Airlines test cheaper business fares NEW YORK (AP) =97 Battered in 2002 by the loss of revenue from business=20 travelers, major airlines are offering a wider array of cheap fares aimed=20 at corporate fliers, whose frugality remains one of the most vexing=20 problems for the ailing industry. The strategy is gathering momentum as an= =20 important test of widely-held assumptions about the elasticity of business= =20 fares, experts said, and could eventually be critical to any turnaround for= =20 the industry, which is expected to report $2.4 billion in fourth-quarter=20 losses, before special items, in the coming days. Continental Airlines is=20 scheduled to release its fourth-quarter results Wednesday, followed by=20 Delta Air Lines on Thursday. Airlines have been reluctant to say whether=20 discounted business fares have been successful =97 that is, whether they= have=20 actually resulted in greater revenue from corporate travelers =97 but=20 analysts are expected to pressure executives on the issue during=20 earnings-related conference calls later this week. "This is the most=20 closely guarded secret in the business right now," said Robert Mann, owner= =20 of the airline consultancy R.W. Mann & Co. in Port Washington, N.Y. "The presumption has always been that business travel is inelastic, that if= =20 you reduce prices, you reduce total revenue," Mann said. "I've never=20 believed that and what we're seeing now is some experimentation around the= =20 issue." In the past year, the seven largest U.S. carriers have increased by= =20 20% the number of so-called alternate business fares, which carry more=20 restrictions but are 34% less expensive, on average, than traditional=20 business fares, according to Harrell Associates of New York, which=20 maintains an extensive database of fares. Alternate business fares refer to= =20 nonrefundable tickets that must be purchased within 10 days of travel. The= =20 minimum one-night stay requirement excludes Saturday nights. The fares also= =20 carry a $100 change fee. Bob Harrell, who tracks airfare pricing trends for Harrell Associates, said= =20 these fares are squarely aimed at "office potatoes," or businessmen who=20 aren't traveling as much as they used to. The initiative is also intended=20 to steer business travelers away from rock-bottom, advance-purchase fares=20 aimed at leisure travelers and away from low-fare airlines =97 both of which= =20 gained popularity during the economic downturn. The reduced spending by corporate fliers in 2002 was driven by two factors,= =20 experts say: the high price of last-minute travel and the added time needed= =20 to pass through security checkpoints ever since the Sept. 11 terrorist=20 attacks. To make up for revenue lost from business and leisure travelers,=20 airlines have increased fees for extra bags, paper tickets changing=20 itineraries. Airlines have also engineered aggressive cost-cutting=20 strategies, drawing inspiration from Southwest Airlines, the thriftiest=20 major carrier around and the only one to post profits during the industry's= =20 worst downturn ever. The hassle factor at airports is gradually improving,= =20 but making cheaper fares available to business travelers remains a=20 "necessary condition" to winning back this important customer base, said=20 Kevin Mitchell, chairman of the Radnor, Pa.-based Business Travel=20 Coalition, a lobbying group. So far, Mitchell likes what he sees from the major airlines. "I'm=20 optimistic. The fact that they've gone this far is evidence that the=20 low-fare sector is really pressuring them," he said. Northwest Airlines began attacking the problem in February 2000, launching= =20 BizFlex fares, its version of alternate business fares. Spokesman Kurt=20 Ebenhoch said the BizFlex fares extend to all of the carrier's routes and=20 have "grown more and more popular," but he would not say whether the=20 airline has noticed a revenue boost as a result. In fall 2002, American=20 Airlines, the nation's largest carrier, lowered the price of tickets bought= =20 at the last minute by as much as 40%, although the changes affected fewer=20 than 1% of all routes. Last week, United Airlines, which is restructuring=20 under bankruptcy-court protection, reduced last-minute fares on direct=20 flights to and from Chicago and Denver by as much as 40%; fares on tickets= =20 purchased seven days in advance for the same flights were cut as much as=20 70%. Whether such pricing reform becomes permanent and expands to include=20 all airlines in all markets depends on whether carriers actually make more= =20 money from business customers by charging them less. "This is the holy grail," said Mann, the airline consultant. "The airlines= =20 are going to have to get this thing (business travel) jump-started, or it's= =20 another year of earnings hell." Indeed, at the start of 2003, several dark= =20 clouds are already moving in, with a potential war in Iraq causing jet fuel= =20 prices to rise and threatening to dampen demand for international travel.=20 Another financial problem looming over the heads of airline executives are= =20 underfunded pensions. Credit agency Fitch Ratings said Monday the=20 industry's pension plans were underfunded by $18 billion in 2002, a=20 dramatic shift from 1999, when they were overfunded by roughly $1 billion *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@escape.ca Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.atlanticlng.com TnT Webdirectory: http://search.co.tt *********************************************************