Travel and car rental agencies hit hard

Vermont Business Magazine, Mar 01, 2002 by Marcel, Joyce

People tended to stay closer to home after September 11, and when they decided to travel, they tended to drive. As a result, airlines suffered big losses, and so did Vermont's travel agents and car rental agencies.

"Collectively, the airlines lost $15 billion, and I think that is more money than all the airlines have made in all the years since Orville Wright," said Scott Milne of Milne Travel American Express. "They actually said the same thing in 1991. Right after the Gulf War, they lost $6 billion, and they were saying it was more money than they made since Wright."

The airlines are the backbone of the travel industry, Milne said, which includes cruise lines, Disneyland, and other resort destinations. Thus, when the airlines cut back, vacation bookings also drop.

"The macro effects on the industry are most clearly manifested in the airline industry, where, depending on the carrier, there is on the average, 25 percent fewer seats flying," Milne said. "That means they eliminated 25 percent of their routes."

The airlines were having a tough year in 2001 anyway, Milne said.

"Going into 2001, they were coming off their best five years in history, but once the economy got a little soft, even before September 11, they were losing money," Milne said.

According to Milne, the airline business needs a return to the days of government regulation.

"My personal opinion is we need a free market-oriented but government-regulated airline industry," Milne said. "Pre 9/11, 2001 clearly demonstrated that the airlines cannot run their own businesses. Then September 11 happened, and granted, there were three catastrophic days when the airports were shut down. But within three days of 9/11, the airlines were all running to Congress crying for $15 billion between direct subsidies and guaranteed loans. They're a poorly run lot of companies that were clearly sliding into a bad situation prior to 9/11, and then we get 9/11. Things were very, very bad."

Milne Travel saw 4 percent of its total revenues for the year travel previously booked and paid for - canceled in the 10 days following September 11.

"That was cancellations," Milne said. "And new business between September 11 and September 30 was off 80 percent. Essentially, instead of doing 20 days worth of new business, we did about 4 days worth of new business, plus we had essentially 14 days of previously booked business that canceled. So in September we had a pretty bad month."

Prior to September 11, Milne's sales were running 25 percent ahead of the previous year.

"Then in October, we were no longer running 25 percent, plus our business was off 35 percent compared to October 2000," Milne said. "And that's even worse, considering we were on track to run 25 percent ahead. November we were off again, 20 percent compared to last year. By the time we get to December, we are back to being about flat with last year, which was pretty good, considering."

Most of the travel industry reported similar figures, Milne said. "I think those are the numbers that everybody in the cruise industry shows," he said. "Some players have been more affected than others. Disney took a big hit. There were huge fears that Disney itself would be a target."

With business so slow and time on his hands, Milne took the opportunity to work on training with his employees.

"We also got a lot of help from cruise lines and vendors with promotions," he said.

Corporate business has not yet recovered from September 11, Milne said.

However, vacation travel has started to boom.

"The good news is that, by and large, we had unprecedented demand in January on the leisure side," Milne said. "By far, we had the biggest vacation sales month ,in our company's history."

Car rentals down

When people stop flying, car rentals drop. The same thing holds true when people drive someplace for a vacation. So car rental agencies took a big hit after September 11, said Chip Spillane, owner of Thrifty Car Rental in Burlington.

"Right after September 11, things slowed down dramatically," Spillane said. "We were down 20-25 percent. People just didn't want to leave their homes. There was a little bit of a spike around the holidays, Thanksgiving and Christmas, but what we've seen is a slow increase ever since the middle of December."

Bookings are now picking up, Spillane said.

"Future reservations are telling us that this spring, people will be getting out of their houses and getting back out around the country. And as the tourism market picks up, we expect business travel will also do the same."