All posts by John Band

Amy Winehouse Memorial Stupid Quiz

In memory of everyone’s favourite alcoholic Jewish female jazz singer-songwriter (bonus points for anyone who has a different favourite alcoholic Jewish female jazz singer-songwriter: please share in comments), a single question today. What was the highest UK chart position achieved by Amy Winehouse’s cover version of Valerie?

Why credit ratings weren’t important in the Thameslink deal

I’ve not abandoned this blog – just, whilst struggling with painful paid work on the kind of social media and consumer goods marketing work I tend to post here (it’s rewarding and worthwhile paid work, but whilst working on it for pay I’m not so keen to blog on it for no money), most of what I post tends towards the political, so I tend to post it on Liberal Conspiracy. If you’ve missed out, my work for LC is here. I’m also on Twitter a lot, and am slightly disturbed to see from my tweet figures that I’ve written more than a book’s worth of Tweets. Oh, and also I was blogging as part of my MA course – I should really repost those blogs here.

However, this current topic is definitely unsuited to any of those media. Roger Ford, who’s probably the best railway journalist working in the UK at the moment (sorry Nick!) writes a great technical column in Modern Railways magazine, and sends out a monthly email based on his work for the mag. But although he’s a brilliant rail industry writer, he’s not a great finance industry writer. And so he’s fallen for an insiduous and silly myth spread by the Telegraph’s Alistair Osborne in this piece.

The last UK government put out a tender for 1,200 new train carriages to be built for the Thameslink project, which links southeast London and its commuter belt with north London and its commuter belt via upgraded lines running from London Bridge to St Pancras via Farringdon. The tender didn’t specify any British-built content for the trains, and was won by Siemens with trains that will be built in Germany rather than Bombardier with trains that would’ve been built in Derby. Siemens bid cheaper than Bombardier, and the government wasn’t allowed to take British jobs into account because a specification of British jobs wasn’t part of the invitation to tender.

This created anger, especially as Bombardier used the announcement as a catalyst to announce that it’d sack two thirds of its contract staff and 25% of its permanent staff in UK train-building, because it doesn’t have any UK train orders after it’s finished building new London Underground trains. Europhobics used it as an opportunity to attack the EU’s anti-corruption rules; more sensible people used it as an opportunity to attack the previous government for failing to specify British jobs (as would’ve been allowed by EU rules) in its invitation to tender.

Which is fair comment. A related question, though, is why – as the biggest supplier of trains to the UK railway network over the last five years – is why Bombardier couldn’t outbid Siemens to the contract. Osborne’s claim was that this was a reflection on Bombardier’s credit rating relative to Siemens. Siemens’s debt is rated at A+ by Standard & Poor’s, compared with Bombardier’s BB+ rating, and the contract was to provide the trains on a leasing basis rather than to buy them outright. He says that because it costs Bombardier more to borrow (credit ratings are basically like individual credit scores, so A+ means you get a cheaper loan than BB+), it would’ve cost Bombardier 1.5% more than Siemens per year in interest costs to supply the trains than Siemens, so no bloody wonder Siemens won.

However, this is rubbish. Neither Bombardier nor Siemens bid on their own. Bombardier teamed up with Deutsche Bank, services outsourcing company Serco, PFI investment company Amber Infrastructure and SMBC Leasing for its bid. Siemens teamed up with PFI investment company InnisFree and private equity company 3i Infrastructure. In neither case would the train manufacturer have put up the money for the trains – in Bombardier’s case it would have been SMBC (which has an A+ rating, befitting its position as one of Japan’s least bankrupt banks), and Siemens’s case, it would have been its own corporate finance division (A+) plus 3i Infrastructure (BBB+). For the Bombardier consortium, the money would have been borrowed against SMBC’s account; for the Siemens consortium, it would have been borrowed against Siemens’s account – they would both have had an A+ credit rating.

So, in other words, the Bombardier consortium and the 3i consortium would have had the same financing costs. The only difference is that, had the bid been successful, Siemens’s credit rating and ownership of a finance company would have allowed it to take a higher proportion of the profits. The difference between Bombardier and Siemens based on credit rating is that Bombardier wouldn’t have been able to take an additional slice of the profits based on the financing part of the project, and therefore had to bring in an external partner for the financing. But that’s about how the profits from winning the bid are shared, not about the cost of delivering the trains.

The same EU rules that ban the government from choosing Bombardier because it’s designed and built in Derby also ban the bid from being awarded on a cross-subsidy basis from companies’ finance arms compared to their building arms. In other words, Siemens’s assessment of the cost of building the trains had to be on the same basis as Bombardier’s, and it wasn’t allowed to pretend that the trains were cheaper and offset that money on the basis of any financing that its finance company did. So there’s no sane reason why this should have made the Bombardier consortium’s bid more expensive than the Siemens bid.

In short, either Siemens overbid (presumably because it was desperate to keep a foothold in UK rail, having lost most major recent contracts to Bombardier), or Bombardier underbid (either because it thought the government would somehow dodge the EU rules and pick the British-based trains, or because it couldn’t really be bothered and was looking for an excuse to cut Derby anyway). The financing problem is not important.

Tesco Academy

I went to a state primary school; admittedly, one in a fairly posh part of the world (Christchurch School in Ware, Hertfordshire, for the morbidly curious). It was the 1980s; education was OKish; there were about 30 people in my class, and the ones who properly dribbled on themselves were removed for maths and English lessons.

I discovered Sue Townsend when I was about 10 and therefore managed to get the entire class of Year 6es singing anti-Thatcher songs loudly in assembly, until the deputy head told me that if I didn’t stop doing that they’d tell my nan on me.

I was in the choir. I know that’s a remarkable concept for those who know me these days, but I somehow lost my ability to sing whenever my voice broke. Oh well, it probably saved me some abuse or other. We were a good choir. We went to Cambridge to enter the Best Year 6 Primary School Choir Competition. We lost. It was probably because I couldn’t sing. Also, our song was bloody lame.

But the other thing we did as a choir – and I’m still in awe this happened in 1989 – was to sponsor Tesco’s. There was a walking-running challenge from Newcastle to London sponsored by Tesco, and alongside their computers (or, possibly in those days, typewriters) for schools vouchers, some of my classmates’ mums, aunties and sisters were participating in this challenge. So we were nominated, as a Leading Choir, to record the theme for the Tesco North To South Run Song. What we sang was, to the tune of ‘When The Saints Go Marching In”:

Tesco is here!
Tesco is here!
So can we have a great big cheer!
(YAY)

…the rest of that verse is sadly lost, apart from the soul of Tesco’s then ad agency and then marketing director, where it’s permanently etched in the blood of innocent children.

They’re setting forth right in the North
Collecting money all the way
[repeat first bit]

We were eventually rejected, presumably because one of the choirs on the route from Newcastle to London kicked our arses. Which is probably, again, my fault. Or, reflecting on the scenario 21 years later, the fault of the satanic bastards who set the challenge up in the first place.

This weird occurrence is something I’ve been meaning to blog for ages, mostly in the sense of “marketing to kids is more insidious than when I were a lad? Fuck off”, and also just in the sense of “that happened. No, that actually happened. A choir of kids sang ‘Tesco is here, so can we have a great big cheer’. That happened.”

So yeah. Now that my mates are parents, and angry about marketing, I still can’t think of anything more insanely blatant than that one. If Tesco did it today, they’d be keelhauled, and possibly hanged at the yard-arm.

Minor observations and questions

As a 30ish male, if you walk around the place with a black eye, you will get a combination of contemptuous looks, studied avoidance, and slightly unnerving deference. I’m assuming the latter comes from people who assume that the owner of a black eye has managed to acquire it through being an ultraviolent Begbie figure, rather than through falling off a chair.

I’m guessing that most women trying the same public-black eye-experiment would instead get a combination of pitying looks and studied avoidance, for fairly obvious ‘different stereotype’ reasons, even if said black eye were in fact acquired in a bullfight or crocodile-wrestling accident – any of my female readers shiner-ed themselves up and care to confirm?

Also, it being a public holiday, families were out in force at the supermarket. Two-parent-one-toddler family combinations were noticeably less efficient at shopping, and much more likely to feature at least one screaming angry family member, than one-parent-one-toddler combinations. And that this held whether the one-parent was female or male (I didn’t see any two-same-sex-parent-one-toddler combinations, sadly).

Does the “higher adult/child ratio actually makes shopping more miserable” hold true in readers’ experience? Or are there other factors at play (e.g. “the more unsufferable the toddler, the less willing either parent is to take them out solo if avoidable”)?

Baffling or flattering?

As if to add ammo to the fervent Marxists who’ve been criticising me for my slavish adherence to neoliberal economics lately [*], I’m going to admit that I’m a fan of The Economist on Facebook.

Not because it’s my favourite paper – I subscribe to the New Yorker, Private Eye and Crikey, and would subscribe to the Grauniad if it went PPV – but because it’s interesting, shapes debate, has a good Facebook presence, and the Facebook comments mechanism gives a better view of “what people think” than the “solely for ubergeeks and psychopaths” den of web comments.

One of the things that I’m looking at right now, both academically and professionally, is the challenge presented by dealing with things that have historically been marketed and customised territory-by-territory in a social media environment that’s global. The Economist provides an excellent example, since every week, it lists its covers on the Web.

Now, if you don’t commute far too often between the US and Other Places, you’re probably not aware that the Economist has covers in the plural: both in the US and outside the US, it purports to be a global newspaper (and, compared to US newspapers, it has a fair point). But it isn’t: there’s a US edition with specifically US-focused content, ads and cover, whereas the global edition only has a US cover if the most exciting thing occurring is actually in the US.

If the Economist admitted to its US readers “yes, actually, we do realise you’re a bunch of insular tits just as much as the rest of your countrymen; stop pretending you’re some kind of cosmopolitan international relations knowall just because you read a paper written by slightly-right-wing people in London instead of raging-right-wing fanatics at home; and we all know we only bother printing international news at all in the US version because otherwise we’d lose our USP; we know perfectly well – and it’s clear from our ad placings – that none of you lot read it”, then it might just about risk losing some of its mystique as an international oracle. Which would kill its whole point

So for the Economist’s Facebook presence, where discriminating between visitors from different countries is hard, it definitely wouldn’t want to show a separate “US Edition” and “World Edition”. That would break the spell.

The way it has dealt with this is ABSOLUTELY FUCKING BRILLIANT. Every week, it adds a “Worldwide Excluding the UK, Europe & Asia Edition” and a “UK, Europe & Asia Edition“. That way, Americans – who are sufficiently geographically disendowed to realise that the world, in any meaningful sense, consists of North America, Europe and Asia – can keep the illusion that they’re reading the World Edition, unlike those silly Europeans and Asians who’ve got a customised edition to suit their own parochial concerns. And we (Asia edition is sold in Aus and NZ, obviously) can work out the conceit and laugh at the Americans.

Overall, this is a great win. Except for the poor sods in Canada, South America and Africa, who presumably have to make do with the lobotomised edition containing news that’s irrelevant. Although I suppose for the South Americans it might help them understand when they’ll next be invaded by CIA-backed guerrillas.

[*] my slavish adherence consisted of making the claim that “pretending that basic economics and tax are hard, if you’re someone who purports to understand postmodernist literacy criticism, is embarrassing”. This isn’t because I rate one over the other, but simply because both neoclassical and Keynesian economics are Very Easy To Follow, whilst Derrida and Deleuze are The Opposite.

A defence of royalty

My lack of interest in the forthcoming Royal nuptials is about as total as it gets. However, people will keep writing about it, and I don’t always look away from their articles in time…

So Johann Hari has written a fairly boilerplate piece about the monarchy, and why the UK shouldn’t have one. He sensibly and rapidly deals with the fatuous points that monarchists make about tourism and ‘defenders of democracy’.

But there’s also this:

In most countries, parents can tell their kids that if they work hard and do everything right, they could grow up to be the head of state and symbol of their nation. Not us. Our head of state is decided by one factor, and one factor alone: did he pass through the womb of one aristocratic Windsor woman living in a golden palace? The US head of state grew up with a mother on food stamps. The British head of state grew up with a mother on postage stamps. Is that a contrast that fills you with pride?

Not pride exactly, no: but I prefer the honesty of the UK’s system. In order to be President of the USA, you have to be immensely wealthy, successful and lucky. In order to be immensely wealthy and successful in the USA, you pretty much have to be born to a wealthy and successful family. President Obama is no exception: his parents both had postgraduate degrees, and his maternal grandmother was Vice President of a bank. Obama’s mum did technically live on food stamps while finishing her PhD, but he was living with his banker grandma at the time. His is not a rags-to-riches American Dream story.

The pretence of meritocracy in the US, based on the belief that anyone can become President, breeds a society in which people who end up poor are treated incredibly badly, because they are perceived as having failed. I’d far rather a system that’s honest, under which we accept that someone who’s born in a slum will never have the same chances in life as someone born with a silver spoon, but try and narrow the inequalities in outcome that this creates as much as we possibly can.

Despite the Thatcherites’ and post-Thatcherites’ best efforts, the UK is far better than the US at doing this. I suspect it’s not a coincidence that the countries which are best at equality overall (e.g. Sweden, Denmark, Norway, the Netherlands) also tend to be monarchies. The monarch is a permanent symbol that life is unfair, and that if you take credit for your own success – rather than accepting that it’s primarily down to luck and that you owe a duty of care to the less fortunate in society – then you’re an arrogant prick.

Facebook discussions with an old socialist

My dad’s friend Martin is an old-school Labour man. I’m his friend on Facebook. It’s nice being in touch with such people. Whilst they’re not always right, sometimes they are.

[Martin R]: The poor are dangerous.

Some people: “this is patronising”. Me:

The poor *are* dangerous. This is clear from Tunisia, Egypt and Libya.

Western liberal-ish states were built on understanding that, understanding that Marx wasn’t wrong, and transferring enough of the money to the working class to stop the poor being actively dangerous. Note the extent to which governments started serious wealth-transfer schemes after WWI, once the USSR had emerged as a serious threat.

Enough Republicanism/Conservatism, and the poor will become dangerous again. There’s only so far things can go before revolutions start happening.

Other chap, who’s not wrong:

The poor can also be wrong. They are most dangerous when they resort to fascist ideologies

Me:

…and they’re most likely to resort to fascist ideologies when living in deeply unequal and unfair societies, where fascists lie that they’re poor because of [Jews/Blacks/Muslims] and that’s the reason why they’re poor. And most likely to be engaged with society when the benefits of economic growth are shared with everyone across the income scale.

Martin:

Arguments about fairness are different. And I don’t suggest that people are right because they are poor. But poor people have little to lose. They can rise up if pushed hard enough. They may not vote, or participate in the political process, but guarding against the possibility of revolt is and undercurrent in every political system. This government seems to have forgotten it.

Sometimes, I think that those of us on the liberal/libertarian side of things forget this. Liberal politics is fundamentally borne out of the desire of both the upper class and the wealthier classes to not have our heads cut off. Yes, if you’re a computer programmer, or an accountant, or any kind of middle-class private sector job that’s going, you pay some tax, and people who are poorer than you don’t, and many people who are poorer than you even get paid benefits from the tax that you pay – but do bear in mind that as a result, they aren’t marching through the town with your head on a spike.

Which, if you take the sheer “fittest will survive, others will fail” creed of right-libertarianism at its word, is what will happen.

I’m quite happy to have a well-paid job and pay a sizeable amount of tax. Not only for the sheer, base point that in Somalia, I’d be unlikely to have an internet connection and sell anyone business advice [*] but also for the extra “non-scary” points that living in a Western country buys you.

I respect the US position of taxing you on your global income (minus taxes already levied in non-hostile countries) on the grounds that it’s the difference between “fair tax” and “danger money cos we’re gonna get you out when you’re in trouble”. The way I’d modify that, were I in charge of taxation for anywhere, is “tax is on your global income ignoring anywhere you’re a citizen of”, given that anywhere you’re a citizen of, you don’t get any help defending you from.

So in Libya – we had a bunch of people with British passports out of there. Awesome; skills. They were being paid US$100k+ tax-free, meanwhile, the average UK taxpayer earns less than GBP25k per year. Should we have left them to die? Hell, no. Is it reasonable that the operation was subsidised by the average UK taxpayer and they paid nothing towards it? Hmm.

This piece is a giant ramble; I’m aware of that. But I have a blog and that’s what Having A Blog is for. And whatever the state may be for, I’m pretty convinced it’s not about ensuring that people who mostly don’t believe in The State can go to foreign places, dodge tax, and then be rescued by gunships at The State’s expense.

[*] I live in Australia, but the taxation regime is very similar to the UK’s and I spent the previous 10 years paying a fair amount of UK tax, and will happily defend any points based on difference to the death.

Cruel and unusual pun-ishment

Bad puns, old Internet memes, very out-of-date ‘cute animal news’ stories, and aviation references, all in one photograph. I’m spoiling you all, just like being left in the sun for a week spoils cream.

Emily the Lolcat

Yes, she really is at Roissy-Charles de Gaulle. Incidentally, this post was based on a tweet by @anattendantlord, which was itself inspired by my link to this gag. But I take full responsibility for the horror.

Dull Friday quiz

Since I’ve been blethering on about aviation, that’s the quiz topic:

1) Which single airport (domestic or international) is the most popular passenger destination for people flying out of Boston Logan Airport?

2) Where was Air Berlin headquartered for the first 12 years of its existence?

3) Out of the top 40 international destination airports flown from the US, which five have the highest percentage of passengers flying there on US airlines? (ie as close as possible to “100% of people who fly there use Delta, United, AA, Southwest, etc”)?

4) Out of the top 40 international destination airports flown from the US, which five have the lowest percentage of passengers flying there on US airlines (ie as close as possible to “100% of people who fly there use Aeroflot / Zimbabwe Airlines”)?

5) From which airport in the EU can you catch a direct, non-stop flight to Australia?

Airlines and Virginity

There’s been some chat this weekend about a sale of Virgin Atlantic. Very much like the sale of Cadbury, this is a point where my general views about the free market are coloured by views by the awful bastards who might end up owning things that I like to have [*].

Virgin Atlantic are the best international airline, without a doubt. Sadly, I seldom fly on them, for tedious reasons related to former employers’ corporate travel policies and enormous quantities of OneWorld Airmiles. If I knew I was going to have to make two business class trips to the UK over the next 12 months, I’d definitely take both with Virgin (because that would earn me a privilege card and would be aces). Since I know I’m going to have to make one economy class trip to the UK, and various other trips elsewhere also in economy, then it’s not going to happen.

And that – if you replicate for everyone who doesn’t live in the UK but thinks Virgin Atlantic are a great airline – is why Virgin Atlantic are, erm, not in quite the financial situation that a self-respecting billionaire owner would hope for.

The future of airlines is alliances plus MONEY.

As far as alliances go, there’s OneWorld, which features the UK’s second-best major airline (BA), mainland Europe’s second-best major airline (Iberia), the US’s least terrible major airline (American Airlines), Japan’s biggest airline (JAL), which I’ve never flown on, the best of the cheap Asian airlines (Cathay), and Australia’s really quite delightful Qantas. Plus some jokers (notably, Finnair. Usually, it’s cheaper to go SYD-SIN-HEL-LHR than SYD-SIN-LHR…). If you’re from almost anywhere, it has the helpful property of getting you almost anywhere else in two hops.

Then there’s Star. If you’re not from the UK or Australia, Star is not a bad alliance at all. It features Lufthansa, who are mainland Europe’s best major airline; Singapore, who rival Virgin Atlantic for The Best Airline (and, to their complete regret and lack of any kind of synergy, own a 49% stake in Virgin Atlantic); United, who’re slightly worse than AA but not by a huge margin; BMI, who used to fight it out with BA on short-haul routes until Ryanair and Easyjet killed all short-haul premium airline traffic that wasn’t direct transfers; and Air New Zealand. If you’re from almost anywhere that isn’t the UK or Australia, it has the helpful property of getting you almost anywhere else in two hops.

And finally, there’s SkyTeam. In the same way that you have McDonalds, Burger King, and greasy men selling you poisonous burgers; or in the same way that you have Microsoft, Apple, or comedy devices that only geeks can comprehend, there’s SkyTeam. SkyTeam features Air France, the most terrifyingly dangerous and irresponsible airline in the developed world; KLM, who I hate for personal reasons [**]; Delta, who’re slightly worse than United or AA; and some entirely unreassuring third-world airlines.

Aside from the alliances, you also have two airlines trying to convert their geographical and geological advantages into a viable business: Emirates, which is Emirates; and Etihad, which wishes it was Emirates. Both are perfectly acceptable.

Emirates is the best way of flying from $_medium_sized_European_city to $_medium_sized_Asian_city, because it flies to absolutely all of them, having noticed that a) its geography is perfectly suited to this; b) fuel is cheap; c) fuck, we have to do something which isn’t just oil. Having been a very good airline for 30 years, Emirates has reached the point where it doesn’t *need* an alliance. Yeah, it can’t fly transpacific, but it can do everything else. And it’ll probably buy Air New Zealand whenever everyone’s stopped being so paranoid about Arabs, if only to stop Singapore buying it first.

Etihad is more of an unknown concern. It was set up by the government of Abu Dhabi in a fit of pique about the fact that Dubai, despite being poorer and less important than Abu Dhabi, had managed to build a world-class airline. So they’ve poached many of the westerners who built massively successful airlines, and have bought huge numbers of planes, and there’s a huge “this must win” thing occurring. And Abu Dhabi airport is over 100km from Dubai airport, so there’s no actual direct reason why both airlines can’t win at once. The most important thing to bear in mind for Etihad, though, is “must be more important than Emirates”.

Oh, also Etihad has an alliance with Virgin Blue, which is Australia’s second-biggest airline. That’s a bigger deal than you’d expect – given Australia’s size and isolation, it’s a far more important market for aviation than its population would justify. Virgin Blue, under various brand names (V Australia, Polynesian Blue and Pacific Blue – the Singapore/Virgin deal currently prevents them from using the Virgin name for international flights), has a sizeable and profitable domestic, intra-pacific, and growing transpacific business.

So, out of this bunch, who’s going to buy Virgin Atlantic? Well, let’s consider the options.

1) OneWorld. No chance. It doesn’t help their network or brands, and the UK regulators would immediately tell BA to shove it.

2) Star Alliance. No chance. Through BMI, Lufthansa are the second-biggest airline at Heathrow, so slots would need to be sold. Also, it’s clear through Singapore’s behaviour that it has no interest at all in Virgin – it just wants the cash.

3) SkyTeam. Very possible. Would be sad for customers, because VS’s excellent standards would inevitably be lowered to those of the other, dreadful, airlines in that alliance. On the other hand, it’d fill an obvious gap for SkyTeam. It’s a risk for Singapore to sell, though, for the same reason: the giant UK gap in SkyTeam would be filled, which wouldn’t make its Star partners happy. And it’s not like any of the SkyTeam partners are so flush as to make Singapore an offer it couldn’t refuse.

4) Etihad. Would be good for customers: the Virgin brand would help Etihad in non-Asian markets; Virgin Blue’s already affiliated with Etihad; Richard’s involvement in “how to make people love your airline” would be welcomed rather than seen as a pain in the arse. Singapore would probably sell cheaper to Etihad than the SkyTeam airlines, as it’s not a threat on core Asian routes (no SE Asia hub). On the other hand, is there really room for non-alliance airlines, even if they do have petrodollars behind them? And how does not having a hub in SE Asia work for a global airline?

I’m keeping my fingers crossed for option 4, but we’ll see how it goes. In an example of how easy it is for people to differ on these things, veteran Aussie airblogger Ben Sandilands thinks there might be a future in a Qantas/Singapore tie-up, whereas I can’t see either airline leaving their core alliance. If the Arabs are banned, Singapore will buy Air New Zealand at some point, though.

[*] Kraft failed to appoint any Cadbury people to its management team in the US, despite the fact that the whole reason for buying the company was that Kraft had been desperately floundering but was cash-rich due to its evil cigarette dowry whilst Cadbury had being growing massively. And now it seems to be removing Green & Blacks chocolate from Australia, in favour of its pre-owned Swiss brands. No greater calumny could be perpetrated…

[**] In the days when this sort of thing happened, my employer paid over GBP2000 for a business class ticket from Detroit to Glasgow for me with KLM. The Detroit-Amsterdam plane wasn’t a problem, but my scheduled plane out of AMS was cancelled. They then let two more planes leave for Glasgow without me on either of them, on the grounds that people who’d paid GBP100 for a quick hop in economy were more valuable than business class customers and they couldn’t possibly bounce anyone. Even as someone who travels for next-to-nothing at the back of the plane whenever I can, that ain’t right – you find some hippies who’d be willing to spend another night getting stoned, you give them GBP200 to turn up tomorrow instead, and you get your business class passengers on the next plane.