"New Fare Policies Are Making Life Tough for Air Commuters"

Wednesday, September 25, 2002

New Fare Policies Are Making Life Tough for Air Commuters
The Wall Street Journal


Most of us commute to work by car, train or even ferry or bicycle. Then
there are the folks who commute to work by plane.

If you think your travel schedule is tough, imagine if you had to rely on
the airlines and airports to get you to work every Monday morning and home
every Friday evening. There are lots of folks who do it, and as you might
expect, they are not a happy lot these days.

Beyond the security hassles, the Kremlin-style customer service attitudes
and the multitude of service cutbacks, airline commuters are furious over
airline pricing -- the one thing you'd think would be in their favor right
now. Instead of fluffing the pillows of some of their best customers,
thanking them for their business and appreciating the reliable income they
provide, airlines are instead making life far more difficult for these air
warriors.

"Airline executives are in a box, in a bubble. They do not understand what
is going on out there," says Steve Landes, who lives in south Florida and
works in New York City. "Quite frankly, they are stupid."

Mr. Landes is the best-known girdle salesman in the airline periphery. He
sells undergarments for Fawn Creations Inc. from an office in the Empire
State Building, but on the side, he's the self-proclaimed head of an
advocacy group called the South Florida Airline Commuters Association. The
group has about 350 members, and its biggest asset is Mr. Landes' telephone.

For 22 years, he has pounded on airlines for better treatment for commuters.
Like any good New York undergarment salesman, he doesn't take "No" for an
answer. He knows people in airline pricing and scheduling departments, he
knows CEOs, he knows some major airline investors, and he can be effective.
Years back, he called a young Continental Airlines scheduling whiz named
David Siegel and convinced him to restore the 7 a.m. Fort Lauderdale-Newark
flight on Mondays for his association members. Another time he fueled a
public outcry that forced Continental to reverse cuts made in its
frequent-flier program.

Airline commuters are perhaps the most skilled group out there at gaming the
system. They have all the elite status they want, they know airline pricing
intimately since these tickets are paid out of their own pockets. Whatever
rules airlines throw up, they'll find a way to get home. Which begs the
question, why do airlines make it so difficult to buy their product?

Mr. Landes quixotic quest has been to convince airlines that they'd do well
offering a "commuter ticket." Why not sell 10, 20, even 30 roundtrips at
once for the same flights at a slightly discounted price? Why should
commuters have to play the airline game weekly? With a commuter ticket,
repeat fliers get cheap tickets while the airline gets decent, dependable
revenue. Loyal customers are happy; the airline keeps its customers loyal.

Despite taking the idea to several CEOs and many others, only Kiwi
International, rest its soul, took him up on it. Airlines prefer to have
more control over their pricing. They hope they can sell a cheap ticket for
a few dollars more in the future, or even sell the seat at a price five or
10 times as high as the commuter fare. That's where Mr. Landes and other
commuters see stupidity. Airlines are getting less and less revenue for
their seats, and people aren't paying the hugely inflated prices like they
used to. Commuters never pay it -- if they get stuck without time to make an
advance purchase and get a cheap ticket, they fly a discount carrier, or
they don't go home. Why, they ask, don't airlines face reality?

"The price to go to Florida is either $198 or $1,200," says Gary Stevens, an
owner of radio stations who has homes in the northeast, Florida and Seattle,
and commutes between them. "I'll pay more -- $600 or $700 even. But I won't
pay $1,200. The airlines are discounting themselves right out of business."

Airlines say they do get people to pay $1,200 -- or whatever is the going
unrestricted coach fare. And even though fewer travelers are paying it,
carriers insist that offering easy access to cheap fares would only lower
their revenue at a time when they can't afford to lose any revenue.

Indeed, airlines see hope for financial improvement in making it tougher for
people like commuters to use cheap fares. What galls airline executives --
and some have said this publicly -- is that business travelers are using
cheap tickets when airlines think they should be paying more. The nerve of
some customers. ...

US Airways Group Inc. is leading the charge to eliminate the one-year grace
period for non-refundable tickets, to tighten stand-by privileges on cheap
tickets and even to declare that miles earned on cheap tickets won't count
toward elite status in frequent-flier programs. The changes weren't aimed so
much at the family going to Walt Disney World once every two years as the
road warrior buying a cheap ticket for a business trip, then standing-by for
a better flight.

The changes strike at the hearts of commuters. Regular air commuters -- not
the folks with private jets or the airline employees who ride to work for
free -- buy cheap tickets months in advance. Florida commuters often buy
tickets six or eight months in advance, especially to cover the peak season
of January-to-April, when flights are crowded and fares are higher. In the
past, if plans changed or illness struck, they could reuse their tickets
with $100 change fees, or standby on the return portion without paying
extra.

"Now, if I get sick or lose my job, I'll be able to paper the walls with
airline tickets because they'll be worthless," Mr. Landes says.

Buying tickets closer to the time of travel is usually more expensive --
unless you gamble on last-minute tickets, and commuters aren't willing to
gamble on getting home. Instead, they're just going more often to the
discount carriers. Spirit Airlines has five flights a day from New York's La
Guardia Airport to Fort Lauderdale; JetBlue Airways has 12 flights a day
from Newark, N.J., to Fort Lauderdale.

"These people are crazy if they think they are going to sell more tickets by
making it harder to buy tickets," Mr. Landes said.

His outrage prompted him to send a blistering fax about US Air to financier
David Bonderman, whose Texas Pacific Group has proposed investing $200
million to bring US Air out of bankruptcy reorganization. Mr. Bonderman,
familiar with Mr. Landes from his days recapitalizing Continental, sent a
fax back right away assuring Mr. Landes that someone from US Air would call.
The next day, the new CEO at US Air, David Siegel, was on the line. The same
David Siegel who heard an earful from Mr. Landes when he canceled
Continental's early-morning Fort Lauderdale-Newark trip about eight years
ago.

Mr. Landes berated Mr. Siegel sternly in the 20-minute conversation. What
was Mr. Siegel's response? "He couldn't get a word in," says Mr. Landes.

US Air, which confirms the conversation between Mr. Siegel and Mr. Landes
took place, did reverse the elite-status frequent-flier mile provision after
an outcry from customers and rivals failed to match that change. But the
other changes were matched and they have stuck. Already, an official at one
airline, who asked not to be named, says the change has generated millions
of dollars in revenue. It was a necessary, if unpopular, move, airline
officials say.

Maybe it is generating more incremental revenue, but such internal
comparisons don't tell you how many customers didn't fly, or how many
switched airlines. Paying from their own pockets, commuters will simply find
alternatives. But it leaves a fundamental question about the airline
industry today. "When times are tough," Mr. Landes asks, "why do you look to
piss off your most loyal fliers?"


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