newsstands, either. The ACI said the median spend per passenger was $3.31 in 2012 (compared to $2.72 in 2009), a pretty slim number when you consider a copy of Forbes sells for 5.99 and The New Yorker commands $6.99 for all those wonderfully diverting cartoons. For that matter, even the ever-shrinking USA Today costs two bucks a pop if you pick one up at an airport newsstand. And have you seen what they charge for a half-liter bottle of water that costs about 20 cents at a warehouse club?

One place where we are spending money, however, is at those automated kiosks that dispense all manner of goods you never thought you'd see at an airport.

According to the ACI, half the nation's airports now have robo-retailers and they rack up an average of $101,770 per unit. That probably explains why those blue Best Buy units are ubiquitous now and everyone from Canadian clothing retailers to prepaid mobile phone vendors are getting into the automated kiosk game. So much for our bemoaning the lack of human contact, eh?

One heartening trend? The homogenization of airport retail seems to be flagging just a bit. More than 40 percent of retail and food and beverage sales at airports are generated by national chains. But while we're waiting out a flight delay, we're more willing than ever before to go local. As much as 36 percent of airport food and beverage sales are racked up at local and regional brands, claims the ACI.

And I guess we can take some comfort that our waiting time is changing the financial game for the nation's airports. Back in the day, airports relied almost totally on airlines and aircraft landing

fees to make their budgets work. Today, not so much. In fact, about 45 percent of $16.8 billion in revenue generated by the nation's airports now come directly from us. Besides the obvious non-airline revenue streams (60 percent from rental cars, parking and airport hotels), our food and beverage spending accounts for 7 percent and retail sales (including duty free) account for 8 percent.

Does any of this really matter? Probably not too much in the grand scheme of things. But after a couple of months of dreary, dreadful weather and an onslaught of record-shattering delays, it's nice to know what we're doing when we're not blankly staring at the departure board hoping that the dreaded red "cancelled" isn't posted next to our flight.

Besides, now you know what I'm doing while I'm waiting out a delay. I'm the guy looking over your shoulder and asking you what you just ordered for lunch and whether your company reimburses the expense of your annual airport club membership.

SPENDING HABITS CONTINUED

February 2014 7

Choose the newly transformed Hyatt Regency Cincinnati and experience a hotel o�ering every possible convenience

under one roof, including: � Twenty-two story atrium with an

abundance of natural light � Red Roost Tavern—Brand new

farm-to-table restaurant � The Market—Grab and Go items � Glass enclosed indoor pool and

outside sun deck � 24 hour StayFit@Hyatt health

club and full self-serve business center

long-haul U.S. route, with about 3.2 million passengers a year, and the most lucrative, with $1.43 billion in annual sales, according to the Bureau of Transportation Statistics. A premium-cabin ticket can cost 10 times more than one in coach—but passengers do get plenty of pampering. At American, concierge employees greet first-class fliers at curbside and whisk them to a special transcontinental check-in room. They’re then taken to the front of the security line and the Flagship Lounge, a private facility within American’s Admirals

Clubs. Once airborne on Delta, business/first passengers are plied with Veuve du Vernay Brut sparkling wine from France’s Bordeaux region, along with premium California offerings such as Merry Edwards sauvignon blanc. “That transcon market is incredibly important, because it helps you become the preferred carrier across the board,” says Gail Grimmett, Delta’s senior vice president for New York.

Lie-flat seats are the latest front in the New York-L.A. war. Delta is shifting some wide-body Boeing (BA) 767s with flat-bed seats from trans-Atlantic to cross-country service and adding flat-bed seats on existing narrow-body 757s on the routes. United is rearranging

its cabins to go to two classes of service from three; as part of the makeover it will lose 12 seats that tilt to not-quite-horizontal on its cross-country 757s to make room for a total of 28 lie-flat seats.

In November, American will start flying Airbus (EAD:FP) A321 single-aisle jets specially modified for transcon service. They’ll have 10 mini-suites with flat-bed seats, 20 fully flat business-class seats, 36 coach seats with extra legroom that sell for an added fee, and only 36 traditional coach seats. Explains American’s chief commercial officer, Virasb Vahidi: “You can tell quickly that this aircraft was not configured for leisure travelers.”

PREMIUM PASSENGERS CONTINUED

Miami Airport opened a Transportation Security Administration (TSA) PreCheck security lane for passengers making a domestic connection from an international flight.

The expedited lane is the first of its kind for domestic connections, according to

John Pistole, TSA administrator.The lane opened Feb. 12 and is located at

the exit of the international arrivals facility in the airport's North Terminal.

Passengers who are members of the U.S. Customs and Border Protection's Global Entry or Nexus programs and those who

have enrolled in the TSA PreCheck program are eligible to pass through the expedited lane without having to remove shoes, belts or light jackets and can leave laptops and compliant liquids in carry-on bags.

The new lane is expected to reduce checkpoint wait times.

Busines Travel News

Miami Airport expands PreCheck to domestic connections from int'l flights