Archive for December, 2012

Bag fees key to airlines bottom lines

December 19th, 2012 by Mariah

(CNN) – Bag charges may mean financial pain and aggravation to a lot of airline passengers, but they are a lifeline and profit-driver to formerly financially strapped carriers.

Recent numbers from the Bureau of Transportation Statistics show that Delta Air Lines had the second-highest operating-profit margin among U.S. airlines in the third quarter of 2012, and also took in the most checked bag-fee revenue: $233.1 million.

No mere coincidence there.

Prior to the airlines’ current and growing ancillary revenue blitz, there was a lot of red ink going around as escalating fuel prices and competition from other carriers exacted much hurt on the airlines’ bottom lines.

But in today’s U.S. airline industry, the top 10 airlines all posted an operating profit during the third quarter, and bag fees, charges for premium seats and meals, and industry consolidation had much to do with the turnaround.

Delta’s third quarter profit margin of 14.6% was only eclipsed by the much-smaller Alaska Airlines at 18.7%, according to the Bureau of Transportation Statistics.

Interestingly, Alaska’s third quarter revenue from bag fees was more than $44 million, well up in the BTS ranking in sixth place ahead of Spirit, Allegiant, JetBlue and Frontier despite the fact that Alaska was only 10th in passenger enplanements over the first eight months of 2012.

Delta generally charges $25, $35 and $125 for the first, second and third checked bag each way, while Alaska charges $20 each.

Part of the reason that Delta took in more bag fee revenue than any other U.S. airline in the third quarter is it has been running second so far this year in enplaned passengers, behind Southwest and ahead of United. Southwest carried about 12 million more passengers than Delta did from January to August 2012, but Southwest’s first-two checked bags fly free policy brought down its bag fee revenue in the third quarter to fifth.

After Delta, the remaining top 10 U.S. airlines in bag-fee revenue in the third quarter, in descending order, were: United, American, US Airways, Southwest, Alaska, Spirit, Allegiant, JetBlue and Frontier.

The key role of ancillary revenue initiatives to airlines’ health can be seen in Southwest’s announcement last week that it would be increasing its ancillary fees as it seeks to take in an additional $100 million or more in ancillary revenue in 2013.

The first two checked bags fly free on Southwest, but the combined Southwest and AirTran (with bag fees of $20, $25 and $50 for the first three checked bags, respectively) attracted $46 million in bag-fee revenue — the fifth highest — among U.S. airlines during the third quarter.

In addition to AirTran’s bag fees, Southwest collects fees for third-checked bags ($50) and excess bags, and its numbers are pumped up by the fact that Southwest is among the largest U.S. airlines in terms of passenger traffic.

The BTS notes that U.S. passenger airlines garnered $924 million in bag fees from July to September 2012, and that comes on top of the $652 million they collected from a poor second cousin, change fees.

And, these numbers are only part of the airline ancillary revenue picture because U.S. airlines are not required to report other ancillary revenue, including fees for seat upgrades, food and beverage, and entertainment, including Wi-Fi.

That means that the airline fee frenzy is even more integral to carriers’ financial health than is immediately apparent — and most of them have plans to up the ante in 2013.

Mark Zuckerberg donates $500 million

December 19th, 2012 by Mariah

FORTUNE — Mark Zuckerberg donated Facebook shares worth $500 million to the Silicon Valley Community Foundation, a non-profit organization that works with donors to allocate funds according to their interests. The gift is the largest ever received by the foundation, which finances projects locally and around the world, and Zuckerberg said he planned to focus his giving in health and education.

Zuckerberg announced the gift in a post on Facebook, where he noted that he and his wife Priscilla Chan had previously signed the Giving Pledge, an effort led by Warren Buffett and Bill Gates to encourage billionaires to donate most of their wealth to philanthropic causes. In 2010, Zuckerberg pledged to donate $100 million in Facebook (FB) shares to an effort to improve public education in Newark, New Jersey.

“Today, in order to lay the foundation for new projects, we’ve made a contribution of 18 million Facebook shares to the Silicon Valley Community Foundation,” Zuckerberg wrote. At Tuesday’s closing price of $27.71, the shares are worth $498 million. “Together, we will look for areas in education and health to focus on next. I’m hopeful we’ll be able to have as positive an impact in our next set of projects,” Zuckerberg wrote.

In a statement, Emmett Carson, CEO of the Silicon Valley Community Foundation said: “Mark’s generous gift will change lives and inspire others in Silicon Valley and around the globe to give back and make the world a better place. We are pleased and honored that he has chosen to continue to partner with us to help him achieve his philanthropic goals.”

Treasury to sell remaining GM shares

December 19th, 2012 by Mariah

 

 

 

The Treasury Department announced plans on Wednesday to sell the 500 million shares of General Motors it still owns, closing the books on the $51 billion bailout that started four years ago.

But even with the $12 billion to $14 billion Treasury will likely recoup from the stock sales, taxpayers will probably lose out on the GM bailout when all is said and done.

Treasury said GM has agreed to repurchase 200 million shares by the end of this year for $27.50 a share, a nearly 8% premium above Tuesday’s closing price. Shares of GM (GM, Fortune 500) jumped more than 7% in early trading Wednesday on the news.

Treasury intends to sell its remaining 300 million shares through various means in an orderly fashion within the next 12-15 months, subject to market conditions. Sales could start as soon as January.

After the repurchase of shares by GM, there will still be $21.6 billion of bailout funds yet to be returned to taxpayers. The average sale price on the remaining 300 million shares would have to be nearly $72 in order for Treasury to break even. That’s nearly triple Tuesday’s closing price.

Related: Two very bright signs for GM

GM started to receive bailout funds in late 2008, with the bulk of the money being used to fund its operations during its 2009 bankruptcy reorganization.

Although GM has returned to profitability since the bailout, the stock has not done as well as hoped. Treasury is getting less than the $33 per share it received at the time of GM’s initial public offering in November 2010. GM CEO Dan Akerson has apologized for the automaker’s weak stock price despite strong earnings.

Related: GM’s next bailout – in Europe

Still, it is estimated that 1.5 million jobs were saved by keeping General Motors and smaller rival Chrysler afloat through bailouts, according to the Center for Automotive Research. That’s why many economists argue that the bailout worked, even if taxpayers are not completely repaid.

Van Conway, a Michigan restructuring expert, said the overall hit to the economy might have been hundreds of billions of dollars if GM and Chrysler had gone under, due to the loss of businesses across many different sectors.

“If we had not bailed out GM and Chrysler, it would have affected companies that no one ever thought about,” said Conway.

GM has bounced back to earn record profits in 2011, as it recaptured its title of the world’s leading automaker. It is hiring workers once again.

 

“The auto industry rescue helped save more than a million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program. The government should not be in the business of owning stakes in private companies for an indefinite period of time,” said Assistant Secretary for Financial Stability Timothy Massad.

Despite the success of GM since 2009, the bailout remains controversial. It was a major point of contention during the recent presidential election. Mitt Romney arguedgovernment funds should not have been used the bailout. GM has been eager to have Treasury sell its remaining stake due to the opposition of some potential car buyers to the deal, who mockingly referred to the company as “Government Motors.” The final sale of stock will also remove limits on executive pay at GM.

“This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM’s progress and our future,” Akerson said in a statement Wednesday.

 

First responders recount initial chaos of school massacre

December 19th, 2012 by Mariah

Newtown, Connecticut (CNN)-Amid the chaos that first-responder Ray Corbo witnessed on Friday, there is one image that he will never forget.

It isn’t the woman who was taken to the hospital after being shot in the foot at Sandy Hook Elementary. It isn’t the police officer he saw leaving the school’s interior covered in someone’s blood.

What will haunt Corbo forever is the memory of parents lined up outside the firehouse just a few hundred feet away from the school, waiting to pick up their children.

“As the children were coming down the street, little by little, classroom by classroom all holding hands, parents were claiming their children,” says Corbo, the first assistant fire chief at Newtown Hook and Ladder No. 1. “After a little while, once they claimed their kid and signed them out … they left.

“There were some sticking around and that’s when we realized that they’re probably not going to be leaving. They’re gonna get the confirmation soon enough that they’re not gonna be grabbing their child and hugging them and taking them home.”

Corbo’s voice is steady, but his eyes glisten. “Their life is changed forever.”

Corbo, along with Rob Manna, the department’s chief engineer, were among the first responders to Friday’s school massacre of 20 children and six adults.

Manna was working less than half a mile from the school in the center of Sandy Hook when he got the call.

“I was there very soon,” he says. At the time, he says, he had no idea what he was walking into.

Corbo and Manna were assigned outside the school, toan emergency triage area that didn’t end up being used.

Despite their combined nearly half-century of experience, the two men say nothing could have ever prepared them for what they have now personally experienced.

“You get the initial dispatch, and you really don’t know what you’re coming in to, but for the most part, you’re ready for it,” Corbo says. “But this time, it was not the case … if you think you’re ready for this, you’re not.

“Very early on, it was determined that this was bad — really, really bad.”

Police and paramedics, some clad in body armor and bulletproof vests, entered the school cautiously.

“They had to find out if anyone survived … if there was anyone to take care of,” Manna says.

Outside, it was mass confusion. Phone calls and text messages spread nearly faster than reports on police radios.

“It was chaos down there. Parents were coming from all directions. You could see the panic in everybody’s face, because they have no idea what they’re coming into,” Corbo says. “They were panic-stricken and trying to get to their children, but they were stopped.”

At the nearby firehouse, he says, he saw parents waiting in line for hours to pick up their children.

“And there’s no more kids around to take home,” Corbo says. “And you know, it’s bad. They’re gonna get some bad news. I’m sure they knew at that point, but there’s that shred of hope there’s somebody hiding in closet or some kid they missed, but ultimately that wasn’t the case.”

Corbo is a father to a first-grader and, had they not moved two years ago, his 7-year-old son Joey would have attended Sandy Hook Elementary.

When he returned home Friday, the former Marine did what many of the parents outside the school could not.

“‘I love you’ was the first thing I said,” Corbo recalls. “And we hugged a lot. Of course, he’s 7 years old, so a hug in the morning is fine, and before you go to bed, but getting hugged all day long, he’s wondering what the heck’s going on.

“He’ll understand someday.”

Manna says his grieving will come later. “For now, (I’ve) gotta be strong.”

Today, Newtown is awash with emblems of tragedy: an enormous American flag, starkly silhouetted against the sky, flies at half-staff in the middle of Main Street.

Just east, on the road that leads towards Sandy Hook Elementary, a host of 27 wooden angel statues sing a silent chorus on the roadside, a tribute to those who died Friday. Police say Adam Lanza shot and killed his mother at the home they shared, before carrying out the rampage at the school where he left 26 dead and also shot and killed himself.

A small bright note is the overwhelming support Newtown has been receiving from around the country and the world — including truckloads of teddy bears that firefighters are distributing to children’s groups, schools and churches..

“The community will go on,” Corbo says. “We have to. There are still a lot of children in this town waiting for Christmas to come. You have to move on. For their sake, it’s gotta be back to normal as soon as we can get it.”

 

Despite Superstorm Sandy, NYC tourism remains strong

December 4th, 2012 by Mariah

New York (CNN) — The crowd of festival goers at a holiday market in New York City’s Columbus Circle Friday seemed to support the message city tourism officials have been spreading far and wide: The Big Apple is open for business and welcoming its usual influx of holiday visitors.

Superstorm Sandy’s wrath a month ago will cost New York state $41 billion, according to New York Gov. Andrew Cuomo, but tourists have largely been unfazed by the storm, which caused very little damage to Midtown Manhattan, the hub of the city’s magical holiday attractions.

That’s no doubt a relief to those who wondered if tourists would be skeptical about visiting the Big Apple after the storm brought the city to a standstill at the end of October.

“Absolutely not,” said Michigan visitor Kelly Coll, 48, who has traveled to New York this season for the last 14 years with friend Tiffany Moen, 46. “The storm did not affect our plans at all,” Coll told CNN on Friday afternoon.

In fact, New York City is on track for a record number of tourists this year, according to George Fertitta, CEO of NYC & Co., the city’s marketing and tourism association.

The tourism association estimates there will be around 52 million tourists this year, up from last year’s 50.9 million.

“Ninety-five percent of all of our hotels, attractions, restaurants and transportation are completely back to normal,” Fertitta said. “For all intents and purposes, visitors should not feel deterred from coming to New York. NYC is open for business.”

Some tourists say media coverage of recovery efforts in the city encouraged them to make and keep plans to visit.

“I was not skeptical at all because of everything I had seen on television,” said Roger Archut, 30, a first-time visitor from Germany. Storm damage in New York City was portrayed as “under control.”

John Murphy, 54, visiting from Ireland with his wife, shared a similar story. Coverage of the storm indicated to him that the area most crucial for holiday attractions, Midtown, home to Fifth Avenue and the Rockefeller Center Christmas Tree, was “well maintained.”

New York City hotels are running and fully prepared for the holiday rush of tourists, officials say.

“Hotel occupancy is strong and there have been no cancellations due to apprehension from Hurricane Sandy,” said Lisa Linden, spokesperson for the Hotel Association of New York City, representing just under 300 hotels in the area.

Yet just because tourism is expected to reach an all-time high this year doesn’t mean some businesses aren’t hurting in the aftermath of the storm.

At the southern tip of Manhattan in the hard-hit Financial District, Harry’s Café & Steak, a popular eatery with visitors during the holiday season, still struggles.

“There has definitely been a decrease in business,” owner Peter Poulakakos told CNN on Friday. Many restaurants rely heavily on the holiday season for a huge portion of their yearly income.

“Get the word out that we are here and ready to serve!” Poulakakos said.

Despite declines, many remain hopeful that business will pick up in the coming weeks.

“The one to two weeks before Sandy were very hard because many tourists didn’t want to be here during the storm,” said Diancoumba Mamadou, who works for Pedicab NYC, a business almost completely reliant on tourism.

“But thankfully, now it is beginning to get back to normal and hopefully will continue on that path.”

If the record-breaking estimates from NYC & Co are any indication, that path will certainly continue.

Obama plan has $200 billion in economic boosters

December 4th, 2012 by Mariah

WASHINGTON (CNNMoney) — The White House initial proposal to avert the fiscal cliff includes $200 billion in economic boosters — a stimulus plan Republican critics are railing against when they say the country needs to start reducing debt. But even deficit hawks say spending more now is fine and even warranted to support a fledgling economic recovery. The key is long-term cuts that take effect down the road.

“What the president has pitched is pretty small,” said William Gale, who co-directs the Brookings Institution’s Tax Policy Center. “There’s a lot more that could be done, and it wouldn’t have that much of a negative long-term impact.”

What’s in President Obama’s $200 billion plan for economic growth?

Two administration officials confirmed some of the stimulus policies Obama would like to see. The dollar figures are drawn from Congressional Budget Office and Congressional Research Service estimates on past proposals.

* $95 billion to extend the payroll tax cut one year.

* $30 billion to extend unemployment insurance benefits a year.

* $50 billion to fund infrastructure projects like roads and bridges.

* $25 billion for other short-term programs, including extending a tax deduction that lets businesses accelerate depreciation on equipment purchases.

The administration also would include measures to make it easier for homeowners to refinance their mortgages.

However, the world “stimulus” is a nonstarter to many Republicans, especially those who credit their 2010 political takeover of the U.S. House to their campaign to end big government, including stimulus.

“At a time when the entire nation recognizes there’s a spending problem, (stimulus) is not serious, it’s absurd,” said Rep. Peter Roskam of Illinois, a top House Republican.

On Monday, House Speaker John Boehner made a counter-offer to the White House, offering to cut $2.2 trillion from deficits through massive changes to federal programs like Medicaid and Medicare. In the letter, Boehner also blasted Obama’s stimulus measures.

To prevent the fiscal cliff, the White House would also stop the Alternative Minimum Tax from expiring, extend corporate tax credits for research and development as well as pass the doc fix to prevent a 27% cut in the rates at which doctors are reimbursed for Medicare.

Singapore Airlines in talks to sell Virgin stake

December 4th, 2012 by Mariah

HONG KONG (CNNMoney)-Singapore Airlines said Monday it is in talks to sell its stake in Virgin Atlantic, a move that could shake up air travel in Asia and Europe.

The airline said it was “in discussions with interested parties” about a sale, but cautioned that the negotiations may not result in a deal. Singapore Airlines has held 49% of Virgin Atlantic since 1999, while British entrepreneur Richard Branson has retained a controlling share.

Singapore Airlines did not list potential suitors, but multiple media reports suggest Delta Airlines is participating in talks. A spokeswoman for the U.S. carrier declined to comment Monday, and a representative from Virgin Atlantic referred reporters to Singapore Airlines.

Shares of Singapore Airlines were down 0.5% in morning trading.

Should Singapore Airlines divest, the sale would be the latest round of shuffling in the merger-happy airline industry. Carriers have turned to consolidation in recent years as rising fuel costs and weak demand have affected profitability.

Delta’s last major expansion, in 2008, took the form of a merger with Northwest Airlines. The consolidation proved difficult, with computer systems, cultural differences and passenger expectations all serving as major stumbling blocks.

But a tie-up with Virgin would provide strategic benefits for the second-largest U.S. carrier, including coveted space at London’s Heathrow International, as well as increased access to European and Asian markets.

The deal might also make sense for Virgin, which has been squeezed by discount competitors. The British airline also lacks a partnership with one of the major air alliances — something Delta could help provide.

Virgin announced in September that Steve Ridgway, the company’s CEO since 2001, would step down in spring 2013. The company reported an operating loss of $129 million for the year ended in February.

5 winter wonderlands

December 4th, 2012 by Mariah

(CNN)-With presents to buy and families to visit, the holiday season can become an endless to-do list.

But take some of that vacation time to explore the holiday spirit in action. At these five wonderlands around the country and the world, you’ll find the wonder of winter, the wonder of shopping and the wonder of Santa Claus up close.

White River National Forest, Minturn, Colorado

This year, the White River National Forest is known for two things. It’s the most visited recreational forest in the country, a hub of skiing aficionados, thanks to nearby Aspen and Vail, and it’s also the home of the 2012 U.S. Capitol Christmas Tree.

Since 1970, the Capitol Architect has partnered with a different National Forest to choose a new tree for the Capitol lawn. This year it was White River.

“This was the first time that White River’s ever had the privilege of providing it, so it was a big deal for us,” said Bill Kight, a Forest Service spokesman.

The Capitol Tree tours the country during the holiday season before making its way back to Washington — and it offers visitors a chance to see a piece of the White River National Forest on the move.

Those who see the forest itself should expect a different experience than in the warmer months, according to Aurora Palmer, who works in public affairs and sustainable operations at the park.

During the winter season, the major attractions include skiing, snowmobiling and sledding, as well as other icy sports. The park even gives out permits for those looking to cut down their own Capitol Tree.

“Fantasy of Lights,” Callaway Gardens, Pine Mountain, Georgia

Callaway Gardens’ “Fantasy of Lights” is entering its 21st year. The resort hasn’t added a new scene to the massive lights display since 2000. And yet it has lost none of its holiday power.

“It’s amazing to see the faces of the people as they come through the gates, and they leave, and they make those Christmas memories,” said Callaway Gardens spokeswoman Rachel Crumbley.

The Georgia resort draws guests year-round. But “Fantasy of Lights” — which includes 8 million lights in 15 seasonal scenes, making it one of the largest displays nationwide — is special, Crumbley said, drawing both couples and families.

“It’s just on such a grand scale,” Crumbley said. “And with the music combined with the lights combined with the themes, I think it kind of resonates.”

Lake Placid, New York

Lake Placid and the surrounding Adirondack Mountains see the majority of visitors between May and October, but that doesn’t mean that the area is lacking when the weather gets colder.

Thanks to its proximity to the mountains, Lake Placid offers “just what the Adirondacks offer,” said Kim Rielly, spokeswoman at the Lake Placid Convention and Visitors Bureau. That means a variety of outdoor recreation, in a park that stretches across 6 million acres.

That’s equal to 6 million football fields, she said, although she says that’s a conservative estimate.

In the last 100 years, Lake Placid has hosted the Winter Olympic Games twice, and it remains a destination for the athletic. Still, Rielly called Lake Placid a “cool little alpine village in the middle of the wilderness.”

At the center of town is an old ski jump, while the surrounding wilderness of the Adirondacks holds multiple museums for exploring and 43 peaks for hiking. One of them, Whiteface Mountain, is paved all the way to the top, so that families can visit the peak by car.

And from December 7-9, Lake Placid will host a “Holiday Village Stroll,” featuring workshops, holiday story time, a “Jingle Bell Run” and more.

Mall of America, Bloomington, Minnesota

The Mall of America remains a destination for any holiday shopper, if only because of its size, featuring more than 500 shops.

But this year, the mall is adding to its seasonal appeal with the unveiling of the “HGTV Holiday House,” a life-size gingerbread house.

Guests can explore the space, which will feature demonstrations, meet-and-greets and regular appearances from HGTV’s stable of home décor and design personalities.

Beyond that, the mall is also hosting a Holiday Music Festival; and its multi-floor shopping selection, complete with an amusement park and larger-than-life Lego installations, dwarfs any other shopping experience as an indoor travel option.

Santa Claus Village, Rovaniemi, Finland

Last on the list is a wonderland across the globe, “the official home of Santa Claus,” at Rovaniemi in Finland.

It’s not just a title: one of the town’s main attractions is the Santa Claus Village. At the heart of the village is the Santa Claus Chamber, where Santa lives, ready to greet visitors.

One of the village’s biggest draws is the Santa Claus Main Post Office, said Sanna Kortelainen, managing director for Rovaniemi Tourism & Marketing.

“The Santa Claus Main Post Office is a real post office, which operates 365 days in the year,” she said. “That is the place where all the letters to Santa are sent. The letters are opened by post elves and read through.”

After that, guests can ride a sleigh or visit the reindeer farm or even explore the Arctic Circle, which begins at the edge of Rovaniemi.

The Christmas season is also the best time of year to visit, Kortelainen said. The season begins with a declaration from Santa on November 24 and goes into January, ending when the sun again begins to rise above the horizon.