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 The Brancatelli File

joe THIS WEEK'S
PHANTOMS AND FANTASIES


BY JOE BRANCATELLI

January 18, 2007 -- Life on the road has made skeptics and cynics of us all. Too many years of phony upgrades, broken service promises and flat-out lies have given us precious little patience for the phantoms and fantasies of business travel.

So what, then, are we to make of Virgin America and Registered Traveler, two ideas whose time has apparently come and gone without ever having actually arrived? Both of these phantoms briefly stumbled into view this week and were quickly exposed for the fantasies they really are and probably always have been.

First let's talk about Virgin America, one of the longest-running sideshows in the history of business travel. Then we can discuss Registered Traveler, which has turned into a dreary, post-9/11 soap opera.

Virgin Atlantic boss Richard Branson, who often seems to be the entire entrepreneurial class of Britain, first began talking about creating Virgin America in 1999. He then promptly made the blunder of a business lifetime when he chose to bail at the last moment on a deal to slap the Virgin America name on a start-up then known only as New Air. That carrier launched the next year as JetBlue Airways and has helped remake the face of domestic aviation.

Every few months after that, Branson would bamboozle some credulous publication into writing about Virgin America as if it was just moments away from its inaugural flight. Along the way, Branson bought aircraft, hired some of the fools who launched Song, Delta's disastrous attempt to mimic JetBlue, and loaned the paper carrier tens of millions of start-up dollars. By some estimates, Virgin America has already burned through about $60 million, about four times what it took to launch JetBlue seven years ago.

Yet it wasn't until December, 2005, that Virgin America actually applied to the Department of Transportation (DOT) for approval to fly. The application was quite complicated and convoluted--and it immediately drew fire from existing airline competitors, all of whom claimed that Virgin America was, well, un-American. Contrary to federal law, which bars foreigners from owning or controlling U.S.-based airlines, Virgin America's critics claimed that Branson was pulling all the strings at Virgin America. His U.S. investors were a front, they claimed.

Even some of Branson's severest critics--yours truly included--thought that the Big Six were protesting too much. Branson may be a braggart and a blowhard, but we figured that the Big Six' objections were simply obstructionist delaying tactics. Even Branson wouldn't be so crazy as to flout federal laws that limit foreigners to 25 percent of a U.S. carrier, we said. Let the DOT process work--it takes the agency an average of more than a year to approve an airline to fly--and Virgin would get its wings in due course, we figured.

But when the DOT did respond three weeks ago, it was to tell Virgin America no. Branson, the DOT has decided, was pulling all the strings and was, in fact, almost all of the money behind Virgin America. In the private part of its order, DOT officials found that the $88.9 million promised by U.S. investors wasn't even at risk. The investors held "puts" that would allow them to cash out of Virgin America with a minimum rate of return of 8 percent.

Virgin America appealed the DOT ruling this week with a startling, 190-page submission. After attacking the DOT as a pawn of the Big Six carriers and whining about the time it took the agency to render a verdict, it got down to cases. To save Virgin America, Branson promised to put his shares in trust and agreed to abandon one of his three board seats. The airline said that, if necessary, it would also fire its chief executive and was prepared to fly some routes without the Virgin name. There were other concessions, too.

But that nagging and apparently crucial issue of the lack of U.S. capital at risk in Virgin America is unchanged. Virgin America's U.S. investors can still bail on the carrier and get their money back with interest. That peculiar and unprecedented state of affairs didn't fly with the DOT three weeks ago and it probably won't on appeal, either.

While all the regulatory sparring was going on, Virgin America finally went public with some of its operational plans. We still know nothing about its planned fares or where it expects to fly beyond its sole announced route of New York-San Francisco. But what Virgin America did promise this week was a first-class cabin with 55 inches of seat pitch and coach chairs with 32 inches of legroom.

Those might have been snappy specs back in 1999, when Branson began touting Virgin America, but they come up short in 2007. The big dogs on the New York-San Francisco route--American and United--already have more spacious first classes. American offers chairs with 62 inches of legroom and United offers lie-flat beds. And United and JetBlue, which launches on the New York-San Francisco run on May 3, both offer roomier coach seats. United's coach seats have 34 inches of legroom and JetBlue's planes will have 34 or 36 inches.

Virgin also made a big deal of its in-flight entertainment system. Unfortunately, it's essentially the same bug-ridden system once offered by Song. It has some marginal new perks (seat-to-seat text messaging, electronic ordering of in-flight meals), at-seat power receptacles and RJ-45 jacks, but it remains essentially a me-too product created to compete with JetBlue, which pioneered in-flight, at-seat live television.

As Virgin America bailed water, journalist/entrepreneur Steve Brill finally managed to open the second and third locations of his Clear Registered Traveler system. To go along with his 18-month-old installation in Orlando, Clear is now working, after a fashion, at the British Airways terminal at New York's Kennedy Airport and at Indianapolis Airport. Brill also has three other airport installations in the works: San Jose, Cincinnati and JFK's Terminal 1.

Hamstrung by his own hubris and endless tub-thumping, not to mention bureaucratic foot-dragging by the Transportation Security Administration (TSA), Brill has had to declare this paltry showing a victory for his $100-a-year program and for the entire concept of a privately operated Registered Traveler network. But less than 15 months ago, Brill told Congress that Clear and its competitors "would likely be rolled out at 30 to 40 of the 50 largest airports" by the middle of last year.

Yet it's not just the glacial rollout of Clear that may have doomed a nationwide Registered Traveler program. More than five years after 9/11, business travelers have adjusted to everything that the TSA has thrown at us and we aren't storming the airports demanding a security-bypass program. Besides, no matter what Brill may claim, Clear isn't anything like a security-bypass program that most business travelers would support, let alone pay into, in any great numbers.

After going through Clear's online registration process, potential Clear members must then turn up at the airport for in-person vetting. Then the TSA has to approve the application, a process that now seems to take weeks and sometimes months. Only then do successful applicants receive a Clear card.

Once they've gotten through the paperwork and the TSA vetting, Clear cardholders still have to show a government-approved ID when they enter a Clear lane. After going through the Clear process, they then must pass through a standard TSA checkpoint, too. Even with Clear clearance, they still have to take their laptops out of their cases and put toiletries in a zip-top plastic bag and run them both through the X-ray machine. They still have to remove their coats and jackets. Coins, keys, cellphones, pens, belts and other metal still must be removed from their person.

And after millions of dollars have been invested and millions of laudatory words written at the behest of Brill, the magical shoe-scanning machines invented for Clear aren't doing their jobs. They've been installed at Kennedy and Indianapolis, but have yet to be turned on. So Clear cardholders there still must remove their shoes.

The $200,000-a-pop machines were turned on at Clear in Orlando beginning on Tuesday, but the TSA says they don't yet properly differentiate between "safe" and "unsafe" metal. So if the machines detect metal, Clear cardholders there will still be required to remove their shoes, too.

Like I said, just another week of phantoms and fantasies on the road thanks to the folks who peddle pigs in pokes and phony upgrades. And our desk-bound compatriots always wonder why we business travelers are so skeptical and cynical…

Copyright © 1993-2007 by Joe Brancatelli. All rights reserved.