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SEAT 2B | By Joe Brancatelli

The 2008 Travel Agenda

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By Joe Brancatelli
Portfolio.com: Business Travel
Tuesday, January 8, 2008; 12:00 AM

We're just a week into the travel year and life on the road has already taken a weird turn. With no advance warning or logical explanation, on New Year's Day the U.S. Department of Transportation imposed new rules for traveling with batteries. Judging from the postings at the D.O.T. and the Transportation Security Administration websites, we're now required to know how many grams of lithium our batteries contain before we carry them aboard or check them with our luggage. Fortunately, the new rules don't seem to have caused any chaos at airport checkpoints-because even the security screeners aren't paying attention to them.

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The battle of the batteries is the first big issue of the year, but it surely won't be the last. But while we're waiting for the lithium to kick in and the rules to rationalize, let's discuss what else will dominate our 2008 travel agenda.

A Revise of the Skies

International affairs will be incredibly important to business travel this year because the concept of "open skies" will liberalize many of the aviation treaties that limit which airlines can fly to which international destinations, and when they can. The biggest open-skies arrangement kicks in on March 28, when the United States and the European Community will allow airlines more freedom to choose routes without bureaucratic interference.

The result? A headlong rush of carriers flying into London's overburdened Heathrow Airport, the world's most important international gateway. The four big U.S. airlines currently barred by treaty from Heathrow- Delta, Continental, Northwest, and U.S. Airways-have already announced plans to fly there the moment that open skies begins. The Heathrow incumbent, British Airways, will retaliate by creating an entirely new airline that will fly nonstop between the United States and continental Europe. B.A.'s plans will be officially announced tomorrow and flights should start by mid-spring. The current speculation is that B.A. will actually call the new carrier "Open Skies" and that it will initially link New York with cities such as Paris and Brussels.

B.A. won't be alone. London-based Virgin Atlantic is expected to create its own new airline to fly between the United States and Europe without a Heathrow stopover. And Lufthansa is furiously reworking its strategy. The formidable German carrier has already announced that its all-business-class flights between Germany and secondary U.S. gateways like Chicago will be replaced with traditional three-class flights; the business-class jets are likely to be part of Lufthansa's own new approach to trans-Atlantic flight.

There'll be changes across the Pacific too. Australia and the United States will begin negotiating about open skies next month. The result is likely to be more flights and lower fares to the land Down Under and the U.S. debut of Virgin Blue, a domestic Australian carrier.

The Urge to Merge

The skies are turning distinctly gray for the nation's so-called "legacy carriers." In 2007, all six were profitable and out of bankruptcy simultaneously for the first time in nearly a decade, but the happy days are already gone. Stocks are tanking­-U.S. Airways, for example, lost 75 percent of its value last year-employees are grumbling, fleets are aging, fuel prices are skyrocketing, and passenger service is crumbling. They are also ceding domestic market share at an alarming pace: When the deregulated era began in 1978, the carriers that morphed into today's Big Six controlled all but a few crumbs of the U.S. market. Today, however, American, United, Delta, Continental, Northwest, and U.S. Airways command just 70 percent of the domestic skies.

So what do you do when you're bleeding a point of market share per year for a generation? Merge some more. Big-carrier combinations have proven to be operational nightmares, brutally disruptive for passengers, and, ultimately, ineffective in staving off nimble upstarts such as Southwest and JetBlue. But the self-styled Sky Gods who run the airlines always manage to protect their own perks and paychecks, so watch for an endless series of "discussions" about combinations and even a merger announcement or two.

Nets on Jets

This year is also when we go back to the future with in-flight internet and email. The first attempt to plug jets into the Web was a spectacular flop: Boeing shut down its Connexion service in 2006 after blowing about a billion dollars and wiring some 100 aircraft. But several companies are preparing to test more-cost-effective options this year. American, Alaska Airlines, and Lufthansa, Connexion's biggest customer, will launch new initiatives, while in recent months, JetBlue, Air France, and several Arab carriers put a few internet-enabled aircraft in the skies on a trial basis. This time, however, the hurdle won't be technological, but social. What happens when your chatty seatmate on the aisle plug into Skype and talk nonstop coast-to-coast. Or when some jerk logs into YouPorn.com? And who wins the space race when someone reclines their seat right into the lap of the business traveler who needs to set up a laptop, log on, and finish a report?

Lodging, Both Class and Mass

After nearly a decade of breakneck expansion and record profits, hoteliers are reaching the supply-demand tipping point in the United States. So many new hotel rooms are coming online that we may actually have more beds than heads. That'll mean a long-overdue moderation of nightly room rates here at home. Overseas, the big hotel chains see a market ripe for the plucking. Despite some initial skepticism and logistical challenges, all-American concepts such as the all-suite hotel and limited-service brands such as Courtyard by Marriott and Hilton Garden Inn are sprouting international branches. Meanwhile, there seems to be no end to the number of luxury hotel brands being created to cater to the super-deluxe market. Which explains why a city like Florence, Italy, now boasts both a Bulgari-branded hotel and a brand-new Hilton Garden Inn.

The Fine Print

What else should you watch for this year on the road? The disappearance, sale, or collapse of state-owned carriers such as Olympic of Greece and Alitalia, the perennial sick men of the European skies ... Another major new aircraft, the so-called Boeing Dreamliner, is set to debut in the fall ... A new terminal for Heathrow Airport, prosaically called T5, opens in London in the spring ... And barring a major financial correction that depresses passenger traffic, lots more delays and discomfort when you fly. But you'd already guessed that one, right?

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To contact Joe, visit his Contributor's page on Portfolio.com.


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