Fees, fewer flights ground business travel

Fuel costs causing turbulence

By W.J. Hennigan (Contact) | Monday, July 21, 2008

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Business travelers are beginning to reminisce about the days when red-eye flights and early-morning meetings were their primary sources of distress.

In recent months, they have been overwhelmed by a cascade of increased costs, canceled flights and fees tacked on by airlines that are struggling to offset soaring fuel costs.

"We're dodging bullets that the airlines are shooting at us," said Donald Segale, president of Segale Corporate Travel Agency, which coordinates travel plans for more than 300 small and midsized businesses. "We take it day by day because everything is changing so dramatically."

Continental Airlines and American Airlines are among the carriers that are scaling back services and cutting routes as jet-fuel prices have nearly doubled over the past year.

American, the world's largest carrier, announced a 12 percent cut in domestic seating capacity in May, joining other carriers that plan to reduce capacity by 10 percent or more after the peak summer season.

Business travelers account for 50 percent of the airline industry's revenue and 30 percent of its passenger traffic, said Kevin Mitchell, founder of the Business Travel Coalition, a Radnor, Pa., group that represents business travelers.

"Seventy-five percent of revenue from the business travel segment comes from small-to-midsized enterprises," he said. "That's significant, because those business travelers are more price sensitive than the travelers who work for IBM or other corporations."

Richard Crum, president of the Association of Corporate Travel Executives, said businesses are tightening their belts and being more careful about how often it sends employees on out-of-town trips.

"Their decisions are more strategic," he said. "Companies now have the tools and the data to make better financial decisions. They will just cut out the trips that won't have as big of an impact on their bottom line."

Mr. Crum's association, which has about 2,500 members in 82 countries, conducted an online survey of its members last month and found that, for 59 percent of respondents, flight cutbacks are limiting their company´s ability to meet directly with manufacturers, suppliers or buyers.

About 65 percent indicated they expect business travelers to seek alternatives to air travel. Survey respondents almost unanimously agreed that there is a point when the cost of air travel will warrant looking at alternatives for travel that doesn't produce revenue, and 61 percent think that point will be reached this year.

Less-frequent service to cities such as Pittsburgh, Cincinnati and Oakland, Calif., is already making it more difficult for business travelers to get where they need to go.

Jim Sachs, president of Puroast Coffee, a seller of low-acid coffee to grocery chains, is tacking on an extra 90 miles to every business trip he takes to and from his home in Sacramento, Calif.

"I am now driving to San Jose or San Francisco because Continental has reduced flights, and there are no other decent alternatives out of Sacramento," he said. "I have seen a 150 percent increase in ticket prices over the past 60 days and because of decreased capacity, if you miss a flight, you might not be able to make it home for two days."

Travelers who choose not to hit the road may have to wait even longer for a flight. United Airlines, the world's second-largest carrier, plans on implementing a Saturday-night stay policy in the fourth quarter, which will cause business travelers in 65 percent of the markets it serves to extend their trips through the weekend to avoid higher round-trip weekday fares. That means one more night in a hotel, one more day dining in restaurants, one more day driving a rental car for the weary traveler.

"We hope the industry doesn't change too drastically," said Mr. Segale, the travel agent. "Face-to-face business is a reality in this country, so we have faith the pure corporate road warrior will still remain strong."

cThis article is based in part on wire service reports.

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