Wed, Apr 03, 2002 page21

• US business travelers fly off the handle

  • NY TIMES NEW SERVICE
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  William Harvey, a manager at Eastman Kodak, flew from Rochester, New York, to Chicago last October. Had he followed the standard business itinerary, leaving on Sunday and returning the following day, he would have paid US$798 for the round trip. Instead, he flew to Seattle on Saturday, saw a Mariners game, spent the night, flew back to Chicago, attended his meeting, and flew home. Total fare: US$212.

  "The airline's own rules and fares encourage you to do that," Harvey said, even though he took up space on several flights.

  After years of rising complaints, business travelers' frustration over the inequities of airline pricing has reached a point of near revolt. Fare sales introduced after Sept. 11 to woo back nervous Americans have widened the already yawning gap between the cost of buying a ticket in advance and showing up at the gate at the last minute. Special deals available on the Internet have only added to business fliers' anger.

  They are fighting back by any means they can. Some, like Harvey, are working the system. Others are driving. In perhaps the most common form of retaliation, many are simply staying home. Business travel fell sharply last March as the economy slowed, and then dropped off a ledge following Sept. 11.

  And it can be little comfort to airlines that the road warriors who kept flying through the fall now feel betrayed -- repaid for their loyalty with higher costs, greater restrictions and fewer amenities. The latest slap was a decision by the largest carriers to cut most commissions for travel agents, prompting many to raise their service fees and thereby increase the cost to customers.

  "I would like to see the airlines act like they want our business," said Steve Kaye, a software company manager in Atlanta. "Between security and no meals on long flights, it ends up being a pretty long day."

  Some airlines have responded with lower-cost business fares that do not require a Saturday night stay. But these are Band-Aids on a system that even many industry executives admit is broken. "There is an overriding need to move to a simpler fare structure," said Rono Dutta, the president of UAL, the parent of United Airlines. "People have a hard time making the purchase and feeling good about it."

  Even so, airlines have trouble seeing beyond their buckets of red ink. The domestic industry lost a record US$7 billion last year and is forecast to lose between US$3 billion and US$4 billion this year. Any experimentation with fares risks widening those losses.

  Though business fares haven not actually risen since Sept. 11, they have not come down, either, as leisure fares have. The airlines say lowering last-minute fares only costs them money because it does not stimulate more last-minute purchases, while reducing leisure fares fills more seats.

  That may make financial sense, but it makes business travelers see red. "They keep telling me fares are coming down, but I don't see it," said Dean Burri, owner of a South Carolina insurance company who logs 300 flights a year.

  Many business people are protesting the stubbornly high rates by spending extra time on the road or booking in advance to cut their travel costs. Research by United showed that the proportion of business travelers flying on business fares has declined to 55 percent from 61 percent two years ago.

  The big airlines have also been losing share to low-fare competitors like Southwest Airlines and JetBlue Airways. At the other end, chartering private business jets has become more attractive to many companies.

  Della Maricich, who runs a Seattle company that designs and produces trade show exhibits and graphics, has found her own creative solution. Whenever someone in her organization has to fly on short notice and faces a US$2,000 fare, she uses frequent-flier miles. "We have a bank of miles available," she said.

  To others, the answer to sky-high walk-up fares is to drive, or simply stay home and rely on alternatives like videoconferencing. "As justified for the expense as you used to have to be, you now need to be hyperjustified," said Kaye, the software company manager.

  The smaller choice of flights and longer waits at airports since Sept. 11 have even pushed some business executives out of the market who would otherwise be willing to pay more for convenience. Kaye has stopped flying to several Western cities because it takes too much time. "It's not just the high fare but the lost productivity," he said.

  Some airlines have made limited pricing concessions to business customers, but critics say those moves have actually added to the complexity of the fare structure and have failed to get to the heart of the problem: the stratospheric rates charged to last-minute travelers.

  Two years ago, for example, Northwest Airlines executives realized that many business fliers were willing to stay over a Saturday night rather than pay higher restricted fares. It then lowered its business fares by 40 percent to 50 percent, a savings roughly equivalent to the cost of spending the extra time on the road. Even so, the tickets have to be ordered 10 to 14 days in advance. Other carriers, including United, AMR's American Airlines and Delta have introduced alternate business fares of their own.

  Earlier this year, Rosenbluth International, a big travel-management company, proposed a more ambitious solution to airlines: cut business fares 30 percent across the board and reduce corporate discounts by the same amount.

  But airline executives countered that such simple formulas would cost them sales. "We just haven't been able to make the economics work," said Bach of Northwest.

  In any case, a new fare structure would be vulnerable to competitive cost-cutting. Carriers have learned that they must match a rival's fare or risk losing market share.

  Last week, America West Airlines lowered its walk-up fares and relaxed restrictions, but because it carries just 3 percent of domestic passengers and attracts relatively few business travelers, analysts doubted that the initiative would do much to shake up the industry.

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