Business Fliers Bargain Hunting

Nation's Business, Nov 1, 1998 by Peter Weaver

Small Firms' tactics for trimming air-travel costs range from using low-cost carriers to choosing alternative airports.

For the past two years, business has been hearing the brunt of major airlines' continuing fare increases for seats purchased on short notice. In response, small firms are adopting a host of tactics to rein in their air-travel costs.

They are using alternative airports and low-cost airlines. They are making the most of the fare cuts that often occur when airlines compete head-to-head in a given market. And- when possible-they're taking advantage of advance purchase discounts.

The fare increases that chase discounts are making bargain hunters of many business travelers stem from airlines' use of a pricing system called "yield management." Under that system, seats available within days or hours of takeoff are typically priced much higher than seats booked far in advance.

While leisure travelers can get steep discounts by buying nonrefundable airline tickets a week or more ahead of time and staying beyond Saturday night, such options are seldom available to business people, who often have to reserve seats at the last minute.

"This yield-management thing is really squeezing the business traveler hard," says Gary Schmidt, co-owner of a travel agency in Oakdale, Minn., and author of Fly For Less (Travel Publishing, $19.95). "It's a system that's based on the maximum a customer will pay rather than the actual cost of the service."

Moreover; Schmidt says, charging what the market will bear for a flight depending on time and destination has created a plethora of fares that fluctuate daily, sometimes hourly, like a commodities market. "From Chicago to Dallas," he says, "there are 125 different fares, ranging from $180 round-trip to more than $800."

Dave Fuscus, a spokesman for the Air Transport Association, a Washington, D.C.-based organization of major airlines, explains the rationale for yield management: "When a business traveler can call for reservations at the last minute-and cancel at the last minute, if need be-this is our premium, time-sensitive product; that's why we charge more."

Airports And Airlines

Among the various ways that small firms try to cut air-travel costs significantly is the use of alternative airports in the vicinity of the T rip's origin or destination-or both. Another money-saving method is to use low-cost airlines-usually small carriers or those just breaking into a market.

Pat Mitchell, an executive assistant who handles travel arrangements for American Inks and Coatings Corp., a printing-supply company based in Valley Forge, Pa., says, "We're routing some of our people through the Trenton [N.J.] airport, using Eastwind Airlines to fly to Greensboro, N.C., where we have a plant."

Although Philadelphia International Airport is closer to American Inks' location, Trenton is less expensive, Mitchell says. "The fare to Greensboro charged by a major airline flying out of Philadelphia runs more than $600 round-trip, and the Eastwind fare from Trenton can run less than $140." Eastwind, based in Greensboro, serves six Eastern cities and began flying in 1995.

"Where there are low-cost competitors in the market, fares decline sharply across the board," says Paul S. Dempsey, director of the Transportation Law Program at the University of Denver.

He also serves as vice chairman of four-year-old Frontier Airlines, a low-cost carrier serving cities nationwide from its Denver base.

Moreover, Dempsey says, the battle might not stop at matching fares. "The major airlines add seat capacity and flight frequency to drive the low-cost competitors' load factors to below break-even levels."

The downside, however, is that if a low-fare competitor is thereby eliminated, Dempsey says, "the majors raise prices back up again to whatever the market will bear."

In a period when a major airline is matching a low-cost airline's fares, however, travelers sometimes can get the smaller carrier's fare level while using the larger airline, which might offer more-convenient flight times and benefits such as frequent-flier miles.

Proactive Seat Selection

Although large airlines may capably defend their "fortress hubs"--and their fare structures-at various airports, some low-cost carriers are still finding innovative ways to compete.

In Detroit, for example, where Northwest Airlines--according to figures in a March report by the U.S. General Accounting Office-essentially controls Detroit Metro Airport, the carrier is facing competition from a tiny challenger, ProAir, which operates out of Detroit City Airport.

How has ProAir been able to go up against Northwest? "Chrysler and General Motors guaranteed us a certain volume of business from their employees," says Arthur Moreau, the company's director of market development. "We started with two brand-new [Boeing] 73 7-400 planes, and we're now flying to Indianapolis, Baltimore/Washington, Philadelphia, and Newark/New York."

ProAir's fares are lower than Northwest's, Moreau says, and "we are flying out of Detroit City Airport, which is nearer to town, which makes it more convenient for the auto companies' personnel to catch flights."