Airline Cuts Mean Business Travelers Are Spending More Time On The Road
July 4th, 2008Jim Sachs, president of Puroast Coffee, the seller of low-acid coffee to grocery chains, is tacking on an extra 90 miles to every business trip he takes to and from his home in Sacramento.
“I am now driving to San Jose or San Francisco because Continental has reduced flights and there are no other decent alternatives out of Sacramento,” Sachs said. “I have seen a 150 percent increase in ticket prices over the past 60 days and because of decreased capacity, if you miss a flight, you might not be able to make it home for two days.”
AMR’s American Airlines and Continental Airlines are among the carriers that are scaling back services and cutting routes as jet-fuel prices climbed almost 100 percent in the past year, according to Bloomberg data.
Weather delays, which increase during the U.S. summer because of thunderstorms, promise more time spent on the ground rather than in client meetings for people like Sachs, who travels 125,000 to 150,000 miles a year.
Business travelers account for 50 percent of the airline industry’s revenue and 30 percent of its passenger traffic, said Kevin Mitchell, the founder of Business Travel Coalition in Radnor, Pennsylvania, which represents business travelers.
“Seventy-five percent of revenue from the business travel segment comes from small- to mid-sized enterprises,” Mitchell said. “That’s significant, because those business travelers are more price sensitive than the travelers who work for IBM, or other corporations.”
“We’re reaching out to customers who were previously booked on flights that have been affected by the capacity reductions and offering them accommodation on other Continental flights, other airlines, or refunds,” said Julie King, a spokeswoman at the Houston-based Continental. She declined to comment on any additional steps being taken to retain business customers.
American Airlines, the world’s largest carrier, announced a 12 percent cut in domestic seating capacity on May 21, joining other carriers that plan to reduce capacity by about 10 percent or more after the peak summer season. Less frequent service to cities like Pittsburgh, Cincinnati and Oakland will make it more difficult for business travelers to get where they need to go, according to schedules released by American, Continental, UAL’s United Airlines, Delta Air Lines and Northwest Airlines.
United plans on implementing a Saturday-night stay policy in the fourth quarter, which will cause business travelers in 65 percent of the markets it serves to extend their trips through the weekend to avoid higher round trip weekday fares. Advance purchase requirements and escalating fares also may prompt companies to reevaluate business trips.
“If the price of oil increases to $150, major airlines will have to cut even further and more deeply,” said Mitchell of the Business Travel Coalition.
Sachs said teleconferencing was not an option for his company, which relies on face-to-face contact.
“Business development has to be done in person, but we are cutting out travel that we used to do to maintain our business,” he said. “You worry about the consequences.”
Delta will charge a $25 fee for redemption of frequent flier miles used for U.S. and Canada travel starting on Aug. 15. With fewer seats available, business travelers who want to use their miles for leisure travel might not even be able to take advantage of them, said David Stamey, director of consumer and industry affairs at the International Airline Passengers Association in Dallas.
“The airline industry has finally hit the proverbial wall,” Stamey said. “In trying to minimize their losses, they’re throwing the baby out with the bathwater.”
Stan Sorensen, vice president of account management and meetings for Egencia, formerly Expedia Corporate Travel, in Seattle, said he hasn’t seen a significant reduction in travelers and is optimistic about performance in the next quarter.
Carriers know that if they raise fares too much discretionary travel will drop off, so they raise the prices that business travelers have to pay, said Ed Perkins, contributing editor to the Smartertravel.com Web site that provides travel information.
“If it’s less than 300 miles, I’m taking the car,” said Stamey of the IAPA. “At least I’m in control of when I leave, when I get there and when I get back.”
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