Until early this year, executives of Compaq Computer Corp jetting across Asia could at least look forward to business class comfort.
No longer. Under pressure to curb costs as global electronics demand sags, the biggest personal computer maker now orders staff in Asia to fly only economy class within the region, Compaq Singapore Director of Communication Tommy Chan said.
"We are tightening as much as we can," Chan said. "If there's any trip going, it requires more scrutiny," with most trips now needing vice president-level approval, he said.
Sony Corp and ST Assembly Test Services Ltd are also trimming expenses to shore up earnings as growth slows in Asia and elsewhere. For airlines, that means leaving more of their most profitable seats empty or slashing fares, more bad news as many carriers in the region face falling profit.
While Cathay Pacific Airways Ltd and Singapore Airlines Ltd are still filling as many as three-quarters of their seats, they won't say how many of their business class seats are empty.
In the US, AMR Corp's American Airlines and UAL Corp's United Airlines blamed falling business travel for second-quarter losses. While American carriers generate as much as 70 percent of their profit from such customers, the figure in Asia is probably about 45 percent for carriers such as Cathay and Singapore Air, said Mark Webb, an airline analyst with HSBC Securities Ltd.
"Companies will force employees to go economy on short-to- medium haul" flights, said Webb. "Quantifying that risk is very difficult," since the region's carriers don't disclose reliance on business travel.
Tighter Belts, Budgets At Houston-based Compaq, which is cutting its workforce by 12 percent this year, the tighter budget means executives located in Singapore are flying economy class to Sydney or Seoul.
ST Assembly Test Services, Asia's second-biggest chip testing company, has also shrunk its travel budget.
"We have reduced staff travel to the minimum level to continue supporting and servicing our customers," said Tan Lay Koon, chief financial officer at ST Assembly. "We're clearly in a serious cyclical downturn -- in such an environment, we should be focusing on cost control." The Singapore-based company's directors and senior managers, who previously only flew business class, will now fly economy on flights shorter than eight hours. The company suffered a first-quarter loss, and analysts say an even bigger second-quarter loss is expected.
"We're attracting fewer business travelers this year," said Kang Myung Hee, ticket reservations manager at Global Travel Agency in Korea. "Many companies have downgraded seat classes to economy. It's especially prominent in computer chip companies." Hard Bargain Where companies are still buying business or first class fares, they are more likely to demand bigger discounts, travel agents say.
"The market is getting more competitive and of course the margins are getting smaller, especially with the big multinational firms," said Chitvee Leelasiri, general manager at the Bangkok arm of Carlson Wagonlit Travel, a unit of France's Accor SA. The company counts Procter & Gamble Co, Bristol-Myers Squibb Co and PricewaterhouseCoopers among its clients.
In Japan, where carriers are still expecting business class demand to hold up, there's also pressure on fares.
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