"Creature comforts lure long-haul fliers"

Saturday, September 13, 2003

Creature comforts lure long-haul fliers
By BILL HENSEL JR.
The Houston (TX) Chronicle


Last year, at the height of the worst-ever crisis to hit the airline
industry, Houston-based Continental Airlines invested $15 million in new
seats. 

The decision was not a hasty one; Continental executives had a sleepover
first. 

"We wanted to simulate as real a travel experience as possible," Continental
spokeswoman Julie King said. "Our executives who slept overnight wore the
same business clothes they were in all day, as if they were on an evening
departing flight. Then they sat down in their seats and shared a bottle of
wine and watched Monty Python movies." 

After that, they slept in the seats to test them out, all the while aboard
an aircraft parked on the tarmac at Bush Intercontinental Airport. 

They reported that they slept their normal length of time, woke up early in
the morning, showered and went on to work, just as if they were on a real
business trip. 

All this was part of a bigger plan to seize a greater share of what
Continental calls the "lucrative business traveler" segment. 

The airline is not done, either. On Monday, Continental is expected to
announce major changes to enhance what it calls its premium travel
offerings. The move will be another attempt to differentiate Continental
from its competitors. 

But Continental is not the only airline making improvements. 

Competitor British Airways has added more of its streamlined "Club World"
flat-bed seats to aircraft on its Houston-to-London route, hoping to lure
more passengers willing to pay top dollar. 

A number of top executives with Houston-based oil-field service companies
use British Airways, said J.P. Peplinski, director of oil-field and global
integrated services for Navigant, a corporate travel management firm. 

"Being comfortable enough to truly sleep on these long hauls is really,
really important, particularly if they are getting off and presenting," she
said. 

British Airways introduced the new seats in 2000, which is when Continental
began discussing the redesign of its international business class seats. 

While newly redesigned seats are a big deal when it comes to trying to
attract the business traveler, so are other amenities, such as the showers
that British Airways provides in its lounges in London, Peplinski said. 

That is particularly true if they are headed to the Middle East or Africa,
she said. 

The investment in the seats points out the seriousness with which airlines
view the business traveler. 

Generally, 40 to 50 percent of the passengers on the average airliner are
business travelers. But they provide 60 to 65 percent of the airlines'
revenues, said David Swierenga, former economist for the Air Transport
Association. 

"Right now, it is awfully hard to tell what is happening with business
travel," said Swierenga, who now operates a consulting firm called AeroEcon.


"Because so many business travelers are now traveling on advance-purchase
discount tickets, they look like personal leisure travelers." 

Internationally, along with Continental and British Airways, airlines
ranging from Qantas to Virgin Atlantic have introduced features aimed at
enticing business travelers. 

Singapore Airlines has what it dubbed the "spacebed," which can lie flat
like the seat offered by British Airways. Although Continental's new seats
recline to almost flat, some believe the flat bed will dominate seating in
the future. 

But all those products are used only in the international arena. 

Domestically, major network carriers are losing market share fast to
low-fare carriers such as Southwest Airlines and JetBlue Airways. 

Business travelers began departing the major hub-and-spoke airlines in
droves, even before the 2001 terrorist attacks. 

The shift began as business travel fares hit an all-time high in the late
1990s, and it was exacerbated by the faltering economy, and then by the
terrorist attacks. 

As a result, many businesses have cut travel budgets, scheduling fewer trips
and shopping for lower fares. 

A study done for the National Business Travel Association earlier this year
indicated nearly 70 percent of business travelers fly on restricted economy
fares, 25 percent on regular economy fares and less than 5 percent travel on
first class and business class fares. 

J.P. Morgan Chase has low expectations for business travel recovery, its
airline analyst Jamie Baker said in a report issued last week. 

Much business travel is conducted domestically, and there has been a
dramatic shift to low-fare carriers during the past several years, he said. 

"By the end of the year, we anticipate low-cost domestic revenue share will
rise above 20 percent for the first time," Baker said. "While we do share
the network carriers' cautious optimism that 2004 will see an overall
improvement in business demand, we'd suggest the rapidly accelerating
low-cost segment represents the greater secular shift than does the
Internet, or newly learned corporate travel behavior." 

Given increasing low-cost penetration in top U.S. markets, optimism for a
rapid rebound in business demand is unlikely to materialize, he said. 

Kevin Mitchell of the Business Travel Coalition sounded a similar theme. 

"Nine years ago, low-fare carriers had a 9 percent national market share,
and today they have 25 percent of the market," Mitchell said, likening their
gains to Toyota's inroads against GM and Ford. "I don't see how they stop
the shift of market share to their low-fare competition without them
rationalizing and lowering their airfare structures. 

"There will be a need for a second major restructuring." 

All the major airlines have undergone restructuring. Earlier this year,
Continental laid off 1,200 employees and announced $500 million in cuts. 

A survey done for the National Business Travel Association in June showed 58
percent of companies had decreased their travel spending compared with last
year. However, there were indications those cutbacks could be easing
somewhat, according to the survey. 

That is what airlines such as British Airways and Continental are banking on
in putting new seats aboard their trans-Atlantic and trans-Pacific aircraft.


Before it took the plunge, Continental met with five manufacturers before
deciding to buy 800 seats from Koito Industries of Japan. 

The carrier also had focus groups and worked with the manufacturer on the
seat redesign. 

Continental finished putting the seats in its BusinessFirst cabins in Boeing
777 aircraft, which are used for overseas flights, about eight months ago. 

Continental bills them as being the world's widest business class seats,
measuring 22 inches between the armrests. The seats recline 170 degrees from
seat back to seat cushion and provide 6 1/2 feet of sleeping space. 

Other improvements to the seats include the addition of hoods and large seat
side wings for privacy, adjustable winged headrests, power ports for laptop
computers, personal multichannel entertainment systems and satellite
telephones. 

British Airways bills its Club World seats, on the other hand, as a "lounge
in the sky" environment. The seats are no longer configured in standard
rows. The carrier has fewer seats in each cabin, giving 30 percent more
personal space overall. 

The Club World amenities also include laptop power points and telephones. 

Passengers also have a choice of up to 18 channels of film and television
with larger screens.


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