"Business budgets travel lighter these days"

Sunday, September 14, 2003

Business budgets travel lighter these days
Cost-cutting creates new work routes
By Brad Foss
The Associated Press


Computer Associates International Inc. has cut its annual travel budget by
20 percent since 2000, and the maker of software does not foresee increased
spending in 2004.

Bellsouth Corp., a telephone service provider, also plans to limit travel
expenses, staffing five full-time travel agents compared with 50 three years
ago, and it's holding videoconferences whenever possible.

At Lockheed Martin Corp., travel costs are expected to decline by $4 million
this year as two-thirds of the defense contractor's employees embrace the
company's Internet-based booking system.

Large U.S. companies have no plans to expand shrunken travel budgets in
coming months.

For the struggling airline industry, which needs corporate travelers to open
up their wallets again in order to fully recovery from its worst downturn
ever, these are not good signs.

Jamie Baker, J.P. Morgan airline analyst, said in a report published
Wednesday that "a rapid rebound in business demand . . . is unlikely to
materialize."

Corporate travel managers say money-saving initiatives that were launched
when the economy soured a few years ago are here to stay.

They say employees gradually are getting hooked with a little prodding from
management on new technologies for booking and communications. In addition,
the expanding network of low-fare airlines has made it more convenient for
business travelers to fly them.

These changes are bound to curb the pace of the airline industry's nascent
recovery. Still, airline executives and analysts are optimistic the industry
can build on its relative success this summer, when domestic flights were
packed with leisure travelers, albeit at historically low fare levels.

Many analysts have narrowed their industrywide loss estimates for the third
quarter. While losses for the year could top $6 billion, airline stocks have
risen sharply from historic lows a few months ago.

Analysts expect third-quarter net profits from at least two major carriers:
Continental and, as always, Southwest.

For most major carriers, it is the impact of aggressive cost-cutting, not a
huge revenue rebound, that is responsible for gradually improving bottom
lines, analysts said.

Carriers have laid off more than 100,000 employees since the 2001 plunge in
the industry. The number of available seats this summer was down 5 percent
from last year and down roughly 13 percent from 2001.

United Airlines and US Airways wrung billions of dollars in concessions from
employees in Bankruptcy Court, while American Airlines did the same to avert
Chapter 11.

"Cost containment is Number 1," said John Heimlich, chief economist at the
Air Transport Association, a Washington-based trade group.

Another reason for airlines to be cautious is that the multibillion-dollar
federal program to reimburse airlines for security fees expires at the end
of the month. The reimbursements were worth about $7 for every round-trip
ticket sold.

The end of the federal aid program comes at a time of year when the industry
would traditionally get a boost from business travelers, but that is
unlikely.

"There doesn't seem to be any move to expand (corporate) travel budgets,"
said Kevin Mitchell, chairman of the Business Travel Coalition of Radnor,
Pa.

TXU Corp., a Dallas-based utility holding company, reported its travel
budget in 2004 would be flat or slightly higher. In 2003, the company
slashed spending by 45 percent to around $7 million.

The large decline from 2002 was partly because of TXU's sale of European
operations, but the company also has made reducing travel costs a priority.
Like many companies, TXU is negotiating better bargains from travel
agencies, airlines and hotels, and it has eliminated "non-essential" travel.

PerkinElmer Inc. plans to spend a little more than $30 million on travel and
entertainment in 2003, down 40 percent from 2000, said Tom McCabe, director
of global travel services for the Wellesley, Mass., maker of laboratory
equipment.

The company has trimmed its travel budget each of the past three years, and
McCabe said there is no sign of reversing course.

PerkinElmer is sending one employee instead of two or three when
face-to-face meetings are absolutely necessary. As for the increased
reliance on video- and Web-conferencing, McCabe said employees don't grumble
about the technology's shortcomings as much as they used to.

"They're looking at it for what it is, an alternative to spending thousands
of dollars," he said.

Lockheed Martin will spend nearly $340 million on plane tickets, hotel rooms
and rental cars in 2003, down 15 percent from 2001, said Richard Wooten,
director of corporate travel services.

The cost reductions are the result of better planning, not fewer trips, said
Wooten, who anticipates further savings as more employees begin using the
company's online booking system, GetThere. Lockheed Martin employees who use
the system, a product of Sabre Inc., spend 11 percent less per ticket on
average than employees who call a travel agent.

Nationwide, business fares are down 5 percent from a year ago, according to
Harrell Associates, a New York-based firm that tracks ticket prices. Also,
according to J.P. Morgan's Baker, low-fare carriers will control one-fifth
of all domestic revenue by the end of the year.

At Computer Associates, where more than 60 percent of employees use
GetThere, spending is expected to be $40 million in 2003, compared with $50
million in 2000. The Islandia, N.Y., company expects 80 percent of its
workers to use the system eventually.

Computer Associates also is trimming its travel budget by holding regional,
as opposed to national, training sessions for its sales force and its online
booking system automatically detects if an employee's itinerary exceeds the
suggested per diem costs for a particular city.

Ellen Hanzl, Computer Associates' assistant vice president of corporate
travel, said the full impact of the corporate travel revolution has yet to
be felt.

"This is the wave of the future. I don't think it's a fad at all," Hanzl
said. "The (cost-saving) tools are only going to get better."


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