"Penny-pinching travelers vs. ailing airlines"

Monday, October 7, 2002

Penny-pinching travelers vs. ailing airlines
By Brad Foss
The Associated Press 


NEW YORK -- Finished with a weeklong business trip earlier than
expected, Brent Baer approached the US Airways ticket agent with a
smile, eager to catch the 2 p.m. flight to Washington and get home
before dark.

But Baer walked away with a dilemma that caused him to grimace: either
pay $246 to change the itinerary on a round-trip ticket that originally
cost $98, or save his money and wait 51/2 hours for the flight he had
originally booked.

With airlines expected to lose nearly $8 billion for the second year in
a row, the industry has become less generous with customers like Baer
who want to fly on the cheap. By linking hefty fees with tight
restrictions, the struggling airlines hope to generate tens of millions
of dollars per year in extra revenue.

In short, penny-pinching passengers may have finally met their match:
penniless carriers.

"The industry is losing its shirt, is flat on its back and is looking
for every dollar of revenue that it can find," said David Swierenga,
chief economist at the Washington-based Air Transport Association, an
industry group.

Carriers have increased fees for paper tickets and extra baggage, taken
away senior discounts and increased the cost of travel for children
flying unaccompanied by an adult. Hot meals are gone on many domestic
flights and alcoholic drinks no longer come free on international ones.

There has even been speculation that carriers could one day offer one
rate for passengers who want a meal and another for those who do not.

The airlines have gotten particularly tough with corporate customers,
refusing to let them use discounts negotiated by their employer when
they purchase cheaper fares aimed at leisure travelers. The cheapest
leisure fares are about one-sixth the price of typical business fares.

"The problem for us is that only about one in a dozen passengers is
flying at full coach fares," Don Carty, the chief executive officer of
American Airlines, told Wall Street analysts last week. That's
significant, Carty said, because nearly half of American's sales come
from traditionally higher-paying business travelers.

The latest change by American, US Airways and others -- the one that
wiped a grin off Baer's face the other day at La Guardia Airport in New
York -- was to put heavy restrictions on nonrefundable tickets, making
these inexpensive fares less attractive to travelers who require more
flexibility.

The airlines' message to budget-minded travelers is simple: We can be
cheap, too.

Air travelers began to curtail spending roughly 18 months ago as a
result of the economic downturn. The trend was accelerated by last
year's terrorist attacks and, subsequently, the industry relied on
dramatic price cuts to lure people back to the skies. The average
domestic fare in August was at a 14-year low, according to Swierenga.

The rising popularity of Internet-based travel agents such as Expedia,
Orbitz and Travelocity, and the increased market share of low-fare
carriers such as AirTran, JetBlue and Southwest, provide further
evidence of traveler frugality.

To survive, major carriers undertook a wide range of cost-cutting
measures. Employees were laid off. Planes were grounded. Schedules were
shrunk. And travel agents' commissions, which had been reduced, were
eliminated. But those changes had little impact on the travel
experience.

By contrast, the stricter rules, extra fees and scaled-back services
could aggravate travelers, analysts said.

"I don't think of the airlines as the bad guys as much as I do the dumb
guys," said Ed Perkins, an advocate for fliers who founded the Consumer
Reports Travel Letter. Perkins believes the nickel-and-diming of
passengers might not really be worth it for the industry.

"It reminds me of a corporation that's losing zillions of dollars and
decides to fight back by controlling the way employees use paper clips
and Scotch tape," he said.

Under the new rules affecting nonrefundable tickets, customers on most
major airlines will have to pay a fee to fly standby and those who miss
their flights will have to buy brand new tickets.

Baer, who works for a Charlottesville, Va.-based advertising agency, was
unfamiliar with the new rules and was stunned to find out that catching
the earlier flight would more than triple his cost. So he called the US
Airways reservations department to "moan a little bit" and the carrier
eventually allowed him to board the 2 p.m. flight for a reduced fee of
$100.

But that still doubled Baer's air travel expense. In the future, he
said, "the question becomes, do I buy the refundable fare?"

Pete Buchheit, director of travel at Black & Decker Corp., said
employees at the Towson, Md.-based company will still be encouraged to
fly on nonrefundables, which make up 77 percent of all tickets purchased
by the tool maker. But if employees are not careful about making their
flights and sticking to their original travel itineraries, Buchheit
estimated the new restrictions and fees could cost the company $1
million over the next year.

"If the attempt was to fence [business travelers] out, I think it's only
going to be semi-successful," said Kevin Iwamoto, who manages air travel
at Hewlett Packard.


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