Business crunch hurts air travel

Bloomberg News Service

CHICAGO — Most major U.S. airlines had losses this quarter as businesses scaled back on travel.

Cisco Systems Inc. has sliced travel spending 46 percent in the U.S. and 35 percent in Europe since November. The company is hosting more meetings at its San Jose, Calif., headquarters and sending just one person to many outside conferences.

"'One riot, one ranger' is our motto," said Ralph Colunga, global manager of travel for the computer networking company.

The 10 biggest U.S. carriers lost an estimated $700 million in the first quarter, UBS Warburg analyst Samuel Buttrick said. The three largest — United Airlines parent UAL Corp., American Airlines parent AMR Corp. and Delta Air Lines Inc. — blame their losses mainly on a slowing U.S. economy that they say has reduced business travel.

The 10 carriers' first-quarter revenue growth slowed to a 3 percent increase that was erased by a 10 percent jump in costs, Buttrick said. The threat of strikes and other labor disputes also hurt revenue as higher labor and fuel costs squeezed the bottom line, analysts said.

Among the 10 largest carriers, analysts estimate that only Continental Airlines Inc. and Southwest Airlines Co. made a profit. Only Southwest, which was helped by improved fuel-hedging, is forecast to have a higher profit than in the year-earlier period. The 10 largest carriers include Trans World Airlines Inc., which AMR has agreed to buy as part of TWA's bankruptcy proceeding.

As U.S. airlines increased fares six times last year, corporate customers sharpened their strategies for battling higher ticket prices. Record delays in the industry last year also encouraged more companies to find alternatives.

"It's never been easier for corporations to reduce travel expenses," Buttrick said, pointing to Internet Web-casts as one alternative. "Air travel takes longer and costs more."

Cisco is encouraging workers to use an in-house booking system where employees review travel options and compare prices. The "guilt factor" tends to lower spending, Colunga said.

Unit revenue, or the amount earned for every seat flown, fell in February for the first time in 18 months, excluding January 2000, Buttrick said.

February was a "bad month ... and March could be worse," Buttrick said on March 21. The decline came as the 10 biggest carriers' February passenger traffic, measured as miles flown by paying passengers, fell 1.3 percent.